Posted On05 Feb 2018
Since the 1970s, Silicon Valley has been the epicenter of great things, momentous disruption, and massive innovations. From the pioneers and the founders of Microsoft and Apple duking it out in their respective garages to the dot-com mavericks in the 90s making their marks on the world, to the present day: Startup Land, the Valley of the Nerds, has drawn the attention and mystique of millions of people around the world.
The Reality Behind Startup Failures: Understanding the Numbers
Somehow, the place has taken on a mythical sort of air. Naturally, like any pocket outside the normative way things are done, Silicon Valley has developed its own ethos, its own culture, and it’s own little bubble. Familiarising yourself with what it’s like working over there may help you get a better perspective on what startups have needed to become to be successful.
For example, take the startup statistic that “nine out of ten startups fail”. The truth is more like 60% and below. According to a study conducted by Cambridge Associates out of Boston, MA., the performance of venture investments in over 27,000 startups between 1990 and 2010 shows that companies that provide break-even returns or less to investors have not risen over 60% since 2001. Even amid the dot-com bubble bursting in 2000, the failure rate was still just 79% and not the purported 90% that people assume is the reality of things.
However, industry influencers out of Silicon Valley in particular still cite the 90% figure because it serves a purpose. It makes failed founders feel better that they misspent their investors’ money, or laid off staff, or shut off their computers, or started working at the Best Buy after going bust.
It helps them pick themselves up, dust themselves off, and maybe start all over again – but making better choices the second time around. Or so many people believe. Silicon Valley’s mindset is that with every failure, the weak ideas are snuffed out, and the strong concepts make it through. However most failures aren’t about ideation, but follow-through.
Few people actually become better CEOs after failing marvelously at it the first time. In fact, having been a CEO who failed herself, this writer knows how difficult it is when you’re handed ridiculous amounts of money, told to break the rules, and succeed under enormous pressure.
As a CEO of a startup, fresh out of whatever bubble has been keeping you hidden (be it school or a cushy job or an impressive freelance portfolio), you find yourself between a rock and a hard place when it comes to pulling off what you said you would be able to – and things just not working out that way. Where do we draw the line between projections that don’t come true, and lying?
The Silicon Valley culture of assuming failure seems to excuse bad behavior for the ones that do make it. We’ve all heard horror stories about Uber and it’s rather wooly compliance with local law enforcement and local governments – as well as read the tweets about how “one-sided” and “small-minded” the reportage pieces were, not by your average startup employee but by the scions of the industry themselves, many of whom have achieved cult-like statuses and followings. Those in the startup grind find themselves inundated with “wisdom” from pioneering tech luminaries, which all seem to indicate that an aggressive attitude and a disregard for the rules is what draws in the big bucks.
But when we take a step back and calmly assess the landscape, we can see why the culture of Silicon Valley has developed into such a mindset.
The need to win at all costs, to disrupt the market, to please investors is one that is magnified by the size of the company valuations. If you’re being told that you’re running a company worth $70 Billion, and your books say the actual figure is only about $70 Million, then the desire to make the valuation match the real number is an urgent one.
Many people look to Silicon Valley as a sort of Camelot that shines brighter than the rest of the capitalist world – and why? Because it represents a place of free-thinking, of unbridled learning, of accessibility, of change. This is compounded by its representation in the media, as well as the movement of massive companies like Facebook and Google and Amazon.
If you’re trying to break into the startup world, if you’re reading the articles and downloading the podcasts and retweeting motivational nuggets of wisdom, try asking yourself some questions to figure out if you’ve bought into the hype or if you’re genuinely ready to be part of that culture.
If you really do idolize the altruistic yen of Silicon Valley and are looking for a company that doesn’t care as much about the capital than it does about the ideas, then there is no stopping you from looking. It is possible that many companies out there fit that exact description. However, remember that you’re about to embark on a journey in the real world, the world outside the academe, that is not usually how it represents itself.
Make sure that the culture you enter into, contribute to, is a strong one. Because maybe, and this is wishful thinking here, a strong culture and loyal employees can change a company from nefarious to conscientious. Maybe if you work towards a concept for the sheer brilliance of the idea itself and not the money that invariably follows, then you will inspire those around you, and above you, to do the same.
Perhaps if you want to work at a company that cares about you, you need to start caring about the company first.
If Silicon Valley has taught us anything, it is that our minds are a powerful thing. If we believe we are working at a company that does good things and puts people first, then we ought to conduct ourselves as such. Why wait for management to dictate how to act or think when you can control how you work for whatever company you choose?
