In one of the SXSW presentations I sat in the presenter asked for a show of hands from those who were there from a corporation. About a third of the hands in the room went up. When she asked who was there from agencies, another third of the hands went up. “How about start-ups,” she asked? The remaining third put their hands up.
Now, there were around 300,000 people at SXSW so that’s roughly 100,000 start-ups present.
A venture capitalist (VC) I met last year told me about how the economics have changed around tech start-ups in the past few years. Whereas Series A funding used to be in the region of $5m and take three-five years to prove a commercial return, today they can do that with around $1.5m and 18 months – a much shorter and cheaper cycle.
What does that mean? It means roughly three times as many funded start-ups.
So what’s the anatomy of a start-up, I thought to myself. Maybe I could get some of that?
The more I dug the more alarmed I became.
Surely they can’t all be like those entitled-not-so-bright 20-somethings portrayed in the reality show Start-Ups: Silicon Valley from Mark Zuckerberg’s sister, Randi? Surely they are not all the parody portrayed by Start-Up Guy?
Oh yes they are. Be afraid, people. Be very afraid. According to a few VCs I’ve met the failure rate of a tech start-up is about 95% (this compares to small businesses at about 20%). So what are these people doing?
The prognosis from a few clients I’d spoken to at SXSW about the start-ups they’d met was pretty scary. As one remarked their “business idea” was a feature buried five layers deep in Tumblr, because well, nobody uses it. Awesome.
Another I heard about in New York was hilarious. This group had got Series A funding of $1.5m for their visual captcha technology (an alternative to those annoying type what you see security internet logins). On launching their alpha version it was hacked – and their business idea killed inside of 20 minutes.
Months of work – dead in 20 minutes. What’s even funnier is they then instantly got on the whiteboard of the company’s boardroom they were camping out in to come up with another business idea quick-smart. I’ve since learnt this is standard practice and there’s even a name for it. It’s called “pivoting” and is seen as a positive thing.
Have we all gone mad?
Is this the 5 per cent of potential winners who are betting big with someone else’s money on the chance they might make it big like Mark Zuckerberg? Or do they even care if it ever becomes a business if they can flip it for a quick million first? Is there really a huge cohort of 20-somethings out there pursuing their start-ups with their “Angel” as a means to avoid the “workforce” they don’t believe in anymore? Have they found the alternative to working for the man?
Maybe I’m just an old fart. I don’t get it. I can’t multi-task and I can’t write algorithms. But I do think it’s a bubble.
Certainly that’s clear though from talking to some friends in Silicon Valley. No question some will make it; most won’t but the funding bubble is self-perpetuating and there’s no shortage of wealthy tech angels with millions looking to fund the next big thing. They’re getting in before the VC’s who are also lining up to fund their part.
Question is, when will it burst?
Andy Bateman is the global CEO of The Leading Edge.
Please login with linkedin to comment
With the “Louie The Flyhunt” campaign, Australians are invited to participate in a unique experience that combines traditional manhunt tropes with cutting-edge technology. Set against the backdrop of the opening of Australia’s fly season, Mortein’s campaign features the notorious Australian icon, Louie the Fly, as the target in a thrilling fly hunt. Wanted posters featuring […]
Social Indigenous Enterprise We Are Warriors (WAW), supported by creative innovation studio R/GA Australia, has been selected to produce the City of Sydney’s New Year’s Eve Calling Country live performance as part of the 9pm firework show. Lead image L-R: WAW co-founders Ben Miles & Nooky. The performance will feature a special Welcome to Country […]
With just over 24 hours to go until the world premiere of Addy Lala and the Mood Tea Thieves, limited tickets are still available for the pantomime, which will run for one night only at the Everest Theatre in Sydney’s Seymour Centre on December 5th. All in the industry are encouraged to come along to […]
2045, a Melbourne-based creative agency founded by Tim Evans and Nick Auditore has just launched. The agency takes its name from the year futurist Ray Kurzweil predicted organic and artificial intelligence would converge. Lead Image: 2045 Team Evans was formerly a Partner and Executive Strategy Director at DT (now AKQA), before co-founding B.B.E in 2015. […]
The National Breast Cancer Foundation has been announced as the Charity Partner for Sydney New Year’s Eve. The Australian not-for-profit organisation is represented by the pink ribbon and raises money to fund world-class research towards its vision of zero deaths from breast cancer. Research that saves lives through a better understanding of how to prevent […]
This holiday season, Emporium Melbourne has announced its festive creative campaign that celebrates and encourages the Melbourne community to embrace their personal ‘untraditional traditions’ – the unique traditions that make Christmas truly special for them, and their family. The campaign’s tagline, “Every tradition starts somewhere”, reflects Emporium’s commitment to embracing, inspiring and applauding diverse traditions […]
Reddit has announced updates to its new ads placement with Carousel Ads and Product Ads. These new units, placed in the heart of Reddit discussions, provide an even more dynamic and compelling way for advertisers to scale to relevant audiences, deliver deeper value to users, and drive stronger, full-funnel performance among the hundreds of thousands […]
Automotive Network Drive has announced its 2024 upfronts, its biggest in more than a decade, with a suite of more than 12 new products that underpin its vision to be the number one automotive network in Australia. Now in its 27th year and with a monthly audience of 2.45 million, Drive is leveraging its reputation […]