in San Francisco, Homeless People and Entrepreneurs are in Bed Together

by francine Hardaway on December 22, 2013

Too much money applied to entrepreneurship is evil.

If you don’t believe me, look at the evolution of the Bay Area over the past decade. The worship of founders has gradually displaced all other forms of respect. Today if you are not a founder, you’re not worthwhile.

Doctors are treated like labor, lawyers are unemployed. Service workers toil at two jobs for minimum wage. not respected. Homeless people shit on the sidewalks. But founders are treated with a respect bordering on awe. Grown men and women with business savvy throw money at young kids building products based on fads. Changing the world is no longer a requirement, nor is profitability, or even job creation.

This will not last. I arrived right after the dot com bust, which cleared out the roads and sent the last batch of easy money boys home with their tails between their legs. That cycle gave us some great companies — Yahoo, Amazon, EBay, — that changed the way people live all over the world. Yet the vast majority of startups during that era failed, and the blowback sent the stock market, and thus ordinary people’s retirement plans reeling.

It took 6 years and the founding of Facebook and Twitter to ignite the flame again. During that cold interim time, many people vowed the excesses would never happen again.

But they did, because it’s a cycle. I will argue that this cycle is worse, much worse than the last. When it ends, which some predict will be next year, it will cause havoc.

Why? Because in this cycle we have experienced the glorification of entrepreneurship and the rise of the incubator accelerator. Everyone now wants to be a founder, often with the same sense of entitlement grade school kids have about getting a participation trophy. If you have an idea, no matter how trivial or unoriginal, you think you should and can build a company around it. And there’s been, till now, enough money to postpone the reality check.

In fact, you don’t even need a business model again. While we laughed at the companies from the last cycle that concentrated on getting eyeballs, we now swoon over WhatsApp’s 400 million users. We think that data for marketers is endlessly valuable. Big data has taken the place of advertising on the “how we will make money” slide of every pitch deck.

But data doesn’t drive sales, and you will watch this play out in digital media next year. Media is the leading edge of this movement because brand advertisers have big budgets. They’re desperately trying to make sense of data and figure out if it’s really helpful or if creativity matters more. They’re slowly figuring out what data is useful (not so much). Ad tech companies that went public this year are already falling out of favor.

In the mean time, founders talk about the Series A crunch or the Series B crunch and don’t talk enough about making money. There’s also a talent crunch as relatively few engineers are in demand at the most successful companies. Misled by their acceptance into the expanding list of “accelerators,” founders have been accelerated only into early fixed overhead and unrealistic expectations; many will run out of runway next year. The investors, many of whom had difficulty raising their most recent funds, are saving their powder for a few special cases.

The rest will now have to scramble to find a business model.

They won’t all succeed. They shouldn’t. This is structural. These are seedlings that have to be thinned so the strongest will survive. But no one likes to be the pruned seedling, no matter how much we celebrate the culture of failure. Another cycle of six or seven years is a long time to wait to be funded again.

In the meantime, the City of San Francisco suffers as well. Gentrified by people who made it in this cycle, the city has a large population of people who didn’t. Decent people who are being driven out of housing by rich founders from the last cycle who drive up home prices and rents in a city always short on affordable housing. Walk through the Mission and smell the aroma of shit, piss and weed. Those might have been founders once. But now they are addicts, or just down on their luck in a city that only recognizes founders.

Job creation of the kind that would allow middle class people to live in the City is a thing of the past, for a hundred reasons.

We need what we’re going to get in the next couple of years: the bursting of the entrepreneurship bubble. It will trickle down from Silicon Valley to the global economy, just like it did in March 2000. And then maybe we will stop worshipping founders just because they’re founders.

{ 1 comment… read it below or add one }

Kelvin December 22, 2013 at 9:01 pm

Service workers were toiling and homeless people were shitting on the street long before the dot com boom. Blaming entrepreneurship is a red herring.

We need more housing, better safety net including good health services, and a stronger safety net. But the problems in SF existed decades before the Silicon Valley-style culture arrived in SF.

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