It Looks Like Success, But . . .
One of my favorite-not-favorite stories is in the news again: a wildly successful start-up once valued at $500M is closing up shop and selling its assets. Readers of this blog and friends know not to get me started on start-ups. I don't meant the one-woman, one-man passion projects that sustain people's humanity and fulfill Graham Nash's admonition to "make sure the things you do keep us alive." I mean the big boy start-ups, funded by VCs and splashed all over the headlines. Because these companies are not [necessarily] profitable and they confuse the rest of us.
There is an element of smoke-and-mirrors involved in many tech / platform / delivery / transportationstart-ups – and yes there is also hard work and tremendous effort and hope and I'm rooting for any and all of them to sustain all those employees and all that optimism and energy. But the scale and scope of their effort and their Big Presence confuse the small guy, the one- or two-woman shop drafting b plans at the coffee house and calling potential suppliers during lunch breaks. Distracting us with the idea that the growth and scale they show are built on anything other than running through someone else's money, a lot of money, urgently hoping to cross the finish line of positive cash flow before the cash dries up and the music stops.
Here's the latest casualty, from an article written by YULIYA CHERNOVA in the Wall Street Journal. I'll pick out the highlights:
Beepi Inc. is inching toward winding down its business after blowing through $150 million in venture capital, the latest casualty of investor caution after a frothy period.
The Mountain View, Calif.-based startup, founded in 2013, was operating an online marketplace for used cars. Having run out of cash, the startup has begun the process to sell its assets to satisfy creditors through an alternative to bankruptcy.
Neither equity investors nor employees are likely to get any money back, said a person familiar with the matter.
The company was also the largest AngelList syndicate deal at the time it raised about $2.7 million on the crowdfunding platform in late 2014 through Gil Penchina’s syndicate that included 86 individuals.
Beepi was last valued in a funding round in 2015 at about $500 million, according to a report from The Wall Street Journal.
Please don't misunderstand me – I am not disrespecting Beepi or start-up culture. I'm just reminding the rest of us to be careful how we define professional and financial success, what we think it looks like and how to get it. Not even touching on the deeper spiritual, interpersonal, and social issues at play, I simply mean that building a business that lasts a lifetime and sustains your creative energy, enables your independence, and supports your family can be accomplished on a smaller scale, with actual revenues supporting growth. Sometimes what looks like success is not.
UPDATE: Feb 24 JetSmarter – private jet sharing co, valued at $1.5B, President Arrested for Embezzlement. See link to article in So Florida business news here and a prescient blog post Is JetSmarter a Ponzi Scheme?
UPDATE Feb 24 How Nasty Gal Went from an $85M Company to Bankruptcy in the Wall Street Journal. "In less than a decade, Nasty Gal founder Sophia Amoruso, 32 years old, transformed an eBay vintage store into a company that generated $85 million in revenue for the 2014 fiscal year."