Startup Era: Declining, Not Dying

In a post last week, Mark Schaefer questioned if we are reaching the end of the startup era. He argues that conglomerates like Facebook, who have virtually unlimited resources, destroy or acquire meaningful startups. While Mark is specifically speaking of tech businesses, companies like Walmart have been doing this for years – manufacturing a one-stop shop with grocery stores, hair salons, vision centers, photo centers and banks.

I agree that it is difficult to grow a small company into a big one. What it takes to properly scale, alone, makes this a harsh reality. I also agree that we are moving away from the belief that we are a nation driven by entrepreneurs and small businesses. Unaffordable health insurance plans, complex tax regulations and lack of viable funding programs have made owning a business increasingly challenging.

Mark ends his post questioning if we are coming to the close of “a glorious era where disruptive little fish could eat the big fish.”

I would argue that it was never the intent for the little fish to eat the big fish. Rather, the little fish just wanted a place to swim.  As a small business owner, I have never wished to compete with or acquire another company. There’s enough room in the pond for all of us. Our offerings are not all the same.

Conversely, I see bigger companies trying to be everything to everybody. Public relations, web and advertising agencies throw social media under their umbrella to claim that market share. HIBU is an example. Because of the nearly extinct relevancy with their directory service, they became a partner with Facebook to push their advertising packages on small businesses with little social media knowledge and few in-house resources. But, HIBU doesn’t specialize in social media marketing. They set up an ad campaign with a mediocre tagline, an unappealing company image, and a link to the home page of the business website.  They tell the client that this is ‘free’ by incorporating it into a broader paid package so the client thinks they are getting a great deal. You don’t know what you don’t know, right?

The little fish want to have a pond to swim in, but I believe that the real reason startup companies fail has little to do with their competition.

Rather, I think startup companies don’t know what it takes to run a business. Many lack fundamental business acumen. Others do not know how to manage resources – time, money or people. And, some simply lack work ethic. This is not the case for everyone. I have seen exceptions, primarily with companies that have what it takes, but underestimate the need for a solid support system. Generally, anyone can start a business, so it’s assumed that anyone can make it succeed.

That’s the real startup myth. Even with ample resources and business savvy, it’s a struggle to run a business – especially a startup. It requires hard work, evaluation and reinvention. (And yes, big fish prey on complacent businesses).

I support anyone who wants to strike it out on their own, but I also tell them the reality of doing so. Not everyone is cut out to run a business. Some jump on the startup wagon because they can, not because they should.  Could this be the reason for the end of the startup era? I believe it certainly contributes to the decline, but I would argue that the startup era is far from over. I think it was simply time to trim the excess fat.