Founders have this weird tendency to aspire and believe they can reach the top 1% of any given field when in reality they never will. I’m talking specifically about startups in this case. The media has helped glorify billion dollar startups (known as ‘Unicorns’) and their founders that have come out of Silicon Valley over the last 10 years.
This has shaped the conversation and ambitions on the ground floor. I’ve spent time with a lot of young first-time entrepreneurs over the last few years. There is a common theme among some of them – they aspire to start billion dollar businesses.
This doesn’t make sense and is an inefficient use of a generations combined capabilities. Unicorns are not the norm – they are outliers.
You might be thinking – “aren’t we supposed to encourage our future entrepreneurial leaders to reach for the stars?” And I’d agree that we should, but only to an extent.
The main issue I see with encouraging the goal of joining the ‘3 comma club’ is that it breeds a dangerous environment of unrealistic goals, wasted resources and sets up the individual for a negative toll on their mental health.
Maybe I’m jaded by my own past naivety and how gullible I was towards the billion dollars stories told by the media. Call it ‘Entrepreneur Porn’ if you will.
The likelihood of actually creating a unicorn is minuscule. Of the few startups that survive (and thrive), how many reach billion dollar valuations? In Australia we’ve had less than five reach this status – Atlassion is the only one that most people can even name.
Is it so bad to have a generation of entrepreneurs all aiming to create the next Uber, Facebook or Airbnb? I think so, here’s why:
Time & Resources Wasted
The consequence of a large swathe of talented entrepreneurs chasing billion dollar valuations is a whole bunch of wasted investor capital and time wasted on ‘Uber for X’ ideas. When I meet people who have been building the ‘next big thing’ for the last 2 years in complete secrecy and they tell me about their expected acquisition value of their business, I cry a little bit on the inside. Call me cynical, but after 5+ years of throwing myself in at the deep end of startups you slowly learn to recognise the patterns and predictability of results.
We need to stop celebrating the unicorn founders, and instead celebrate the little guy. After all, it’s the little businesses that make up the 50%+ of employment in the country. Instead, whenever someone is trying to give you advice on how to do well in a startup, they will almost constantly refer to something that Mark Zuckerberg or Steve Jobs once did or said. Most of the time this advice has the right intention but probably won’t do any good – because it simply won’t be relevant to the context in which we are operating.
I’m guilty of doing this as well – relying on well known success stories of the top startups to drive home a point, but maybe it’d be worthwhile applying the principles of success that have helped countless small businesses become sustainable instead.
The Personal Psychological Cost
I remember being 19 and living on my own in the middle of Sydney. Being in startup land was completely new to me – and it was incredibly exciting. I read stories of Richard Branson and other billionaires. Books like “Think & Grow Rich” created these internal goals that I aspired to. By the time I was 21 I wanted to be living in a penthouse with at least $20M in personal wealth.
So I set my sights on creating a business that could hit that kind of goal in that timeframe. I worked myself to the bone and exhausted myself mentally and physically on a daily basis. It was a very dark time. 5 years on I’ve learnt that when I set more realistic goals and stay away from the big monetary goals – I have more success and personal happiness.
“If you’re chasing your big valuation just for the money – you’re going to have a bad time.”
So who is causing this cultural ambition amongst the growing entrepreneurial eco-system? There’s two main culprits that I’ve identified and they both have different incentives driving them to promote the unicorn goal.
- The Media: The truth is that the media just wants a good headline because it will mean more advertising dollars. A billion dollar acquisition will get more clicks than a million dollar acquisition. I notice as well that tech-startup journalism will consistently celebrate the startups that have raised money instead of those that have bootstrapped. I’m more interested in learning about the guys slowly but surely building a business one customer at a time.
- Venture Capitalists, Angel Investors, Incubators and Accelerators programs are almost solely incentivised to encourage entrepreneurs to start companies with billion dollar visions. This is how they can get the best returns for their funds invested. They know that you will most likely fail, but they also know that if they invest in 100 entrepreneurs with a big vision, they might get lucky and unearth the next Facebook. Is this a wise allocation of capital? Could it be invested in a way that achieved more consistent returns? Need there be so many dead companies and distraught entrepreneurs littered along the way? Could a different approach have a better impact on the economy?
Don’t get me wrong, I’m not saying we shouldn’t think big. I’m just saying that if we all think big – the majority of the potential job creators won’t end up employing anyone.
We’ll just have a growing graveyard of failed startups and burned out entrepreneurs. Instead if we celebrate the little business owners a little more, we might just see a more balanced and successful ecosystem emerge with far less wasted time and resources.