Every time you go to a tech blog, visit TechCrunch or go to Twitter you’ll see a barrage of stories about how someone is going to “disrupt” healthcare, or “shakeup” transportation.
In recent years we have started to see more and more information about companies which have made huge promises but have ended up as massive failures.
Take the example of Theranos. Elizabeth Holmes thought she would be able to put a “lab in a box”. She was hoping that she would be able to analyse blood samples from a single drop of blood from the finger, rather than the traditional way of drawing blood from a vein with a needle.
Holmes ended up fooling investors into thinking that she had some kind of proprietary technology which could analyse tiny blood samples from finger pricks. She hired a huge team and because she was a psychopath she had no problem lying to all of them and fooling them into thinking that they were making headway with their technology.
Soon Holmes even landed a contract with Walgreens and became a billionaire in the process.
Theranos did hundreds of thousands of blood tests which produced results which were inaccurate and caused an unknowable amount of harm to hundreds of thousands of patients.
Obviously this charade couldn’t continue and Theranos came to a crashing end and Holmes is currently being charged with several counts of felony fraud
There’s also the example of WeWork. WeWork was founded by Adam Neumann. He had the idea of creating workspaces, where small companies could come along and rent office space in an ad-hoc fashion and rent as much or as little space as they needed.
WeWork kept on buying up more and more office space and leasing it out to clients. They raised more and more capital – billions of dollars! Investors saw that WeWork was growing and leasing more and more office space so from the outside it looked like there was real growth occurring.
But WeWork turned out to be a pile of poo. They were not profitable and they were simply buying up property for a dollar and leasing the space out for 50 cents.
WeWork managed to fool people into thinking that they were a “technology” company. That they had some kind of proprietary technology to manage space and do clever stuff behind the scenes. But obviously, anyone with a brain can see that this was just a traditional real estate company. And unfortunately the laws of nature apply no matter what the business is. If you are spending more money then you make, then you will fail.
Adam Neumann ended up stepping down from the company due to his unethical practices and his habit of wasting investor money on private jets and living the high life. The future of the company now looks incredibly bleak.
There are a countless number of companies out there who do the same thing. In fact it seems to be a playbook that a lot of founders follow, because this is what they think successful companies do:
- Start a company and make ridiculous “disruptive” claims
- Get hype and coverage in the media
- Use the hype to con investors and customers
- Realise that you don’t have a viable business
- Panic and try and survive
To an outsider it may seem that there are lots of companies out there who are doing amazing things. In the tech news press there’s non stop talk about “disruption”, “big data”, “AI”, “Machine Learning”. But the real reason that so many companies are making these claims is because they are failing.
They need the hype to make it sound like they are on to something. They need the hype to fool investors that if they don’t invest their millions of dollars then they will miss out big time. It fools competitors into not competing, because if a well funded company is getting a ton of press then it makes it look like a small newcomer won’t even be able to compete.
From the outside “press”, “hype” and “big launches” seem amazing. But from within, the company is actually on a knife edge. They only want the hype and the press releases so that they can raise more and more money so they won’t die.
This whole cycle of hype and raising money, only for a company to crash and burn is incredibly harmful to the whole ecosystem. Is it any wonder that people in the real world are so cynical of people who start any new company that has anything to do with technology?
People are shocked when I tell them that my company has not raised any money. They don’t understand how we can ever “scale” or “disrupt”. They get even more shocked when I tell them that I actually don’t want billions of dollars and do not want to “disrupt”, but to help the industry.
My customers are shocked by the fact we are a technology company that has made a promise and then really delivered on the promise.
Worse yet, I see other founders out there who think that they need publicity to be successful. They think they need to be mentioned in TechCrunch to be taken seriously. They don’t realise that most startups are in the press so that they can get hype so that they can raise more money for their failing startup.
A lot of founders out there don’t realise that really the only things they should be spending their time on is to make a great product, to solve a real problem and to speak to their customers so that they can make their product better.
The idea of no press, years of hard work before people know who you are and what you do is daunting. But there are no shortcuts.
And if everyone takes the same shortcut, then it ceases to be a shortcut!
Next week on Startup Lies we shall discuss why bigger is most definitely not better when it comes to startups!
This was part three of “Startup Lies”.
- Part two can be found here: “Startup Lies Part II – “Work For Us, Because We Give Unlimited Vacation Time! Also, Have Some Free Pizza!”
- Part one can be found here: “Startup Lies Part I – “I Need Capital”