That Series A crunch? “It’s the Facebook, stupid!”
Rants are fun because they’re fun, but also because invariably, they trigger counterrants. Yesterday we wrote about how Dan Lyons thinks a Series A crunch is a good thing, and that most of these “crappy” entrepreneurs with “crappy apps” didn’t deserve any seed funding anyway.
Today, Pascal-Emmanuel Gobry (@pegobry on Twitter, a French writer/entrepreneur who previously wrote for Business Insider and Forbes) retorts that, basically, Dan Lyons is full of it.
Says Gobry, on the blog of his market research outfit Noosphere: “a lot has been written about the Series A crunch, but that Lyons certainly wrote the dumbest commentary on it.”
That’s in paragraph two, but it gets better after that.
1. It’s the Facebook, stupid!
First, Gobry says, you have to look at the reason why nobody wants to fund consumer startups anymore, and the reason is simple: Facebook.
The funding environment for social/consumer startups has been, for good and for ill, basically 1-to-1 correlated with Facebook’s valuation. When Facebook was valued at $100 billion on the private markets, investors poured money into consumer media startups; now that Facebook’s valuation has crashed, they are holding back.
2. It’s also the VC industry that’s in decline
Plus, says Gobry, it would be wrong to assume that the series A funding crunch has anything to do with the startups. For one, the barriers of entry into the internet are being lowered every day, and it’s become so cheap to launch and distribute, that it might arguably be the best time ever to launch startups, he says. He thinks that the VC industry is just in “its own trend of secular decline, period”. He doesn’t give any reasons for this secular decline, though.
3. What’s you call crappy, might indeed be the next Facebook
Says Gobry: “you don’t know what silly social startups are on to something real, or not. [...] For all the talk about Pinterest’s “overnight success”, nobody remembers that the company struggled a lot in its infancy, with very low traction and almost no one using its product. Now Pinterest is one of the top 50 websites in the US.”
“The cardinal rule of transformative startups is that they look like a crappy toy when they get started, whether they are Pinterest, Instagram, Twitter, Facebook or even Google.”
Gobry ends his analysis with a healthy dose of sarcasm: “That’s for the analysis that, had Lyons had enough braincells, he might have written.” Read Gobry’s entire answer to Dan Lyons at Noosphere.
Photo: STFU, by Rachelle, Flickr
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