If the bubble's burst, no one's told us in Silicon Valley

Click to follow
The Independent Online

"It's so hard, I've almost given up being frustrated." These were the words of a Silicon Valley colleague, just another guy in the trenches here in dotcom land. He was talking about how hard it is to make progress at a startup.

"It's so hard, I've almost given up being frustrated." These were the words of a Silicon Valley colleague, just another guy in the trenches here in dotcom land. He was talking about how hard it is to make progress at a startup.

We were also talking about the recent events on the Nasdaq stock market and about the local press reaction. San Francisco TV stations have been heavily promoting stories about the "sudden crash" of the dot.coms.

Local newspapers have also been playing on resentment against dot.comers with reams of not particularly well-informed copy about company after company hitting the wall.

Gleeful speculation about BMWs soon to be repossessed and a real-estate crash just around the corner find a ready market among the majority of Bay Area workers who are not in dot.coms. A local paper recently featured a long rant - complete with front-page picture - that San Francisco wasn't "our" town any more, thanks to the dotcom minions.

So we were having breakfast at the Peninsula Creamery in Palo Alto, sorting it all out. The Creamery, along with Buck's in Woodside, Café Barrone in Menlo Park and a couple of dozen other joints, amount to the public meeting rooms in the world's largest and loosest company, "Silicon Valley.com".

The Creamery was its usual early-morning self - deals were happening everywhere: lots of people and mobile phones in constant, chirping action. Legal pads, spreadsheets, printed PowerPoint presentations and laptop computers covered the table-tops, mingled with coffee cups and plates of pancakes. Earnest, pitching voices were held low to avoid spilling top-secret business plans to the guys at the next table.

If Silicon Valley is crashing, the Valley's players haven't noticed, yet. There's a queue at the door every morning at the Creamery and every other eatery favoured by the deal-makers. And that's just the morning spots: don't get me started on lunch and dinner hangouts.

My colleague, a guy named Mark Anderson, is like a lot of Valleyites - he makes no regular pay cheque. He works as a hired gun for startups, and normally accepts equity - stock options with no value - rather than cash. He lives relatively modestly to keep his expenses low, and anyway, he's always working so he doesn't really have time to enjoy a house or flashy car.

And Mark has worked long and hard for companies that are likely to disappear. Unlike people in almost any other industry, he never gets paid for a lot that he does. If he's lucky, some day, one of the companies he's worked for will succeed, and then he can get a cheque.

In fact, he rides a bicycle to most of his gigs. So much for the repo man getting his BMW - and so much for the stories in San Francisco's dailies, about Valley millionaires. A lot of people have made money in the Valley, but the picture of streets paved with gold is at least a little distorted. Most Valley workers are not independently wealthy - not when nine out of 10 of their employers fail.

And the notion that dot.coms are suddenly hitting the wall is just plain laughable. Most startups fail - in fact, venture capitalists will tell you that nine out of 10 startups fail in the sense that they don't go all the way to becoming fully fledged operating companies.

And, anyway, what's a successful company? Of the 100 largest companies in the United States in 1900, only one, General Electric, is still in business. Looked at from that perspective, 99 out of 100 "successful" businesses fail, so the dot.comers are actually doing 10 times better than the big, established companies.

Dot.coms are startups and startups mainly fail. It has always been thus, and it will likely always be thus. It's probably never been easier to start a company than it is right now, but that doesn't change the reality: it's very, very hard to start up a human enterprise.

Lots can go wrong - and does. Great ideas get sunk almost daily because people can't get it together to agree on a business path, because they're not experienced enough, because they don't market well, because they market well but have lousy products, because they don't understand customers, because they didn't really check the market out, because they charge too much, because they charge too little, because they give their product away free, because they didn't give their product away free, and for at least 100,000 other reasons.

And then there's things that were lousy ideas to start with. Look at any venture capitalist's list of funded companies and this will become painfully obvious. It's even obvious to the VCs, who'll tell you they have no plans whatsoever to offer additional funding to two-thirds of their own startups. VCs call it "drowning the kittens" - the Darwinian process by which they winnow the fit winners from the unfit losers. And sometimes, great idea, great people, and great execution hit bad luck and disappear anyway. It happens.

So just because recent events have reminded "overly exuberant" (a term I usually take to mean "greedy") investors that startups are risky, doesn't mean the people who do them are likely to stop doing them. Hope springs eternal, I guess.

cg@gulker.com

Comments