Are you ready to ride a rocket?

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The New York Times has a very long, detailed article by  Erin Griffith on the sins of venture capital entitled More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost.

Neither the writer nor the many founders quoted seems to realize that venture capital is for the very, very, very few – about .1% according to a post on Quora. As I was told by a veteran vc investor in one of my companies years ago, “Venture capital is the most expensive capital you can get as a founder.” VCs are focused on two things: growth and exits. Venture capital is rocket fuel: go for it only you are prepared to ride a rocket, which will either reach escape velocity or crash back to earth – in other words go public/get acquired or go bust – don’t even consider it.

Frankly I consider most of the article to unrealistic whining. As Josh Kopelman, a venture investor at First Round Capital, an early backer of Uber, Warby Parker and Ring, said,  “I sell jet fuel,” he said, “and some people don’t want to build a jet.”

Some companies that have raised vc money have realized they want to step off the jet.

Wistia, a video software company, used debt to buy out its investors last summer, declaring a desire to pursue sustainable, profitable growth. Buffer, a social media-focused software company, used its profits to do the same in August. Afterward, Joel Gascoigne, its co-founder and chief executive, received more than 100 emails from other founders who were inspired — or jealous.

“The V.C. path forces you into this binary outcome of acquisition or I.P.O., or pretty much bust,” Mr. Gascoigne said. “People are starting to question that.”

For those of you wise enough to avoid the vc grow fast or die rocket ride in the first place there is some information on new ways to fund startups or ways to undo vc funding.

In September, Tyler Tringas, a 33-year-old entrepreneur based in Rio, announced plans to offer a different kind of start-up financing, in the form of equity investments that companies can repay as a percent of their profits. Mr. Tringas said his firm, Earnest Capital, will have $6 million to invest in 10 to 12 companies per year.

Earnest Capital joins a growing list of firms, including Lighter Capital, Purpose Ventures, TinySeed, Village Capital, Sheeo, XXcelerate Fund and Indie.vc, that offer founders different ways to obtain money. Many use variations of revenue- or profit-based loans. Those loans, though, are often available only to companies that already have a product to sell and an incoming cash stream.

But the reality is that these new ways to obtain startup funding are a drop in the bucket. Founders who can’t finance their companies through customer revenue must look to friends and family, angels, angel groups, bank loans or maxing out their credit cards if they want to avoid vcs.

The reality is that vcs and other investors have realized they can make more money pouring investment into later stage unicorns like Uber than they can by investing in raw startups, which is making life more difficult for the early stage companies I mentor.

But the laws of investment are much like the laws of physics, you might be able to bend them, but they can’t be broken. Create real value and someone – customers or friends and family, angels, whomever – may pay for or invest in that value creation engine. Too many founders I see are focused on raising money, not value creation. It’s a bit like a pro football team focused on the Super Bowl before they have even won a game.

The rise of services startups

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Back in the Pleistocene era of startups, in 1989 when we raised my first round, venture capitalists wouldn’t touch a service business even if you paid them to do so. “No economies of scale, no IP, no barriers to entry.” Well here we are thirty years later and three of the biggest venture-backed companies in the U.S. are service companies: Uber, AirBnB, and WeWork!

And the number one product company in the world, Apple, is struggling as the market for premium-priced smartphones is saturated and low price competitors are attacking Apple’s literally gross margins, the standard playbook for going up against entrenched competitors who have gotten too fat and happy.

Even Apple is dipping at least five toes into the services business with Apple Music, iCloud, Apple pay, iTunes Store, etc. and proudly touts the growth in this part of their business as they simultaneously hide the actual unit shipment of their products.

What the heck has happened over the past thirty years! Two things: the digitization of everything and the gig and entrepreneurial economy.

Let’s face it, Uber and AirBnb would be nothing without their smartphone apps – what they are doing would have been impossible in 1989 even though the services they are delivering, ride sharing and home sharing, have been around in other forms for decades. Similarly, WeWork is a new play on what were called “executive office suites” back when I was starting companies and lacked the cash to rent a full size office. Regus and others would provide entrepreneurs like me a small office and a set of basic business services: reception, copying, coffee, a mailing address and a conference room. Basically Regus was the grandfather of WeWork. And they are still around today, but valued as commercial real estate not as a high tech company, as WeWork is. Smartphone apps tied into cloud computing have enabled Uber, AirBnb and dozens of other companies providing services to today’s time poor, cash rich millennials and their cohorts. Food delivery, like Uber Eats, DoorDash, Instacart et al is an entire service category where VCs have poured hundreds of millions of dollars.

The other driving force behind the rise of services is the sharing economy or the gig economy or whatever you want to call it. This new economy relies on contractor labor, whether it’s drivers, delivery people or owners who rent out their apartments or houses (landlords) all to make a buck in ways the weren’t either possible or profitable decades ago. The rise of startups has also driven the need for office space with amenities, thus WeWork. Contractors are much cheaper than employees as they get no benefits: no healthcare, no vacation or sick leave, no unemployment insurance, and can be hired and fired at will.

So should founders target services business today to hop on the VC gravy train? As usual, it depends. The most important criteria are the same as they were 30 years ago: you need a large market, one capable of sustaining a billion dollar market cap company. A market that is growing, not shrinking. And it helps if the incumbents are asleep at the switch. You still need a great team and some kind of secret sauce that gives you an unfair advantage. But building products, whether they are hardware or software, can be very time-consuming, expensive and risky. May be better to add a layer of services driven by software to an existing business model, as Uber has done with ride hailing, aka taxi and black car services.

Or you may want to hedge your bets by combining services and software. Data is the new oil and how to you drill for oil when Google and Facebook own most of the oil fields? Crack that nut and you may have a successful startup.

But if you do aim for a startup keep in mind why investors historically have shied away from services companies: you need to be able to scale, you must keep your employee count low, keep overhead low by using contractors, and attack a sleepy market, as Harry’s did with shaving.

There’s a ton of opportunity out there for a smart team to solve customer problems by combining digitization with the gig-based workforce to leave the dinosaur companies in the dust.  But the fundamentals of a startup must be adhered to: great team, large market opportunity, and the secret sauce.  And keep in mind that if you succeed you will have a thousand imitators, so plan out how you will stay ahead of the competition, not just disrupt the incumbents. And don’t be afraid to go after VC money, because unlike the last century, they will now greet top gun teams building a service business with open arms.

Do you have what it takes to build a unicorn?

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Sean Wise has an eye-opening article on Inc.com This Study of 195 Billion-Dollar Companies Found 6 Counterintuitive Truths About Building a Unicorn, After 15 months, 300 hours and 100 charts, here is what researchers discovered about creating billion-dollar startups.

I’m going to list the six success factors in building a unicorn, adding a few comments of my own about how these findings relate to both mentors and founders. What is not addressed in the article, which I think is important for the vast majority of entrepreneurs who don’t build unicorn companies, is are these same factors key to creating a valuable company, just not one valued at a billion dollars or more?

Ali Tamaseb, a founder turned venture capitalist at Data Collective VC, gathered data on 65 key factors from all 195 unicorn startups based in the U.S. His work included all startups since 2005 that have publicly reached a valuation of more than $1 billion. The least surprising finding is that almost 60 percent of billion-dollar startups were created by serial entrepreneurs. In fact, he found that 70 percent of billion-dollar founders were “superfounders,” or founders with at least one previous exit of more than $50 million.

1. Industry knowledge isn’t required.

Certainly this is contrary to the received wisdom. But just as interesting to us mentors is that 80% of founding CEOs in healthcare and pharma had direct experience in their target market. Mentoring groups often reflexively bring in additional mentors with direct industry experience once a startup emerges from the very initial stages of company formation. From the study’s findings, this is only necessary in two verticals, which are closely related, healthcare and pharma. Unfortunately, neither Sean Wise nor the researchers speculate on what it is about these two verticals that requires domain expertise. My guess is that both are heavily regulated industries – see my post about the fourth risk – and that domain expertise is needed to navigate the complexities of government regulation. You don’t learn that in business school nor by doing a startup in an unrelated vertical.

2. Technical CEOs aren’t necessarily more successful.

I heard a great quote from an MIT VMS mentor the other day: “It’s not the technology, its the psychology.” Meaning that the customer and their psychology is what is decisive about a venture’s success, not the novelty or even value of the technology. This does not fly well at MIT, otherwise known as the Massachusetts Institute of Technology. Virtually every founding team is either all engineers or engineering dominated. So again, this finding is very helpful to mentors as we help founders build their team. This finding that successful tech founders vs. business founders are a 50/50 split was also found to be true of the author’s VC fund, Ryerson Futures.

3. You don’t need to be capitally efficient.

I was trained by the many VCs involved in my four VC-backed startups to “stretch the dollar” – they demanded capital efficiency, but only to a degree. As one vc told me, “Steve you’re going to waste a million dollars in this venture, but I don’t know which million, and that’s ok.”  According to the study less than 45 percent of unicorns were capital efficient. This certainly jibes with my reading about vc-backed startups – vcs are willing to put hundreds of millions into companies they believe will ultimately scale and go IPO, like Uber. This doesn’t mean that mentors should tell founders to be profligate in their spending, but only reinforces the “Nail it, then scale it” maxim. The function of external capital is growth and scaling, not creating product/market fit.” So I would say you need to be capital efficient until you reach product/market fit, after which you can focus on adding fuel to your rocket to gain escape velocity.

4. It’s (usually) not OK to be a copycat.

It’s no surprise that more than 60 percent of unicorns had a very high level of differentiation compared to incumbent firms. The worst strategy is copying what another startup is doing, especially if that startup is well funded. As a mentor I do preach differentiation and I believe that is the received wisdom.

5. You don’t have to be first to market.

Being first to market was a popular catch phrase and strategy in the dot com boom. Since that time few people I know see it as a formula for success. However, what the study found is that the best markets for billion-dollar startups already have a number of large incumbents, and often the startup uses the inefficiencies of these incumbents as a point of disruption. This is really important! What it tells me is that the size of the market opportunity is very important, but being first to  that large market is not. In fact this finding jibes with my belief in the maxim “No competition, no market.” Founders need to concentrate on large market and should not be discouraged by the presence of large incumbents.

6. You don’t need to be part of an accelerator to be successful.

The most dominant success factor in billion dollar market cap companies is that 70 percent of the founders were co-called “super-founders” – founders who with at least one previous exit of more than $50 million. This isn’t surprising. So if you aren’t a super-founder you may well want to apply to an accelerator. See my post Should you join an incubator or accelerator?

This article and the study upon which it is based provides very useful information for both founders and those that mentor them, regardless of whether the intent of the founder is to build a billion dollar market cap company or not.

 

Kryptonite for founders – the down round

 

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Entrepreneurs are by nature optimistic and first time founders even more so. But once you have raised Series A, B, or C rounds there’s a dark side to taking VC money: the down round.

The number one goal of VC-backed companies is not customer satisfaction, market share, gross revenues, or social impact: it’s growth in the company’s valuation.

The lead investor in any round of financing sets the valuation of the company. Given the many variables involved and unlike real estate, the very few comps, this is a black art. But so long as founders push for growth their capital needs may well outpace their revenue, meaning that they need a cash infusion. While there are other ways, such as a bridge loan, typically VC-backed companies raise another round, which means selling enough shares at a sufficient price to meet the company’s needs, typically for 18 months or more.

For each new round the value of the company is set in order to derive the price per share for existing investors, who may want to invest to maintain their percentage ownership position, or new investors who are eager to get into what to them is an exciting deal. So what’s the down round and why is it kryptonite for founders? A down round occurs when investors purchase stock in a company at a lower valuation than the previous round. The causes of a down round are not only bad news for the company, they are worse for the founders who are almost certainly going to have their ownership diluted, as rare is the founder who is both willing and able to invest enough in their company to drive maintain their equity position.

Causes of down rounds

A down round is a last resort if a company needs cash and can’t draw on a credit line or land a bridge loan. There are several reasons for a down round.

Failure to meet milestones or metrics

Milestones and metrics vary from growth company to growth company, but a major reason for a down round can be a failure to meet milestones that may have been set at the previous round. Milestones can range from gross revenues, gross margin, and market share, to shipping a new version on time. This is why founders need to be conservative when setting milestones – under promise and over deliver. But beware of what the VCs call lowballing – knowingly setting goals that are so very easily met that they can be called layups.

Emergence of competitors

Given how cool entrepreneurship is these days and how universities are fueling the startup fire by not only offering many courses in entrepreneurship but they are also setting up incubators or accelerators, running business plan competitions, and even making grants (equity-free money) to student-led startups. So I tell my mentees that however unique their idea may seem to them, the odds are that some other startup somewhere – and that now includes Israel and western Europe these days – is working on the same thing, or something very similar. And competition doesn’t only come from other startups – the vogue for innovation in large companies has generated internal startups and new product initiatives. While one can use sources like Techcrunch to track competitors, your competition may well be in stealth mode – operating under the radar of Internet media companies that track the startup world. Before you start your company you need to do a thorough web search for competitors. But that’s necessary, not sufficient. Monitoring competition has to be an ongoing task. The simplest way to do that is to set up Google alerts. In addition, success will attract copy cats. This is why investors are so fixated on sustainable competitive advantage and unique selling proposition.  Be prepared for competition and be ready to explain why you will continue to grow due to your competitive advantages, be they patents, exclusive distribution agreements, large customer base, high switching cost for your customers, price advantage, superstar management team or any combination of advantages.

Previous rounds were overpriced

Investors hate to admit it, but they are like lemmings. They are eager to jump on the latest thing, be it crypto, block chain, deep learning, robotics or artificial meat. Flooding a sector with capital can result in valuations that were driven more by competition amongst VCs than true market value. While a rising tide raises all boats a falling tide can leave many boats stranded on dry land. “Market corrections” in your sector may cause your investors to stick to your previous valuation or even lower it as they come to their senses about whatever wave they thought you were riding.

Down rounds rarely make the news. But today’s article in The Wall Street Journal Genomics Startup Human Longevity’s Valuation Falls 80% sub-titled Fundraising round this week values company co-founded by genomics pioneer Craig Venter at about $310 million; aiming for a turnaround is the story of a down round. Genomics latest round  represents an 80% decline from its previous valuation of $1.6 billion – that’s a real haircut!

But down rounds aren’t simply confined to a lower valuation, they also often come with harsh terms and conditions as well.

This round also includes onerous terms that promise priority payment in case the company shuts down or sells itself, and a so-called ratchet that would reset the share price investors in the new round paid if the company has to raise future capital at a lower price, according to the filing. Such terms are rare in venture-capital financing, and typically imposed on companies struggling to find new investors.

According to analysts at the law firm Fenwick & West, 9% of venture financing in the third quarter were down rounds, up rounds represented 78%. Simple math tells us that 13% of rounds were at the same valuation as the previous round – resulting in dilution for all involved unless they “buy up” to maintain their percentage ownership.

The genetics firm Human Longevity is a case study of the fallout from a down round:

As the company has continued to burn cash, its workforce has dropped to around 150 from roughly 300 people at the end of 2016, according to one of the people. And its chief executive officer, chief medical officer and chief operating officer all departed in 2017, according to their LinkedIn profiles.

Dr. Venter, who helped sequence the first human genome, relinquished the chief executive role at the beginning of 2017, resumed it in December, then stepped down again in May, according to company statements. He remains a shareholder.

So how can founders avoid down rounds? As mentioned above, you can start by not getting greedy on the valuation of the Series A round. But mainly by continuing to hit benchmarks and continuing to grow important metrics (versus vanity metrics like page views). Founders need to realize that they have stepped onto the hamster wheel of VC-backed companies: get big fast and then get acquired or go public. The pressure on the company will be unrelenting. So before you take VC money, which is the most expensive way to fund a startup, investigate your alternatives. The best use of professional investor funding is to scale your company, meaning you have nailed your target customer, your business model, your competitive advantage, and the ability of your infrastructure and cash on hand to keep up with the needs and demands of a rapidly growing customer base.

One of the failed initiatives of Human Longevity is a real red flag to founders who think that data is the new oil and they will get rich drilling for data.

But key facets of its business didn’t develop as planned, say people familiar with the company. It had hoped to sell analytics to pharmaceutical companies as they increasingly incorporated genetic sequencing into drug development, these people say. But drugmakers have been slow with the new technology and wary of sharing data, they said.

If you are counting on revenue from the data or analytics your company generates you need to be very sure that it really has value, and to whom. Too many founders I mentor seem to assume that all data has value – not true.

The old medical saw that An ounce of prevention is worth a pound of cure holds true for down rounds as well. The best way to avoid them is to carefully manage both your cash flow and be able to make accurate revenue projections. Your goal every day should be increasing the value of your venture, whether that’s by becoming more capital efficient, selling new products  to old customers, raising prices or inventing new products.

Down rounds should be something you only read about, you never want to hear that phrase  from the mouths of your CFO or your investors!

Everybody’s talking about gender, but no one’s talking about class

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As the father of two daughters, I’m glad to see greatly increased awareness of discrimination against women in the startup world and some progress in leveling the playing field. A lot of focus is on the fact that there are far fewer female founders and it is far harder for those founders to raise capital than it should be. Research is demonstrating that more diverse teams make better decisions than the typical mono-cultures found in the startup world of young white males as founders and middle-aged white males as investors.

But what I haven’t seen addressed, and frankly I have to admit to not thinking too much about, is the very small number of founders who come from lower socio-economic levels. It wasn’t until the end of The Boston Globe article An upper-class mindset doesn’t make you classy that that the reasons for this surfaced:

…,the predominant US upper-class view of rules is that they’re made to be broken. Just look at popular books about success, like Marcus Buckingham and Curt Coffman’s “First, Break All the Rules” and Angela Copeland’s “Breaking the Rules & Getting the Job.” If we want to succeed, these books tell us, we’ll need to cast aside established social norms and chart our own path. This is sage advice for people who have little threat, but clearly bad advice for the working class.

Though they tend to shun rules, the relative looseness of the upper class offers several strengths: they tend to be much more creative, entrepreneurial, and open-minded. The working class, meanwhile, struggle with diversity: they are more suspicious of people who are different from themselves, who appear to threaten their sense of social order.

In today’s digital economy, several attributes of cultural looseness reinforce upper-class advantages. Whereas those from tight groups understandably tend to view change as a threat, loose communities see mainly opportunity. They have the cultural reflexes — socialized from a very early age — to adapt to disruptive changes, and the autonomy and independence to chart their own course.

Unfortunately the article’s author, Michele Gelfand, a professor at the University of Maryland, and the author of “Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire the World”  and Jesse Harrington, a research associate at Fors Marsh Group, don’t offer any solutions to this problem.

Their conclusion, We must recognize that it’s culture that we need to reckon with, not just our bank accounts is not actionable information

However, one of my VMS colleagues is a mentor at an accelerator called Smarter in the City. Their mission is to bring diversity to Boston’s tech landscape:

Our mission is to diversify Boston’s startup sector by providing support and resources for local minority-run ventures. Through our accelerator program, we draw investment to communities that have traditionally been left out of the high-tech startup scene.

Check out the stats on minorities in Boston on their home page, they are eye opening!

9.2% of tech industry employees are Latino and African American

0.2% of venture funding goes to black women

20% of firms are owned by minorities

$8 average net worth of African-Americans in Boston

Supporting incubators and accelerators in the lower socio-economic areas of high tech-centric cities like Boston is one way to attack the lack of diversity. But I think this problem needs to be addressed earlier in lives of potential founders. Why aren’t there classes in entrepreneurship in the Boston public schools? Clubs for budding student entrepreneurs? Business plan competitions in high schools? In other words, young people across the economic spectrum need support, training, and encouragement to explore creating their own businesses. Unfortunately our public schools are still stuck in the 19th century model of churning out compliant workers for industries’ assembly lines. But until there’s real change in the antediluvian public education system, investors who have made a lot of money betting on entrepreneurs who look like them should direct some of their massive profits to support organizations like Smarter in the City. I don’t see a single VC firm or angel group listed amongst the sponsors of Smarter in the City. Though kudos go to Microsoft as the sole tech sponsor.

 

 

 

 

When it comes to building companies, Waste is good!

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The common maxims of startups are that “cash is king” and you must “stretch the dollar.”  And that conventional wisdom is just that, conventional. But there’s another side to spending, as the editorial director of Conde Nast, Alexander Liberman, the mentor of the owner S.I. NewHouse, oversaw ballooning editorial budgets and the lavish image of Conde Naste.

You may recall Gordon Gecko in the film Wall Street proclaiming in stentorian tones,”Greed is good!” Well he had nothing on Alexander Liberman, who summed up the company’s ethos when he said: “I believe in waste. Waste is very important to creativity.” And he should know something about creativity, as Liberman was a success in painting, sculpture, and photography before joining Conde Naste.

And as many music and film fans know, a single song or single scene may be redone dozens and dozens of times until the creative person in charge  – the record producer or the movie director – is satisfied. No one cared how many reels of tape were wasted by the Beatles in recording the Sergeant Pepper’s Lonely Hearts Club Band – it was a massive hit, just as no one was counting up the thousands of feet of film left on the cutting room floor by George Lucas, director of Star Wars.

I was taught by VCs that spending should be an investment in the company and should be carefully monitored by management for its ROI. But I was also told by an early investor and mentor after raising many millions of dollars from is firm that, “You’re going to waste a million dollars launching this company. You just don’t know which million.” That advice gave us the freedom to experiment, to fail, and then fail harder the next time, until we finally did get it right and the company became a hit.

As Apple Designer Director Jony Ive points out, problem solving is necessary in creating a great product, but it is creativity that’s the spark that ignites the development process and fuels the fire.

So does that mean founders should add a new line item to their budgets labelled, “Creativity” or “Waste”? Probably not, but I wouldn’t rule it out. What founders do need to do is to make creativity and problem solving the first duties of their staff, not toeing the line in a line item budget. I learned this lesson the hard way. I started Throughline, Inc. as a way to help founders save time and money on the necessary infrastructure of their companies: office space, furniture, servers, telephone systems, etc. I mistakenly thought VCs would love me and promote Throughline to their portfolio companies.  And one VC did buy the story and invested half a million dollars to start the company. And we did acquire a great strategic investor, Silicon Valley Bank – the go-to bank for founders.  But Throughline did not succeed. What I learned post-mortem, and should have learned pre-mortem through customer discovery, was that VCs could care less about operating expenses. What do they care about? Growth! Growth in eyeballs, users, customers, market share, brand, and a talented staff – the top line, not the bottom line.

Management is doing things right, leadership is doing the right things. Leave cash management to your bookkeeper or contractor CFO. As a founder, your first duty is not cash management it’s customer acquisition. Look no further than Uber, which is losing billions of dollars, but has grown faster in both customer acquisition and revenues than almost any other startup in history. As a result, even as a massive money-loser to the tune of one billion dollars a quarter!, Uber is valued at as much as $120 billion.

The true bottomline is that building companies and building products is an art, it’s a creative endeavor. Companies have announced this in their names: Software Arts, Electronic Arts. If you have a great idea, start building!

 

Startup companies are archaic!

Libin

One of the major issues I’ve seen in mentoring over the past decade is the discomfort, pain and even confusion great engineers go through when they enter the dreaded “time to start a company” phase. As a serial entrepreneur, my product sweet spot was building the company. I enjoyed the entire process, from idea to idea validation, to forming a business entity with a partner, to recruiting. The thing I didn’t like and wasn’t good at was finance and I always had a CFO to handle that. But engineers are just the opposite. Engineers like building things, but things don’t include companies. It’s amazing to me how many teams form and never have a founder’s agreement, only to run into problems when they actually have to create a business entity. So how do engineers get their products to market without going through the pain, hassle, and major distraction of not just forming a company, but then running it?

Scott Kirsner, The Boston Globe correspondent who writes the Innovation Economy column weekly, has an excellent article entitled This former venture capitalist is reinventing the way a company works that focuses in on one former founder’s response to this problem.

Phil Libin, founder of Evernote and a former venture capitalist thinks he has the answer.

“The whole venture capital model is stupid,” Libin says. But “the stupidest thing,” he continues, “is the idea of a company. Companies are increasingly archaic, as a unit of organization in the world. What is it about companies that makes the most sense?”

People who are smart and skilled at creating products, Libin says, shouldn’t have to “raise money, have human resources drama, and run a small little fragile company.” Instead, they should “use their superpower to build a great product,” while having ownership in what it becomes

Libin has founded an alternative to creating companies for entrepreneurs. All Turtles. (All Turtles? Yet more proof that all the good names are taken!) I found the AI generated painting on their home page rather disturbing – not a great way to attract people to your venture. But don’t let that stop you!

I’m have a passing familiarity with two Boston-based attempts at solving this problem:
Paul English’s Blade Network and Joe Chung’s Redstar. I’ve met both founders and they are super smart, very experienced entrepreneurs. I wonder if Libdin has talked with them. I also worked in one of the region’s first incubators, HyperVest.  All Turtles is not an incubator nor an accelerator. The former incubates startups, the latter accelerates the progress as a company. The product of All Turtles is products, not companies.

What differentiates All Turtles from other attempts at taking ideas to market without the hassle of creating a company as the vehicle is that AI is the foundational technology. I can’t remember if this is an original idea or I read it some place, but I believe that AI will be like electricity – it will be everywhere, in everything, but rarely visible to consumers.  The competition for great AI developers is intense – they are more options than just about any other tech niche.

But Libdin is really aggressive.

Startup creation and venture capital funding, in Libin’s view, are too focused on “the 50 miles around Stanford University,” in the heart of Silicon Valley. All Turtles has already set up operations in San Francisco, Tokyo, and Paris. Libin says Mexico City is next, and his goal is to be active in 20 of the top 50 cities worldwide in the firm’s first decade. That is largely a strategy to tap markets where there is technology, design, and product development talent that are less competitive than Boston, New York, or the Bay Area.

While Libin seems to disdain VC money he’s accepted a $20 million investment from General Catalyst (a great name, by the way).

“Phil has a brilliant mind and has been able to attract incredible talent from all over the world,” says Niko Bonatsos, a managing director at General Catalyst. And Libin is “spot-on to notice that not every amazing product thinker loves or cares enough to do the company-building part of the equation.”

Depending on the value-added and T’s and C’s of working with All Turtles it may well attract great engineers and scientists, but I’m not optimistic, as it’s just one in a series of series of attempts to create a Ford-like assembly line for technology concepts that could turn into the next big thing.

My best guess is that All Turtles will go the way of the Blade Network and end up creating a company or two and putting all their resources there. But time will tell. In the meantime there’s at least one viable alternative for creators of great products who want to avoid the hassle of creating a company, while participating in the wealth a truly great product can generate. Check it out if you aren’t afraid of see the disturbing image on the home page.