2013-01-25, Nerijus Celkonas

Startup - revealed

Startup - revealed

I‘ve been watching this phenomenon that‘s pouring out of „the dream country“, USA, for some time now. It seems that startups is the new panacea in macroeconomics that‘s going to save countries‘ economies and smooth the crisis waves that keep on coming.

The definition of a startup from Wikipedia - A startup company or startup is a company or temporary organization designed to search for a repeatable and scalable business model.

 I can clearly see that the term „young company“ is synonymous with the term „startup“ these days, as I work in beginner companies (I intentionally don‘t call them startups) and also invest in them, that is, I see both sides of the matter.

 Let‘s compare the differences:

Feature

Startup

Young company

Goal

Rapid enrichment,

Problem solution

Ownership of new business

Strategy

None

Available

Financing

Venture Capital

Company income, banks, VC, IPO

Idea

Shifting

Stable

Business model

Searching

Business plan

Income

No plan

Budget

Expenses

Burn rate

Budget

Business know-how

None

Available

Experience, practice

Not necessary

Essential

Finish

Exit, business sale

Long-term stable business

 

Venture capital ecosystem is created

For young people of the BigMac generation it‘s quite hard to understand that‘s this is an illusion only: that fast food was created by businessmen and it isn‘t natural feeding environment. The same is with startups – it‘s a business model (even a whole ecosystem because of its scale) created by USA‘s businessmen (they‘re now called venture capitalists) from stock market funds (at the expense of all of our pensions and future debts).

 Fund surplus, search for new profits and lack of time and innovative knowledge of cash administrators has created the space we now live in – the startup generation. One success story is blown sky-high with the help of media, so youngsters wouldn‘t stop believing in the „bright“ future. It should be clearly understood that startupers are „meat“ only, that is, material for capital, and most of the startup creators drop out of the game once capital comes in, which is fair, as they lack knowledge, practice, budget, business plan, etc., - the essential components of a stable business.  At the startup stage there‘s no need for knowledge, business efficiency, stable income, etc., the most important thing is the repeated confirmation of the concept. Nobody even found a more decent word for business incubators – chickens, incubation period, steroids and exit come to mind.


Startup is not traditional business, it's stage 

Those who went through the traditional business school often just smile when seeing startupers calling themselves businessmen. Don’t fool yourselves and call things by their real names – startup is NOT a business, it’s only a search stage for the best business. Terms used by most startupers like “pitch, burn rate, co-founder, closed beta, monetize, social proof, angel, seed, hackaton, freemium, lean startup, mentor, infuencer, MVP, hacker, maker” also shouldn’t be used in business.

Startupers are also misled by providing young and successful companies as great examples of startups. Were Apple, Microsoft, Facebook or Amazon startups? No, because from the start, their creators had clear visions and goals and weren’t searching for business models.

 

Business education and “fail fast” generation

As we all understand, startupers aren’t required to have experience, practice and business knowledge. Their goal is to find a profitable business thread and sell it. Mentors use the right tactics – fail fast. This means – if your business model didn’t succeed, close it and try again. One thing gets forgotten, though, this is valid for startups only, but not to regular businesses, as a business has to change, adapt and not go bankrupt. In my opinion, the worst thing in this situation is that young people identify businessmen and startupers as one and the same. It’s all about the money, so it’s very easy to get lost. Those, who know the chaos or complexity theories, will understand the butterfly effect when small changes in the past might amount to huge changes in the future.

Big businesses can’t find professional management specialists already and education institutions are blamed for not being able to prepare the needed resources. Professionals are simply being bought-over by companies and the new generation is dragged into the games of business model search. The question for venture capitalists is clear – who will manage your business in 10 or 20 years? Will you trust your billions with those grown in the FAIL FAST generation?

 

Governmental level and P.Thiel foundation

Most of us understand that educational institution missed the progress train and schools teach truths that were necessary in the XX century. You’ve probably seen the TOP billionaire list that dropped out of college. Bill Gates and Mark Zuckerberg dropped out of Harvard University. Steve Jobs dropped out of Reed College. They are all iconic billionaires. And this contributes to global PR campaigns. 

More so, countries started creating various organizations for startups with the great goal of stimulating entrepreneurship. Entrepreneurship doesn’t equal management. Governments probably can’t see another way out, when their incomes are decreasing, but to prepare the future generations for independent survival. But will such model succeed? If we won’t adapt our educational system to the requirements of the XXI century and continue teaching our kids with the Fail Fast methodics – won’t it be a disservice for them?

Peter Thiel, a person that thinks about the new teaching methodics and partially understands the educational problems, also doesn’t give into to the public PR campaign – he motivates entrepreneurship, but not knowledge. His fund thielfellowship.org supports dropping out of college financially. Even though it’s quite ironic, but on his title page he cites Mark Twain: “I have never let my schooling interfere with my education”.

I truly hope that my opinion is false and all will be great not only for our children, but for generations to come. 

 

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Latest comments (2)

Marius
on 1/2/13
http://melanie.io/2012/10/18/build-a-business-not-an-exit-strategy/
Tadas
on 27/1/13
http://techcrunch.com/2013/01/26/a-closer-look-at-the-quality-of-angel-returns-data/