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News & Press: Arizona Business News Updates

How entrepreneurship has become just like the Hollywood dream

Tuesday, June 10, 2014   (0 Comments)
Posted by: Rhette Baughman
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Sitting in a noisy, Bay Area-esque restaurant in Phoenix with another of the Stealthmode Partners, the conversation rolled around to our burnout on the Bay Area scene. We had independently acknowledged this to each other, but had never discussed it before. We’ve been (sort of) part of the Bay Area/Silicon Valley scene since 2000, when we raised $8 million for a company run by a 23-year-old who kicked us out, blew through the money in a year, and never delivered a product. We like the scene a lot less now than we did then.

That company, whose equipment later formed the backbone of Limelight Networks, taught us a big lesson about young entrepreneurs and money. It taught the young entrepreneur an even bigger lesson: For his next company, he never took a dime of outside funding. He bootstrapped the company until he sold it.

Now, the next generation of entrepreneurs needs to learn that same lesson. It has been extraordinarily easy to get seed funding in Silicon Valley during this cycle, and the expectation that you can start a company and get enough money to get it going has spread globally through social media — forcing many other non-Silicon Valley areas, including our Valley, to attempt to compete.

Of course we cannot, because we have nowhere near the number of angels and the infrastructure that California has.

My partner commented insightfully that entrepreneurship has become like Hollywood: The entrepreneurs are like starlets who move to Silicon Valley with the same naive expectations young girls used to have when they moved to Hollywood. The angel and venture capital companies are like the studios that sign the stars with a little money and the promise of fame and fortune.

When the first term sheet is signed, however, the entrepreneur undergoes the same loss of freedom as the star (or even the director) who signs a contract with a studio. The funding means the studio owns him, and he has lost his creative freedom. The entrepreneur is working for the investor, just as the starlet is working for the studio. As for the investor, he has a profile and a brand to keep up. As one VC said to me recently, picking up a breakfast check I had offered to pay, “the VC always pays.”

So entrepreneurship Silicon Valley-style does not lead to freedom. In fact, it leads to anxiety, depression and endless workdays. It’s worse because the entrepreneurs are so young, and they don’t have the experience to deal with its complexities.

An interesting insight into this world, about which you can’t tell much unless you’re part of it, comes from downloading the mobile app Secret. People post anonymously via Secret, and if you are their Facebook friend, you get to read and interact with their posts — also anonymously.

Secret has given me interesting insights into entrepreneurship in the Bay Area. Some typical posts: “My mom raised four kids and had three jobs; I’m spending $150,000 a year on a nanny, housekeeper and personal assistant for my wife. Makes me feel guilty. Should it?”

And another: “I volunteer anonymously in a number of places because I worry that investors and friends would think less of me for caring that much about others.”

Still another: “Change the name from Burning Man to Earning Man because everybody that goes is a working yuppie playing hippie for the weekend.”

The comments on these posts are even more revealing, but for now I will spare you any more of the turmoil behind the scenes.

Originally posted at Phoenix Business Journal. Written by Francine Hardaway. Francine Hardaway is a serial entrepreneur, brand strategist and CEO of Stealthmode Partners, an accelerator for entrepreneurs. Reach her at francine@stealthmode.com.



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