You may have seen on social media yesterday that Humane, a Silicon Valley startup, has just released a new product, a little device that sits on your jacket and does some AI stuff. No one can tell exactly what it does, other than after raising $230 *million* dollars they’ve created a device that does less than an Apple Watch, and costs more.
The product is a complete flop, and yet no one would admit to it. Why?
Even people who should know better that the market for this product does not exist are responding with things like : "I don’t know if this is it, but I love what they’re trying.” , or “congratulations to the founders for trying something hard, and to the investors who invested into this.”
This is wrong. We should be honest about successes and failures regardless where they come from. If a pair of 20 something college dropouts launched a product like this, they would’ve been the laughing stack of the Internet for days. Remember Juicero, a startup that raised millions to reinvent a juicer, and failed spectacularly. We all recognized that was a waste. We understood, embraced it, and moved forward. The are plenty other examples where founders get scolded for trying hard things. Media constantly bashes Adam Neumann for doing something hard, or Elon Musk for building not one, but multiple spectacular companies. So why not Humane then?
I think Silicon Valley has a vision problem, where they fund and celebrate people they like, regardless of the outcomes, and they ignore people they don’t like, regardless of the outcomes.
$230 million could’ve founded 500 different startups, scrappy founders, who would’ve worked hard to first identify a problem and test the market before committing millions in resources to build something that nobody wants. Instead that money was wasted on very high salaries that produced a very murky result.
Trying hard things should be celebrated, but doing it poorly should not be rewarded.
The point of a startup is not to waste money but to find a product market fit as cheaply and quickly as possible, and then to scale that product to its maximum potential. Wasting money as a service has only been popularized in recent years. Most VCs would normally fund a hypothesis, and if it shows signs of potential, will continue expanding their investment.
$230m for one hypothesis is a rather ambitious bet on a product that showed no evidence of being desired. For comparison, $318 million is how much Tesla raised pre-IPO, excluding their department of energy loan, and by that point they had hundreds of roadsters on preorder, worth tens of millions of dollars. While Tesla entirely changed the definition of a car, Humane turned off the screen on the Apple Watch and called it future.
So yes, making real bets on wild things is the best way to uncover future potential, but the best are sure not evenly distributed among the wild ideas and their founders. 500 scrappy founders would’ve done what startups are supposed to do - validate an idea first, build later - and yes, it would’ve yielded with more potential unicorn bets, than putting a ton of money into one bucket.