What Uber Really Fears

Isabel Roughol posted a very interesting piece on LinkedIn today about how Uber’s Privacy scandal is a symptom of Uber’s culture. She paints a cautionary portrait of a company that is endangering its future with its wanton disregard towards privacy and threatening its enemies, even if these “enemies” are journalists doing what real journalists are supposed to do.

Uber will probably survive this “scandal” because it doesn’t fear the media nor does it worry about a large-scale customer abandonment because of its corporate behavior. Nor does it fear its old school competitors because they lack the organization and political juice to pressure government leaders.

Simply put, the service is far superior to anything out there and most people put a value-added service like this ahead of their ethics (ever try to get a cab in New York when it rains?). Call it situational ethics, but when a service like Uber is so seductively easy and efficient, and you’re talking about a low out-of-pocket expense like a cab fare, a blind eye will be turned.

The only thing Uber fears is regulation and taxation on a local, state and/or Federal level, which frankly is inevitable. When these government agencies figure out how they can get a slice of the Uber revenue pie, the situation will change.

And this is the real cautionary tale: The parallels to Zynga are eerie. Zynga thrived by exploiting a loophole in Facebook’s ad policy and declined – okay, crashed – when that loophole was closed.

Your move, Uber.

RIP, Digital Entrepreneurship 1.0

by Andy Harrison

Fatigue is overtaking the digital startup world. The economy as a whole is cyclical in nature, as is each segment. So why is the tech/start-up/digital space any different? There is product fatigue – a lack of substantive innovation. Only incremental work. Nothing resembling a game changer – nothing new is there – how many more new ad tech algorithms do we really need? There is consumer fatigue (e.g. app downloads are down by up to 25% depending whose research you believe) and device overload. There is investor fatigue – concerns of 1999 – The Sequel.

But as importantly, this fatigue shows that key parts of the startup world are in need of significant overhaul. Yes, it’s Darwinian. But for the start-up ecosystem to sustain long-term health, there needs to be a significant purging of the crappy businesses, as well as the short-sighted business practices that have become common in this first wave of digital entrepreneurship.

Digital Entrepreneurship 1.0 is dead. It is time to move forward in the continuum.

Overall, how startups are born and grow needs to be revisited. What happened between 2007 and 2012 is gone. To quote John Lennon, “The dream is over.”

Bootstrapping will only take most startups so far. The minimum ante now is $100,000 out of your pocket (both living expenses and business expenses). You don’t starve an infant. And there is a difference between running lean and being financially anorexic. Either way, young businesses increase the chances of failure by not making the necessary investments of resources and personnel in the gestation period. If you don’t have the money (or a sugar daddy or momma), expect to fail and hope someone adds you to their team for your next gig.

But mainly, I think that the start-up accelerator model is broken, especially now when there is such an explosion of such programs around the United States. Accelerators are becoming institutionalized, which is a subtle form of stagnation. Understand that there are certain accelerators that are excellent (e.g., ERA, Kaplan Education, DreamIt), but the current model is a flawed.

• Three-to-four months is not enough time to accomplish more than an MVP, maybe. An MVP is a waste of resources if there is no pressing need for the product and you have no clue how to monetize it. Smart investors are looking for entrepreneurs who understand their businesses – the key drivers, what and who they have now, what and who they need to add, the financial fundamentals of their businesses and their markets, milestones, the competitive landscape. And you’re not going to learn all of that in three-to-four months while working 20 hours a day building that MVP and going to sessions where you don’t fully understand the material.
• Companies get admitted that shouldn’t – These companies have an inferior product/service offering and people who are not leaders or even managers. They lack the basic business building tools and the requisite business savvy.
• Lack of Commitment, Part I – The resources/people offered by a corporate accelerator aren’t easily accessible nor are they always top-notch (i.e., the A-team is not going to drop everything to help a startup or two).
• And the programs themselves aren’t well-thought out in terms of training/structure/etc. Some accelerators are glorified 120-day efforts to develop and deliver an investor pitch – with no substantive assistance in developing and building the companies they admit.
• Certain accelerators/incubators use a template-model partnering with companies that want to start an accelerator. It is highly dependent on 1) the company finding the right people – people who understand how an accelerator is supposed to operate and have a culture of mentoring and intrapreneurship, 2) Structuring a program of substance; and 3) a substantial commitment of corporate resources (people, access to the host company’s resources, etc.) to make it happen. It is not like getting a plug-and-play franchise like a Subway sandwich shop.
• Lack of commitment, Part II – $20,000 to $40,000 is not a lot of money to invest, particularly If you’re in New York City, it barely covers the living expenses of team members (a diet of Red Bull and Ramen is highly overrated.) If a company is accepted into a program, it should get more resources and cash. It must be nurtured. This isn’t Survivor. Presenting inferior companies at the end of a program not only damages the inferior company, it tarnishes the reputation of the accelerator.

Not everyone is meant to be an entrepreneur. I think people who offer programs like Entrepreneurship Boot Camps or Entrepreneurship in 12 Easy Steps are missing the point because these programs are built on a flawed premise and are a form of opportunistic cashing in on success. Some entrepreneurs may be sincere in wanting to share their knowledge, but they are not sharing all of their secrets, contacts and other true, critical elements to their success (besides timing a market perfectly or dumb luck). They are offering false hope. It is a mirage.

Further, funding is broken. There are unrealistic investor expectations (no hockey stick) from an investing cohort where a 15% success rate is considered amazing. That is sad. Crowdsourcing sites have become a fuster cluck. Just like the App Store, discovery is difficult – to get people to invest, a full-bore marketing/PR plan is necessary to build awareness and get people to your listing. Do you really want to spend time and money to attract low-dollar investors, as opposed to putting it towards building your business?

Another concept that has become distorted is the MVP. It has devolved to the point where MVPs are being designed for investors, not customers. While there have been a number of posts in the last month or so on what an MVP really is or how to build one, there is still a mentality of “slap together a few features and throw it out there” with no plan on how to incorporate feedback, let alone how to build out the platform, app, service, whatever.

Finally, there is culture. The nature of startup community has changed as 1) it matures; and 2) MBAs who once flocked to Wall Street now go to Flatiron, which results in an odor of arrogance that is permeating New York.

So what’s the solution? How do we evolve? Embedded in this piece are the cornerstones for Digital Entrepreneurship 2.0. It’s not for everyone. For those who participate, investors need to change their expectations (singles and doubles, not home runs), accelerators and development programs must be fully committed (no lip service) and the entrepreneurs they choose to help must have substantial products and services – which they have developed to an “investment ready” level. But that is a conversation for another day.