The Valley has taken some criticism for massively incentivizing the smartest people in the world to work on problems that won’t really benefit our species – like how to get more ad clicks. But that’s not what really bugs me.
What really bugs me is that in SV, nothing is built to last. Everything is built for an exit.
Imagine a party and a room full of silicon valley entrepreneurs. You are a new entrepreneur to the area and you want to meet the guy who is everything you want to be. Go on. Admit it. It’s that guy in the corner surrounded by people, who arrived 2 years ago, started his company 18 months ago and just sold it to Google for $20 to $50 million and now works for them. That’s the guy everyone wants to talk to because they want to be that guy. That is the epitome of SV success. And it is a massively destructive culture.
SV is attracting the worlds most talented engineers and tech business people. The founders, staff and investors of these companies hope that these folks will build a product for 18 months to 3 years, have the company acquired by a large incumbent and have the product killed within 2 years. Only the team remains as employees for the acquirer.
The dominant business model in SV is not innovation and entrepreneurship but recruitment. And if you arrive in SV and are hoping to build to get acquired, you are really an aspiring recruiter. Your strategy is to assemble a team, find a project that is intellectually interesting enough to them to keep them all in one place for 1.5 to 3 years, and have them demonstrate their talents to a large tech incumbent who is hiring. When the hiring event occurs, the incumbent will acquire the company for somewhere between $1 and $4 million per engineer. The deal will be cash for investors and an earn-out for founders, both of these being the equivalent of recruiting fees.
What makes me sad about this is that many real and talented entrepreneurs who could be building innovation and job creation machines are caught up in this. They are mentored into thinking this is the way things are done and their potentially world-changing businesses are eaten by the system.
Most of the rest of the world has a wonderful natural selection system for defining business success. Good, healthy successful businesses generate cash and lots of it. They create jobs, make people profoundly happy and satisfied and create new products and services that improve lives. They grow organically with their customers as they develop a pattern of making people happy.
Silicon Valley is a wonderful place to raise investment capital for a technology business. My investors are amazing individuals and have empowered us tremendously as entrepreneurs. But basing a business in The Valley feels to me like clearly stating your intent to exit and not build. And I think every entrepreneur’s intent should be to build and not exit.
Leave a Reply