For anyone interested in getting into the highly-lucrative tech startup game, I thought it would be helpful to put together the following road map for how the process works. I suppose it does resemble a list, but I’m just breaking format this one time as a sort of public service. In return, I certainly hope that anyone reading this that successfully follows these steps to fabulous wealth remembers to cut me in for a small piece of the action. Kinda like how Peter Thiel cut his buddies Reed Hoffman and Mark Pincus in on his initial Facebook round and they each pocketed almost $200 million after the IPO. That’s what I call a good friend. I’m lucky if I get a Christmas card from mine.
In any event, follow these steps and you should be golden. Good luck!
1) Come up with some ostensibly technology-based gimmick targeted at the age 16-29 market (an age group that happens to be experiencing historically high unemployment rates, by the way, but don’t worry about that). Regardless of the cost to create and support your gimmick, er, business concept, it should be given away for free so as to enhance and accelerate the growth in your user base and traffic. Your free gimmick can be a variation on an already-existing product and, in order to experience the best chance of success with VC’s, should most likely be a game, a camera filter, a to do list or a way to hook up with the opposite sex.
2) Convince a former investment banker from Lehman Brothers, who moved west after the ‘08 Wall Street meltdown and is now working as a VC, that your free gimmick can “gain traction” and “engage users.” The VC (who used to wear $1,500 suits on Wall Street) will likely arrive at the meeting with you in a Porsche wearing jeans that have a crease down the front that has been pressed in by the dry cleaners. He will still wear the same $600 Italian shoes he wore on Wall Street.
3) Close your seed round, launch the business, attract some users, lose tons of money.
4) Cross your fingers and pray for a Google, Facebook or Yahoo buyout.
5) Hire a top tier investment banker to gin up a ridiculous valuation for your money losing company based only on previous ridiculous valuations of other money losing companies.
6) Close a second round of financing (probably led by some combination of a Middle Eastern Oil Sheik, a 75-year old Texas oil baron whose granddaughter uses your worthless app and/or a clueless hedge fund manager who only invested as a favor to a golf buddy). Become a millionaire on paper.
7) Hire a sharpy accountant or lawyer to help you devise a strategy to “get liquid” (thereby eliminating any real incentive you may have to continue trying to develop your free gimmick into an actual business).
8) Attract more users. Lose more money (who cares, it’s not yours). Get into better parties at SXSW. Buy the same model Porsche as your VC. Give self-important speeches and sit on panels at conferences sponsored by fawning websites whose writers want a job where they can make some real money.
9) Repeat Steps 6 through 8.
10) Experience the inevitable loss of media “buzz” and a sudden downward trend in users and traffic. Watch as new free gimmicks (possibly endorsed by Justin Timberlake, Kim Kardasian or Ashton Kutcher) catch the interest of your fickle target market. Continue losing money…HUGE amounts of money.
11) “Pivot” the business into being something completely different than the bad idea it started out to be. Your new idea can be just as bad, and still drive no revenue, but should almost certainly be a copy of something else that is then hot in the media.
12) Continue losing users. Continue losing money.
13) Resign. Issue press release explaining “what a great ride it has been” and how you are “looking forward to your next challenge.” You should also mention how confident you are in the future success of the company from which you just resigned because of the “solid foundation” you put in place and the “amazing people” on the staff. In reality, the company will shut down within six months.
14) Repeat Steps 1 through 13.