The cognitive dissonance in Silicon Valley is amusing. You think VC-istan was ever not political? Where do you think VC's come from? They don't grow on trees. They grow in McKinsey and Morgan Stanley, where they learn to deftly navigate corporate politics at the highest levels. Thats not the only thing they learn, of course, but it is a fundamental pillar of the training. Silicon Valley is owned by Wall Street (what do you think it means for VC's to "raise funds?") and favors those who can play that game.
Not that I think this is a bad thing mind you. It just is. It's like dating-it's futile to complain about the rules. They're just the rules. You're trying to convert capital into a successful business, so you gotta play by the rules of the people who have the capital. Which is true for pretty much everyone. Being in Silicon Valley doesn't insulate you from the reality that exists everywhere else.
Wait, are you serious? Have you looked at the average VC today? Overwhelmingly, they are made up of former entrepreneurs. The analysts may come from Morgan Stanley and McKinsey, but the partner's don't. This is one of those conjectures that people state without backing up.
Well, its hard to speak for average due to a lack of data. I will say from my anecdotal experience, every partner at our firm is a former entrepreneur / operator. The other high profile firms I know all seem to follow that model for the most part.
The sweeping generalizations and alleged industry-crossing trends in this article undermine a very basic truth: that a small minority of people are successful by kissing ass rather than kicking it.
The author has set up an imaginary "nobility" (including himself, presumably) of people who's intentions are—by his definition—"pure". You're either an entrepreneur or a "corporate stooge". There is no middle ground. There is no one in a Fortune 500 company who is responsible for delivering results, apparently. (Unless we're defining "entrepreneurs" as "anyone who is not a corporate stooge," which seems like a stretch.)
Moreover, there's apparently no one who can both play the "political game" and deliver results. As if the mere presence of the former taints the well, so to speak.
I think the fact of the matter is the politics—relationships, perception, track record—do matter and should matter. If you think you can build a good product and people will beat a path to your door, you're horribly naive. As a VC faced with two equal products, would you rather back someone who's already built a product and had an exit, or someone who's doing this for the first time? The former is certainly lower risk...
This would be accurate if time were going backwards. The world it describes is how things were in the 90s.
For the last two decades, at least, the power of hackers/makers relative to MBAs/smooth talkers has consistently increased, and that trend shows no sign of slowing down.
Forget the hacker/maker vs. "business guy" distinction. The article's central claim is the rise of a kind of person adept at playing the political game of VC -- raising a round, and then getting soft-acquihired if their company fails.
I, for one, have a hard time believing that every startup M&A transaction adds shareholder value to the acquirer. A more likely narrative, and one the author of the article calls into question, is that the entrepreneur has friends/other back-channels at the acquirer and uses these personal connection to engineer the "acquisition" of their company, at the expense of shareholders.
I can't say for sure this never happens, but I've never seen an instance of it. A startup is composed of its people. For an acquiring company to take on people they didn't want would be the ultimate sacrifice.
I think the article is more referring to Hackers/Makers that are also smooth talkers. Obviously an MBA/Business guy with no technical experience/knowledge is not going to be able to pull off any sort of political entrepreneurship in VC-istan.
I stopped trying to parse this comment just before it gave me an aneurysm as I tried to resolve what "VC-istan" might refer to and how non-tech MBAs had no influence there. VC's fund tons of companies headed by operators with no technical experience (look at some 2012 portfolios to see this). It is eas-ier to get external funding if you're a tech with no company operating experience, but it still not eas-y to do that. So it's probably not "obvious" that MBA/business types have no influence wherever "VC-istan" is. Which is I think a good reason not to start calling it "VC-istan".
The word "VC-istan" has been used a lot in this thread and even elsewhere, I don't understand why you put so much emphasis on not understanding what it means.
For example: because the commenter upthread doesn't appear to know what it means, since they think that MBAs have no influence there. Because it doesn't mean anything; it's a slippery term, meant to diffract understanding rather than focus it.
A hacker/maker who is also a smooth talker is always going to do better than one who isn't a smooth talker, though. That's like saying "A person who builds useful stuff but also has an Ivy-League degree will be hired over someone who builds useful stuff but doesn't." Duh, but it doesn't mean that building useful stuff is less useful than having the Ivy-League degree (or being a smooth talker).
One must not be an MBA/smooth talker to be neck-deep in SV politics. Here are some companies he was probably referring to (or would be if he studied them closely): Path, Color Labs, Quora, Asana, Airtime and Foursquare.
I'd cry if two of those services went away but I'd be lying if I didn't acknowledge they are cogs in the machine this article was describing.
TechCrunch is the elephant in the room. Basically any startup that is successful at getting frequent TC coverage could be accused of playing the politics game. However whether they are using TC to reinforce their safety net or using it grow their company (or both) is open to interpretation.
I really don't like this article. I'm not saying that the author is right or wrong, but what is the author trying to accomplish? They aren't helping change the ecosystem or bring new conversations to the table.
I feel like this feeds to pettiness and bitterness toward fellow entrepreneurs that you don't feel "deserve" it. Who cares what they raised? Who cares who they sold to?
If you're doing what matters to you, it shouldn't matter.
I feel like this feeds to pettiness and bitterness toward fellow entrepreneurs that you don't feel "deserve" it. Who cares what they raised? Who cares who they sold to?
Yeah, it's easy to look over and see somebody else failing (or succeeding) and just express "sour grapes" and accuse them of just "playing political games".
That said, do politics enter into it on some level? Yeah, I'm sure they do. And I've been "the guy" before, watching other startups that I personally judge to be of very low quality and little potential get invited to events, get press coverage, etc., when we didn't. But to sit here and say "they got XXXX because they were just skilled at playing the political game" does feel like just "sour grapes" to me.
And even if it were true, what good does it do to bitch about it? Nobody cares and crying over spilt milk isn't moving us any closer to our goals.
I prefer to just stay heads-down, nose to the grindstone, work my ass off, and figure that we will succeed in the end, if it's deserved. We're playing the long-game here, and if our vision is correct and we execute, we'll get what's coming to us in the long term. If not, well... then we won't.
If you're doing what matters to you, it shouldn't matter.
One thing I always have in the back of my mind is to work hard to avoid hating anyone because they're good at what they do, and it's hard work because the human psyche is tremendously good at finding justifications and pulling the blinders over oneself. Tearing someone else down is the childish and easy way to build yourself up, but it's only in your own head, it doesn't actually make you any better and it doesn't impress anyone around you.
Hate should be reserved for people who really do bad things, and even then we're probably better if we can avoid the hate entirely.
One thing I always have in the back of my mind is to work hard to avoid hating anyone because they're good at what they do
Stop right there. None of us hate people who are good at what they do. When we find someone who's better, we seek that person out and try to learn as much as we can. I'd believe this to be especially true on HN, where there's an above-normal proportion of top-5% programmers, many of whom rarely get that opportunity to learn from someone of truly superior skill.
The problem with political players is that, while they suck at what they do, they're great at hacking evaluation processes and making themselves look superior. That hurts everyone (except them) because their shitty decisions and ideas result in a widespread proliferation of crap.
Sure, sometimes. But if your company is not doing so hot and you see some ridiculous acquisition and think to yourself how the fuck did that happen, it's easy to jump to the conclusion that it's political bullshit when in fact you don't really know the whole story. You don't know what the tech is or what the real numbers are or what the purpose of the acquisition was. I think it's very easy to jump to a conclusion on an emotional basis, and our belief in our objectivity is what makes this all the more treacherous.
Convincing people to give you large sums of money has always been based on gaining their confidence. And people being what they are, that confidence has always been based more on how you present yourself than on any objective logical measures.
What if I tell you that, there're a bunch of people who do nothing but present themselves? And, when they're co-founding a company with you, they still do nothing but present themselves (not your company)?
As Cory Doctorow aptly stated: every good eco system has parasites.
I'm sure these types exist, but they are an inevitable side effect of the properties that make the eco system successful.
Now, I’ve decided to refrain from naming names, since any specific mentions would almost certainly induce a wave of denials and distract from identifying and, hopefully, ending the underlying trend.
You've identified a "terrifying" trend, but you don't want share any names or substantiation because it would distract from the important discussion you think we need to have. That's really shoddy journalism.
That's the way I try to look at it. Nobody locally (RTP, NC area) seems to pay much attention to us or give us any credit, where when I look at what we're doing I can't help but think "What? Are you people crazy? Do you realize how fricking awesome this stuff is?" But then I have to acknowledge that I'm (very) biased, and that our focus should be on identifying, connecting with, and having conversations with, our future customers. Getting press mentions, getting invited to events, accepted into accelerators / incubators, etc., all those things ultimately play second fiddle to customers.
IF the day comes when we have paying customers and are growing, then the accolades and attention will come. Or not. In the end, it doesn't really matter. If we build a profitable, growing, successful business, it doesn't really matter if we get any accolades or not. Although it does pain my "inner Tony Stark" to say that, as I really want to have a big "Fogbeam Expo" one day. :-)
Net-net, I just try to remember "we haven't proven anything yet".
Well ... I think it is much simpler than that - startups are in a buyer's market. We have oversupply of startups concentrated in few relatively narrow classes of problems. So the most connected people win.
Which is paradoxical because the uncharted areas today are bigger than ever - but there are not much ships sailing there. Maybe the "solve problems that you have" mantra is becoming too influential. So we have two tracks - one of people with common problems and the tech skills to solve them and the other - much bigger - people that have real problems but lack the skills to solve the problems.
But we got success stories like Raspberry Pi - when people tried to solve a problem they didn't have but created something awesome in the process.
And just today Google bought a flying wind turbine startup - and it does not look like aqui-hire.
I've gotten hung up on this before, but after two years away from the Valley, I realized a lot of this stuff is small potatoes.
We've all seen companies that have been involved in multi-million dollar transactions on pure hot air and politics alone. These can seem discouraging to people who want to build actual businesses, and deals like Tumblr and Instagram are in another league entirely.
But, for most of them, you really have to look at the actual magnitude of these things (on a financial level) before you decide to be indignant about them.
As a thought experiment, if you take the amounts of money involved in typical fundings and even a lot of exits, and compare it to amounts of money involved in things outside the startup ecosystem, it can be thought-provoking, even if you're comparing apples to oranges.
For instance:
- The project budgets of large consultancies. (e.g. I worked on a routine project at a consultancy once where the budget was $12M.)
- Smaller government agencies and civil engineering works (e.g. new Central Subway on 4th St is around $900M [how much politics do you think is involved in that?])
- Real estate listings
- The amounts invested in even smaller hedge funds/mutual funds. (I think Zed Shaw had a piece on this)
- The profits of bigger SV companies that actually are profitable (Google, Apple, etc). Or, the budget of some given department in such a company.
- Real acquisitions outside of tech (see the WSJ on an average day for figures that can make your head spin).
I know these things are obvious, but it really needs to be stated sometimes. It's hard to rationalize big numbers unless you really think about it. And you can get tunnel vision living in the Valley.
$5M here and there is chump change in the grand scheme of things in the world that venture capitalists and large enterprises inhabit. There is bound to be a certain amount of noise you see observing these transactions, and definitely politics. Fun to watch and comment about, but not really important.
While these aren't grave injustices, I guess I would concede that when taken wrong, it does have some chilling effects for people like the OP and myself. The current business climate does create some awkward and unnecessary dilemmas for people in the uncanny valley between being an entrepreneur and an employee. There are plenty of smart people who, in a perfect world, might go for starting a fairly medium-risk/medium-return sort of business. But with all the "smart money" on crazy startups impacting everyone's salaries, the rents, and the news cycles, it changes things. If you do go ahead with it, you might be tempted optimize your business at least partially for a potential acquisition and spend more on generating hype than on the fundamentals. Or you might get such a compelling offer from one crazy, poorly-proven but well-funded and well-connected startup that you forgo your perfectly viable plan entirely.
So, the odd politically-motivated acquisition or funding shouldn't make you feel bad, but the cumulative effects can be suffocating for sure!
You said you left the Valley. Where'd you go? How do you like it?
I'm in New York. In 2005-7, it just seemed obvious that if you were young and wanted to have a career, you moved to the Valley or New York. However, I don't think it's that way anymore (if it ever was).
I'm trying to figure out where the future is, because the Bay Area's been parasitized by NIMBY and acq-hires and lost its vitality, and New York VC-istan's pretty damn uninspiring. Austin and Seattle seem like strong candidates.
I'd personally pick Austin if I were looking for an already established major tech hub that is not one of the coasts. It's got a fun atmosphere too, lots of music and good night life.
I would also look at Atlanta, Boulder, Pittsburgh, Philadelphia, Chicago, and Detroit. The latter is a really interesting contrarian pick: ultra-cheap real estate, neat history, and an interesting subculture of hacker/maker types.
Austin's changing and we have plenty of people more interested in the douchey vc tech scene than building cool products.
The cost of living is (for now) cheaper than SV or NYC but housing is hard to come by and the live music scene is getting pushed out of its old stomping grounds by luxury condos every freaking block.
I'm hoping one day to live in detroit. I keep hearing cool things going on there (even in other fields such as urban ag) so that potential mixed in with the actually livable real estate (It's sickening up here in NYC just listening to friends talk about how much rent is for what they are getting), and I wouldn't call myself a contrarian but I definitely one to try to find even if that means if I'm taking pieces here and there of others ways.
On the bad side, there is still this feeling of lingering racism throughout the entire area. The city itself is very poor, with the exception of a few neighborhoods. And outside of those stable/safe neighborhoods (and even within them to some degree), the city has this vast feeling of emptiness. Like it's Berlin after the bombings but everyone left.
Real Estate values are so low that you literally have one guy (Dan Gilbert) building his own Delta City downtown. It's not a bad thing to have a billionaire so committed to making a great downtown, just a little odd and strange that no other regional wealth holders have really stepped up. Gilbert is doing his damnedest to make Detroit a place favorable for start-up entrepreneurs. He's associated with groups like TechTown, Detroit Venture Partners, and BizDom U. There's also a pretty reasonably sized 'old-school' tech economy here from the auto industry. IBM, HP and Microsoft have big offices in the suburbs. Lots of people here work on mainframes, industrial HR software, factory automation, and the like. If you want to make software that has effects on real physical objects, no better place to do it than here.
On the good side you will never find a more committed group of people than those who are working to make Detroit better. Groups like the Detroit Mower Gang and the Hub of Detroit are great. It's pretty inspiring what many of these groups are doing. Architecturally, Detroit is absolutely astounding. For the price of a 1br in San Francisco or Manhattan you can purchase yourself a beautiful mansion that your friends on the coasts could only dream of. At one point Detroit was referred to as the 'paris of the midwest', and it really shows in the buildings that remain. You probably won't ever have to worry about a lack of affordable housing. If you are looking for some international flavor, Canada is just across the border and Detroit is ~4 hours drive (or a train ride) from both Chicago and Toronto. The region also has the largest Arab population in the USA. As well as large Japanese, Indian, Korean, Mexican and Vietnamese population centers.
Detroit isn't like other cities where the people in the region associate with the Central city. Philly and Baltimore have bad reps but people in Montgomery County or Baltimore County still defend their city. Up until recently (and still in the older generation) many people in the suburbs of Detroit simply don't care about the Central City, and actually take pleasure in seeing it burn. Regionally, the greater Detroit area's economy is actually pretty ok. It's just that none (or very little) of that wealth made it through to the city.
Depends on where you live. Many neighborhoods have private security forces. The area around Wayne State University also has police protection from the University's own security force.
Outside of those areas it can get pretty dicey depending. But ymmv. You have to know your neighbors and in some cases rely on their eyes in the neighborhoods.
The Detroit area in general is a pretty fine place to live. Good food, loads of great things to do outdoors (if that's your thing) which varies wildly by season, and it's quite cheap to live. It's very car-centric and owning one is practically required to get around, but if you're fine with that it's pretty all right.
As another data point, I've found Philly to have a lively and close-knit startup culture, albeit much smaller than NYC and SV. Gabe Weinberg (founder of DuckDuckGo) keeps an on-going list of links related to the Philly startup scene: http://foundedinphilly.com
I'd be curious to hear what ways you think Philly can improve.
Cool, I'm familiar with Gabe and salute his efforts. The city badly needs him/them. I was born in the city and went to college there so I hope it can become greater than what it is. The main thing, imho, that needs to happen, is to get the word out amongst college-aged people in the area and the attraction of more venture funding. The general attitude of the people there is what pg refers to in one of his essay's as the 'default'; graduate and work in a large corporation. This formula is not working anymore and the startup attitude needs to affect Philly and the rest of the country proportionally to the new state of affairs.
"Its dangerous reputation is mostly just reputation, but don't leave valuables in your car. Vehicle smash-and-grab crime is very high."
It has a dangerous reputation for a reason. Detroit hasn't really been safe for 10+ years. I lived in the area for 25+. Nearly everyone I know that lived in or around the city was held up, saw gun crime, or mugged.
I know two people that were shot in the middle of the day for being at the wrong place at the wrong time. Luckily, neither of them were fatal.
Another issue is that if you do have an emergency, the police/ambulance most likely won't get to you for many hours.
If you want a good tech scene, pick a city like Ann Arbor or Grand Rapids.
I'm from the UK and relying on the internets, but from my perspective anyone pretending that the Bay Area's still not the place to be right now has completely lost perspective. It literally has an order of magnitude more activity or even two in startups than anywhere else.
I moved to SF in 2009 and left because a product I made got acquired by an NYC company. I lived in NYC from 2010-2012, then moved back. Although things have changed so much here that sometimes I have second thoughts!
There are some things you can point to as indicators (e.g. rents have doubled). But I have a harder time gauging the sort of atmosphere/ethos and whether that's changed or I have.
(note I'm not affiliated with startups here at all, I actually have a boring corporate job in the suburbs. I just love seeing Detroit get back on its feet as a city)
All joking aside, what are your ambitions? Do you intend / desire to found a startup yourself? Do you want a job in a startup? Do you want a nice, safe, boring corporate job? Do you want to be a consultant? Freelancer? Wall street hedge fund manager? Other?
Anyway, if you are at all interested in the startup world, want to live somewhere without all of the hubris and pomposity of the Bay Area, and somewhere with a reasonable cost-of-living and a nice climate, come check out the Triangle (Raleigh/Durham/Chapel Hill) area of North Carolina.
Despite what you may have heard, the entire state isn't a right-wing, christian fundamentalist, redneck backwater with nothing but hog farms, tobacco farms, and cotton. The Triangle area is home to the largest research park in the world[1], and has a burgeoning startup scene[2], especially around the revitalized downtown Durham[3][4]. And we just had another tech IPO from a Triangle area company today[5]. Heck, we even had a local company win $50,000 on a CNBC reality show[6].
Seriously, there's a lot going on here and it's a pretty nice area to live in. With all 3 of the vertices of the "triangle" being "college towns" to some extent (Durham: Duke U., Chapel Hill: UNC - Chapel Hill, Raleigh: NC State University) there are plenty of young people here, and with all the big companies in the park (IBM, Cisco, Glaxo, tons more) there is a very diverse and multi-cultural population as well. Durham/Chapel Hill rank as the #4 city on the "most educated city in the US" listings[7] as well. And Wake County (Raleigh/Cary) has some of the best public schools in the country[8]. So, yeah, while the stereotypes about the South may have some truth to them, NC (especially this part) probably isn't anything like what you'd expect if you haven't been here (or aren't from here).
Real estate agents are rarely hired because they're the best. They're hired because they have a relationship with the person selling the house or their relative or friend. It's also difficult to separate the good from the bad because the business is all about connections and there's no way (that I know of) to measure their effectiveness.
Then, multiply that out over millions of houses and apartments and offices.
It's both surprising and alarming to me how many VCs cite "emotion" (rather than logic) as a main if not primary factor in their decision to fund a startup or not. I'd venture (no pun intended) to say that this is the root cause of much of the "politics" and cronyism described by the OP, and I don't think YC is immune to this either.
Sure, we can talk all day about "human nature" and how "those are the rules of the game", but there's gotta be a better way for investors to make funding decisions than "trusting your gut" or "I have a good feeling about this team."
Yes, VC has changed and evolved over the years thanks in part to new institutions like YC, but the overall VC landscape still reminds me way too much of that scene from the based-on-the-book film "Moneyball" where a bunch of old baseball scouts are sitting around a table discussing who to recruit for next season, and they keep recommending players based on fluff and BS like how good a guy looks swinging the bat (vs. actual hitting stats), how confident he looks, how good he he looks with his shirt off, etc.
This all leads me to believe that, while things are getting better, there's still a long ways to go before Silicon Valley and michaelochurch's so-called "VC-istan" can be considered anything close to a true meritocracy.
The problem I see with your complaint is that any early venture funding is a bet on people ("I have a good feeling about this team") and there's no escaping that.
The real Moneyball was based on using better metrics to choose players ... in a rigorously constrained game. Starting a business of the sort we're talking about is entirely different, and I see little in the way of opportunities to apply logic to the choosing people question.
I agree that baseball is easily the most "rigorously constrained game" there is, but I don't think that's reason to dismiss the use of more/better metrics in assessing startup founders and teams.
The same argument you make was once used to dismiss the value of metrics in other more free-flowing and less-constrained sports like basketball, but analytics has become a staple of the sport ever since. [1] And since then, advanced metrics have even found their way into Mixed Martial Arts (MMA), of all things. [2]
Sure, starting a company is obviously very different from sports and building a sports team, but I don't think it's THAT different. Sports is essentially a simulation of real life, and I think the move to using advanced metrics in startups is inevitable. If you think about it, even startups are a highly constrained and simplified (i.e. smaller-scale, less people, more uniform "path", etc.) version of running a big business. I see no real reason, besides general skepticism, why metrics cannot be used to improve the startup fundraising process.
Everything is political, because everyone else is political, except for me - I'm not political.
The winners of the political game are the same individuals who reinforce the political game, and the people who complain about the politics are inevitably the ones who can't muster the energy for fake affection, enthusiasm, flattery, obsequiousness and therefore lose the political game.
As soon as something has become a culture in itself it is already too late - it is and will forever be political, til the very beginning of the next big culture shift, which will also inevitably become political.
It's self-selecting, and it's been going on since the beginning of history.
The only answer is to not give a shit. To not complain about politics, or if you happen to be a winner of politics, to be self aware enough not to then turn around and reinforce the game that you just won at.
The OP is presenting this as if the objective of every startup is to get fundings or to get acquired. It's not.
The objective should be to help a big number of users with something and make profit.
Funding should be just a tool to help you achieve that if you can't bootstrap your business. If there are VCs who fall for tricky presentations, they'll soon realize that it is not that fun to lose money investing in startups with no future.
If there are two camps, these would rather be 'those who want to build a business' (sending invoices, paying customers, etc) and 'those who want to make a big flip' (with major financial rewards)
Since VCs (and indirectly LPs) are in the business of growing money, they will follow the money.
Its not as scary as it first appears as VCs have a huge incentive to correct this while in the corporate world, the incentive to correct it is quite less.
I feel like the douche-pocalypse described by OP has already happened. It's not a future threat. It's how most people have to live. The Apple founders would be unable to get funding these days. They wouldn't even get a meeting.
VCs have set themselves up as executives (maybe more like record industry shot-callers than steel-company management) of the first postmodern corporation. If you don't take their terms, they can't exactly fire you, so they fund your competition. Tech press is a weird sort of HR organization, and so-called "startup CEOs" are merely product managers within this weird meta-corporation that is just as badly stacked against software talent as a 1970s steel company.
It's having pernicious effects on the software industry, which is now a hotbed of mediocrity utterly opposed to what it used to be.
I think what killed software entrepreneurialism for good was the rise in housing prices, coupled with the student debt epidemic and the cost of health insurance. Unless independently wealthy, no one can actually afford to "bootstrap" in these locations, so true entrepreneurial activity has been replaced by VC-istan careerism.
I don't know where the future is, but it's not in Silicon Valley now-- no place where middle-class houses cost $1.2 million is anywhere near the future-- and it's not in New York, and it may not be in the U.S. at all.
On a side note, I wish people would stop calling the VC ecosystem in the Bay Area, "Silicon Valley". That's why I use VC-istan. They're different things. Silicon Valley has a 70-year history and it hasn't always been VC-istan. VC-istan is just how it died.
I've been doing startups since the mid 1990s†. There is no reasonable argument that says that it is harder for tech people to get funding now than it was in the 1990s. It is much, much easier to get funding in 2013 than it was in 1999 (which was the last time I got funding):
* There are more investors doing deals now than there were then
* The deal size needed to start any given company is lower and investors are playing along with that instead of holding out for deals they can shove 8MM into
* More technical people with no previous operational experience are getting funded than got funded in 1999 --- you can just look around to see this; bubble companies still needed grey hair and/or Ivy MBAs to get off the ground
* Companies have better pre-A-round options (particularly, syndicated convertible note funding) than they did in the 1999s, when "angel investor" meant "best friend's rich uncle gives you $200,000"
* There are more people with operational experience in software companies staffing VC firms
In 1999, if you were a software developer with a good idea, a working prototype, and just a little bit of traction, but no experienced operators and no inside track, you had no realistic chance of getting off the ground with external funding of any sort.
Your whole argument stems from a flawed observation and so, I think, falls apart when the observation is shown to be incorrect.
I do not like venture fund financing either, but the hyperbole you bring to these arguments does my own dissatisfaction with the model a disservice by presenting an easily dismissible caricature instead of an argument.
† From 1995: 1. Bootstrapped ISP with mid-double digits FTEs, 2. Angel-funded product company that exited successfully, 3. Venture funded product company that failed, 4. Venture funded product company that eventually exited successfully, 5. Matasano; I had key/sr/mteam roles at all of them and founded 2.
I would suggest the two of you are describing different parts of the elephant.
I was deeply struck by Venkatesh Rao's arguments [#] that entrpreneurlism now is simply a new form of hiring than genuine disruption. Michaels comment that VCs are the execs in some new corporate format has the ring of truth.
However, it certainly seems there is more capital, more widely available, and more fairly accessible both in the US and elsewhere. This means that a vastly increased number of entrpreneurs will be able to take flight and not all of them will be lacking the leverage of insight into tidal forces that Michael is alluding to.
Anyway I need sleep, but it seems to me that there is an elephant in the dark, it is the shape of Western workforce in the future - and we are all trying to describe its shape.
The notion that entrepreneurship is simply a different form of hiring is a popular notion that bears no relationship to reality. Operating a company is nothing at all like having a job. Operating a company that is cash flow positive after paying market salary is an extraordinarily privileged position relative to any reasonable (ie, not a first baseman for the Yankees) candidate/employer relationship in the market.
The thing that makes people believe that entrepreneurship is merely a hiring challenge is that most companies fail, and in this market, tech talent is so scarce that a failed startup team can still generate a premium. This is called "a safety net", and it is a good thing. You should be extremely wary of the kinds of people who argue that safety nets are a bad thing for tech startup people. Companies don't do their best work when they're dangling their development team's feet over the prospect of having no income and no health insurance if they fail.
The fact that most new businesses fail is not a new thing. Most new businesses in all sectors fail. That's why the rewards for financing a successful one are so high: that capital has been put at extreme risk.
I completely agree that a safety net allows you to concentrate on good long-term work and is invaluable.
But I also glimpse a new way of organising work. New ways of bringing together teams and rebuilding old networks, flexible remote working making this possible in ways not seen before. Add into the mix totally new market-types opening up (Indian micro-products where you need to think and capture value at fractions of a rupee at a time will demand insights that no-one walking the streets of SV will ever grasp)
I doubt that new entrepreneurialism is going to be a better sort of linkedIn for HR departments - but I do think that the (tech) world of work I will retire from will be radically different to now - and there are advantages in knowing which way the elephant is pointing.
>I've been doing startups since the mid 1990s†. There is no reasonable argument that says that it is harder for tech people to get funding now than it was in the 1990s. It is much, much easier to get funding in 2013 than it was in 1999 (which was the last time I got funding)
So, the "since the mid nineties" is a big misleading.
You might have been "doing startups" from then till now, but you were on the getting funds game from "mid nineties" to 1999 -- which is like only for 4-5 years at most, more than a decade ago.
And even that was during the most "give funding to any BS" bubble period in history, so it might not be that indicative.
No, I also read the arguments -- I even agree with some.
I just wanted to point out that the "experience" part you mention (which people might see as validating) might not that relevant for the current climate.
If you had read the comment, you'd see that your attempted jab about my experience during the first bubble does the opposite of harming my argument; I am, obviously, arguing that it is easier for techs to raise external funding in 2013 than it was during the time of "give funding to any BS", as you put it.
>I am, obviously, arguing that it is easier for techs to raise external funding in 2013 than it was during the time of "give funding to any BS", as you put it.
And by what bizarro logic is that argument not harmed by your inexperience in the current funding scene?
That is, how does you arguing that "it is easier for techs to raise external funding in 2013" get any credibility by your 1999 experience?
That statement might or might not be true (it could very well be easier to get funding in 2013), but if you're gonna play the experience card, then you'll also need 2013 experience to compare the two eras.
The Apple founders would be unable to get funding these days. They wouldn't even get a meeting.
This was true in the 70s as well. The Apple founders had to rely on revolving credit from the parts suppliers to get the parts they needed to get off the ground.
Eh, that's more like angel level stuff. Wikipedia's history is lacking in details, but says "Jobs eventually met Mike Markkula who co-signed a bank loan for US$250,000, and the three formed Apple Computer on April 1, 1976." That's a million in 2013 dollars.
But I know they got VC funding later (and I seem to remember they weren't given the third degree in getting it) and Wikipedia acknowledges that saying "On December 12, 1980, Apple launched the Initial Public Offering of its stock to the investing public. When Apple went public, it generated more capital than any IPO since Ford Motor Company in 1956 and instantly created more millionaires (about 300) than any company in history. Several venture capitalists cashed out, reaping billions in long-term capital gains."
They had traction well before they met Mike Markkula - the Apple I sold out, even though it was nothing but a kit.
If can show traction today similar to what Apple had, you'll have a bidding war of investors on your hands. This is how YouTube and Instagram got bought for $1B+, it's how Google got two separate VCs to co-lead their series A, and it's how any number of other small startups attract investor attention.
The thing that's new is that you can sometimes get VC funding based only on an idea, without traction and without a prior business relationship. That never used to happen before YC. When I quit my job in 2007 to pursue a startup (2 years work experience), I told our VP of BizDev (a former investment banker) "Realistically, we have about zero chance of getting VC funding without traction, but this is our chance to try to build traction and see if it's fundable ourselves" and he was like "Well, at least you're being realistic about your odds."
Not that I necessarily disagree but YouTube, Instagram and Google are bad examples. The first two had founders who were master "politicians" and were already well connected in the valley. Sergey and Larry were Stanford CS PhD students who merely had to impress their professors with their prototype to get introductions to SV Royalty.
Facebook would be a good example though. Zuck did come from Harvard which added credibility and opened some doors but from the beginning FB's traction is what mattered far more than anything else.
I respect you a lot Michael, but don't you think perhaps you are romanticizing the past a bit too much here? I mean there was a time when tech advancements were more fundamental simply because you couldn't do as much in software. What makes you think VCs have changed so much?
I don't know whether VCs have changed, so much as they've either pushed themselves or been pushed into an inappropriate role.
A large part of it is that big companies have given up on trying to innovate (they just buy innovations, at a panic price) and the people from whom innovation typically came are now a pariah caste of almost-unemployable miserable geniuses. Even worse, those people can't raise funding anymore because they've been outcompeted (for attention, press, and funding) by people with superior social polish but shittier ideas.
VCs are private equity guys. For deciding whether two $300-million biotech companies should merge, they're probably the best people out there. It's not that they're "good" at making those calls, but that the companies are so complex and unusual that almost no one is, and they're the most adept at figuring out what's going on amid the chaos. They might be able to tease out a +0.02 correlation in decision-making while the rest of us would get zero. For figuring out who has the competence to start a tech company? They're in the dark. Not a clue among them. It's not what they learned in business school or McKinsey. They'd do 100 times better to have a person like me do the talent scouting/vetting, but for a variety of reasons that will never happen.
The real evil isn't VCs so much as it's the replacement of R&D by M&A, representing a wide-scale trend of engineer disempowerment. Being a software engineer used to be an R&D job because non-engineers understood that they didn't know how to do that job, so it got a lot of autonomy and trust. Now, it's being treated as commodity work, and the result is a catastrophic dilution of the industry. VCs aren't singularly to blame for this, but they certainly didn't stop it.
It was actually a lot better, for engineers, to be in R&D labs of large companies than it is to be an engineer at a VC-istan startup. You had more career growth and more opportunities to learn stuff. Don't be fooled by the bullshit equity handed out now. Sure, these R&D engineers didn't get rich at 27-- they had to strike out on their own to do that, and many were happy being upper-middle-class technology researchers as a lifelong career, so most never did-- but most VC-istanis don't either.
We need to bring back the R&D flavor of the software industry, or we'll have lost the industry for good.
There is a fundamental problem in everything that you say.
The VCs may be private equity guys, but they have learned to pay attention to what is said by angels and early seed investors. Who in turn frequently got that way by being in successful startups. Which really did compete on merit. And those people know plenty about programming.
As a case in point look no farther than ycombinator itself. I first heard of Paul Graham because he was a well-known Lisp hacker, and when I was starting in programming I was told to read a book of his to open my eyes to how much I did not understand. (I did read On Lisp and highly recommend it.) I first heard of Robert Morris because he famously accidentally took down the internet. They got the money with which they started ycombinator by running their own startup. And every year they identify dozens of unconnected but talented people as people who deserve a chance, and suddenly some kid whose main qualification is that they could impress some talented hackers is in one of the most prestigious inner circles in the Valley.
And yes, part of what they look for is the "social polish" that you deride. Because they've learned that you need some of that to make your business succeed. And yes, they will help you learn how to spin yourself successfully. Because that also helps in the real world.
But in the end they give a first step up to a lot of people who then go on to build everything from better online analytics to motorcycles that won't fall over.
You've bought into the startup porn a little too much. YC is a startup mill -- they make a TINY investment, and it doesn't matter if most of them fail. The failed founders make a HUGE investment, and its on their head that the majority of the cost of failure sits.
YC floats on a bubble of spit and polish and politics. They want people like you to buy into it, because they need to take advantage of people like you.
You're the one who doesn't understand what is going on here.
The failed founders are adults who walk into the project with risks understood. Yes, a large percentage fail. However the ones who fail wind up with invaluable experience, an excellent item on the resume, and a network of connections to help them either try again or get a job. This is not a horrible downside if nobody is depending on you.
As for me, personally, I'm a married middle aged man who has been watching this from a distance. I have plenty of friends who have entered, gone through ups and downs, and mostly wound up reasonably well off. Unfortunately I have family commitments that have made the risk profile wrong for me. I also sat out the dot com crash and watched a lot of people lose a lot there.
I've also seen a lot of people think they were entering the startup world without a clue about what they were doing. They go through the motions, then painfully lose their shirts. Anyone competent develops a radar for those unfolding disasters. I feel sorry for them, but learned a long time ago the dangers of trying to rescue people from self-inflicted injuries.
> The failed founders are adults who walk into the project with risks understood.
Most of the YC founders are barely out of college.
> However the ones who fail wind up with invaluable experience, an excellent item on the resume, and a network of connections to help them either try again or get a job.
You're really just pushing the startup religion; that somehow inexperienced people who failed at getting traction now have a resume bullet point and a great network?
If that's true, then it just lends credence to the original article's point that we've replaced quantifiable quality with politics.
At their age I went to graduate school in math. Which was a longer time commitment, at lower likely salaries, which left me with no real employable skills.
I do not see a failed startup at that age as a worse economic choice than graduate school was for me.
Losing 1-3 years of career development by working at a failed startup with other 20-somethings from whom you have nothing to learn is a very expensive career choice -- unless we do actually live in a bubble of vapid startups in which actually being good at your job (whether it's programming, business development, or otherwise) doesn't actually matter.
That's not even factoring in the broader opportunity costs, actual cash outlay, etc.
I don't think that's the right way to think of Y Combinator. It's Harvard++.
What incubators and VCs and tech press sell, much more than money or exposure, is legitimacy. Once you're legitimized, you don't need to worry as much about money because it will seek you out.
Being YC means you're already legitimate (it was the first of its kind, and is therefore highly prestigious) and require almost no further capitalization from YC itself.
I tend to view the tech R&D golden age as a product of post-war prosperity and the unique advantages the US had during the latter half of the 20th century. Trust between corporations and employees, and indeed the longevity of corporations themselves has now been so eroded that no one is willing to continue playing the long game of R&D. Take into account the insanity of how the patent system protects all the wrong people and has on balance the exact opposite of its intended effect, and I see the current situation as a bit of a Darwinian inevitability.
Being a software engineer is still a kick-ass job compared to almost anything else out there today.
Being a software engineer is still a kick-ass job compared to almost anything else out there today.
No, I really don't think so. If I were to do it over again, I would rather be an Alaskan fishing boat operator than a software engineer doing 99% of the stuff that paid programmers have to do.
My body is mediocre. It works, there's nothing wrong with it, and I'm probably in the top 33% for physique, but I'm not Olympic material, so using my body for mediocre physical work does not offend me. It seems about right.
I think I would be happier in medieval times when there was no expectation that a smart person would do high-quality work. You did harsh physical work for 45 years and then died. Seems more fulfilling than this corporate bullshit where a bunch of well-connected high priests don't merely do less work and make more money, but the fuckers think they earned it!
My mind, on the other hand, is Olympic material and any time someone tries to coerce me into using it for the grunt work they don't want to do, it just makes me homicidal.
This comment is the worst piece of crap I've read here. It reads like the worst kind of egotistical, entitled, and insular stereotype of people in this field. You ought to be ashamed.
You mind, "_is_ Olympic material". Bollocks. Did your Olympic class mind research the fatality rates and lifestyle for Alaskan fisherman? Happier in medieval times? Are you out of your damn mind? God help you that you have to deal with a boss that makes more money then you and doesn't recognize what a snowflake you are. I can't believe you have to deal with mundane tasks like the rest of us peons.
EDIT: I read the civility note, but how does the parent comment have positive points to engage with constructively? Honestly. It is pure tripe. I bet that 6.8 billion on the face of the planet would do anything to trade place with this guy, and he's wishing that he lived in a time when 1/3 of children died before age 5 and 1/5 of women died because of childbirth? Just because he is suffering from malaise? Can't he watch Office Space or Fight Club to get it out of his system? Didn't more than 1000 Bangladeshis die in a sweatshop less than 1 month ago? What a stunning lack of perspective and empathy.
You hold strong opinions for how little you understand.
I am aware that there's a higher fatality rate for Alaskan fishermen than software engineers. However, I don't really worry about dying. I do worry about subordination, which I find to be worse. If I'm to die, I'll die. But the slow death that takes 50 years (subordination) is one I can't tolerate even thinking about.
Also, let's talk about the emotions that come along with robbery and crime.
Let's say that someone robs you at gunpoint and take the contents of your wallet. Lucky for you, you only have $3 in your wallet at the time. So the financial loss is trivial. You're still traumatized, and no one likes being robbed. No one. Even with only $3 lost, you'd probably rather this never happened, and avoid the place where the robbery occurred for a long time.
Yes, there are horrible things in the world that I can't control and those are far more awful than the state of the software industry. That's true. If I could change them, I would; and I'd feel awful if I didn't.
However, people are fundamentally local in how they engage with the world. They tend to focus on things they can change, the robberies in their neighborhood rather than half a world away. And, fundamentally, what we need as software engineers is a neighborhood watch for our industry.
The problem with Work (the social-climbing game, not the activity) is that when you get robbed, it's taken to be entirely your fault. If someone steals from you and fucks up your career, you're the loser, not him. He probably got a promotion for that shit.
What is the matter with you? Why do you write like this? Are you trying to build a personal online brand? Talk like an actual human being.
I don't need 5 paragraphs of explanation about why we deal with problems that are immediate to us. That is obvious. Prairie dogs understand that. Granted, that was not what I objected to in your original post, but I'll give you a pass on that.
Now, your last paragraph would be interesting if it weren't the fundamental point of (most recently and noteably) Karl Marx, who, interestingly enough, lived his entire life and wrote out a far better though-out version of your rant before there was a single computer. This is the what the rest of us have referred to as, "shit happens" for centuries.
I probably wouldn't have created a throwaway in the first place if it weren't for the unbearable arrogance in your posts when you're talking about something that philosophers have been discussing in far better depth for centuries, and the myopic belief that this is unique to software. Even if you switched too commmercial fishing you'd probably be the one complaining that he's stuck at deckhand because some other guy kissed the captain's butt to make first mate.
While the bitter negativity is a step to far, I also think that you romanticize serfdom.
Read The Prince and tell me that corporate political ethos is not the same as 15th century court intrigue. All your work in either case is at the whim of those in power.
I don't "romanticize serfdom", but there is one advantage of pre-industrial serfdom over modern subordination. It lasts half as long; if you're lucky, < 1/50 as long.
You imply that malnourishment, lack of medical care, and hard labor, all contributing to an earlier death very soon after the end of productive capacity to be superior to a longer, less physically taxing, existence with more (Maslovian) needs met- that also has a high probability of retirement;
given 98% of your productivity in both systems profit other before yourself: your goals are clearly suicidal or trolling
If you would rather be a serf, then you can go - now - to some random country in Africa and try your hand at subsidence farming. The experience is pretty much the same as serfdom was, and your current economic situation is likely to let you start with a big step up over most of the locals.
> If I were to do it over again, I would rather be an Alaskan fishing boat operator than a software engineer doing 99% of the stuff that paid programmers have to do.
I usually find your comments thought provoking but as somebody who is familiar with this industry I assure you that this is not the case.
No need to even go into the conditions, which are probably more horrible than you imagine (in terms of the work itself, workers' physical safety, interpersonal interactions that usually range from unfriendly to physically abusive, and overbearing managers which we all know you despise). Those are obvious. But if you think that VC's exercise undue influence on the tech industry, and if you chafe against this kind of control (as it seems you do), you would not enjoy an industry where people doing the actual labor and putting their lives on the line (really) make very little compared to the extremely large companies that bankroll the operations and distribution.
A nitpick, I know, but... software development is still not a bad industry to be in compared to most.
I have to assume he is trolling here as he is quite a bright lad after all, and he had nothing to say when I called him out in my reply. As a troll it was one of the most effective I've seen in a while just by reply volume.
I have go call bullshit on this. You are probably younger than every Alaskan fishing boat operator today and you could go do that tomorrow if you really wanted. Also, why would it be better to pay 80% of your labor directly to a king who would let you starve after a bad harvest or two than it would be to deal with some douchey suits?
I mean you can't really be serious with this, it's just a diatribe against the existing corporate hegemony, am I wrong?
> Also, why would it be better to pay 80% of your labor directly to a king who would let you starve after a bad harvest or two than it would be to deal with some douchey suits?
Most of the time its literally the same thing: pay 80% of the value of your labor to someone who doesn't care if you starve in a drought.
In medieval times what you produced had intrinsic value. If you work in a corporation it's impossible to isolate the value you are creating from the company itself. Maybe they take 80% of your value, or maybe you are extracting a paycheck and providing negative value. In any case though, I find it disingenuous to seriously compare this to being essentially enslaved by a feudal lord.
Companies are built on employees creating more value than they are paid. That's obvious. The fact that its harder to measure who produces how much doesn't change the dynamic, it just means you have to do the analysis statistically instead of individually.
The other thing companies are built on is employees being able to create more value within the company than outside of it. Every single employee has the option of quitting and founding their own business. Several do. Many take a pay cut to exercise this right.
This is a crucially important point. The question becomes: to what extent does the accumulation of capital, expertise, equipment in a corporation render a software engineer able to produce more value than working on their own, or in a partnership, or other arrangement?
I would imagine this varies dramatically by industry. I know several of the biosciences, for example, do require a lot of specialized people, equipment and tons of cash... Many of the areas we're seeing disrupted by startups are areas where you'd hit diminishing returns (from, say, more equipment / capital) rather quickly.
FWIW, if you'd really prefer to be an Alaskan fishing boat operator than a software engineer, that option is open to you. I have a friend that spent 6 months on an Alaskan salmon-fishing boat before taking a job at an economics consultancy. He said the work is back-breaking, the job conditions are dangerous, the hours are insanely long...but it was overall a pretty good experience, because he learned that maybe office work wasn't so horrible. (He forgot it a couple years later when he quit and decided to party it up in Thailand off savings later, but that's another story...)
Also FWIW, I used to think my mind was Olympic-class material as well, and certainly had the test scores and comments from accomplished adults to back it up. Maybe it still is, but I care a whole lot less now, because I've learned that beyond 120 or so IQ, EQ matters a lot more. And if my mind is actually that awesome, I could use it to increase my EQ rather than complain about how nobody recognizes how brilliant my IQ is.
"I would rather be an Alaskan fishing boat operator"
Having spent a week on a trawler in the North Sea (and coming from a family where most of my males ancestors for ~300 years were fishermen) I can emphatically state that I like having a job on dry land.
It is incredibly hard work, uncomfortable, risky and unpleasant in just about every way possible.
I love being a software engineer, but I would quit in a second to become a crew member under Han Solo on the Millenium Falcon. Until that opportunity shows up software developer is one of the best jobs on the planet. Go work physical labour for awhile, then make a decision. If you like it better than switch, if you don't like that then switch again. There are no limits besides those we create for ourselves. Oh, you do have to let go of the thinking that money matters, you might have to get a cheaper house or have some hard discussions with your wife or friends. If they love you though they'd rather live in an apartment with a happy person than a huge house with an unhappy one though.
As someone who actually lives up in Alaska, I think you guys may be romanticizing it just a tad. Sure, it's adventurous and everything, but do you really want to live somewhere where you have multiple feet of snow nine months out of the year (or more - we had a snowstorm just about a week ago. Yes. In May.) Everything is more expensive, jobs are hard to come by unless you want a two-weeks-on two-weeks-off rotation to somewhere where it's even colder (-50 F plus wind chill is pretty normal for the Slope), etc.
If you do want to deal with that, good-for-you, but it's not like the grass is verdantly greener here.
And yes, I know you both were probably only half-serious. It just amuses me when people refer to Alaska like its some sort of mystical Last Frontier. It is pretty cool up here, I must admit.
I had the great opportunity of interning at HP Labs during my Junior year summer, and it was (in its own way) the kind of R&D haven that you describe. My team was comprised purely of PhD scientists, many of them former Xerox Parc exiles from down the road. Brilliant, wonderful people who could spend decades as engineers and researchers and be appreciated for their technical contributions.
It definitely had to deal with the corporate mandates, but (at least in my team) the team manager was a player/manager (MIT PhD who could do EE, ME, and CS) who was quite deft at managing the politics.
I imagine the place is being slowly eroded, especially given how poorly the company has been doing as of late, which is really a shame and I wish I were in a position to do something about it.
>A large part of it is that big companies have given up on trying to innovate (they just buy innovations, at a panic price) and the people from whom innovation typically came are now a pariah caste of almost-unemployable miserable geniuses.
Why innovate when the miserable genius idea generates a 10% cap rate and you can borrow from your wall street pals for 3% and run the company like crap so it only generates a 5% cap and it still makes money?
The miserable genius eco-system has very expensive money. Meanwhile, up in the wall street/VC jet stream, money is easy to come by.
I guess a lot of large corporations and their shareholders have stopped thinking that they can or want to do creative/innovative work, and have decided to focus on doing repetitive work more profitably.
That's why I use VC-istan. They're different things. Silicon Valley has a 70-year history and it hasn't always been VC-istan. VC-istan is just how it died.
To be completely honest, I never knew you intended to imply a geographic location when you use the term "VC-istan". I always thought you were applying that to refer to, basically, all VCs, anywhere.
Not sure if that changes to the extent to which I agree/disagree, but it is a detail that wasn't apparent (at least to me).
Sorry for the confusion. No, I don't intend VC-istan to be pinned on a specific location. There's definitely a New York VC-istan, and probably a VC-istan for every city that has a serious VC scene.
However, people use "Silicon Valley" to mean VC-istan, but Silicon Valley is something much bigger (at least in time, because it goes back about 70 years).
I've decided that if I had a dollar for every occasion that you refer to VC-istan, I could retire. The idea that people a) don't bootstrap here or b) can't afford to live here is some sort of VC agenda is just ridiculous. This is the pinnacle of the software developer's era of leverage, and yet you seem to insist that it isn't. Where's the proof?
This is the pinnacle of the software developer's era of leverage, and yet you seem to insist that it isn't.
Really? This must explain why every software company runs open allocation, instead of people being stuck on projects that often hurt their career. It must also explain why software engineers get to pick their tools and never get stuck maintaining legacy garbage that really doesn't add any value, but that risk-averse empty-suits are afraid to throw away. It must also explain how software engineers get paid enough money to raise a family and weather the instability of this industry, with its disposable companies and all that. It probably also describes the absence of age discrimination as a threat that begins in the mid-30s.
Oh wait, I just described an alternate reality that doesn't exist. And the real one is pretty horrible.
Maybe the world is dramatically different where you live and, if so, I'd love to hear about it. What I've seen is pretty dismal. Low respect for people who actually write the code, lots of legacy, low autonomy, ageism starting around 30-35. ("If you're so smart, why don't you have my job?") Even Google is closed-allocation. Now, if you know where to find something different from what seems to be the prevailing software industry experience, I'd love to hear about it.
Me and my friend recently talked about housing prices here in SV. His father moved to SV about ~25 years ago and was a tech worker in Cupertino. About a third of his income went to housing, and we calculated it would be around that price now too for current tech workers. It's above the US average, but it's still stayed somewhat consistent. You have adjust for the very recent complete cash sale, foreign investor, unoccupied house boom here driving up the price.
Remember, you have the option to drive 30m to Hayward from Palo Alto and buy a 3bed2bath for $330k. You don't have that option in lets say Vancouver, BC where a 3bed2bath costs $850k, and 30 minutes away in New Westminster, BC a similar house still costs $850k.
Student debt and health insurance is something epidemic to the entire USA, and you can still cost reduce it somewhat by being young and going to state universities.
"Remember, you have the option to drive 30m to Hayward from Palo Alto and buy a 3bed2bath for $330k. You don't have that option in lets say Vancouver, BC where a 3bed2bath costs $850k, and 30 minutes away in New Westminster, BC a similar house still costs $850k."
These prices and this dynamic are not even close to representative of most of the US.
hot cheap money does it. Wait for the FED to raise interest rates. I.e. why to invest in a startup when just keeping cash in a bank deposit gives you 7-10% return?
I read somewhere that the average return of VC companies hasn't been higher than traditional investments for the past decade. Wow! VC is high risk, should be high return. It is high risk with blue chip stock return.
This type of anomaly still functioning is possible only because of the low interest rates environment we have had for the past 15 years. Cheap credit enables this. People being forced to invest as they can't just keep money on 1% "savings" bank accounts helps that too. Once the hot air is out, it'll all go back to normal.
Not that I think this is a bad thing mind you. It just is. It's like dating-it's futile to complain about the rules. They're just the rules. You're trying to convert capital into a successful business, so you gotta play by the rules of the people who have the capital. Which is true for pretty much everyone. Being in Silicon Valley doesn't insulate you from the reality that exists everywhere else.