Why 90% of Silicon Valley Startups Fail
I was raising my second round in Silicon Valley and a phone call that's where my wife called me that I don't need to go back to home, so I lost my wife and I got depressed and that's how I lost my money, and I was five months homeless and during that time I was told many times that I should fail my first startup-like everybody else should I? I want to make sure I understand the question during that time you were told by people that you should let that first startup fail? Yeah, because many people say your first startup will usually fail it's rare go hard is it rare too what we are associated with the first time on it's not rare at all it's rare in Silicon Valley where everybody over evaluates companies and forces, VCS has a business model it's called raise a fund try to make a bet on 10 20 30 companies and push all of them very hard because if one can actually get through it will pay for all the others but it doesn't care about the 29 sperm that didn't make it so everybody gets the same advice because they're being selfish then one of the reasons.
I've pushed back very heavily on Silicon Valley culture over the last five years or so and stopped kind of investing the same way I did was I didn't want to put once I understood I'm like wait a minute this system sounds great at first I don't think I don't think it's rare at all I think there's a ton of small businesses that succeed on their first one but I think they look a lot more like the guy here in the yellow shirt who says I'm going to take a 20-year perspective and not a 20-week perspective right so many people here if you're funded or you're part of Silicon Valley you're not actually building a business you're building a financial arbitrage machine based on metrics that VCS want to see and growth you're not building a company you know for me so look I mean you obviously I've dealt with you know your young dude and I've already dealt with real life shit you know you have other emotions tied into that because it represents other things than just a company.
I think it's always a bad idea to raise more capital than you need to based on everybody's just overextending themselves it's like bad credit and I think that everybody's dreaming you know everybody gets seduced by Instagram or ways or Shopify but when you look at the maths yeah most first companies fail because people don't know what they're actually signing up for when they start raising capital they lose their business they get caught up right you were raising your second round that means most of the behaviour that your company was doing after your first round was more predicated towards the things that the market needed to see for a second round than what the customers needed the reason I've never raised money or even you know I brought a company from the day I left school twenty-two so twenty years I've been running a company every day of my life and every day of my life I've raised no capital and every day in my life I had to make payroll every two weeks so you know when I started hypermedia I was already successful and I started it in a conference room of another company for nine months and then another year of free rent in exchange for my time, because I didn't want the expense so you know I think that you what you need to do is make sure that the company doesn't represent something above and beyond the company back to some themes my partner in crime here was saying you need to make sure there's no baggage in that company that you say to yourself this has to succeed because if it doesn't I lost my wife I was hung like it'll you know you need to be very careful that this thing doesn't have some deep emotional baggage in it.
Because one of the most important things for entrepreneurs to do is know when to not run the company anymore it's very you know which is very tough, so I would focus on that more than the ideological fail-fast that guys let's make pretend you know nothing about technology in Silicon Valley how the fuck does fail fast makes sense it starts with fail, so I think there's a culture that needs to be reset in the startup ecosystem and that VCS need to be scrutinized more for what they're actually up to by the way this is capitalism you took their money like I if you listen to this whole episode I've talked out of both sides of my mouth I've been on the side of giving $300,000 and the founder fucking shit the bed and like fuck you so it goes both ways this is not like, sucks like there's a bunch of kids running around with stupid fucking ideas raising two million dollars and then throwing it directly in the rubbish by buying $50,000 fucking squeaky tables right, so I think that um I think that we as a whole need to be more thoughtful and I would say that's the theme of the episode so thank you guys for being here my friend.