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19

The Undertakers of Silicon Valley

A report from the front lines of Silicon Valley's failure industry.

by Adrian Daub

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cool investigative journalism piece into Sherwood Partners

Daub, A. (2018). The Undertakers of Silicon Valley. Logic Magazine, 5, pp. 19-32

24

The clean-up crew stays deliberately out of sight [...] their clients think consulting them will constitute a capitulation. An admission that what they're running is a business, that their career is in the end just a career, that gravity has some kind of purchase on their meteoric trajectories.

A lot of the younger VCs are themselves highly successful founders, and the contingency of their own success hasn't yet sunk in. [...] Why do they deserve their good fortune? What does it mean?

This matters because only those who have encountered the most stupefying, most inexplicable success will end up funding the next generation of startups. [...] Among those who do have that kind of cash, their sense of reality can be deeply warped - perhaps it almost has to be a little bit, shell-shocked as they all can be by their extraordinary luck.

—p.24 by Adrian Daub 3 weeks, 6 days ago

The clean-up crew stays deliberately out of sight [...] their clients think consulting them will constitute a capitulation. An admission that what they're running is a business, that their career is in the end just a career, that gravity has some kind of purchase on their meteoric trajectories.

A lot of the younger VCs are themselves highly successful founders, and the contingency of their own success hasn't yet sunk in. [...] Why do they deserve their good fortune? What does it mean?

This matters because only those who have encountered the most stupefying, most inexplicable success will end up funding the next generation of startups. [...] Among those who do have that kind of cash, their sense of reality can be deeply warped - perhaps it almost has to be a little bit, shell-shocked as they all can be by their extraordinary luck.

—p.24 by Adrian Daub 3 weeks, 6 days ago
26

[...] The term "lifestyle business," he points out - meaning a business that is designed to keep its owners fed and happy rather than making them brain-meltingly wealthy - is "kind of a pejorative in this world." Because to be reminded of why people normally work is an unwelcome dose of real life, of gravity, of adulthood.

love the last bit. startup life is about escaping the reality that most people are compelled to sell their labour-power merely in order to survive. it's fetishising work-as-choice

—p.26 by Adrian Daub 3 weeks, 6 days ago

[...] The term "lifestyle business," he points out - meaning a business that is designed to keep its owners fed and happy rather than making them brain-meltingly wealthy - is "kind of a pejorative in this world." Because to be reminded of why people normally work is an unwelcome dose of real life, of gravity, of adulthood.

love the last bit. startup life is about escaping the reality that most people are compelled to sell their labour-power merely in order to survive. it's fetishising work-as-choice

—p.26 by Adrian Daub 3 weeks, 6 days ago
29

The reason is what one VC calls “the repeat business effect”. Sure, a 24-year-old can run his company into the ground – but he’s still a 24-year-old, with time and energy for another startup, and then another. And any one of those could pan out and make everybody fantastically rich. It is, as one founder told me, “the luxury of having a lot of runway left”. Why would you upset a person like that and potentially miss out on a future payday?

There is a lot of money sloshing around Silicon Valley in search of that payday. It laps up Sand Hill Road, all the way to the famous Rosewood Hotel with its Tesla-filled parking lot and tech divorcees on the prowl. [...] The money that pours in – from pension funds, hedge funds, private investors – has to go somewhere. It is agnostic about individual failure or success; its mantra is the law of averages. By the time one venture crashes and burns, everyone is already on to their next one.

But failure comes encased in bubble wrap – at least among those who have a reasonable expectation of running into each other again. What about those who don’t? Many of the employees who have foregone sleep, pay, healthcare and a social life for the benefit of now-worthless shares will not be instrumental in making the next spin of the wheel the winning one.

There are many ways to close up shop in Silicon Valley: get acquired or acqui-hired, wind the company down, buy out your investors and start anew as a small business. Depending on how a company dies, however, most or all of the employees will not be part of these transactions. Google won’t acqui-hire the receptionist, or even the publicity person. They won’t take on those who were only contractors, or those who mysteriously got the boot right before a desperate final funding round.

And even among those with titles, salary, and equity, the acqui-hiring party gets to pick and choose: in an acqui-hire truly deserving of the name, the company’s product and assets matter little. It’s really a way of hiring a very small group of people – and it falls to that group to stand up for those members of the company that the hiring party is not interested in. “They know what they’re prepared to spend,” one person whose company got absorbed into Google told me. “How equitably that gets spread around is basically one big prisoner’s dilemma.”

—p.29 by Adrian Daub 3 weeks, 6 days ago

The reason is what one VC calls “the repeat business effect”. Sure, a 24-year-old can run his company into the ground – but he’s still a 24-year-old, with time and energy for another startup, and then another. And any one of those could pan out and make everybody fantastically rich. It is, as one founder told me, “the luxury of having a lot of runway left”. Why would you upset a person like that and potentially miss out on a future payday?

There is a lot of money sloshing around Silicon Valley in search of that payday. It laps up Sand Hill Road, all the way to the famous Rosewood Hotel with its Tesla-filled parking lot and tech divorcees on the prowl. [...] The money that pours in – from pension funds, hedge funds, private investors – has to go somewhere. It is agnostic about individual failure or success; its mantra is the law of averages. By the time one venture crashes and burns, everyone is already on to their next one.

But failure comes encased in bubble wrap – at least among those who have a reasonable expectation of running into each other again. What about those who don’t? Many of the employees who have foregone sleep, pay, healthcare and a social life for the benefit of now-worthless shares will not be instrumental in making the next spin of the wheel the winning one.

There are many ways to close up shop in Silicon Valley: get acquired or acqui-hired, wind the company down, buy out your investors and start anew as a small business. Depending on how a company dies, however, most or all of the employees will not be part of these transactions. Google won’t acqui-hire the receptionist, or even the publicity person. They won’t take on those who were only contractors, or those who mysteriously got the boot right before a desperate final funding round.

And even among those with titles, salary, and equity, the acqui-hiring party gets to pick and choose: in an acqui-hire truly deserving of the name, the company’s product and assets matter little. It’s really a way of hiring a very small group of people – and it falls to that group to stand up for those members of the company that the hiring party is not interested in. “They know what they’re prepared to spend,” one person whose company got absorbed into Google told me. “How equitably that gets spread around is basically one big prisoner’s dilemma.”

—p.29 by Adrian Daub 3 weeks, 6 days ago
31

That’s the funny part of the tech industry’s narrative about itself. For tech, failure is always assumed to be temporary; for everyone else, it’s terminal. Taxicab companies are going out of business because they’re losing money? Creative destruction, my friend – sink or swim. Uber hemorrhages cash? Well, that’s just a sign of how visionary the company is. This double standard justifies the exploitation of workers outside of the tech industry – and, in certain cases, the exploitation of workers within it.

—p.31 by Adrian Daub 3 weeks, 6 days ago

That’s the funny part of the tech industry’s narrative about itself. For tech, failure is always assumed to be temporary; for everyone else, it’s terminal. Taxicab companies are going out of business because they’re losing money? Creative destruction, my friend – sink or swim. Uber hemorrhages cash? Well, that’s just a sign of how visionary the company is. This double standard justifies the exploitation of workers outside of the tech industry – and, in certain cases, the exploitation of workers within it.

—p.31 by Adrian Daub 3 weeks, 6 days ago