It’s 2016 and anyone paying attention to what is happening in Silicon Valley sees that a something odd and unsettling has happened - did a bubble pop in the private world of startups and tech companies? With investors writing down several companies in their portfolios recently, we are seeing the effects of an era, the Bubblegum Era.
Like a teenage with a wad of gum in the back of the classroom, we have been irreverent, noisy, disrespectful, and have continued to rely on our parents for our allowance (those investors that just love to tell us fairy tales about unicorns). We have broken the rules of traditional business by not focusing on accountability like paying attention to our bottom line, revenue, and profit.
In some ways, it was good that we broke the rules and stopped focusing on making money: the companies that have succeeded in the past decade broke rules to create new boundaries, and our world is inconceivable without the valuable presence of companies like Google, Twitter, and Facebook. Simultaneously, the mentality of irreverence looked an awful lot like a teenager: naive, deluded about entitlements, and not at all concerned about who pays the rent or paychecks.
The Bubblegum Era was a time when billions of pointless consumer applications were created; we raised money and debt with the hopes that our exposure to more people would monetize later and a new Facebook would emerge from the shadows; and we feared the day that we would have to take a hard look at our bottom line.
Thankfully, times are slowly changing. The adage “build now; monetize later” is becoming a redacted ideology much like how we remember fashion in the 1990’s: Terrible. For one example, Twitter is facing considerable backlash from the public markets as they have been public for two years and have not been profitable and user engagement is decreasing.
Are we, as a tech and startup community, ready to spit out our bubblegum and avoid another tech bubble?
Since selling my company, Klick Push (now part of GiftConnect), part of my day revolves around working with venture capitalists, private equity partners, and early stage CEO’s. My work involves evangelizing how FullFunnel.co helped our four-person team at Klick Push effectively sell into dozens of Fortune 500 brands through the implementation of accountability and process into our sales infrastructure - or as FullFunnel calls it a “sales engine”.
As I talk with a lot of individuals about FullFunnel’s ability to grow and scale organizations, they tread with a hint of skepticism and doubt as though I were talking about time travel or magic. To me, what is unbelievable and magical is how companies are planning to hit these mythical hockey stick graphs that founders put in pitch decks and VCs eat up.
Furthermore, many investors and founders operate under misguided pretenses that “profitability will organically happen” and that “investment will always be available.” My favorite contention was from one VC, “we don’t believe in bringing in outside contractors into our companies. It doesn’t work - that is why our companies raise capital.” Personally, I don’t know a single company that hasn’t used outsourced services to scale their business effectively, and I know for a fact that raising capital is nowhere as easy as it used to be.
As I read about tech companies getting written down by their investors, one might think that the the tech world is approaching a “bubble.” In my opinion, and through all the conversations I have had, we are not entering a bubble but instead we are being forced to spit out our gum. We are entering an era where maturity is a prerequisite to building a company and “vision” is a character trait that is not only an understand of product iterations but an understanding of hitting growth and sales metrics.
The tech accelerator business model is an excellent signal that the tech world is evolving past the Bubblegum Era. Organizations like 500 Startups, Techstars, and Y-Combinator are some of the most visible of these tech accelerator programs which are essentially a sponsored boot camp meant to get your business in order. Tens of thousands of companies apply to go through these programs and thousands get accepted to go through them with the hopes of gaining momentum, visibility in a crowded startup world, and the opportunity to see the fruits of much labor.
The primary curriculum of these accelerator programs is to prep startups for an investor pitch and raise money- building the business is secondary if not tertiary. These programs are businesses themselves that take on the motto “spray and pray” where they invest a little into a lot of startups in hopes that one hits. Key word is “hope” as follow up knowledge and attention is not there to help companies grow. Hope is the only thing left when you have a lot of companies under your belt.
Two weeks ago I went down to Dallas to visit Tech Wildcatters, a top tier accelerator program, and got to see what they were doing differently since my company, Klick Push, went through the program three years ago (the height of the Bubblegum Era). Our sentiment of the program was that we traveled to an interesting place, met amazing people, but it most likely derailed our focus onto building investor pitch decks rather than building our business. To my delight (and a bit of envy), Tech Wildcatters has spit out their gum. The program is now not solely about advising companies on how to raise capital but instead focuses on creating a business - a business that sells a product that people want. Novel, right?
The same day that I visited they launched The Gauntlet Fund, which motivates companies that go through the accelerator program to hit key milestones with regards to product development, sales, and marketing. As a reward, the Gauntlet Fund will provide ancillary capital to keep the company afloat in their quest to profitability. I am honored to say that after my visit to Dallas, that I am going to be playing an active role in the Gauntlet Ventures and this next phase of the accelerator world. Afterall, I am a byproduct of these programs.
I am confident that the tech world is not approaching a bubble, but are simply getting rid of their bubblegum as it is time to grow up. Snapchat might be the last big startup of the Bubblegum Era, but they too are focusing on becoming a distribution tool for marketers (which implies revenue and profit - decidedly mature concepts for any business).
We are all tired of the millions of apps that are designed to help us “connect”, “collaborate”, and “communicate” with each other and are ready for the next wave of businesses to provide a return on our investment. Whether that investment is monetary, or it is our time and emotions, we as entrepreneurs and investors are being forced into a new era of accountability of the bottom line. If we choose to spit out the bubblegum and grow up, there is less of a chance of blowing a bubble that will inevitably pop.