I don’t know Ed Sim, I am sure he’s a wonderful man, human being, businessperson, VC etc. and to be fair he seems to be pointing back to an article he penned in March 2006 when the Crapstr’s of the world were raising $5M rounds based on a napkin scribble, so the following rant has nothing to do with him, but with the news that Joost is basically dead and $45M has been wasted, expect a lot of VCs to suddenly start to get on the “too much money is a bad idea”.
Revisionist historians I tell you.
Let’s back up for a second. The entire [flawed] VC model is based on:
1- talking a lot about being a risk taker, but then:
2- investing in the same old people, with the same old models, doing the same tired things
3- plowing too much money too early on in order to to take control
4- celebrate the funding more than the exit (this is key folks, re-read a few times if need be)
Then repeat stage 2 and 3 a few times until the time
a) when the founders are so diluted they could care less about the company
b) there’s been enough turnover that no one really takes ownership of problems or cares about results
Eventually, as is the case with 99% of startups, everyone realizes that this idea was pretty lame and the VCs just needed “big ideas” and “big names” to eat up their funds…
Once it is clear that this company won’t be the home run needed to make up for the other clunkers in the VC’s portfolio, then “tough times call for tough decisions” and suddenly, VCs force management into crazy options:
- fire 90% of the company and go white label
- fire 75% and scale back until a greater fool comes around and buys the sucker, ensuring that the VC at least gets its investment back while everyone else gets squat.
- shut down the crapper.
I, for one, call bullshit.
A lot of people smarter and richer than me say “you should raise as much money as you can” but that is hogwash.
VCs have 5-10 other companies in their portfolio, so naturally they don’t care about your company and your staff nearly as much as they should. Raising too much money makes you throw cash at problems. This is basically why VC-funded startups seem to have a greater failure rate than bootstrapped companies.
All right, I feel better. Back to work.
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WatchMojo NewsletterOm Malik has a good piece on Joost and what went wrong. We commented on it as well, we were one of the initial content providers when the service was, well, like hulu, full of buzz and something you wanted to be a part of.
We were being diplomatic in our post, though we outline some of the issues we saw from day 1, but Malik and his team are direct and candid: “Becoming a white-label video provider was what a business did when all other strategies failed.”
Malik hits the nail on its head with the last line: “In the end, however, it all boiled down to a lack of content.”
Bingo.
It’s not just a lack of content, it was a total lack of understanding of content, as well. The one example I used was them asking us to take 1 to 3 minute pieces (formatted perfectly for the Web) and then insist on us editing into longer pieces of programming. We did it because at the time, being on Joost was validation for our content… I always push for our distribution partners to succeed… but sometimes, the company gets in its own way.
PLAY
