WANTREPRENEURS – Part 1 of 3

Ever seen start-up hipster types always talking about their “killer business idea” in vague terms because they are afraid someone will steal it as if the idea is the hard part of starting a company?  If yes, then you have seen this bane of actual businesses. These wannabes Steve Jobs types come from many walks of life. I have noticed that they take pleasure in talking about the startups rather than you know, working on the product and getting it out there — which is exactly why a lot of actual potential value has gone to waste. Companies like Theranos (valued at 10bn at a time WITH NO WORKING PRODUCT) or Nikola (Again no working product, insane valuation, and General Motors buy-out deal) are just the tips of the iceberg.

These companies not only lose investors billions of dollars (investors such as your average people to retirement fund managers) but also their employees who could have been working on a viable product (instead of the mad fantasies of someone who has watched too many Sci-fi movies and spent too little time in a lab). One would expect for SEC to have regulations against such things — such as not accepting investments without a working prototype and approval process.

These 2 components are important because, as you dig deeper into the minds of these wantrepreneurs, you will find they like to talk about something called “exit strategy”, namely being valued high enough that they can dump all their stock and live comfortable or be acquired by a larger company and wash their hands clean of it: like Myspace and other products. Unlike those products, however, these people have little to no intention of turning a profit. This is of course dangerous, and a trend of this can easily cause another .com bubble.  Now that we have learned what a wantrepreneur is, let’s talk about how to recognize such companies. Every investor wants to beat the market but for every Amazon, 100 Nikolas are operating on the same operational procedure, namely, making no profit for over a decade to increase market share.

Wantrepreneurs are a clear dangerous investment. They can hide quite well and usually are very convincing on the surface, led by charismatic manipulators who have little to no technical knowledge or interest. They think that if they throw their “magic” which can be anything besides actual technical work and other people’s money at the problem, the problem will be solved. It worked for every other problem in their usual, very privileged lives.

I have observed from multiple angles (unwitting client, employee, and technical partner) how these people will cause so much wasted value, and as such, have noticed a few common patterns in companies like this. I hope by sharing this information, my readers will be able to recognize and avoid such companies. In my next column (part 3), I will try to highlight the effects of such people on those that do not make it to the news.  The first red flag you should be looking for is when they always talk about everything surrounding the product or service but never the actual product. When asked about the product, they explain they need to be careful or afraid that their great idea will be stolen, the reason for not sharing.  In truth, they are afraid of being found out. Quite frankly, as soon as I hear the latter part, I just tune out….. (Part 2, March Issue)