Back when I first entered the startup World, it was hard to create a startup. For starters you needed over $1M just to get going. You had to buy gear, software licenses, etc. And there was no real social web to help you cheaply bring products to market.
These days there are effectively no barriers to launching a product. If you have the talent you can build and launch something for free. Most of the teams we meet at Real Ventures come in the door having built and in many cases already launched – even though they have not raised money before.
This is all good! And as seed investors it’s certainly easier to make a decision if you can touch and feel a 1st product.
But just because you can build something it does not mean you should. More and more people are launching products and then trying to turn those products into companies. Accelerator programs like YCombinator and Techstars, and of course our Founderfuel, have aided this trend. We are there at the very beginning to provide capital and mentorship.
But this tweet from YCombinator founder Paul Graham should set off some alarm bells:
That’s over 10,000 applications to YCombinator in a week. Each of these applications represents a team that wants funding and wants to go down the path to building a funded company with all the growth and exit expectations that come with that.
Now, it’s true that only a small % of these applicants make it through. But each one represents someone who wants to build their own company vs. join an existing team. This is one big reason why it’s so hard to find talent these days – especially technical talent.
I’m all for encouraging entrepreneurship, but I worry about this trend. If you don’t get into YC and you take a job, will you leave as soon as you get into another program? What happens when all these companies hit the seed VC market? Will users begin to feel completely saturated and overwhelmed by these app and service companies? Will exit prices go down as there is so much supply on the market?
Lots of things to consider and time will tell whether this is good or bad. But from where I stand, 10,000 applicants per week to one accelerator program is not a good sign. And it brings me back to a fundamental principle for startup founders:
Don’t start a company just because you can.
Don’t do it because you know an accelerator will fund you.
Don’t it do it because you have dreams of riches and getting on Techcrunch.
Start it because you have a passion for solving a real problem or opportunity. One that keeps you awake at night. One that you are uniquely qualified to solve. One that is worth solving and will be hugely valuable to all stakeholders. One that can become a “real” company.