Our Blog

I have the bad feeling that startup will become a dirty word very soon. A word, describing company raising and spending huge amount of money for making non-sense.

Non-sense may be a strong word, but some very odd things were born out there - USB wall chargers, USB charge meters and other stuff that make “Trabant perfume” sounds reasonable (“Trabant” is a low-cost car from the Eastern Block with 2-stroke engine - thus the specific smell).

Over the last few years, founding a startup is common and very popular. A large number of graduates and workers that get sick of boring tasks get out of their career rut and found startups inspired by some idea. It is a fact that startups are more than ideas - a great bunch of them focus their efforts on similar products and services. As healthy competition is good for business, market saturation can end up with a sharp decline of some products.

Still, this is not the problem - the problem can arise if investors lose their trust in presented ideas. After five pretty much the same presentations, even the sixth will be treated the same even if it is most advanced and refined. A second drop is the expense. According to some VC reports, the cost of investment is 3 times more expensive than a few years ago (including Mattermark data - 145% a year) for the same payout. The cost is partially related to valuation, valuation leads to expensive personnel, and all gets stuck in a vicious circle.

Additionally, according to various reports, crowdfunding is on track to account for more funding than VC and is expected to outstrip it soon (various sources incl. http://www.forbes.com/sites/chancebarnett/2015/06/09/trends-show-crowdfunding-to-surpass-vc-in-2016/). One of the reasons may be because the VCs are already familiar with huge amount of ideas and do not fund something they do not like, do not believe in or is yet another pitch on the same topic. I have watched a TV show with presenting ideas in front of VCs for various things that are already on the market and I did not see any additional feature or something that should position the new product in front (or par) the existing one. For example Moto-jacket with Airbag - there are similar products from Alpinestars (http://www.alpinestars.com/valparaiso-tech-air-jacket) and Dainese (http://www.dainese.com/en_en/d-air/street/) for years. I will get one from a well-established and respected brand, and you?

VCs usually fund ideas in their area of business, thus startups funded by VCs have the great advantage to have their advice, backup and support. Having in mind the above, ideas that are not found valuable from the VCs will be provided for crowdfunding. Another part of the crowdfunded companies will be the ones started by competent people with the experience needed.  Some of them may become useful, but if the rest are the majority, this can lead to decline in trust in crowdfunded companies.