to Home posted 15/02/2015 in Everything about 5 minutes read

Let’s be honest

During my tenure at Core Incubator I’ve seen more than 100 ideas pitching for funding. Out of those 100 ideas 10 were worth listening and 1 was worth investing in. These numbers are enough of a reason to give up playing in the early-stage VC field. So let’s be honest about all of that and agree that the “startup scene” in SE Europe should go back to school.

The contamination with US based startup news about funding rounds, valuations and sales has created a distorted perception that today anything goes and the effort needed to reach a healthy exit is at its lowest. There are no visionaries, no daring goals, no crazy approaches. The depth of ideas pitched around is practically non-existent as authors don’t proof their ideas (either technically or plain business side). At the same time, those shallow ideas are valued as pure gold with diamonds on top.

While this kind of thinking and “cutting corners” is nothing unusual in this region, the appalling thing is that “mentors”, “speakers” and “judges” seem to deceive the entire ecosystem by not calling bullshit what obviously is bullshit, and continue smiling at “entrepreneurs” even when they manage to produce a presentation in the same way a toddler produces a total mess with a bowl of whatever toddlers eat.

Yes, entrepreneurs are fragile beings. We should hold their hands and not shatter their dreams. Because business is just that, a fairy tale full of smiles and pats on the back.

The hypocrisy shown by everyone, myself included, helps no one. Various startup weekends and challenges make entrepreneurship seem like board game, directly insulting entrepreneurs that everyday create added value and understand that if there is no added value for the customer, there will be no customer.

I’ve long believed that those symptoms can be alleviated with small but consistent changes in the way authors think and construct their ideas into products. I was wrong. Not small changes, big changes are needed. From the education system that produces kids with no stamina or any wish whatsoever of achieving something without giving up on the first obstacle — to the country-wide policy of heavily penalizing entrepreneurs by imposing mountains of bureaucracy just to keep the state engine running.

At the same time the regional culture of creating startups by using the path of least resistance should be made an olympic sport. It seems like it is enough to start talking about the product to create a PR campaign, with the media hungry for “positive” stories, even when they are just fog. Adding on top of that journalists that write about stuff purely by copy-paste routine publishing PR articles that hold close to zero value. In that kind of environment it is not uncommon to read headlines about fantastic products, genius ideas and magnificent business models by companies that have zero, nada, niente paying customers, only to fade into darkness months later because they got punched in the face.

Startups are not an endangered species. Apart from being a buzzword, they are not in any way different than any business out there. The level of absurdity jumps through the roof when the CEO of the Croatian Deutsche Telekom subsidiary calls the 1B€ subsidiary a “startup”. Now we can safely say that “startup” is just a word that is thrown wherever anybody feels it will stick.

When the hype wheel starts spinning, the clueless state machine jumps in and starts throwing around ideas about funding startups via state run investment funds or whatever other apparatus the highly efficient bureaucracy machine is capable of creating, chewing and sucking every letter out of entrepreneurship by killing every will to even think about starting a business.

On top of that, the previously mentioned absurdity of publicly headlining businesses with no customers reaches a new level when that same business received public funding in Croatia and immediately incorporated in London. Or when Bulgarian VC funds received EU money in order to invest into Bulgarian businesses, but instead start organizing pitching events in other EU countries. Surely that helps in developing the Bulgarian economy.

This spiral is dangerous. Piles of public money are being thrown out of the window because public money has an “expiration date” tag, therefore it needs to be spent before asking for more. While the Jeremie scheme is a positive and successful story, the side effects are devastating. By making public VC money free the private VC money will run away. The solution to the public funding issue is to make sure public money follows (instead of leading) private VC funding.

Education is key. The vast majority of entrepreneurs draw inspiration and knowledge from what is installed in their heads during formal education. Universities should realign entrepreneurship and incorporate it in forms of micro-incubators with cross partnerships between Economy and e.g. Computer science courses. By creating teams in the early stages, the importance of teamwork is put first minimizing the “one man show” effect that usually means the “one clueless man show”.

The last step is to start calling bullshit what bullshit is. Individuals that use the media to promote their ideas should be held responsible when doing so. There is nothing wrong in using the PR way, but the business community should recognize a loud mouth when such appears. Yes, journalists should be held responsible too, but they don’t start the spiral, they only accelerate it.

~ the end ~

to Home posted 15/02/2015 in Everything Lead image by Matthias Ripp


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