Elitism of start-ups

Photo courtesy: LAUNCH on Flickr

Just a couple of weeks ago, I attended the LAUNCH conference (a conference for start-ups and investors) in San Francisco. As I was walking around the start-up demo tables, I started to realize the huge magnitude of what I think has plagued the tech start-up community today: ELITISM. To describe it in its simplest way, I define elitism in the context of start-ups as “ventures that aim to benefit a really small % of society”. I earlier believed that this was true only for the start-ups I was following closely and what I saw emerging from hackathons, but after looking at some of the best start-ups in not just the country but in the world line up to present their hardware and software that I struggled to consider meaningful, I knew my hypothesis was validated. This hypothesis has grown from a lurking concern in my mind to a mental block that I am struggling to come to terms with, and that is why I want to talk about it with you.

Why are most new companies, especially tech ventures, not trying to solve real human challenges? Let’s back up: why am I concerned about this, and what is it that I call meaningful that these start-ups are not doing? I believe that most of us have one common purpose of existence: to make the lives of other people better, in the pursuit of happiness. And that the more lives that we improve, the more we serve humanity and the more purposeful our existence becomes. And so, one of our core endeavours as we create start-ups and work nights and weekends to build products and services should be to improve the lives of more people and create more meaningful impact in human lives. If this theory is so reasonably sane and simple, then why are entrepreneurs all over the place solving small un-problems (eg. filters for pictures) and getting away with it successfully?

Here is where I think the problem lies: The way start-ups think about markets, value creation and organizational goals is very different from the theory above, and to some degree, wrong. And this has given rise to a delusion of doing something meaningful. Start-ups and early business mentors tend to focus on addressing large markets, in the hope of a better financial outcome. Mind you, if you come from a social or economic development or public policy background, you probably misinterpreted that statement entirely. It is the difference between capitalism and communism – a large market for any business is more revenues and a happier bottom line, but a large market in the social context would mean more people benefited. Early stage start-ups tend to confuse market size with market impact (in the context of communism). It is a natural social problem: technology innovators and entrepreneurs come from backgrounds and are often geographically concentrated in areas and around people who belong to the upper cream of society (owing to their knowledge/abilities), and so they only see problems that are faced by people around them. They arrive on solutions that are often “cool”, allowing them to recruit around these ideas. Community validation is key to any start-ups early stage growth, and they get plenty of it. The number of people who potentially would use this creation multiplied by the miniscule price paid by each customer is typically large enough to make entrepreneurs believe that the market is huge.

This leads to a misunderstanding of value creation in society. The willingness for people on an average earning $5,000/month to pay $20 for a start-up’s web-based services makes entrepreneurs believe that their customers derive high value from their offering. They probably do derive some satisfaction, but we need to realize that $20 is a negligible % of their customers’ disposable income. And this gives rise to a struggle to deliver more value to these customers and have them pay a little more. Not only does this one start-up now start creating a complementary product which could take away some more negligible % of this customer’s earnings, new entrants begin to emerge, upon realizing the existence of what is considered the market (as addressed above). What is clearly being ignored here is that most of these start-ups are delivering these products and services to a small strata of society sitting on the top of the socio-economic pyramid of the world. The struggle to please this strata is a competitive and cut-throat rat race, becoming the center of attention of  the industry (eg. the 40+ cloud file storage services), and meta-start-ups, such as start-ups for other start-ups and product creators, emerge.

In all of this, investors and start-up gurus do quite the job of making things “worse”. Most tech entrepreneurs are mentored, led-forward, judged, invested in by individuals who judge products and services based on their personal liking of the what the company creates. And we know how high standards of living these individuals maintain. This is not true just in shows like Shark Tank, but is the reality for most seed and angel stage investments looking for massive acquisition exits. This is true of the TechCrunch news reporters. This is true of the thousands of incubators opening near our corner grocery stores. Granted there are a few investors and leaders who drive company visions based on true improvement in general public’s lives and know how to avoid personal bias from coming in, but such individuals are numbered. But irrespective, the guiding path-makers, the past entrepreneurs and the ones who write books on how to be lean start-ups, promote and encourage and teach new entrepreneurs how to hop on to newer ideas where there are potential “markets”, leaving their original dreams, just like Andrew Mason left The Point for Groupon.

 

Things don’t have to work this way

When I arrived on the idea I would pursue in my life, that eventually became a start-up, I went back to my original question of what is the purpose of our existence. And that allowed me to avoid the trap I discussed above. But we are not the only ones – several start-ups with keen insight into real challenges largest communities of people face have figured out solutions to really difficult human challenges. Things that, as I consider, matter. Like my friends at LearnUp, which focus on job-skills training for improving employment, or my close buddy’s CheckUp, going after some root healthcare problems, or another friend’s One Earth Designs working on promotion local innovation and entrepreneurship using solar energy. And no, I am not suggesting starting non-profit companies; all I am suggesting is starting pro-people enterprises. Until recently I did not think so, but Tim O’Reilly partly convinced me that Square was doing the same.

I don’t know a definitive way to shift the attention of entrepreneurs, but I certainly have a couple of ideas. The first one is for investors of non-American ethnicity (if there is such a thing) to collectively build a fund for soon-to-graduate potential immigrant and non-native entrepreneurs to address big problems in countries of their origin, and even take natives along to other countries on a trip to experience the ground realities and challenges, and feel the market potential, and think about solutions. That would be one hell of a start-up “bus” tour, and may be touches upon the need for entrepreneurs to look outside of saturated developed world markets. To further understand local problems, I have another idea: which is to make entrepreneurs assume the lives/roles of individuals who belong to lower stratas of the society. This one is inspired by a television show in which I once saw a mayor of a city assumes the role of a trash collector for several days, to better understand what it means to live that life.

 

Why the f#%@ am I so concerned, really?

I believe there is good reason for my paranoia. I think that we have tremendous brilliant and sharp talent in this world who are very capable of solving the largest human challenges today, but they are too busy building the lousy and wrong stuff – more photo tagging, to-do, and social media apps. If this trend continues, we will continue to shamefully fail to address challenges that are beginning to question the existence of our future generations. But the worst fear lies in our failure to combat elitism, which is exponentially increasing inequality in society. The myth that the start-up world’s creations are creating a trickle down effect and helping us realizing democratization at scale could not be further from the truth. If we blunder in our efforts to show entrepreneurs paths for building value for the ordinary, it is not long before a group of commoners will stand with banners protesting on Sand Hill Road with the movement Occupy Start-ups.

 

6 thoughts on “Elitism of start-ups”

  1. Varun, this was really well written. I agree with what you are saying, but this generalization is not just about startups. This is true of business in general, especially ones started in the US. Startups are just baby businesses that are growing super fast.

    I think the big distinction, which I think you touched on a little bit, is that startups these days make it seem like they are all about “disrupting business” and “changing the world.” So they have all this momentum, but they are really only creating change for a usually-well-to-do, usually-english-speaking subset of the population. Big companies are like that too. But it seems a little disingenuous because all these companies position themselves (or at least it seems so in the media) as being different from normal business, organizations on the bleeding edge of change.

    It also shows that there is so much potential in these untapped groups. That people have these problems, but no one has spent the time to try to come up with some disruptive solutions. They are too busy listening to the SFO echo chamber, where they know they can quickly find users.

    It would be amazing if we could put the energy of all of these startup founders into things like poverty, food preservation, and education.

    There are lots of social innovation efforts, fellowships and incubators out there though. They just don’t have the gobs of funding like many of these incubators.

    Also, I wanted to mention Warby Parker too with their buy a pair give a pair, and I agree that Square is definitely helping a really, really large group of people, and making a big difference in their lives. And then of course there are entrepreneurs like you!

  2. I loved the post.

    Above all I liked the question, as to why tech start ups, or ventures, or new companies are not trying to solve real human challenges.

    I thought it would be a nice idea to answer this question from the perspective of an aspiring tech entrepreneur.

    As an entrepreneur the first motive of tech or any other start up is money, loads of it and in a steady stream. If one is a product of the middle class segment of a developing country, the odds become even more steep, because there is a lot to lose and a lot to gain, its a precarious situation for anyone.
    So, having calculated the odds, it makes more sense to focus ones limited resources to a market who have the capability to pay for the products/services, so we and the likes of us paint a bulls eye on the Elite. A necessary evil. We receive no “free” help or advise, almost everyone we meet has an agenda with us.

    Is this good?

    Looking at the bigger picture, probably not.
    But start ups who have started from a garage, with no backing, just the “josh” and the spark of an idea, need the elite to grow. The rent has to be payed.

    Would this be a different scenario if the Elite cared for human betterment? Or are they to be blamed for mindless innovations by start ups?

    I think not. The elite suffer from the same disease as we do, the human condition.

    This is the era of the indifferent human race, social media and free exchange of information has been invaded by glamorous trends. This is the age where food is sold on the foot paths and shoes in AC showrooms. We have taken every thing for granted, the food we eat, the air we breath, the water we drink and the life we live. We measure what is discussed by us over the internet by twitter trends, trends where we discuss things from far and wide, entertainment, glamour, sports, but not the people dying of drought in India, or war in Syria.

    Social awareness is like water in a desert, it disappears after some time, after it has lost its coolness. Money is like a mermaid’s song, and young impressionable minds fall for it. Some where in the race for money, we lose the human aspect altogether.

    Good survives too, but too little is done and it is done too damn late.

    This is what I feel is plaguing everyone. even us the entrepreneurs of the information age.

    What we need?

    I am hoping for a comet. A near death experience for our species. Let Darwin’s rule, rule for some time.

    Maybe then we will see a different Human Species, Homo Cohabilus, a race, which will be advanced and caring. A race which is more Human than us.

  3. I don’t know who the commenter ‘Abhishek Rai’ is, but he has certainly made my day. Going from the blunt/poignant insight of

    “As an entrepreneur the first motive of tech or any other start up is money, loads of it and in a steady stream”

    … to the hopelessness-tinged come-on to celestial bodies: “I am hoping for a comet. A near death experience for our species”… just had me guffawing till my eyes ran. I don’t know why. Comic apathy mixed with truth, I guess.

    Interesting article.

    Also, the “Yo app” (google it) is up there with brayola, and it too has funding.

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