SF New Tech throws an incredible pitch event, in large part due to the format and community that Myles Weissleder has cultivated over the organizations relatively short history. The formula seems simple enough: pitch for 5 minutes, take questions from the audience for 5 minutes. Too often, entrepreneurs focus their preparation on the first 5 minutes, only to blow it in the last 5. Such was the case on Wednesday night.
C.J. MacDonald stumbled through his pitch of his company’s collaborative bookmarking tool, Herdmark. He nailed the “what” of the presentation with a suitable demo, struggled with the “why” by not fully explaining how Herdmark would positively impact teamwork, then fumbled on the inevitable question in the Q&A: How will you monitize the product?
His answer was a rambling I-don’t-know which would have been troubling enough to investors in the room, yet forgivable in the traction-first-revenue-later model of company building currently (and tragically, in my view) in vogue.
Then, C.J. stepped on the landmine. “Revenue is really over rated,” he said. He laughed awkwardly, perhaps realizing what, as the chief-make-money-and-turn-this-into-a-business officer, he had just said.
It was flip, and it was fatal.
His comment though, is endemic of the state of Silicon Valley, and perhaps the startup environment worldwide. Too often these days, startups set their sites on funding and/or acquisition as the destination for the entrepreneurial journey.
In a pitch session this afternoon, for example, Meograph founder Misha Leybovich impressed me when he professed his desire to build “the next Adobe.” His company, he said, was building what Adobe would have built if that venerable company were starting anew today. Leybovich gives a compelling presentation. After the pitch, the panel engaged him in conversation about channel partners, noting which might be future acquirers. “This talk of acquirers is theoretically interesting, but,” I said, Misha, “I thought you wanted to build a billion dollar company?” (Never mind that Adobe’s current market cap is $23B+.)
“I do,” he answered, “but I’m a practical guy. “If someone offered me $100 million, I’d have to take it.”
I may be wrong to conjoin these two events, but both seem to point to the underwhelming ambition of so many startups today. Why worry about revenue if you (or your engineering team) can be quickly acquired? Why build the next great American Technology Company when someone waves a check with a lot of zeroes on it?
There was a time when I sneered at the swing-for-the-fences investment strategy of most institutional investors. Now, though, I’d be thrilled to see a full bench of startup founders willing to try.
I had an email this morning from Misha, who justifiably wanted to clarify the conversation. He wanted me to be clear (I think I am above) that he wasn’t the one to bring up the topic of acquisition. ”
- We are not building this company for a quick flip, and already do have revenue,” he wrote.
In fairness, Meograph stands out among statups for its customer focus and early revenue growth. If current trends continue, the company is on track to cash flow positive in 2014. Not a lot of startups can say that.
Perhaps the more important correction, however, is Misha’s comment on the hypothetical buyout. ”
- I said, ‘If someone offered me $100 million tomorrow, I’d have to take it.’ This just makes common sense … while I have lofty ambitions, $100M for less than a year of work wouldn’t be a bad outcome at all and could finance many more of my future ambitious startups.”
He has a point, and I understand it. Yet it doesn’t counter my thesis that the great many entrepreneurs starting companies today are as (or more) focused on personal wealth creation as they are on big company creation. That’s not a judgement, but an important observation and, I think, a recognition that startups have become for many just another asset class.