Startups below zero

So I’m calling it: the margin of costs beyond a founder’s living expenses is now officially zero. What next?

The whole subject of startup expenditure is beginning to get unbearably repetitive and boring.

a d v e r t i s e m e n t

Is your startup accelerator in trouble?

  • is the whole thing starting to look like a ‘one hit wonder’?
  • were the applicants below expectations?
  • are you feeling out of your depth?
  • is the schedule beginning to look unrealistic?
  • are you beginning to feel that you ‘went native’ with the founders’ optimism?

You’re not alone

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We’ve been studying startup accelerators

It turns out these problems, and a whole lot more, affect all accelerators in their early stages

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If one more person tries to tell me ‘the costs of starting a business have collapsed’…

Well, once you get down to zero, is there any further to go?

Well, for a start, there’s the whole ‘one founder, many startups’ thing, even when they’ve still got a day job, or no job and no other means of support other than welfare or parents, and are still ‘pre-revenue’ with their startup(s).

Sort of a ‘fractional cost of living per-startup’, I suppose, but wait:

Another, perhaps even more extreme possibility is the ‘negative cost startup’.

That means getting paid to start a startup.

No, I don’t mean equity investment from friends, family or fools (er, business angels).

And no, I don’t mean a grant, at least not in the sense where you have a specific, identified project, addressing a specific identified requirement, that you have to apply for and successfully be awarded.

No, that’s too much like a contract project, something which would have to have a defined outcome.

That’s too much like a normal project, for a normal startup, or established contractor, or consultant.

So that comprehensively disqualifies it from falling into this brand new category that I am putting forward:

The negative cost startup

The negative cost startup, is the startup that you are paid to start, not because of anything to do with the nature or outcome of whatever the heck you are doing, but purely to keep you busy, or off the streets, or ‘gainfully employed’ and (yes, here it is, this is the political punchline) excluded from the unemployment statistics.

No exit requirement, revenue requirement, profitability requirement, return on investment.

Do I really need to say any more?

I probably do, because ultimately, all the practicalities of this little wheeze are inevitably going to need to be dreamt up by politicians and implemented with considerable relish by civil servants.

Whilst it would seem almost inevitably self-defeating to require dole-substitute startups to be measured by their outcome, there would undoubtedly need to be some bureaucratic process established in order to distinguish between ‘not bothering to try getting a job with an employer’ and ‘working on my startup’.

I can see it all now:

  • government run startup mentoring schemes (complete with suitable startup mentoring training, qualification and accreditation requirements)
  • mandatory mentoring requirements for startup founders (a certain number of hours per week needing to be spent being mentored by accredited mentors)
  • online startup founder progress reporting requirements (have you pivoted since the last time you logged on?)

Some cynic out there is going to read this and cry ‘recipe for a disaster!’ or ‘yet another ridiculous waste of taxpayer’s money!’

Personally, I would be pretty darned sure that anyone who reacts that way will be entirely innocent of two highly relevant kinds of experience:

  • the incomparable exhilaration of participating in a vibrant startup accelerator program
  • the depressing hopelessness of long-term unemployment in a run-down area

Social impact, anyone?

Oh, and just in case anyone doesn’t think this makes commercial sense, let’s just do the sums.

What if each one of these negative cost (to the founder) startups is only one thousandth as likely to be successful as those in Y Combinator, even if the mentoring does turn out to be competent?

The cost to the taxpayer is no less than unemployment payments and little more than the additional mentoring if everything else is done online.

There’s nothing that dictates that you have to pay the mentors, they could be ‘big society’ volunteers and there’s nothing to stop the founders offering the mentors equity in their startups, an incentive mechanism which perhaps offers the potential to make the startup’s success prospects a lot better than one thousandth of Y Combinator.

But one thousandth of the success of Y Combinator, for a cohort of startups say, one thousand times the total number (less than 500) of YC startups (i.e., half a million formerly unemployed founders)?

That’s half a million Y Combinators, with the value of (at least) one.

How many Y Combinator-level accelerators are there in Silicon Valley? Or the US? Or the world?

And when you do those sums, don’t just evaluate Y Combinator by the value of their stake in the  billion dollar valuation of AirBnB, or even ten billion dollar DropBox.

Instead, take into account the value to the economy of those startups themselves.

Take half a million off the unemployment statistics, call them self-employed, create half a million jobs, each one engaged in the ‘business model discovery process’.

And what could be more credible than an entire economy seriously investing in finding the next FaceBook, Google, Apple or Amazon?

If it works, maybe the only people left on the unemployment register will be those who would rather go looking for a job than create one.