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Not every startup needs to be a “Startup”

October 24th 2018

By Joseph Flaherty, Director of Content & Community

Derek Thompson recently tweeted a comment disparaging parkour robot pioneers Boston Dynamics.

It’s an unfair critique that’s not supported by the company’s history.

After being spun out of MIT in 1992, the Boston Dynamics operated independently for over 20 years, serving as a consultant to clients like DARPA and Sony before being acquired by Google in 2013, and then sold to Softbank in 2017. Crunchbase shows no fundraising history, so presumably, they’ve funded operations entirely with grants and consulting revenues, before being beneficiaries of Google’s largesse, not viral videos as Thompson chides. Before shorting them, I’d be more curious to learn how the heck they built robots capable of performing ridiculous tricks with a fraction of the cash that Juicero had!

I don’t write this as a criticism of Thompson, who is one of the better journalists working today. Stories about Boston Dynamics can be confusing. They appear in TechCrunch, buffered by stories about more traditionally funded, and financially-minded startups. It’s easy to think of them in the mold of Pebble, Zano, Ouya, Pono, and other hardware startups who promised transformative change on a tight timeline. But that’s unfair to Boston Dynamics’ founders, whose primary ambition seems to be making a living while nerding out.

So far as I know, the company has issued no Musk-ian missives about fundamentally changing the world, or even their market, in the near term. They just consistently release videos of their products getting better, smaller, and cheaper, while the Twitterati quip about Skynet. It’s not their fault their demo videos are de facto B-roll for journalists who fret robots are going to lead to mass unemployment in the near future.

With so many venture-backed startups being funded and growing quickly, we’ve lost the vocabulary to appreciate viable, but low-velocity tech startups. Without funding rounds to tally, or unicorn thresholds to cross, discussing the importance or even validity of a startup can be hard for many in the tech community.

Boston Dynamics products look as cool as any industrial tools made by iRobot, but the company seems to operate more like Xerox Parc or Bell Labs. The default is to treat them like any other startup, and that’s a mistake.

Transformative ideas often lurk in liminal spaces. There are a lot of amazing tech startups that would be poor “Startups.”

Not every startup needs to be a “Startup”

DEKA, is a Manchester, New Hampshire-based engineering firm best known for bringing the Segway to sidewalks. But beyond their most famous bomb, the company has been improving medical devices for four decades, starting with insulin pumps, then wheelchairs, robotic arms, and water purification systems. Founder Dean Kamen has a reputation for being an eccentric autocrat, and if you read the book about the creation of the Segway, he doesn’t seem like the kind of person suited to running a venture-backed startup, nevermind a public tech company. But he has made countless lives better, while employing hundreds, and using the proceeds from his engineering work to create FIRST Robotics, arguably the most influential computer science education non-profit in the US.

IDEO would probably be a fairly poor public company too. However, it has made millions of dollars a year for decades by marrying high tech and humanistic thinking. It sold the importance of design to corporate America at a time Apple was struggling to survive. It doesn’t have the scale or growth velocity to make it a venture-backable business, but it has helped countless technology brands succeed, most recently our portfolio company PillPack, which was recently acquired by Amazon.

Nervous System manufactures home goods and jewelry using custom software, 3-D printers, and laser cutters. It looks like a hardware technology startup. In today’s funding environment they could easily create a deck, pitch their brand as a DNVB, and raise venture capital to expand operations. Instead, the proprietors leverage the appeal of their work to the press and use the demand to grow their design studio organically.

A typical venture-backed startup will raise money to buy Facebook ads to fuel growth. Boston Dynamics, and these three other startups make cool stuff, pitch it to media outlets, and use the resultant free attention to fuel (more modest) growth.

These aren’t “lifestyle businesses.” They’re (mostly) large organizations with budgets in the millions, or even tens of millions of dollars. They play important roles in the tech ecosystem. They’re not typical M&A candidates, but making lots of money, providing interesting employment to thousands of people, and producing work that benefits millions of lives shouldn’t be seen as a failure. Sure, you can “short” these companies, or dismiss their value, but all you’re doing is making the world a less interesting, useful, and beautiful place.

Startups shouldn’t be defined by funding source

Entrepreneurship should be thought of as a set of talents that allows one to work in a poorly-defined area and in a permissionless fashion. It should not be defined strictly as a C-corp chasing equity financing en route to an IPO.

I understand the need for a shorthand to separate high-growth tech companies from small businesses and single-employer entities, but there’s a lot of interesting opportunities in the space between the IPO pipeline and the Penny Saver classifieds.

We need more synonyms for “Startup”

Working at Founder Collective, I have the great honor to meet brilliant entrepreneurs on a daily basis. Some are clearly incubating the next internet giants.

  • Others have cool, quirky ideas, that could make for brilliant businesses, but lack the ability to scale quickly, or sometimes at all, beyond a profitable niche.
  • Many of these entrepreneurs seem like they would be amazing leaders of a 30-person technical team, but not the captain of a 30,000 FTE public company.
  • Occasionally we see a company that is working on a technology that is clearly transformative, but whose application is a decade or more away from viability.
  • Some of these founders seem better suited to pursue their ideas in big organizations that provide more infrastructure.
  • A few fail to make sense as venture deals but have the prospect of being interesting non-profits.

Unfortunately, many of these founders contort their business plans so they’ll appear to be better fitted for venture capital — and many get it. We’d all be better off if we helped direct those entrepreneurs to funding sources appropriate for their circumstances, rather than try to fit them in a template that’s really only suited for a small subset of startups.

If someone takes venture capital, it makes sense to compare them to other VC-backed startups. But when a startup is pursuing an alternate path we should try to appreciate their atypical ambitions. Venture is an overused tool and an expensive substitute for the hustle Boston Dynamics exhibits. Startups like it should be studied, not scolded.

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