The Thin Skin of the Venture Capital Market

The other day, I saw that one of my favorite products, Slack, just raised $120mm at a $1.12 Billion valuation.  The company is doing about a million a month in recurring revs.  

Personally, I think it was kind of a bad idea--not necessarily because of the valuation, but because it seems like $120mm is way too much money for a software company at this stage, especially one that might even be cashflow positive right now.  I think it's likely that it will unfocus the company and what it definitely does is eliminate the possibility of exiting for anything less than two and a half billion dollars.  That is likely to lead to decisions that might not be in the best interest in the company or the users.  

So that's what I wrote on Twitter...


And then I promptly got Twitter flack from one of the people who works at one of the company's investors.  They seemed annoyed that I said anything in the first place.  

What was said, who's right, etc., doesn't much matter.  The fact is, it's just not cool to criticize the investing side of the venture capital market.  

Which is why I'm sure the dude who picked apart the physics of the latest round of UBeam will undoubtedly get eviscerated in the tweet and blog world.  

"...Here’s the problem. IT’S AN IMPOSSIBLE IDEA. Having done my share of ultrasound physics AND wireless charging work in the past, the first thing that struck me about the idea was that, to transmit any appreciable amount of energy through sound waves, those waves would likely burn you, or at least deafen you, and any other small animals in the vicinity. This is why charging is currently done inside copper wires surrounded by plastic - so you don’t get hurt!

I’m no physicist - oh, wait, I am..."

Now, I know the company and while I'm actually not a physicist, my instincts told me the same thing--or, even if it wasn't impossible, it would be so inefficient that it wouldn't be an interesting proposition to consumers.  Also, I wasn't sure that it was really a problem worth solving.  I really don't mind power cords.  I'd really rather someone fix the battery problem than the cord problem.  This seems like duct tape for the battery problem.

That doesn't mean I have anything against the founder or the investors.  Meredith Perry has been working ridiculously hard for the last two years on this and I respect her effort.  I just respectfully don't see the same opportunity as her investors do, and I reserve the right to be 100% wrong.  I've been wrong many times before.  We all have.  For her sake, the company's sake, and their lead investor's sake, I hope I'm tremendously wrong on this.  I like Mark Suster a lot, too.  He's been nothing but tremendously nice to me.

But can't I disagree with him on an investment?  Why isn't that ok?  Why does it seem to automatically make someone an asshole to be critical of an investment?

This is done in the public markets all the time.  Turn on CNBC and you'll see tons of dissenting opinions on publicly traded companies.  

But in the private markets, we've got "Yay, founders!  Entreprenuership is awesome!"

I think it sucks that we are in a media culture where we're supposed to give everyone pats on the head for entrepreneurship when there are legitimate criticisms to be had about the high profile investments we read about all the time.  For the most part, journalists give startups a free pass when venture capital money is raised or when companies that clearly seem to have failed get "acquired". 

It's just not cool these days to say anything bad about the business side of startups unless you cross over into the "Big enough to pick on" world, like an Uber.  (That might also be the "Everyone thinks the founder is an asshole anyway" world, too, not that Travis really cares--he seems awfully busy running his huge company and making money.)

The problem is that when new entrepreneurs read only one side of opinions on an investment, they fail to understand the legitimate criticisms of business models that are out there in the market.  I can't tell you how many times I've been pitched and examples have been made of companies that I don't think are doing that well--but that you'd never know that from the press.

We have no legitimate debate and discourse in the startup market around individual investment ideas and it's hurting the entrepreneurs that are starting companies right now.  They're thinking everything is sunshine and roses and it's just not--but you're an asshole if you say it.  


No one should get personally attacked, but business criticisms of the business decisions made by founders and investors should be more fair game than they are.  

I think we'd all benefit from the public discourse, especially new founders.