Avoiding the Cargo Cult And Getting The Trans-Atlantic Startup Model Right
See the full TechCrunch article here
Highlights:
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My problem with the European startup ecosystem is somewhere else. I actually believe that it bears some signs of a Cargo Cult. Here is the definition from Wikipedia:
"The best known examples of Cargo Cults come from some Pacific islands during World War II. The American airfields and their personnel brought relative prosperity and modernity to the island people, but once the war was over the Americans took their planes and equipment and left. The local people wanted to bring the prosperity back but they did not understand the substance of why the Americans came there. They only saw the form. And so the locals crafted wooden headphones, lit fires to light up runways and tried to attract back the planes with canned food and other useful goods by emulating airfield traffic.
"Something similar happens in the startup community in Europe these days. People start companies, write business plans, meet with investors, talk about term sheets and exits. But in reality most Europeans don’t actually understand the substance of the system—the business plans are wooden headphones and term sheets are fabricated control towers. Repeating the form of US-based startups without a real understanding of how much the deep and complex ecosystem of Silicon Valley contributes to the suc... won’t bring prosperity to companies coming from Europe."
As I mentioned on the panel at the SCI launch: I've seen plenty of business plans by first-time entrepreneurs with good ideas who plan to be profitable 3 years for now. I did exactly the same thing when I first started Skyrove, simply because I was emulating business plans from overseas. I now pay much more heed to the likes of 37signals' "Getting Real" philosophy, i.e. solve somebody's problem right now and charge for it, right now.
What do you guys think? Are SA startups making the same mistake? Or am I being shortsighted by planning to be profitable first?
Highlights:
"
My problem with the European startup ecosystem is somewhere else. I actually believe that it bears some signs of a Cargo Cult. Here is the definition from Wikipedia:
A cargo cult is a type of religious practice that may appear in traditional tribal societies in the wake of interaction with technologically advanced, non-native cultures. The cults are focused on obtaining the material wealth of the advanced culture through magical thinking, religious rituals and practices, believing that the wealth was intended for them by their deities and ancestors.
"The best known examples of Cargo Cults come from some Pacific islands during World War II. The American airfields and their personnel brought relative prosperity and modernity to the island people, but once the war was over the Americans took their planes and equipment and left. The local people wanted to bring the prosperity back but they did not understand the substance of why the Americans came there. They only saw the form. And so the locals crafted wooden headphones, lit fires to light up runways and tried to attract back the planes with canned food and other useful goods by emulating airfield traffic.
"Something similar happens in the startup community in Europe these days. People start companies, write business plans, meet with investors, talk about term sheets and exits. But in reality most Europeans don’t actually understand the substance of the system—the business plans are wooden headphones and term sheets are fabricated control towers. Repeating the form of US-based startups without a real understanding of how much the deep and complex ecosystem of Silicon Valley contributes to the suc... won’t bring prosperity to companies coming from Europe."
As I mentioned on the panel at the SCI launch: I've seen plenty of business plans by first-time entrepreneurs with good ideas who plan to be profitable 3 years for now. I did exactly the same thing when I first started Skyrove, simply because I was emulating business plans from overseas. I now pay much more heed to the likes of 37signals' "Getting Real" philosophy, i.e. solve somebody's problem right now and charge for it, right now.
What do you guys think? Are SA startups making the same mistake? Or am I being shortsighted by planning to be profitable first?
Tags: cargocult, siliconvalley
Views: 2
Replies to This Discussion
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Permalink Reply by Sheraan Amod on -
Some startups succeed by going the VC-funded approach, others succeed by going the bootstrap approach. Some succeed by Freemium models and others do it by charging on day 1. Surely it depends on the context and startup in question?
I do think that our perspectives and views are highly biased by personal experience though - confirmation bias makes us believe in what worked for us, and distrust things we tried that didn't work. It's human.
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Permalink Reply by Justin Stanford on -
I think SA startups are almost forced into planning for profitability early on, given the fact that big funding is generally harder to come by here, and there's also no real secondary market or IPO market for startups here and foreign ones are hard to access from here, so simply building something that might get bought for millions whether it's earning any revenues or not isn't as viable an option as it is in the US for instance.
I actually think this is a good thing, we should always be striving to build good, strong, fundamental "value" companies, with customers, cashflow and sales. If we can create a culture of that here it will be for the better.
Tech bubbles evolve when over time more and more esoteric business plans start to find funding and then even get sold/acquired for big figures. In the long run though, sound value based companies will survive the vagaries of bubbles and will be less dependent on funding or being sold. You ultimately have more options, and the luxury of time, and likely a higher valuation in real world terms, if you are cashflow positive or profitable.
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