Well-said. I worked at a place that had layoffs awhile back and it was a real bummer, in part because of the layoffs, but also because management lied about the reasons for them and the health of the company at the subsequent all-hands. Once management switches to "lie openly and often" mode all the interpersonal behavior incentives change. Like you said, it becomes reasonable to be skeptical and distrustful...
I know that's a very comforting line of thought but it rings a bit false. Without the funds from the LPs backing the VCs there would have been no Twitter and no ecosystem of apps to begin with.
I agree it sucks that Twitter shafted its developers, but the LPs wanted to get paid. They don't get into VC to back charities. The VCs are just repping their LPs when they do this stuff.
Not really how VCs work. Each VC is made up of funds. When EV was CEO and Twitter was the size it was, a lot of your fund's success might hinge on one or two companies in your portfolio. Without them exiting, it is hard to raise the next fund. If you can cash out your companies, show a huge return, it gets easier to raise your next fund at favorable terms.
You seem to be backing up what I was saying. The VC's LPs want huge returns. The VCs also want huge returns. The Twitter board chose the path it did to create those returns.
I am not backing up what you are saying. VCs want huge returns in a compressed timeline.
This comes at the cost of what is good for the company. Using Facebook as an example, you would sell Facebook when Viacom wanted to buy it for 75MM. Great huge return for investors for such a young company. Can turn around and show your fund had a huge exit. Especially great for a seed fund but terrible for the founder and the employees. Luckily, Zuckerberg had control and could thwart investors desire for a quick sale. [1]
I am totally not against VCs making a return but what I am against is VCs forcing premature exits. We may never know what Twitter could have been if the ecosystem stayed in-tact and they figured out how to monetize the whole thing and kept the user growth trajectory in place.
The "ecosystem" was on the path to destroying the company. The 3rd party Twitter clients had huge chunks of the Twitter userbase - back in 2010-2011, 20% of Twitter users used EchoFon, 11% used TweetDeck, etc.
If they had let the system continue, one of the clients could have gotten enough market share that they could have simply changed the backend to their own app, and none of the users would have batted an eye. Or Facebook could have bought up 2-3 of them quietly then forced Twitter to sell on the cheap.
It's easy to romanticize the wild-west period of Twitter's API being completely open for all use cases. However, it was, from a strategic perspective, extremely dangerous to the company's future - there's a reason why companies now know to build walled gardens.
It seems hard to argue that we outsiders know better that the "twitter-as-a-developer-platform" vision would have turned into a business much larger than what Twitter is now vs. the people on the actual board reviewing the finances. That seems to be what you're arguing. It seems that the people with all the numbers in front of them decided the returns would be better if they ditched the devs and sold brand ads. I'm just saying that's likely logical from the POV of VCs and their LPs.
Thank you for the encouragement. What you wrote out here, is what I've been doing for the last year or so. I had some good friends tell me to just man up and figure out how to make what I thought would help sell my stuff. So I did. Were it not for this grant money, I'd keep on trucking along making incremental improvements to my business. Maybe in a year I'd get up to 9-10k/month. I suspect it's quite do-able.
But with this funding, there's an opportunity to do something grander while still running my little business on the side. That's new territory for me.
If you don't follow the GPs advise then contract out little pieces and do the integration yourself. No point in setting yourself up to be ripped off, you have a winning formula, be careful.
-Not vaporware. I have a prototype I've been using to sell my own products. That's how I make $5k/month right now. The problem is that there's no way anyone other than me could use the code I cobbled together to do what I do. Heck, it's a pain for me for me to do it. I have to edit a few text files and swap some arrays around each time I make a sale.
-Team. This is a good point. Had I applied to something like Y-Combinator they would have said to come back when I have some technical founders. The organization providing this grant does not have that sort of dev-centric culture however, so they did not ask this.
That's really as detailed as I feel comfortable getting. I've changed a few details in my post to further protect folks, but the facts are more or less as they're stated.
