As with formerly intelligent folks like Dave McClure, Web 2.0 has a magical ability to make people forget logical reasoning skills. Today, we discover the odd case of Don Dodge, Director of Business Development at Microsoft’s Emerging Business Team. He had the cajones to stand up to Paul Graham’s stupid article about how Microsoft is done for by showing the tremendous revenue growth at Microsoft.
I read his blog at that time and thought to myself, “Wow, someone who actually has a brain.” Today, he lost much of that respect by sucking up to the grand daddy of Web 2.0 retardation, Paul Graham, by gushing about Demo Day at Y Bombinator.
I posted a response falting him for falling for the hype and he didn’t even post it to his blog. Instead, he defensively responded with a brilliant email:
This hardly qualifies as hype:
Like any VC portfolio, the Y Combinator companies will include a couple big winners, a handful of moderate successes, and a large number that will fail to gain traction.
These companies are only a few months old. But, investors have to place their bets now. Most companies don’t get funded. Of those that do many will fail. It is a tough risky business. A few winners makes up for lots of losers.
It is easy to sit back and criticize…maybe investing in bonds and treasury notes is best for you.
Don Dodge
Director, Business Development
Emerging Business Team
Microsoft Corporation
Incredible Don. Just incredible. If he read my post, he’d see that I was criticizing Y Bombinator’s hype. Y Combinator companies are for the most part, major failures. It’s fascinating to watch sycophants like Don Dodge claim that Y Combinator is like “any VC portfolio.” What is a standard VC portfolio? Please do enlighten us as to where the average seed-stage VC does well. Seed stage VCs have a 5-year return of -4.0%. That’s quite shitty.
Let’s compare Don’s recommendation:
1. Don invests in seed stage VC firms that generate a -4.0% return before carry and fees.
2. I’ll take his advice and invest in T-bills and earn my 4.77%.
3. I win. Don loses.
Y Bombinator shows again that the Paul Graham spin machine is in full force. I really admire Paul Graham’s vodoo abilities to convince formerly intelligent people to fall for the trap of thinking his companies are going somewhere.
Anywhere.fm is going Nowhere.fm. It’s in clear violation of copyright laws and has no revenue model. At a time when Pandora and Last.fm are being hammered by licensing fees, what will happen to Anywhere.fm’s even more retarded model?
The Web 2.0 sycophants are never ending. Welcome to the la-la land of the tech world where bright talent is lured into stupid business that allow you to share dating references through a social network for your dog’s fleas. It’s assuring to know that today’s young minds are out solving the most pressing problems of our generation.
Jay, Your comment is on my blog, as is my response. It is copied below for your convenience.
Don you’re just building up the hype here. Anywhere.FM is nowhere close to being a success. It looks like you’re drinking the Kool Aid faster than they can produce it.
Posted by: TechDumpster (living in First Life) | August 10, 2007 at 03:03 PM
Hype? Kool Aid? Maybe you missed this line “Like any VC portfolio, the Y Combinator companies will include a couple big winners, a handful of moderate successes, and a large number that will fail to gain traction.”
Most ideas don’t get funded. Of the ones that do, many of them fail. VCs and Angel investors take enormous risks. They are eternal optimists and work really hard to help entrepreneurs succeed.
I applaud them. Call that hype if you like.
Posted by: Don Dodge | August 10, 2007 at 05:22 PM
We do applaud people who take real risks but it’s good to take real risks on real businesses. That’s our argument. Anywhere.fm is an example of the hype.
Jay, maybe Anywhere.fm doesn’t qualify under your arbitrary definition of a “real business”, but as far as we can see given such a short time since their launch, it *seems* like they have something that is useful to a lot of people.
It’s very possible that they will never find a way to make money, but at least they seem to be doing better than 99/100 new startups: people want to use what they’ve built. Personally, I’d rather invest in 10 startups that I know people want to use but don’t know how to make money yet than 10 startups that know how to make money but don’t know if people want to use it yet.
And those startups that know how to make money and know that people want to use it? Of course anybody would want to invest in them, and they’ll get their choice of any investors.
@ David
That’s a fair point. I think the problem we are trying to address is the hype. It’s a cool product. Great, I’m happy for them. They have a few copyright issues ot get over but we’ll leave that aside for a moment.
The problem with hype is that it distorts information by creating a false sense of perception. When Anywhere.fm DOES figure out a model and do something, then I’d be happy to sing its praises. Until then, why don’t we just focus on figuring out that model?