2 books that detail the dark side of startup culture, VCs and Silicon Valley
On WeWork and Adam Neumann
In the commercial real estate space, all eyes were on WeWork and its mission to “elevate the world’s consciousness” through its co-working spaces and free beer. There was skepticism for years around the sustainability of its business model, but yet WeWork’s valuation rocketed to $US47 billion, an amount more than 10x the market cap of its long-running competitor, IWG (i.e. Regus).
After its failure to IPO in 2019, questions have been asked about WeWork’s charismatic founder, Adam Neumann. His resume looks something like this:
- College dropout with no commercial real estate experience.
- Pocketing millions by leasing multiple properties that he owns back to WeWork.
- Trademarking “We” and selling it back to the company in an attempt to pocket $US6 million.
- Opening WeGrow, a for-profit school for children that costs up to $US42,000 per child.
- Making a $US13.8 million investment into an artificial wave pool company to “enhance” WeWork’s offering.
- Walking away with over $US1.7 billion without any consequences.
Now, WeWork isn’t the only “tech” startup that over-promised and under-delivered. Other companies that flopped include:
- Juicero, a Silicon Valley company that sold juicing machines for $US699, before people realised they could squeeze the proprietary juice bags by hand. It attracted $134 million in funding from investors like Google and Kleiner Perkins Caufield & Byer
- The Melt, a restaurant chain that utilises technology to create the “perfect” grilled cheese sandwich. Starting in 2011, The Melt failed to reach its 500 store target, having only opened a dozen by 2016. Sequoia invested $10 million.
- Guvera & Big Un (if you’re familiar with the Aussie tech space).
If you are interested in similar stories, here are 2 books that provide a real-life look at the dark side of startup culture:
Disrupted: My Misadventure in the Start-Up Bubble (2016)
Written by Dan Lyons, the book describes his journey navigating the startup world after losing his job. As a man in his 50s, he was a “Beached White Male”. Needing a way to support his wife and 2 young children he had taken a role at the fast growing (pre-IPO) Hubspot, a marketing software startup.
Initially excited about the opportunity to join a potential rocket ship, he quickly realises that it’s not all it’s cracked up to be, being a fifty-something-year-old guy struggling to work with brainwashed Millenials.
The book concludes with top executives at HubSpot attempting to illegally access Dan’s manuscript of this book, with the FBI getting involved. A humorous yet cynical look at startup life.
- “Here I work for a guy who brings a teddy bear to work and considers it management innovation.”
- “These are the bozos. They are graspers and self-promotors, shamefulness resume padders, people who describe themselves as ‘product marketing professionals’, ‘growth hackers’, ‘creative rockstar interns’, and ‘public speakers’.”
- “Shouldn’t Hubspot be running lean, trying to make their VC money last as long as possible? Shouldn’t they be spending their money on software development rather than beer blasts?”
- “Unfortunately, what culture fit often means is that young white guys like to hire other young white guys, and what you end up with is an astonishing lack of diversity.”
- “Guys who once would have gone to work on Wall Street hoping to get rich, move to San Francisco, where venture capitalists entrust them with millions of dollars to do their worst.”
Dan brought his startup experiences and insights to the popular HBO TV series, Silicon Valley, as a screenwriter.
Bad Blood: Secret and Lies in a Silcon Valley Startup (2018)
Written by John Carreyrou, a French-American journalist, the book details the incredible rise and fall of Theranos and its founder, Elizabeth Holmes.
Theranos was a technology startup that claimed it could perform non-invasive blood tests, therefore revolutionising the blood testing market. After raising more than $US700 million from high profile investors (like Rupert Murdoch), Holmes was exposed as a fraud after it was revealed that the Theranos’ blood testing machines were inaccurate, giving patients misleading medical results.
Founding the company in 2003 as a 19 year old, Holmes’ net worth skyrocketed to $US4.5 billion by 2015. She emulated her idol, Steve Jobs, by wearing black turtle necks, and purposely changed her voice to sound more manly and deep. However by 2018, Theranos ceased operations, wiping out Holmes’ fortune. She and her COO are now facing criminal hearings and could spend up to 20 years in prison. Some quotes from the book:
- “Hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.”
- “By positioning Theranos as a tech company in the heart of the Valley, Holmes channeled this fake-it-until-you-make-it culture, and she went to extreme lengths to hide the fakery.”
- “It was clear she worshipped Jobs and Apple. She liked to call Theranos’s blood testing system ‘the iPod of health care.’”
An insightful look at Silicon Valley culture, where someone with a poor knowledge of science and medicine could build a US$10 billion health company through a bit of mystique, marketing and bullying.
Finally, a quick mention must also go to Chaos Monkeys: Inside the Silicon Valley Money Machine. Written by Antonia Garcia Martiez, the autobiography details his life at Facebook during it’s pre-IPO stage. Another interesting book on Silicon Valley greed and hubris.
One must wonder if there will be a repeat of the “Dot-com bubble” of the late 90s. In a world of low interest rates and easy money, how many more companies will put the “con” in Silicon Valley?