Hi Mike,
Good morning and thank you for weighing in again on this subject. I agree the level of discourse that has crept up in follow-on comments and articles to my original article has been quite potent.
I also feel that the harsh, and sometimes whiny, sentiment is indicative of the challenges facing those that are building companies and searching for funding here in Austin. People have called, emailed, Facebook’d, LinkedIn’d and told me face-to-face that the egregious terms and lack of local funding is effecting them too. We can also attribute the tone of the follow-on articles and comments to emotions. People were triggered by something in that article. It hit very close to home for many.
The reality obviously exists somewhere in the middle. When the issues were brought to light, people got defensive on each side of the issue and formed two camps. It is that two-camp model that creates the problem. The Austin startup ecosystem should be coming together to talk about this, but we don’t have a place to do this and I would disagree with anyone who says they “do ”have a place.” It may simply be a place for a small percentage of the 1,500 startups in Austin. Austin has several cliques rather than a cohesive ecosystem. As said in his comments on the original article:
Austin has really functioned like a “boys club”
While Austin isn’t perfect, every city has its warts. The intent of the original article was to indicate one problem with some of the terms that have emerged from VCs here in Austin along with what I felt may be contributing to them. Venu from said:
“… and we cannot imagine any one of them asking for those terms. Anyone that has participated in building a successful early stage company knows that highly punitive terms like that leave little incentive for the team”
The venture capital firm he portrays as one categorized by “a liberal definition of ‘venture capital firm’” is a VC firm that his partner Krishna has sat next to on venture capital panels here in Austin. He is correct that it wasn’t Live Oak or Silverton Partners and I trust that I didn’t indicate that it was. These egregious terms came from someone his firm probably considers a peer. Unfortunately the terms are not unique to my company and have been confirmed to me by others who reached out after they read the article.
An attorney friend at a firm here in Austin who papers many of the Austin funding deals each month read it and said it was “fairly accurate to what he sees happen to young entrepreneurs on a weekly basis.”
PWC felt the original article was an honest portrayal of what is happening in Austin. So much so that they asked all of their Austin staff to read the Dark Ages of Austin Startup Capital. Other financial-based companies in Austin did the same, with one friend saying her “50-person company of accountants were all asked to read it.”
The article seems to have catalyzed the frank discussions that are happening in the dark crevices of Austin and brought them out in the open. While painful to hear, it is what has been created by us as a community.
Aftermath
There have been aftershocks sent through the Austin startup community, creating follow-on articles. While not necessarily “gentle” in terms of their writing style, chosen words, and fueled by passion, the authors’ sentiments cannot be disregarded as “bitching.” Conversely, we could simply categorize that article as one written by someone with “only three years building startups” which does not a career make.
is very correct stating that it is hard work to start a company. For too long there has been a “kool-aid” passed around to the young people in Austin with ideas that “it is easy to start a company” and “you should quit your job and become an entrepreneur.”
No. Not everyone can, nor should be, an entrepreneur. It takes a certain type of person. While not having had the perfect entrepreneurial career, I have been starting, running, and exiting companies for the past 25 years. Of all those companies, 2 became publicly-traded, 4 were acquired, and countless others failed. Each failure drove me to be a more well-rounded executive for the next time.
Young entrepreneurs should hear from their elders what it is really like to do this job.
- You will get “kicked in the teeth” and it is your job to get back up and keep going with a smile on your face.
- You will be told to spend the money to office your company downtown. False. Downtown is expensive and you may be paying up to 10x the price you could pay elsewhere for the same square footage. Companies are started and office’d everywhere in Austin.
- You will have a financial plan and it will be made up of suppositions and numbers that cannot be verified. Go with your gut and what you can reasonably defend until such time as you can use real data to revise your estimates. Know that the investor that asks for 5-year financials should know better and that your numbers past 24 months are made of of wishes, dreams, and rainbows.
- There are patent trolls out there and they may, and often do come after your Austin company. You may be forced to close the doors because of it even when things are going great. Get up, smile, and keep going.
- You should conserve every dollar as if it is your last. Each will be worth $7 a year from now. Andreessen Horowitz partner told one attendee a few months ago that “the funding environment was likely to get tougher in the coming months, noting that anyone raising money should wrap up their rounds quickly.”
- Your original plan may change as you validate/invalidate your hypothesis, so be willing to change from one approach into another. This is one reason why investors bet on teams, rather than ideas.
- Some days you will have a hard time getting out of bed and feel the world is caving in on you. Having business partners will make these days easier. When they are having a hard day, it is your responsibility to keep them going as well.
Looking Forward
Somewhere deep down we all know that we need to keep moving the conversation forward. Someone we all know well told me the other day that it is great that the conversations are being encouraged and we need to start looking at the conversations with a “heads up display” wherein we know what is in our immediate past but are looking forward to what is coming up ahead.
Change is what’s coming up for Austin. We can’t go back to not knowing that people are having these issues. We should welcome the future and move towards it. It will make for a better Austin.
Thanks for reading .
Richard
