How has life changed for founders since the early days of YC? Where are VC and the economy headed? Is data privacy a concern for startups today?
Who better to ask than Antonio García Martínez, author of “Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley”? In the book, Martínez detailed his own company AdGrok’s $5MM acquisition by Twitter, complete with a post-merger turn of events that led him to becoming the first ads targeting product manager on the Facebook Ads team.
Since successfully wrangling his startup team, exiting in 2011, pioneering a new division at Facebook, and publishing a book in 2016, Martínez has remained involved in — and observant of — the changing startup economy. In the interview that follows, we asked Martínez to expand on some of the issues he’s been vocal about.
Atrium: What in the startup world has changed since AdGrok?
Martínez: It’s gotten a lot slicker, and it knows what it’s doing. I realized at a recent YC alum Demo Day that I wouldn’t have gotten into YC now – it’s just way harder to get in. People know what they’re doing more, there’s generally more traction.
There’s standard documentation and it’s an assembly line in a way, neither of which de-legitimizes startup culture. But, it’s lost some of the roughness and the sort of pirate-like nature.
It’s definitely way easier to start, there’s no question about that. Today, quitting your corporate job to do some crazy thing and get into YC doesn’t seem like career suicide. It’s not something you have to hide from your parents — it’s just what every ambitious young person does in tech. How can you not do that? In fact, you’re kind of a loser if you don’t.
And, I wouldn’t say that it’s harder to wrap up either. The chance of success was always de minimis, right?
Today, you have way more outs than you used to. Back in the day, you had to turn profitable and become a concern, which in the case of lots of technology is actually very difficult.
Or, you had to IPO – that was really the vision. Now, you actually have far fewer companies IPO’ing, and those that do, do it later in their life cycle. Why is that? Is that because more companies are just failing? Getting acquired was also an option, but not that many smaller companies were getting acquired.
More companies are finding more outs along the way. Whether it be getting acqui-hired, or raising more money in the venture capital market so that you don’t need the public ones, founders have a lot more leverage. There are so many more ways to finagle a soft landing now than there used to be.
Atrium: How has this impacted the perception of startup founders in general?
Martínez: Being a ‘startup pirate’ has become institutionalized and mainstream, rather than being what it was when I went through YC: this bizarre, desperate thing that a small subset of people used to do.
That’s not a terrible thing. It’s not like I’m a hipster saying, “I was into flat whites before they were cool.”
Plus, this was always the goal. I mean, why is it called Y Combinator? The name itself is a function that produces other functions – it was the startup that was meant to produce other startups. PG’s [Paul Graham] vision, particularly towards the end, was to have it be this long-lasting institution that wasn’t just a weird, but very lucrative hobby that he managed to come up with. The idea was to make it professional and streamlined, and so this is progress, but it is a little different.
Atrium: One theme in Chaos Monkeys that got talked about was competitiveness in the startup world. Do you think that’s changed?
Martínez: As I wrote in Chaos Monkeys, “Love is a great emotion, but hate and fear last longer.” More people do startups to prove some early doubter wrong than any sort of aesthetic vision of the world. To be in the startup world, everyone’s got some bee in their bonnet, some pebble in their shoe about something.
Even though it’s become professionalized and mainstreamed, with lots of resources, it’s still an uphill climb with relatively small chances of success. You really have to want it in some deep, almost pathological way. I don’t think that’s changed.
If it has changed, it’s that, before, you had to be completely crazy or a zealot of some sort. Now, maybe it doesn’t require that high level of bee in your bonnet.
Atrium: What do you think about the current fundraising market?
Martínez: This too shall pass. What was it like when the bottom came out of the market in 2008, when the credit crisis hit? The Dow was down, and suddenly a lot of liquidity dried up, even in the venture capital markets.
I think a lot of people in the current startup world don’t remember because memories are short and we all live in the eternal present now.
There’s this weird presumption in the tech world that somehow they exist in this sort of stratospheric bubble, away from the common concerns of the everyday business cycle. I don’t think that’s true. If this massive Trump rally were to come to an end and the S&P were to crash 20-30% over the course of a month, you’d start seeing people in the tech world get nervous.
That decrease in asset value manifests itself in various ways. Companies that had healthy balance sheets – because their equity was worth a lot – suddenly don’t, so they can’t necessarily buy other companies. Investors choose to put less money into risky parts of their portfolio (because they’re kind of scared), and venture capital’s always the riskiest part of most portfolios.
However, I’ve also been calling this a bubble for the past eight years, and I’ve been wrong every year. Still, at some point it will have to deflate to some degree.
Atrium: As a well-known Facebook alum, you’ve written a lot about privacy. What should entrepreneurs and startups learn from Facebook, and what should they be cautious about?
Martínez: If you look at the track record of companies that have taken the approach of “beg for forgiveness rather than ask for permission,” they have obviously done better than other companies.
As Bradley Tusk says in his book about Uber dealing with local institutions like the New York Taxi Commissioner, Uber’s very overt strategy was to get in there fast as hell, get as much market traction as it possibly could, and then use all of its own users and fans as advocates to muscle the city into accepting the fait accompli it had set up before the city had a chance to react. That was very clearly their strategy. You know what? It kind of worked.
We’ve recently seen GDPR, and the newly signed California privacy bill coming into effect in 2020. Even there, it’s 10-12 years after Facebook was founded that they finally got around to regulating it.
The reality is this:
What are you going to do? Start a company, approach regulators with, “Look, this is how we should be regulated,” and then work closely with them? It just doesn’t work that way.
In addition, you can’t predict how your technology’s going to be perceived by the outside world.
I’ve been on the record criticizing some of Facebook’s behavior over the past two or three years. There are things that could’ve been improved, and mistakes were made.
I really think the whole Facebook story is mostly about how humans use this very powerful social media tool, and what they do with it, more than the tool itself.
When “Delete Facebook” started in March, I went to App Annie, which tracks app installs. Just a day or two after “Delete Facebook” was going viral is when Facebook had its highest rank in the app store. In other words, people might have deleted it for one day. Then they went back the next day – like a smoker quitting and the next day going and buying a carton – and downloaded the app again.
The reality is that privacy only matters to media elites who like making a stink about it, politicians, and underemployed European bureaucrats. While I think it’s a partially trumped-up narrative, if the entire media world gangs up against you, you’ve nevertheless got to deal with it.
Even so, no consumer really cares about privacy in a deep way. I’m not talking about just saying they care — nobody cares enough to actually do something about it.
Atrium: In recent years, the overlap between personal branding and corporate marketing has been noted by many. Is there a way founders can use that to develop an ‘authentic’ persona?
Martínez: The whole notion of a personal brand, I find disgusting – it’s just bizarre. It’s odd that we’ve commercialized everything to the point where everything in life, including your own sense of self, is a marketing problem. Whether it be courtship or communication, everything is a sort of marketing problem.
I find that very strange, and part of me doesn’t like it. But, it is the reality, and I play the game as much as anybody, to some degree.
Your authentic self… it all sounds very mealy-mouthed – I don’t know that I totally buy it.
On the one hand, you get to interact directly. Whether it be Elon Musk going on some rage, or some intellectual that you get to interact with on Twitter, it’s more real than formal modes of communication in the past, such as seeing a person at a public lecture or book signing, where it’d be very formal and stuffy. So, there is a certain reality to the authentic self thing.
On the other hand, are we really bringing the authentic self online? I don’t think so. I think the online world is pretty damn intolerant, and if we actually did bring our authentic selves, there’d be even more flame wars and witch hunts than there are now.
All that said, people like authenticity, or at least the appearance of authenticity… which effectively ends up being the same thing. It’s something I struggle with: I think if I were my authentic self, I’d get socially ostracized – I think most of us would.
I think it was Pascal who said, “Who among us wouldn’t be hung 10 times a day if we were judged for the crimes that we thought of committing?” If we actually unfiltered completely, and then pushed to a global audience, I don’t think most of our personal brands would last very long. But, this is the world we live in – everyone has a personal brand.
Photo Credit: HarperCollins