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The formula behind San Francisco’s startup success

By TechCrunch

Why has San Francisco’s startup scene generated so many hugely valuable companies over the past decadeRead full story

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  • Mat Kaliski
    Mat KaliskiVC at Rubicon Venture Capital

    I wholeheartedly disagree with this take on the industry. The author says “But the basic takeaway is this: Losing money is not a bug. It’s a feature. One might even argue that entrepreneurs in metro areas with a more fiscally restrained investment culture are missing out.”

    On what planet are these sound business principles? What the author misses on is that spending wildly and losing money results in a company that is always in need of external financing. This is fine in the early stages of the

    I wholeheartedly disagree with this take on the industry. The author says “But the basic takeaway is this: Losing money is not a bug. It’s a feature. One might even argue that entrepreneurs in metro areas with a more fiscally restrained investment culture are missing out.”

    On what planet are these sound business principles? What the author misses on is that spending wildly and losing money results in a company that is always in need of external financing. This is fine in the early stages of the company but expecting the money to keep coming in is a huge trap that many founders fall in. There is no discipline when things are going ok, but it’s already too late by the time that company needs to cut back. If the VC addicted growth isn’t there, there’s no Vc funding to keep the company alive.

    I have a big focus on secondary and tertiary up and coming tech markets because they have a different appreciation and business building approach. They’re on a path to building self sustaining companies because the funding isn’t as abundant as it is in San Francisco.

    And we also need to discuss what “successful” means. Is it just raising hundreds of millions of VC funding? Is it building a self sustaining business? What’s more successful a company worth $100m with $50m in funding or a $100m value with $5m in funding.

    Also let’s not just forget what happened to Birchbox just last week. They got completely recapped and wiped our all previous investors

  • Great people is the key to a company’s success and SF has a lot of talented people. However, people are starting to realize that there are amazing places outside the valley so I see their formula spreading across other cities.

  • Laurel Touby
    Laurel ToubyManaging Partner/GM at Supernode Ventures

    This is an SF hammer that found SF nails. If the authors analyzed “successful” startups in NY or Boston or elsewhere, perhaps they wouldn’t be $1 b+, but they would be generating valuable products, jobs and perhaps profits and returns for their investors. Why is $1 b in Market cap the factor to applaud?

  • This article points out interesting outliers. From a team perspective: The most successful projects I have worked on all have one thing in common: They filled key roles with experienced people, and these key roles were different from company to company. When you fill key roles, find the people who know what you don’t know, and listen to them.

  • Yusuke Umeda
    Yusuke UmedaFounder and CEO at Uzabase

    Mat is raising a good point. I agree with him. Entrepreneurs need big ambition, but at the same time need strong discipline.

  • Fara Warner
    Fara WarnerJournalist

    Losing money isn’t a bug it’s a feature. Good data journalism combined with terrific writing.

  • Josh Miller
    Josh MillerProcess Improvement Analyst at

    This startup model still seems dangerously fragile to me, more so because of how large the businesses have become. It’s like your business model is to race a car to beat a high speed train across the tracks. You (and your employees and customers) have to take all this risk by operating at a loss and giving ownership to VCs then race to become so big that you can “invert” before the VC money runs dry.

    What would happen if Uber suddenly stopped getting loans from private capital? Would the business

    This startup model still seems dangerously fragile to me, more so because of how large the businesses have become. It’s like your business model is to race a car to beat a high speed train across the tracks. You (and your employees and customers) have to take all this risk by operating at a loss and giving ownership to VCs then race to become so big that you can “invert” before the VC money runs dry.

    What would happen if Uber suddenly stopped getting loans from private capital? Would the business - a mainstay of everyday life for many - disappear? Or would someone on the sidelines with cash-on-hand strip it fr the founders and try to flip it like a foreclosed house?

  • Ken Magel
    Ken Magel

    But what percentage of startups that attempt this approach last to profitability? I expect the percentage is very small.

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