I want to start out by saying that this is one of the more troubling articles that I’ve written for this blog. The topic is something that is near and dear to my heart (i.e.
I’ve long accepted the fact that
I want to get on the record that I love living in
What’s Wrong With Startups In
Here are some random thoughts and ideas I have on the East Coast vs. West Coast theme.
- Where did we go wrong? On a relative basis,
- As an entrepreneur that has bootstrapped two prior companies (and working on my third), I think one of the biggest “costs” of raising capital is not dilution, but distraction. I wrote about this in my article “Fatal Distraction: The True Cost Of Venture Capital”. Though not specifically targeted at
- As investors on the East coast, we are too careful. As entrepreneurs, we are not careful enough. This is the point that keeps me up a lot, because I think I’m part of the problem. Or, more accurately, I’m not enough a part of the solution, and so I’m part of the problem.
- In my own small way, I’m trying to change this. Last year, I made three early-stage investments (and when I say early stage, I mean early-stage). The average due diligence for each of these investments was < 24 hours. Actually, to call what I did due diligence is a grave distortion. I really didn’t do any due diligence at all. I tried to understand the idea (as best I could), I tried to understand the entrepreneur (as best I could), and I made my bets. That was it. For those deals I said no to, I said so quickly and convincingly. At some level, I think that’s how it should work. This is why I have a fair amount of respect for Paul Graham and Y Combinator. You may not agree with their investment thesis, but I think it’s closer to what entrepreneurs actually need. [Interestingly, the smart folks at Y Combinator actually divide their time between both coasts].
- This year, I joined
CommonAngels (a local angel investment group here in
- As for the entrepreneurs themselves, I think many of them are not understanding the reality of the mindset here. Sure, you might have a game-changing, paradigm-shifting, belief-shattering idea for a consumer Internet play. But, you’re going to spend a couple of months finding the right people to talk to, another couple of months educating these right people and the last couple of months (if you make it that far) convincing them to invest. At the risk of alienating a lot of the people I know in the investment community (and even a few entrepreneurs), I’ll give you my sound-bite: Many software entrepreneurs may be better off moving to the west coast than dealing with the pain of trying to get funded on the east coast. There, I said it. I’m going to walk around for a little while now because I feel so traitorous. … pause… As much as I hated to do it, I think it needed to be said.
If I sound frustrated, I don’t really mean to. I think I’d sound a lot more frustrated if it weren’t for the fact that I’m not really looking to raise large funding for my own startup, HubSpot, which is in the online marketing for small business space. I’m fortunate in that I can bet on myself and keep writing checks until the money runs out, sanity runs in, or the idea itself succeeds. Let’s see what happens there. But, not everyone else can do that, and there are lots of entrepreneurs here in Boston/Cambridge that have ideas and would possibly make great startup founders.
For all of you budding software entrepreneurs (and the investors that invest in them), am I off-base? Is the East Coast actually closing the gap (instead of widening it) when it comes to being a great place to launch an exciting new software startup? Is raising money even necessary now for software startups? Can’t most people just bootstrap? Would love to hear your thoughts in the comments. This is one of those cases where I’d really, really like to be proven wrong. I really like it here in