I just read an entertaining but entirely worrying article from the CEO of a Silicon Valley startup; The Confessions of an Arrogant Startup CEO. Give the article a read and form your own opinion about it. I read it and it shocked me.
There is something fundamental in there that I believe is at the heart of a self-destructing startup culture in Silicon Valley.
The gist of the article is as follows: Francis Pedraza is trying to raise more funding (they already have $1.5m) for his startup, Everest. He sent an email to Mark Cuban that started as follows: Subject: Peter Thiel invested so you’re lucky I’m emailing you.
Mark didn’t respond well and told Pedranza that he wasn’t interested.
That’s all well and good and sometimes founders push too hard as Pedranza admits.
The thing that absolutely blows me away is this sentence from Pedranza about the desperate situation he’s in with regards to his staff: “If I don’t raise money, they don’t get paid.” I thought that for a business to be sustainable, grow and employ the best that it needed to generate enough revenue to pay staff and continue to be profitable? No?
This is how dire the situation has become in the Valley that revenue and profitability aren’t the main focus but raising funding to pay salaries is?
If I were Cuban I wouldn’t have invested in Everest either but for an entirely different reason.
If the CEO of a startup isn’t focused sufficiently on revenue and ultimately profitability then it’s all over before it’s begun.
Silicon Valley needs to stop looking at fund raising as success and start focusing on profitability.