Honest review of startup industry
The main purpose of this article is to provide honest feedback about the startup industry.
I hope it will help aspiring entrepreneurs to get a better understanding of the environment and find the right people for their startups.
DISCLAIMER:
I share my personal opinion based on my personal experience.
Totally normal startup story.
Some time ago we had a meeting with a managing partner of one accelerator/VC company just to find out that our project did not fit into the profile of an upcoming program. What a waste!
After 2 weeks of communication with a representative of this company, where she was literally pushing us with requests to provide additional data about our “perfect customer” and “unfair advantages of our team”, we ended up with a weird 3-minute conversation just to be told that:
“I like your project a lot and I will keep you in mind for our next programs, but this program is for Industry 5.0, and you are SaaS“.
What a waste!
Surprisingly enough, the very same emotion “What a waste!” I kept feeling after dealing with any startup related institution: Garage 48, Startup Wise Guys, The Founder Institute, sTARTUp, 500.co, yCombinator, EthAum, F6S – you name it.
Result was all the time the same:
What a waste!
Eventually, I came to some conclusions based on my experience and practical data.
Let me share some of them here.
It is all about people.
There are a lot of different kinds of people in the startup industry.
Some of them are useful, most of them are not.
Unfortunately, it is way too common for this industry, when people are trying to take advantage of startups, rather than genuinely supporting startup projects.
Particularly if our startup is at early stage.
Let’s start with individuals and institutions which are rather worthless.
Investors – key people of startup industry.
Investors are cool guys, and they are the core element of the startup industry.
It would be fair to say that the startup industry exists for the benefit of investors – to help investors make more money.
Investors love money and never care about anything but ROI. How many X is their main concern. What is the current MRR and CAC would be interesting for them to hear.
Startup industry exists for the benefit of investors.
As startup founders, we should be ready to answer following questions:
1. What is our proven ROI (return on investment)?
2. What is our average MRR/ARR (monthly/annual recurring revenue)?
3. What is our current CAC (customer acquisition cost)?
If we do not have clear answers, we should not bother ourselves with miserable attempts to draw the attention of investors to our meaningless projects.
It would be a guaranteed waste.
Investors are actually hunting for people who could answer those 3 simple questions above.
This is how investors make money. They invest in projects whose founders can provide investors with ROI, MRR and CAC.
Investors are all about numbers, rather than ideas.
Nobody cares about how brilliant the idea of a startup is and how crucial its social impact is.
Nobody cares. Particularly investors.
Accelerators work for investor’s cause.
The main issue with accelerators is that their employees, who have never engaged in any kind of business activity, start to teach entrepreneurs about how to engage in a business activity.
As a result, all acceleration programs I was unlucky enough to participate in provided an experience compared to elementary school classes, where teachers show kids how to draw circles and triangles.
Accelerator will teach you how to draw a circle inside a triangle.
Despite the loud name – accelerators – the real idea of these institutions is to evaluate the investment attractiveness of a particular startup.
Accelerators do not actually accelerate, they provide investors with investment opportunities.
And like any commercial entity, accelerators want their cut. Thus, they primarily look into startups which have more or less figured out their ROI, MRR and CAC already.
In other words, to be accepted into an accelerator, a startup project has to be accelerated enough already to have a user base and a reasonable number of paying customers.
Incubators earn money from rent.
I barely understand what is the particular value of incubators for development of startup projects.
All the “incubators” I saw were basically co-working places, where you pay a normal commercial price for renting a desk and getting office utilities.
Incubators are regular co-working places.
From time to time, they keep some kinda startup events and some kinda startup parties, which normally have zero value for the development of your project.
I managed to get some cool connections there though.
But that was rather a bug than a feature.
Instead of conclusion.
If I would think about a real life example to describe the startup industry, then I would distribute roles in the following way.
Investors are the clients, obviously. They are the ones with money, and pleasing an investor is the main duty of all other participants.
Incubators are a sort of specialized hotels, where you have a room, a toilet, a double bed. And a red lamp hanging above your front door.
Accelerators are something like pimps. Their function is to explain to startup founders how to provide satisfaction to investors in various ways. And then connect chosen founders with investors.
Who are startup founders themselves, I believe it is clear enough for everybody to understand.
Startup founders in one picture
ByCycle – find the right people for your startup.
There are indeed some people who are important for our projects and who can really make things work.
They have nothing to do with so called “startup community”.
They are not mentors, investors or startup managers of any kind.
They are our teammates and users of our products.
Teammates and users are the most valuable people of startup industry.
Our teammates and our users are the people to decide the fate of our projects.
Try ByCycle for free and see how it works for you.
For any questions or comments, feel free to contact us here.
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