An Archive of the SOS Email Lists.
Johnny Cash did a song a while back called A Boy Named Sue and we couldn’t resist. Our bugaboo of the week is the incessant number of calls we’ve been receiving of late, where a cheerful voice on the other side of the phone starts with, ‘Hi, I’m Sue!”
‘End.’
No you’re not. You’re a bot and if some telemarketer or politico feels that we’re valuable enough to be worth a phone call, then please do us the courtesy of having a human call us, rather than some bot or other.
Question of the Day: Do You Earn Less Than a Silicon Valley Intern? Chances are, the answer is ‘Yes.’ One of the big tech news stories of last week was the amount of money that tech companies tend to pay their summer interns. Here’s the Forbes list of The Best-Paying Tech Companies for Interns. According to the article, “Facebook interns earn an average monthly base pay of $6,056, according to Glassdoor. Interns at Google rake in $5,678 per month, on average—while those at Amazon and Apple make $5,366 and $4,914 per month, respectively.” Not including perks and benefits, and keeping in mind that internships generally last just a few short months. Annualized (around $80K), not bad base salaries, generally, for untrained and relatively unskilled college students.
We anxiously await the follow-on article about how much these companies are paying newly-minted entry level grads, and if they’re offering them housing and travel as well.
Bill Gurley wrote an excellent post last week on Why the Unicorn Financing Market Just Became Dangerous…For All Involved. It’s a must read, as the investing landscape has changed dramatically, courtesy of the outrageous number of unicorns, many of whom are still functioning under old paradigms: traction over profits; marketing/perception uber alles; too big to fail. Gurley warns about a new twist in the landscape: sharks with dirty term sheets, whom he defines as “sophisticated and opportunistic investors that instinctively understand the aforementioned biases of the participants and know exactly how to craft investments that can exploit the situation. They lie in wait of these exact situations, and salivate at the opportunity to exercise their advantage.” It’s terra incognita and definitely not for the faint of heart – or the young and inexperienced (ahem). “Dirty term sheets are a massive problem for two reasons. One is that they “unpack” or “explode” at some point in the future. You can no longer simply look at the cap table and estimate your return. Once you have accepted a dirty offering, the payout at each potential future valuation requires a complex analysis, where the return for the Shark is calculated first, and then the remains are shared by everyone else. The second reason they are a massive problem is that their complexity will render future financings all but impossible,” Gurley explained.
One of the problems that led to the first tech bubble was inexperienced investors throwing too much money at startups that didn’t make business sense or were just stupid. Some people did get rich and the idea of sudden and easy money was intoxicating. These unicorn valuations have led to a different problem, as Gurley points out. The inexperienced investors are back, but now experienced investors (not to be confused with the sharks) – who invested heavily in unicorns and are tapped out – are approaching novices. “Perhaps the biggest mistake untapped investors will make is assuming that because there are branded investors already in the company, that the new investment opportunity must be of high quality. They use the reputation of the other investors as a proxy for due diligence... You are not being invited to a special dance, you are being approached because you are the lender of last resort…
It wasn’t the best week for startups. In case you missed it, Beacon, the all-you-can-fly travel startup that raised $8.5M, and which promised to transform aviation, was permanently grounded last week, as was Shuddle, the Uber for getting kids around, who had raised over $12M in hopes of, we guess, disrupting soccer moms.
Then there’s Theranos, which, we believe, is the only female-founded unicorn, and which promised better, faster lab tests, supposedly using revolutionary, proprietary blood-testing technology that the company said required only a few drops of blood, instead of the usual vial. And speaking of drops, while the company was valued at $9B at one point, Theranos may well reach zero in not too long a time. The company’s troubles started a few months back, with a Wall Street Journal expose (Hot Startup Theranos Has Struggled With Its Blood-Test Technology, which claimed that the company exaggerated the precision of some of its diagnostic tests, and used machines from other companies rather than its own technology for many of the tests. Now regulators may bar CEO Elizabeth Holmes and the company's president, Sunny Balwani, from the blood-testing business for two years, for having failed to fix the problems.
Cockroaches, Unicorns, Startups. Enough Already!, said Om Malik. “I get really annoyed by these dumb labels that are put on startups…These made up words represent a limited grasp on vocabulary of those who are seeking cheap attention. As an investor, what I don’t look for is startups that come with dumb labels, popularized by reporters who don’t know what the hell they are talking about and are looking for cheap slogans to put on their click bait bullshit headlines.”
Truth be told, that whole startup lexicon is rife with misleading terms – beginning with the term ‘startup’ itself.
There’s no simple math for startups, and if it were up to us, ‘startups’ would be used much less, and banned in the tech sector completely.
Back in the pre-bubble days of Web 1.0, we wrote a piece called, “How to Get Rich in Silicon Alley – The First Wave.” We still have it, for those of you who’d like to see it; it’s too long to include here – and part of it was a ‘guide’ to how to keep employees chained to their desks by incentivizing them with anything but money, which, of course, as founders, you wanted to keep for yourselves.
That was then and this is now and not much has changed in all quarters of technology, except for company names and maybe a slightly different lexicon. ‘Millenials’ is a new one and we’re actually not attacking you all here, so calm down. This is meant to be instructional. Millennials are being dot.conned by cult-like tech companies, said this New York Post piece about “Fake Steve Jobs” Dan Lyons, a former HubSpot writer who now writes for “Silicon Valley,” as in the HBO show, and his experiences in the tech world – specifically, at HubSpot. “A huge chunk of potential compensation at tech startups comes in the form of stock options, which could turn out to be worth nothing but are certainly worth nothing if employees get so burned out that they leave before the options vest,” reads the piece. “This is part of the plan. Tech firms basically operate like South African gold-mining operations, with confident young Tame Impala fans being the bodies thrown into the pit to break their backs digging up nuggets. All of the IPO gold, though, goes straight into the pockets of their masters topside.”
You know how it goes: unless you’re the lead dog, the scenery never changes.
Of course, it’s really one point, when you get down to it. Between the high California taxes, outrageous rents ($250K Per Year Salary Could Qualify For Subsidized Housing Under New Palo Alto Proposal) and mushrooming number of H1B visa holders taking jobs formerly filled by American-born workers, meaning that American-born workers would have to take a considerable pay cut to compete with the auslanders, it’s all about quality of life. As a recruiter, we will honestly tell you that salaries for tech workers haven't significantly changed since the ‘90s, despite the fact that the cost of living has risen considerably in the venerated tech hubs - specifically, Silicon Valley and New York City - and rent/home ownership costs have skyrocketed. And lest we forget, “…More than 80 percent of H-1B visa holders are approved to be hired at wages below those paid to American-born workers for comparable positions,” according to Mother Jones.
Former Intel chief and Silicon Valley icon Andy Grove died last week and a good time to remember Andy Grove’s Warning to Silicon Valley. ‘According to Mr. Grove,” says the article, “Silicon Valley was squandering its competitive edge in innovation by failing to propel strong job growth in the United States…. Silicon Valley misjudged the severity of those losses, he wrote, because of a “misplaced faith in the power of start-ups to create U.S. jobs.” … But just as American companies have bolstered their profits by exporting jobs (or hiring H1Bs), many now do so by shifting profits overseas. “… All of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability — and stability — we may have taken for granted,” said Grove. Silicon Valley and much of corporate America have yet to live up to that principle.’
April is the cruelest month, wrote T.S. Eliot. It also marks the end of Q1 in a year abounding with unicorpses, so this may be a good time to take a look at the startup and investment landscape. Especially since, as CBInsights recently pointed out, many paper unicorns will be looking for more funding very soon (D-Day for Unicorns – When Will We Know if the Bubble Has Actually Popped?) and it’ll be interesting to see what happens, especially considering layoffs many of those companies are experiencing, and Snapchat’s recent flat round.
Hate to state the obvious, but isn’t the definition of a successful business one that makes money? And shows black on its balance sheet? Unless there's some special Silicon Valley Math that we don’t know about...
Not long ago, Stephen Hawking warned that because people would be unable to compete with an advanced AI, it “could spell the end of the human race.” Elon Musk has weighed in with his concerns, too, warning that AI could be more dangerous than nukes. Those who found themselves amused by Google’s robots that could pick themselves up, but were still not quite a match for the guy who knocked them down, or watched a Google robot dog play with a real dog, might have considered Hawking's and Musk's comments as needlessly promoting fear-mongering, as they were jumping the gun on some possible far-off dystopian future, the operative being ‘far-off,’ given the various foibles of the robots.Technology, including AI and robotics, were still in their early stages. We know that the two are completely different disciplines: patience.
In case you missed it, last week, Google’s AlphaGo beat a Go master, employing (in the third game, the AI having won the previous two) a move that was first perceived as a glitch in the program, as it came from out of nowhere and made no sense at all. It was a move that led to the program’s victory over the previously nearly-undefeated human, and no one saw it coming, of course, the latter part of the sentence being the operative. That so-called glitch has described as being both ‘inhuman’ and ‘beautiful,’ and while both are true, the net-net is that it’s potentially pretty frightening. It seems AI, which is ‘Artificial Intelligence,’ but given what amounted to be the alien nature of the program’s decision, maybe we do need to re-define AI as ‘Alien Intelligence,’ the program’s odd move having first been perceived as a move outside human comprehension, ergo, ‘alien.’
Ever notice that Facebook doesn’t have a ‘dislike’ button? You can ‘unlike’ something, once you’ve liked it, but you’re not allowed to ‘dislike’ a post. Dissing is evidently verboten. Bret Easton Ellis recently posted a piece on Living in the Cult of Likability and, let’s face it, your posts are defining your ‘brand,’ lest we forget that you are the product, after all. “Instead of embracing the true contradictory nature of human beings, with all of their biases and imperfections, we continue to transform ourselves into virtuous robots. This in turn has led to the awful idea — and booming business — of reputation management, where a firm is hired to help shape a more likable, relatable You. Reputation management is about gaming the system. It’s a form of deception, an attempt to erase subjectivity and evaluation through intuition, for a price,” says Ellis.