It’s been a little over a year since I joined Gartner and some things about startups, especially the cloud platform and management variety, stick out one anlayst-year in.
1. Many startups don’t know what to do with their product.
They’re pursuing the wrong market, promoting the wrong feature, using the wrong metaphor, blowing the product out of all proportion with itself, etc.
Say you have a great feature. why build a not-great product around that great feature to compete in a market full of other non-great products built around more or less interesting features of their own? Just be honest: sell your bloody feature to someone who wants it or to a bigger player who needs it. But I probably don’t know what I’m talking about and this approach doesn’t fit the path-to-exit models in effect.
2. The herd mentality is very much real.
In my tiny little specialization of cloud platforms and management software, there are 76 that I know of. And this number seems to grow monthly (found number 76 yesterday). Seriously, why do entrepreneurs keep entering this (very crowded) space and who are the financiers who keep throwing money at them? How many potential acquirers are there and how big could any of these folks get independently? My view is dim.
Not only are they creating a phalanx of not-likely-to-exit entities all marching towards the same cliff, but they’re locking up useful talent that could be doing something that might have some kind of impact.
3. Money has to be put to work.
Lots of it. And funding startups is one way to put it to work. But I’ve come to the conclusion that some (more than admitted) of what goes on is a group of people in an inbred ecosystem sustaining a particular lifestyle off of someone else’s cash–everyone collecting a bigger or smaller slice of that more or less free pie as befits their nominal function.
I’m familiar with this pattern. I’ve seen it before in the other realms of finance more dominant where I live in NYC.