Entrepreneurship bubble or am I just a sceptic?

I'd like to think that I do my best thinking while taking a shit. I'm sure many of you do too, don't deny it. So it's not rare that I serenely decide to move my bowels and think of how to make everyday things better, on a regular basis. Like how I could create an app that would let me share pictures with my friends for a few seconds or create a new line of inexpertly built headphones and hopefully have Dr. Drake or Snoop Diddy vouch for them in return for an equity stake.

A few weeks ago, I have a quick scroll through facebook and see yet another "last day at work today....onto bigger and better things", this time posted by Jeff, a credit sales person at a prestigious BB, with a penchant for UV raves judging by his display picture. I clearly give him a customary e-pat on the back, or poke, which ever is more acceptable. Fast forward today, Jeff updates his facebook and is now involved in some sort of development for a tech start up, who's 'about us' page is written in the most sophisticated of tech talks. All I can gather from visiting this website is that they modulate something or another to produce easily digestible and integrated data sets for something else. Yep, easily digestible they say. Jeff was a political science major at college and was pretty much gung-ho about prestige, banking and french cuffs. Yet this move was mirrored by three other facebook friends who also made the move from banking (all in S&T) roles to the promised land of entrepreneurship/tech start up.

So my next bowel movement got me thinking, are these guys buying into this start-up/entrepreneurship/be your own boss/#ihavemyownoffice bubble without actually calculating the risk firstly, and secondly, are they ignorantly running with a breed of humans accustomed to writing code and solving problems with bouts of creativity normal humans just can't grasp? In short, what the fuck are they doing there?

This isn't a swipe at financiers wanting to turn to entrepreneurship nor am I making a general assumption that tech start ups are confined only to computer scientists. If you have a wonderful idea and you decide to pursue, by all means, please do. I love to read about new ventures that make me think "Jesus, while you were taking a shit and coming up an app that analyses the fibre content of your stool, someone just made a 3D printed flying unicorn." Still, to me it just seems that this entrepreneurship 'bubble' is little too inflated with fairytale helium. These self made guys who've made Twitter or WhatsApp are genuinely frickin' incredible, celebrities in their own right (without the trash reality tv of Keeping up with the Zuckerbergs) who garner attention from actual celebrities, politicians and Wall Street, and are now being dramatised in actual TV series. One day minions will write songs.

We have various colleges with their own incubators, crowd funding platforms that raise millions and TED Talks dominated by people who are doing their own thing in an attempt to change the world. At the same time, starting your own business is no longer just about generating an income stream or a stable venture that makes you your own boss, but rather its who's linkedin does the best job at romanticising the title of Entrepreneur. I sometimes cringe when I see descriptives like 'Serial Entrepreneur' attached to people that really get off on the whole entrepreneurship notion without anything substantial to show for it.

Is there a bubble? If so, when does it burst or slowly puncture? Do some of these guys have to realise that entrepreneurship and the start up environment can be unrelenting, painful and draining - economically and mentally? When does the realisation, that 9 out of 10 VC backed businesses fail, sink in, and that you could be involved in one of those 9 failing ventures? Of course, failure can breed success but even then for every failure-turned-success entrepreneur, we have 100's living off bank loans and spousal income while they try to recreate the wheel in efficient triangular form. Then again, as I read @"AcctNerd"'s thread, what is the worst thing that can happen? (In an entrepreneurial context...read it now for it's gold with regards to networking)

TL:DR - People quitting goods jobs to try and become a part of something new, exciting etc. Some aren't clearly assessing the risk whilst others don't realise the rate of failure. Is entrepreneurship becoming romanticised and if so, are we in a bubble which could potentially go bat shit crazy.

Would love to hear people's views on this.

 
Best Response

I skimmed your post, didn't read verbatim.

I disagree that there's a specific entrepreneurship bubble, I think it's just an extension of the tech bubble we're seeing right now, and tech companies are quite easy to start if you have a patent. the multiples we're paying for new tech companies are much much higher than those of their old tech counterparts, making the incentive to start a company that much more enticing.

also, it's important to remember how easy it is to start & fail at business in the US. other countries have much more regulatory hurdles than 'murica. For example, it takes north of 100 days to start a business in Brazil, where as in the land of the free and the home of the brave it takes 5 (source: my college econ classes + http://www.doingbusiness.org/data/exploretopics/starting-a-business). making it easy to start & fail at business is one of the reasons I love this country, it's meritocratic. if you want to take the risk, no paperwork is going to hold you back (theoretically).

something else to consider is low borrowing costs, since the Fed has pegged the short end of the curve near zero even as home prices have recovered, it makes getting a HELOC, SBA loan, or personal loan collateralized on your home that much more affordable. this wasn't the case years ago because either rates were higher or people had no equity in their homes, felt worse about the job market, etc.

correlation is not causation, but I will say that it is interesting to watch, I'm a firm believer that without entrepreneurship, there would be minimal innovation.

 

I completely agree with the innovation aspect.

I'm just not convinced by the bandwagon aspect of the craze today. One of my college alumni was the so-called serial entrepreneur. After failing 3 times, he hit the 4th venture out of the park. Tech company just realised $1m turnover in the past year. He always told me that innovation and the desire to make waves (however big or small) was the motive, not money. My banking friends seem to be attracted by the multiples, you mentioned, as opposed to any other reasons. Not saying anything is wrong with that, just seems a little misplaced.

 

I think it's important to make a distinction between types of entrepreneurs. There are the "wantrepreneurs", the guys that have had several successful exits and other types of relatively successful entrepreneurs (inside and outside of tech).

I think you're taking issue with the wannabes (and specifically the tech culture)...they guys/gals that are chasing the $s and trying to get rich quick by ripping off /copying the latest app big hit...I don't really blame them given the current environment, but you're right that most will fail.

The beauty is that I don't think if they are truly smart and hard working, that they will just fall flat on their face. There are many start-ups that are more like the walking dead. They aren't a big success, but they continue to fight and eek out small profits or show just enough revenue growth and promise to continue to get funding with the hope to win the marathon. Once we go through another down cycle and venture/angel funding is harder to come by, I think many of these could get washed out. That could be a few months away or a few years...who knows.

In the meantime, you should try to align yourself in a career / job / company where you can challenge yourself, learn/grow and have fun. We'll be dead in 50 years anyways, so why not? Going through a quarter-life crisis and trying to hit a home run when you're young makes a lot of sense (even people who have no business swinging the bat sometimes get lucky :-)

Batter up!

 

The time to take crazy risks is when you are young and don't have many assets to protect. If you fail you are still seen as a success (assuming your business wasn't a joke) and can rejoin the traditional workforce without much problem.

Not sure its a bubble as much as it is people recognizing that it really isn't a long term hindrance to their career.

"Everybody needs money. That's why they call it money." - Mickey Bergman - Heist (2001)
 

I see private equity having a field day sooner or later. Its sad. There are many awesome entrepreneurs doing great new things, but many who are wasting their own time and lives. I know a kid from college who had a bunch of his frat brothers join his "startup," where they literally just sell stuff on ebay and Amazon, BC he majored in entrepreneurship and can't get a job from anyone else. They sell nothing unique, nothing different, nor are their tactics anything different. They don't even sell on Alibaba and they tell people they're going global. BAHAHAHA. But hey, less competition for us BC these types seem to often be the ones who might be seeking finance/consulting jobs who, after 2008, thought they were gonna beat the next recession.

 

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