He literally gets asked about this directly in the article and admits as much:
> TC: Almost every time we’ve talked over the years, you’ve said that work is busy. Certainly, it slows down sometimes.
> MP: Sherwood has mostly been on an upward run since we started [in 1992], but we did slow down in 2014, and we couldn’t figure it out. Well, VCs were running their companies further to the edge to [improve their internal rates of returns before they hit the fundraising trail]. Turns out we had our best quarter ever in 2015 [as soon as they stopped funding those companies].
Blame the news industry for running with the same lead every couple of years. It works.
Much like the predictably news industry, people her predictably don't read the article before dismissing it.
Yeah the 2008 financial meltdown saved my lumbar region. Paid 250 for a 1,600 euro chair. Very happy. On the other hand a lot of people lost everything. So that was the flipside.
I'm keeping an eye out for a La Marzocco espresso machine. I've seen a few through windows in Palo Alto that will probably be up for grabs before too long.
heh, you may or not be familiar with the axiom: "A startup's potential is inverse to the number of Aeron chairs they own"
There was a startup, Quokka Sports, where we did the office design for them in a brick-and-timber building in SF, and they freaking folded just before the office build-out was complete... going through their office, the conference rooms were literally PILED with brand new aeron chairs... So I had several for a time...
Probably sounds bizarre, but when I was setting up my home office, I didn't really have time to go out and look for chairs. I decided just to use a $10 stool until I could find a chair that I really liked. 2 years later, I love the stool :-) I have to think about posture, but I'm convinced that the complete lack of support has helped strengthen my core. I don't really want to go back to a normal chair.
>MP: We sell a lot of patents, maybe more than anyone else. Usually, the only way to pay back [lenders’] loans is to sell the patents. So people aren’t paying what the company would have been worth but usually enough to pay back that secured debt.
So many companies saying they'll only use their patents defensively... may find that their patents will fall into the hands of someone who doesn't share their perspective.
Activity of restructuring firms is a good leading indicator of what's happening in private markets. These types of guys get involved well before public announcements of companies like Quixey. [0] It's also a very valuable service. Silicon Valley does well when people and assets from failing companies are freed up to join hyper-growth companies. Lenders are also more willing to take on startups as customers when they are confident that liquidators can get their money back.
I've been saying that since mid-2015 we've been seeing a slow down in the startup sector overall. Last year it was clear that new startup creations isn't keeping pace with previous years and shutdowns are more common. I think 2017 will be a disastrous year for startup formation and venture investment. SXSW this year was diminished from what it was in past years and it's clear that there's a pullback across the board.
I was at SXSW but didn't have as much time for Interactive sessions as in past years. Can you expound on your SXSW observation?
I did notice the trade show seemed dominated by the country pavillions like I don't remember before. It made me wonder if they were basically bussing in international startups to cover up for the general lack of startups that wanted to buy a booth.
If anything it will be a market adjustment year while companies building startups in low value industries shift to high value ones (ie, anything AI). High spikes and drops are relatively rare (at most 1-2 decades). And some industries don't have that volatility at all. Startups will always to some extent have fluctuations but that doesn't mean it will be world ending like the last two.
Markets and investors adapt to experience. Much like this article said, companies are learning to wind down companies faster and pivot earlier. Founders and VCs get better at managing risk.
Here's an idea. Go talk to these guys when you're starting your company. These guys are seeing all the failures, so they should have a decent grasp of what NOT to do.
Discounting for the fact that they're only seeing failures.
There's some innocence in your comment which I wish I still appreciated. I think the grittier reality is that a lot of these startups were based on generally mediocre ideas, but were funded anyway because of relationships and contacts.
I cringe every time I see another "Come help us change the world at..." or "Come help us reinvent blah blah" here on HN. Instant red flag to me, but I'll be damned if they didn't get funded anyway.
I admit I'm jaded, but I'm still convinced this is the correct way to look at things: being an entrepreneur is about moving investor's money into your own pocket.
The whole idea of creating a large valuation so that you can have a successful exit is literally just that. You are creating demand for the company so that you can sell it to somebody and keep part of the money. The idea of starting a company so that you share in part of the profit generated by the company is ludicrous in today's world.
But always keep in mind that being "successful" is not the only way to move money from an investor's pocket into your own. You can merely hype the hell out of the company. If successful, you can engineer an exit with no viable product. You can also create the "killer demo" which encourages a large company to buy you just so that they can suppress the technology (not so common in this decade, but was standard practice in the 2000's).
And here's the best part. If you "fail" utterly, you can still pocket a fair amount of cash. Most successful entrepreneurs that I worked with do not have the attitude that "this company must succeed". Not by a long shot. They throw spaghetti up against the wall over and over and over again, with the belief that eventually something will stick. They view the "failures" as the salary they get paid (from investors) while waiting for the money train to roll in to town.
What's even more awesome (as in, it strikes me with awe) is that if you manage to hype your way into the second round (or higher) consistently, then you are a high flyer and people will flock to stuff money into your pockets, even though you have never actually produced a "successful" venture.
I am absolutely convinced that your job as a founder is not to make the company "successful". Your job is to raise money, make connections and sell the company. Sure success is a "nice to have", but leave that to your CTO/COO/unwitting co-founder. I often see founders on HN complaining of burnout, trying to keep it all together. Meanwhile all of the successful founders I've worked with don't get bogged down with that stuff. Their the ones going home at 4:30 while the hired help stays until 2 in the morning propping up the server with popsicle sticks and devising various sacrifices to appease whatever god seems to be angry at the time.
While this is certainly a click-worthy title, I'm much more interested in seeing whether the relative number of startup failures is increasing, rather than looking at this in absolute terms.
2015 was a banner year for startup funding, and you would expect many of those war-chests to be running low right around now.
Isn't this a very healthy statistic? In theory, not all companies are meant to last forever. Heck, no company should last forever.
Infact, I would argue that he should be doing 7-8 a week. Clearing out the deck and making way for the new is a good way we can maintain a long term healthy eco system.
Frankly, many iffy biz models that escape startup death aren't survivors but are just long term zombies that are propped up by investor stupidity with no clear path to sustainable growth.
"Shut down 3 or 4 unicorns" - wonder who they were - and I find it a bit funny that he doesn't seem to know the exact number. Or maybe he's just trying to be less specific on purpose.
Valuation is very much a vanity. You can inflate it in a variety of ways. By the time the companies get to him, I think the joke is that you can't tell whether it was actually a unicorn or not. If common stock is worth 0, nobody cares anyways.
The number of wind-downs a week is presented as interesting, but there's no indication how this represents the health of startups in general instead of his businesses ability to get customers.
The indication (more than normal) is given in the response to the first question, from which the article's title is taken:
> MP: We’re seeing two to four companies wind-down a week, which we’ve never seen before. I think more [investors] are taking the Sequoia Capital approach, meaning if something isn’t working, they’re moving on
edit: I think the parent was slightly edited but apologies if I simply misread.
"The price of consolidating the companies is too high."
I find this fascinating, as it really speaks to my experience in small companies. The thing you actually create -- code, docs, self-serve product, sales and marketing collateral -- isn't particularly valuable. Most of the knowledge is tribal knowledge, and you're all just spending time trying to expand that. It's amazing how far you can go, and have to go, with the informational equivalent of duct tape and string.
This is a natural byproduct of the evolution of tech sector becoming THE world leader. We are no longer a small mammal outrunning giant reptiles, we are now the dominant force shaping the future of LIFE. This is a smart corrective measure to prevent a bubble. The best firms have learned that only scientific innovation, technical genius, and world-class leaders deserve capital for their ideas.
This may be a good thing for new start-ups. If investors are not "throwing good money after bad" they may have more fuel in the tank for new bets. Each massive round in a unicorn can fuel ten series A rounds.
[+] [-] iron0012|9 years ago|reply
[+] [-] mrbgty|9 years ago|reply
You weren't exaggerating.
[+] [-] cavisne|9 years ago|reply
[+] [-] dmix|9 years ago|reply
> TC: Almost every time we’ve talked over the years, you’ve said that work is busy. Certainly, it slows down sometimes.
> MP: Sherwood has mostly been on an upward run since we started [in 1992], but we did slow down in 2014, and we couldn’t figure it out. Well, VCs were running their companies further to the edge to [improve their internal rates of returns before they hit the fundraising trail]. Turns out we had our best quarter ever in 2015 [as soon as they stopped funding those companies].
Blame the news industry for running with the same lead every couple of years. It works.
Much like the predictably news industry, people her predictably don't read the article before dismissing it.
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] nsxwolf|9 years ago|reply
[+] [-] scandox|9 years ago|reply
[+] [-] dharmon|9 years ago|reply
[+] [-] samstave|9 years ago|reply
There was a startup, Quokka Sports, where we did the office design for them in a brick-and-timber building in SF, and they freaking folded just before the office build-out was complete... going through their office, the conference rooms were literally PILED with brand new aeron chairs... So I had several for a time...
[+] [-] nogbit|9 years ago|reply
[+] [-] mikekchar|9 years ago|reply
[+] [-] serg_chernata|9 years ago|reply
[+] [-] cmrdporcupine|9 years ago|reply
[+] [-] DonHopkins|9 years ago|reply
http://www.deskdepot.net/chairs
[+] [-] metaphorm|9 years ago|reply
[+] [-] mahyarm|9 years ago|reply
[+] [-] justinzollars|9 years ago|reply
[+] [-] hkmurakami|9 years ago|reply
>MP: We sell a lot of patents, maybe more than anyone else. Usually, the only way to pay back [lenders’] loans is to sell the patents. So people aren’t paying what the company would have been worth but usually enough to pay back that secured debt.
So many companies saying they'll only use their patents defensively... may find that their patents will fall into the hands of someone who doesn't share their perspective.
[+] [-] jessaustin|9 years ago|reply
[+] [-] throwanem|9 years ago|reply
[+] [-] strictnein|9 years ago|reply
[+] [-] kayge|9 years ago|reply
https://www.youtube.com/watch?v=kdXKdRoB9Wk [potentially NSFW for language]
[+] [-] mathattack|9 years ago|reply
[0] http://www.bizjournals.com/sanjose/news/2017/03/09/quixey-al...
[+] [-] ajamesm|9 years ago|reply
[+] [-] rexreed|9 years ago|reply
[+] [-] brandnewlow|9 years ago|reply
I did notice the trade show seemed dominated by the country pavillions like I don't remember before. It made me wonder if they were basically bussing in international startups to cover up for the general lack of startups that wanted to buy a booth.
[+] [-] dmix|9 years ago|reply
Markets and investors adapt to experience. Much like this article said, companies are learning to wind down companies faster and pivot earlier. Founders and VCs get better at managing risk.
[+] [-] spitfire|9 years ago|reply
Discounting for the fact that they're only seeing failures.
[+] [-] jksmith|9 years ago|reply
I cringe every time I see another "Come help us change the world at..." or "Come help us reinvent blah blah" here on HN. Instant red flag to me, but I'll be damned if they didn't get funded anyway.
[+] [-] mikekchar|9 years ago|reply
The whole idea of creating a large valuation so that you can have a successful exit is literally just that. You are creating demand for the company so that you can sell it to somebody and keep part of the money. The idea of starting a company so that you share in part of the profit generated by the company is ludicrous in today's world.
But always keep in mind that being "successful" is not the only way to move money from an investor's pocket into your own. You can merely hype the hell out of the company. If successful, you can engineer an exit with no viable product. You can also create the "killer demo" which encourages a large company to buy you just so that they can suppress the technology (not so common in this decade, but was standard practice in the 2000's).
And here's the best part. If you "fail" utterly, you can still pocket a fair amount of cash. Most successful entrepreneurs that I worked with do not have the attitude that "this company must succeed". Not by a long shot. They throw spaghetti up against the wall over and over and over again, with the belief that eventually something will stick. They view the "failures" as the salary they get paid (from investors) while waiting for the money train to roll in to town.
What's even more awesome (as in, it strikes me with awe) is that if you manage to hype your way into the second round (or higher) consistently, then you are a high flyer and people will flock to stuff money into your pockets, even though you have never actually produced a "successful" venture.
I am absolutely convinced that your job as a founder is not to make the company "successful". Your job is to raise money, make connections and sell the company. Sure success is a "nice to have", but leave that to your CTO/COO/unwitting co-founder. I often see founders on HN complaining of burnout, trying to keep it all together. Meanwhile all of the successful founders I've worked with don't get bogged down with that stuff. Their the ones going home at 4:30 while the hired help stays until 2 in the morning propping up the server with popsicle sticks and devising various sacrifices to appease whatever god seems to be angry at the time.
Typed partially in jest... only partially...
[+] [-] _sentient|9 years ago|reply
2015 was a banner year for startup funding, and you would expect many of those war-chests to be running low right around now.
[+] [-] trimbo|9 years ago|reply
https://www.wsj.com/articles/is-the-tech-bubble-popping-ping...
[+] [-] KeepTalking|9 years ago|reply
Infact, I would argue that he should be doing 7-8 a week. Clearing out the deck and making way for the new is a good way we can maintain a long term healthy eco system.
Frankly, many iffy biz models that escape startup death aren't survivors but are just long term zombies that are propped up by investor stupidity with no clear path to sustainable growth.
[+] [-] pdog|9 years ago|reply
[+] [-] crpatino|9 years ago|reply
[+] [-] inthewoods|9 years ago|reply
[+] [-] philip1209|9 years ago|reply
[+] [-] KevinEldon|9 years ago|reply
[+] [-] RichardHeart|9 years ago|reply
[+] [-] pricechild|9 years ago|reply
The indication (more than normal) is given in the response to the first question, from which the article's title is taken:
> MP: We’re seeing two to four companies wind-down a week, which we’ve never seen before. I think more [investors] are taking the Sequoia Capital approach, meaning if something isn’t working, they’re moving on
edit: I think the parent was slightly edited but apologies if I simply misread.
[+] [-] trjordan|9 years ago|reply
I find this fascinating, as it really speaks to my experience in small companies. The thing you actually create -- code, docs, self-serve product, sales and marketing collateral -- isn't particularly valuable. Most of the knowledge is tribal knowledge, and you're all just spending time trying to expand that. It's amazing how far you can go, and have to go, with the informational equivalent of duct tape and string.
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] good_vibes|9 years ago|reply
[+] [-] justboxing|9 years ago|reply
Anyone know what these 3 / 4 "Unicorns" are?
Also, isn't the term "unicorn" use to refer to wildly successful startups that have very low chance of failing? This sounds like an oxymoron...
[+] [-] kevan|9 years ago|reply
[+] [-] rrhyne|9 years ago|reply
[+] [-] cuca_de_chumbo|9 years ago|reply
[+] [-] seizethecheese|9 years ago|reply
[+] [-] JoeAltmaier|9 years ago|reply