Archive for the ‘Funding’ Category

Tech Stocks Approach Bubble-Era Valuations

Tuesday, August 23rd, 2016

Computer and software stocks account for more than a fifth of the value of the S&P 500 – a near-15-year high. Strong revenues make a replay of the 2000 dot-com crash unlikely.

A Bloomberg News report delivers the following insights:

  • “Tech is one of the only industries where earnings continue to expand.”
  • “Gains are built on earnings, driven by demand for products such as Apple’s iPhone and Google’s web ads.” The S&P 500’s tech stocks are expected to expand profit by 2.8 percent in the third quarter.
  • “Information technology accounted for about one-fifth of the S&P 500’s operating earnings in the 12 months through March, almost precisely its market weight. 

Since 2015, investors have favored tech companies chasing revenues instead of user growth, which helps to differentiate today’s gains in the sector from the rally that ended with a crash in 2000.

“It’s healthy growth,” Bloomberg quoted Rich Weiss, a Los Angeles-based senior portfolio manager at American Century Investments, as saying. “I don’t believe we need to worry about a tech bubble here or in the near future.”

Related Articles: 

AI and Big Data: The Next Frontier of Fintech

Wednesday, July 27th, 2016

Data analytics is becoming a cornerstone of the financial industry, with startups and established financial service firms looking to give investors clearer guidance with information collected and captured from multiple sources.

Advances in machine learning and artificial intelligence (AI) in particular are providing greater insights and better customer experiences.

AI-powered data analytics not only captures vast amounts of data in real-time, but also helps users understand how different data points relate to each other, providing insights that might otherwise be lost. Faced with a breakdown in brand loyalty as younger customers prioritize user experience, financial services are now racing to leverage data-driven cognitive technologies.

Cambridge, MA-based Kensho, which recently received $58 million in funding from Goldman Sachs, San Francisco-based Alphasense, backed by Tribeca Venture Partners, and Toronto-based Bigterminal are some of the fintech players leveraging AI.

It’s a lucrative market. Equity deals for AI startups, including fintechs, has increased nearly six times to nearly 400 in 2015, up from from 70 in 2011. As of June 15th, more than 200 AI-focused startups raised nearly $1.5 billion (U.S.) in funding this year alone.


TechPortfolio-Quote about Watson

“Data is the lifeblood of AI,” Falguni Desai of Future Asia Ventures wrote in Forbes recently. Desai quotes Adrian Lawrence, partner at Baker & McKenzie, in saying: “data and the various rules and processes which both enable and regulate access to and use of that data, stand at the heart of disruptive fintech businesses.”

The market is also “evolving from a descriptive analytics model (rear view mirror view) to a predictive analytics model (insight GPS view),” says Jim Marous, co-publisher of  Financial Brand.

“With predictive analytics, we are in a better position to ‘know the consumer,’ ‘look out for the consumer’ and ‘reward the consumer,’” he writes, “learning from previous experiences and predicting future behaviour.”

Bigterminal CEO Adam Rabie says advances in machine learning are allowing fintech platforms like his to do more for their customers.

Powered by IBM Watson, Bigterminal’s solution curates, consolidates, and analyzes financial data from markets, social media, and other sources. The company’s target market includes researchers, analysts, and traders as well as big banks and insurance companies. Bigterminal’s app can be used to conduct research, generate hypotheses, and make decisions based on significantly more data than what financial analysts traditionally use.

“Previously unthinkable”

Leveraging IBM Watson’s cognitive technology has allowed Bigterminal to do what was previously unthinkable, Rabie says.

“Our machines are computing hundreds of thousands of stories a day, millions of tweets, and trillions of financial data points,” he says. “If it can be smart at finding the anomalies and the connections between them, it can deliver a lot of explanations that are outside of human capacity.”

Developer FYI

Other notable financing in the space includes a $325 million Series E round last year for Avant, a personal-loan startup that leverages machine learning. Seattle-based fintech Kavout also recently launched a new investment platform that finds trading opportunities using tools powered by machine learning and big data.

Improvements in cognitive technology, such as relationship analysis and language comprehension, will expand the possibilities for data analytics in finance and banking. As fintechs bring this functionality into their services, they will continue driving disruption in the financial world.

For a free trial of IBM Watson Analytics click here.

NYC Tech Catches Up to the Hype

Monday, July 25th, 2016

Editor’s Note: This post by Matt Turck, a Managing Director of FirstMark Capitalfirst appeared on

The New York tech ecosystem is in an interesting place right now.  The emergence of NYC was a big story at tech conferences and in the press maybe four or five years ago.   Fast forward to today: on the one hand, NYC has become the clear Number 2 to the Bay Area; on the other hand, it’s hard not to notice that things have gone a bit quiet – at a minimum,  we seem to be past the stage of unbridled enthusiasm.

The bull case is that New York is now firmly established as a startup hub, and therefore it is less press-worthy than when it was first emerging; to wit, entrepreneurial activity and VC investment levels have never been higher (for context, with $1.9B invested, Q1 2016 saw almost 7x more VC investment in NYC than Q1 2012)

The bear case is that, for all the progress, NYC still suffers from many of the same issues that have plagued it for years: a relative dearth of $1BN+ exits, a lack of local anchor companies that can serve as acquirers, and a comparatively lower concentration of talent, particularly when it comes to not just starting, but actually scaling, startups.

Those are non-trivial concerns: while they offer some protection, network effects can just as easily peter out as they can get stronger – an ecosystem is fundamentally a living and breathing organism.

My take:  New York is in the process of catching up to the hype.  That doesn’t make for splashy headlines, and takes a long time, but the reality of the NYC tech ecosystem coming of age is actually happening right now.

The Slope of Enlightenment

So where are we? If there was a Gartner hype cycle for emerging tech ecosystems, my sense is that New York would probably be somewhere in the “slope of enlightenment” phase.


Both the scale and the steepness of the slopes are not right, but this is probably directionally correct.

New York had a long ride to the “peak of inflated expectations”.  Throughout the 90s and the 00s, New York went from having a handful of entrepreneurs and VC firms to something that felt more like a real community (then known as “Silicon Alley”).

But it probably wasn’t until 4 or 5 years ago that people started talking excitedly about New York as having the potential to be a major global tech ecosystem.  There certainly was tons of momentum, with everything coming together nicely.  It had a deep connective tissue of meetups, conferences and new incubators.  It had a mayor, a tech founder himself, who truly got it.  It had some VC firms like Union Square Ventures with national appeal, and West Coast firms were starting to actively invest in later rounds.   And most importantly, it had a whole series of fast-growing startups, the bloodline of any ecosystem.  The press (a lot of it New York based) was all over it – not only was New York going to take over Boston, it was also about to give Silicon Valley a major run for its money!

A lot of the above is still true, but unfortunately, there has been a number of hiccups along the way.  A lot of the “poster child” companies that were frequently mentioned then have gotten into various levels of trouble, after raising large amounts of VC money.  Gilt ($271M raised) had an underwhelming exit. ($336M raised) was a flameout.  Quirky ($175M raised) went bankrupt.   Foursquare ($166M raised) has been working on finding its second wind as a data company.  There were some great acquisitions (Tumblr’s $1.1BN acquisition was a watershed moment), and some New York startups had IPOs – but unfortunately, those newly public companies, like many others across the country, experienced difficulties in the public markets (Etsy went from a $3.3BN market cap at IPO to $1.1BN currently; OnDeck went from to $1.3BN at IPO to less than $400M currently), with Shutterstock being the exception.

Finally, there are a number of large startups in New York that have been doing quite well, but are now reaching the 10-year mark, and have yet to reach an exit.

All of this had led, perhaps not to “disillusionment”, but certainly to more nuanced feelings, and people generally realizing how long it will truly take for New York to come into its own.

Rinse and Repeat: Still Early

As any student of emerging tech ecosystems knows, the key dynamic to success is the “rinse and repeat” cycle. You need several waves of successful tech companies to go through the whole cycle of founding, financing, scaling and significant exit.   Post-exit, the hope is that successful founders, employees and investors then contribute back both money and expertise to the next generation of tech startups, a few of which eventually become highly successful themselves and then provide money and expertise to the following generation.

The trouble is, each successive cycle takes years, because the average successful startup takes 5 to 10 years to get to a large exit.

One key reason the Silicon Valley has become such a powerful network is that this “rinse and repeat” cycle has been happening there for decades, at least since the 1940s and 1950s (Hewlett Packard), with a real acceleration in the 1970s and 1980s (Apple IPO, founding of Kleiner Perkins, etc).

At the other end of the spectrum, some of the more recent tech hubs are arguably just at the beginning of their second cycle.  In Paris, for example, the next cycle is under way, with alumni of successful startups like Criteo or Exalead creating a number of new ventures, such as Algolia and Dataiku, but those are still relatively young (2 or 3 years in).

New York is somewhere in the middle, but probably still on the earlier side – perhaps 5 cycles in?  The comparative lack of exits doesn’t help, as it slows down when the next cycle starts.  The point here is that, while New York is well on its way, things take time, and you can’t just hope to rush through cycles – getting to a fully mature tech ecosystem will require continued patience.

NYC Talent is (Finally) Maturing

Now, to the bull case about New York.

One particularly apparent aspect, from my perspective: there is now a much larger pool of experienced startup talent to choose from.

It’s certainly not perfect – as mentioned above, there are just not that many people who have been repeatedly through the growth stages of the startup life.  But New York has come a long way in a few years.  Not so long ago, when looking for, say, a VP of Marketing, or someone to run operations, startup founders often needed to really stretch — could that agency person somehow figure out the marketing job? Could that smart associate from Goldman Sachs learn the operations role on the job?

That’s much less the case now.  There are a bunch of people in the system who have now worked at 2 or 3 startups in the past.   Even companies like Fab and Quirky, despite not making it past the goal line, have produced legions of experienced talent, who have now joined other startups or started their own.

There’s also an interesting emerging phenomenon around people starting to leave the NYC outposts of the various West Coast tech giants after several years of service there — Google, in particular (whose impact on NYC has been incredible), but also Facebook, Twitter, Microsoft — to join or start NYC startups.  For example, the three founders of Cockroach Labs (in the FirstMark portfolio) are all former senior engineers at Google who moved East to work at Google New York, and then decided to remain in New York to  start new ventures.

Finally, we’re seeing an increasing number of people who are moving from the Bay Area to New York.  Some are people who are originally from the East Coast, or went to school there, and decide to move back after a few years in the Bay Area, because they want to live in New York.  Others are executives with no particular history on the East Coast, who are recruited into NYC startups — the interesting trend here being that those execs feel increasingly comfortable that there is enough density of quality startups in NYC that they could find another great job, should this one not work out.

A Broader, Deeper Ecosystem

The other big story about New York is that it is no longer just about ad tech, media, commerce and fashion tech.  In fact, it hasn’t been for years, but perceptions are slow to evolve, and it seems to still be what many people outside of New York seem to believe.

One way of thinking about New York’s tech history is one of gradual layers, perhaps something like this:

  • 1995-2001: NYC 1.0, lots of ad tech (Doubleclick) and media (TheStreet)
  • 2001-2004: Nuclear winter
  • 2004-2011: NYC 2.0, a new layer emerges around commerce (Etsy, Gilt) and social (Delicious, Tumblr, Foursquare), on top of adtech (Admeld) and media
  • 2012-present: NYC 3.0 – in addition to the above, just about every type of technology covering just about every industry

Certainly, the areas that put NYC on the map in the first place continue to be strong.  New York is the epicenter of the redefinition of media (Buzzfeed, Vice, Business Insider, Mic, Mashable, Bustle, etc.), and also home to many great companies in adtech (AppNexus, Tapad, Mediamath, Moat, YieldMo, Magnetic, JW Player, etc.), marketing (Outbrain, Taboola, etc) and commerce (BarkBox, Birchbox, Bonobos, Casper, Harry’s,, Rent the Runway, Warby Parker, etc.).

But New York has seen explosive entrepreneurial activity across a much broader cross-section of verticals and horizontals, including for example:

  • Fintech: Betterment, IEX, Dashlane, Fundera, Bond Street, Orchard, Bread
  • Health: Oscar, Flatiron Health, ZocDoc, Hometeam, Recombine, Celmatix, BioDigital, ZipDrug
  • Education: General Assembly, Schoology, Knewton, Skillshare, Flatiron School, Codecademy
  • Real estate: WeWork, HighTower, VTS, Compass, Common, Reonomy
  • SaaS: InVision, NewsCred, Squarespace, Sprinklr, Conductor, Namely, JustWorks, Greenhouse, Percolate, Mark43, Movable Ink, Splash
  • Commerce infrastructure: Bluecore, Custora, Welcome Commerce
  • Marketplaces: Kickstarter, Vroom, 1stdibs, SeatGeek
  • On Demand: Handy, Via, Managed by Q, Hello Alfred
  • Food: Blue Apron, Plated, Maple
  • IoT/Hardware: littleBits, Canary, Peloton, Shapeways, SOLS, Estimote, Dash, GoTenna, Raden, Ringly, Augury, Drone Racing League, Electric Objects
  • AR/VR/3D: Sketchfab, Floored
  • Bitcoin/Blockchain: Digital Currency Group, Digital Asset
  • Nonprofit/Charity: charity: water, DonorsChoose, DataKind, Crisis Text Line, DoSomething

A number of those companies are scaling very significantly.  While “unicorn” status and/or large amounts of VC money certainly do not guarantee success (as seen above), it is worth noting some recent large rounds for companies such as WeWork ($430M Series F), Oscar ($400M Series C), Vice Media ($250M growth equity round), Flatiron Health ($175M Series C), Betterment ($100M Series E), Via ($100M Series C), Vroom ($95M Series C), Datadog ($94.5M Series D), IEX Group ($70M Series C), Digital Asset ($60M venture round / Series A), InVision ($55M Series D), Giphy ($55M Series C) or VTS ($55M Series C).

The Rise of Deep Tech in New York

Finally, one trend I’m personally particularly excited about: the emergence of deep tech startups in New York.   By “deep tech”, I mean startups focusing on solving hard technical problems, either in infrastructure or applications – the type of companies where virtually every early employee is an engineer (or a data scientist).

For a long time, MongoDB was pretty much the lone deep tech startup in NYC.  There are many more now.  A few of those are in my portfolio at FirstMark:  ActionIQ, Cockroach Labs, HyperScience and   But there’s a lot of others, big and small, including for example: 1010Data (Advance), BetterCloud, Blockstack Labs, Chainalysis, Clarifai, Datadog, Dataminr, Dextro, Digital Ocean, Enigma, Geometric Intelligence, Jethro, Keybase, Placemeter, Security ScoreCard, SiSense, Syncsort or YHat – and a few others.

The New York data and AI community, in particular, keeps getting stronger.  Facebook’s AI department is anchored in New York by Yann LeCun, one of the fathers of deep learning.  IBM Watson’s global headquarter is in NYC. When Slack decided to ramp up its effort in data, it hired NYC-based Noah Weiss, former VP of Product at Foursquare, to head its Search Learning and Intelligence Group.   NYU has a strong Center for Data Science (also started by LeCun).  Ron Brachman, the new director of the Technion-Cornell Insititute, is an internationally recognized authority on artificial intelligence.  Columbia has a Data Science Institute. NYC has many data startups, prominent data scientists and great communities (such as our very own Data Driven NYC!).


Hype often precedes the reality of any market.  This was very much the case for the New York tech ecosystem, but NYC is now growing into its reputation.

As an added bonus, the New York tech community continues to feel truly special.  Perhaps because NYC is still in the “underdog” phase, there’s a spirit of openness, collaboration and solidarity that is very palpable — almost ironic considering the reputation of New Yorkers!

At FirstMark, we feel proud to be part of this community, do our best to keep building it (through our four monthly events: Data Driven, Design Driven, Code Driven and Hardwired), and we are more bullish than ever about New York.

Artificial Intelligence Funding Latest Silicon Valley Gold Rush

Tuesday, July 19th, 2016

Silicon Valley will be producing fewer “like” buttons following a funding shift away from social media to deep learning and artificial intelligence.

VCs’ interest in deep learning is surging. CB Insights predicts that funding of AI-enabled startups will reach $1.2 billion in 2016, compared with only $145 million in 2011, when social media startup funding peaked at $2.4 billion. This year so far, the figure stands at $6.9 million.

John Shoch, a VC at Alloy Ventures in Palo Alto, told the New York Times that new approaches in the space, such as those from Facebook head of AI Yann LeCun, have led to more investors rushing to fund the AI space: “You get a new set of tools that let you attack a new set of problems, which let you push the boundary out.”

Silicon Valley could have an opportunity to solve physical problems, instead of concentrating on social media-based apps like food delivery or dating that support “assisted living for millennials,” as Recode editor Kara Swisher alleges. Industries where new AI-enabled startups are working include radiology diagnostics, from Enlitic, and enterprise intelligence, from MetaMind, recently acquired by SalesForce.

An artificial intelligence research centre, OpenAI, was funded in December 2015 with the aim of focusing on a positive human impact, backed with $1 billion of funding. The organization’s mission is to extend “individual human wills and, in the spirit of liberty, [make AI] broadly and evenly distributed as possible.”

Still, the transition to AI in the startup space needs more depth in terms of resources.

Jana Eggers, NaraLogics, at StartupFest

Jana Eggers (above), CEO of AI-based personalized recommendation startup NaraLogics, says, for example, that there is still lack of diversity in the deep learning space. She told StartupFest Montreal that if only rich white males are programming AI, the technology can’t reach its full potential.

“We need people like you, and we need people not like you,” she told the audience.

Developer Hotfix

500 Startups’ Dave McClure Advises Founders at Startupfest

Friday, July 15th, 2016

At #Startupfest in Montreal, the founder of 500 Startups, an early investor in now publicly traded Twilio, said less than 10% of the VC firm’s investments will have a “meaningful economic return.”

The sobering words from Dave McClure, a respected voice among VCs, helped bring perspective to Startupfest attendees on the challenges facing startups aiming for Twilio-like success.

Still, McClure’s comments about Twilio, a cloud communications platform used by Uber and many other widely used apps, was one of the most popular tweets from yesterday’s sessions in Montreal. 500 Startups invested in Twilio’s series B funding, along with Bessemer Venture Partners, in 2010, according to Crunchbase.

The cloud communications platform debuted on the New York Stock exchange last month, and saw the value of its shares jump 92% above its IPO prospectus price of $15 per share.

McClure is modest about the success.

So how do you get McClure or 500 Startups’ attention? A functional product, early customer usage, and a good team, said McClure.

“Show me objective, quantifiable evidence of your product,” he told the audience.  

Twilio is the first IPO for 500 Startups. It’s also the first US venture-backed tech IPO of 2016Since its launch in 2010, 500 Startups has made 1,200 investments across 60 countries. VC investments in communications and networking companies reached $968.4 million in the year ended March 30, according to Dow Jones VentureSource data.

500 Startups has seen other exits mainly in the form of acquisitions, including:

For more insights from Startupfest, follow TechPORTFOLIO on Twitter, Facebook and LinkedIn – and now on Instagram.

Shopify Leaders Praise Canada’s Startup Environments

Thursday, July 14th, 2016

Canada is the best place for a startup to knuckle down and work on a product that they believe in, Shopify’s Tobias Lütke said on the first day of Montréal’s Startupfest.

Lütke, in an discussion with Re/code’s Kara Swisher, told the audience that Canada didn’t lend itself to explosive growth, but is a good place for a startup to build a growth culture: a sentiment shared by tech industry thought leader Tim O’Reilly:

Still, a more subdued environment isn’t an excuse for complacency.

It’s critically important to “keep connecting with the front line,” an effort that Blackberry didn’t make, Lütke said, referring to the once-dominant smartphone maker based in Waterloo, Ontario. “Stay hungry,” he warned.

To achieve this, bring people on your team that think as founders and builders, not just joiners, said Shopify COO Harley Finkelstein. It’s important to keep your team focused, which is why he worked to keep Shopify’s culture open despite its rapid growth.

“We’re a company that sets our philosophy around personal growth where people are comfortable with the uncomfortable,” he said.

TechPORTFOLIO is covering Startupfest until July 15. Get more of our insights by following us on Twitter, Facebook and LinkedIn – and now on Instagram.

Fintech a Massive Market Opportunity For Startups

Friday, July 1st, 2016

When it comes to funding startups, fintech reigns supreme.

In 2015, according to Accenture, global fintech investment reached $22.3 billion (U.S.) — up 75 per cent from $12.7 billion the year before. The rush to develop the alternative, online platforms offering financial services is moving more quickly than many other areas of tech innovation.

Banks and brokerages occupy a central position in every economy. In Europe in 2014, the total assets of the banking sector were €26.8 trillion. In the U.S. in 2015: $15.75 trillion.

Who wouldn’t want a piece of that?

Tech startups have started quietly joining the financial sector with the aim of providing a new world of solutions, including payment and loan services, currency and investment platforms, and wealth management tools. These have been the domain of banks and governments for centuries.

One factor increasing pressure on financial services — and creating big opportunities for startups — is a large wealth transfer happening between the generations.

“There is a $40 trillion intergenerational wealth transfer that is in progress, from a generation that has traditionally relied on an in-person advisor relationship to a generation that expects much more of a technology-augmented experience,” top Vanare executives Richard Cancro and Alexey Sokolin said in a recent Financial Technology Partners report.

This transfer combined with the millennial generation’s expectation of a more technology-augmented experience — which traditional banking providers have been slow to provide — is creating a moneyed user base keen to embrace new approaches to banking.  

While regulations remain a hurdle, particularly in the wake of the 2008-09 global recession, fintech startups are expected to jump through every hurdle required to cater to the coveted millennial demographic, which is expected to make up two-thirds of the global workforce by 2030.

For July, we are exploring the vast market opportunity that is fintech.

Our stories will feature insights from key sector figures such as BMO InvestorLine President Julie Barker-Merz, and Adam Nanjee, head of the fintech division at MaRS.

Watch for our interviews as well as explainers and exclusive entrepreneur profiles, as we explore one of the hottest topics in tech today.

Tech Startup Ecosystems Missing Out On Diversity

Monday, June 27th, 2016

The lack of women in a progressive and disruptive sector like the startup tech world is, unfortunately, still a topic for discussion in 2016. 

Women are making a lot of headlines lately. There’s one running for U.S. President. Their numbers in political positions are on the rise. More women are also graduating from college and university than men.

But a huge gender diversity gap persists, especially in tech startup ecosystems. While articles — see here and here — boast that female-founded startups in the U.S. have increased to 18% in 2014 from 9% in 2009, that number is still objectively deplorable.

This should be a huge disappointment for the startup tech industry given the growing body of research showing that gender diversity isn’t just the right thing to do — it can boost profits for companies and investors alike. In fact, Bloomberg recently ran a backtest and discovered a gender-focused investment strategy would beat the S&P 500 by 141% over the past 10 years.

So why would an industry known for game-changing innovation still lag when it comes to gender diversity.  

To explore this, we sorted through some of the numbers and found that women in the tech workforce still account for a meagre 30%. When looking at CEO positions in the top 100 tech firms, the numbers are worse. And for the funding sector, the low percentage of female VCs and disparities in funding is, frankly, embarrassing.

Our coverage also includes profiles of a few women who are breaking through barriers, including Sonia Strimban of MaRS and Shopify’s Julie Hache.

Lastly, we’re conducted our own survey for women in tech — on the site but also across our social media channels — to get a better sense of how they’re faring when it comes to treatment in the workplace and opportunities for advancement.

Here’s what our respondents said:

Tech’s Gender Problem Means Money Lost

Monday, June 13th, 2016

Only 17% of Fortune 500 CIOs are women, according to data released this year by the National Center for Women and Information Technology. The stat is roughly in line with a 2014 study showing that women account for only 11% of executive positions at top Silicon Valley companies.

While Facebook COO Sheryl Sandberg and HP CEO Meg Whitman are well known, the overall lack of female founders, executives, and venture capitalists limits the value of the tech sector.

Female entrepreneurs generate 20 percent greater revenue than their male counterparts, while receiving 50 percent less VC funding, according to a 2012 report in Harvard Business Review, citing Kauffman Foundation data.

Explanations for the under-representation of women in tech abound. Some cite an over-reliance by VCs on existing networks, who are mostly male. Others bring the problem back to elementary and secondary education, when girls may get less encouragement in STEM courses.

Whatever the case, the under-representation of women is an economic detriment, regardless of the industry.

$28 Trillion

A recent McKinsey report stated: “In a ‘full potential’ scenario in which women play an identical role in labor markets to that of men, as much as $28 trillion, or 26 percent, could be added to global annual GDP by 2025.”

Given the numbers, gender equality should be a funding priority in tech ecosystems across the world. So why isn’t it?

Craig Newmark, founder of Craigslist, argues that venture capitalists in tech ecosystems are not putting their money where their mouths are, citing issues such as a lack of female-led startups when the data doesn’t support those claims.

Though acknowledging the true problems is an important first step, systemic, measurable changes are needed: from STEM education, to recruitment processes, to funding. Otherwise, we hinder both social and economic progress.

Startups Need to Change Their Cultures in Cockroach Era

Thursday, June 9th, 2016

As unicorns go out of style with VCs, the glossy, idealized cultures of startups will need to change.

A recent article from TechCrunch notes that free-flowing VC funding has softened startups and perpetuated cultures that focus more on small wins like offices and sought-after hires, rather than big wins like building a strong customer base and generating revenue.

Unlike mythical unicorns, cockroaches don’t require palatial offices, onsite chefs, and playgrounds consisting of pool tables and arcade games. They are perfectly comfortable with a dingy basement, relying on scraps for sustenance.

This shift in culture may be a trade-off in attracting top talent, but one that should benefit startups in the long-run. Miriam Diwan, a former portfolio manager and the co-founder and CEO of NowMoveMe, tells Inc. that “the employees looking for Facebook or Google levels of perks are not the best fit” for startups.

Similarly, YCombinator president Sam Altman says “the people who get hurt most often are employees at these startups who look at these valuations and think they aren’t pretend.”

Cultural change can be difficult for any organization. A key challenge for startups is to ensure that changes are aligned with long-term strategic plans and organizational values.