Startup Ecosystem Has It Gotten Better Since the 2000s?
Yes and no…
I got into a debate recently with a seasoned investor who was adamant that the ecosystem of resources is better for today’s founders of consumer brands than twenty years ago. When I pressed him for his rationale, he pointed to the greater amount of resources across stakeholder groups (including more free advice).
That sounds right when you compare 2021 to 2008. But, here’s the rub.
There is no system of structured accountability (other than gossip) to drive out the charlatans and unethical bad actors that tend to gravitate to unregulated sectors of the economy (for lack of any other means of income).
And very few are willing to rank stakeholders by objective criteria like AirBnB rates hosts and guests simultaneously.
The problem with the ecosystem today for founders of consumer brands is not that abundant help is not available, even for free. It’s the sheer lack of any accountability process within the ecosystem. There is literally no one other than your board or your team looking out for you.
It’s a wild ecosystem. This means the burden is entirely on you to vet every stakeholder yourself.
This raises the related question of whether or not the level of naivete of the average new CPG founder has changed. I simply can’t answer this, but I do sense a stubborn number of naive founders out there
The most vulnerable founders are those who are new to the business community and business negotiations. They simply lack the vetting skills and business discipline to vet anything appropriately. I have witnessed live ‘in concert’ with some of my early clients.
Moreover, there are massive power asymmetries along axes of capital, knowledge, and connections in a wild ecosystem. When a naive founder gets approached by stakeholders with power along with all three of these axes, they are at a horrible negotiating disadvantage. The need to over-prepare is huge, yet too many founders get involved in long-term relationships without proper vetting.
Since 2008, far more unaccountable private investors exist who are simply not socially accountable to existing VC/PE peer networks like Nutritional Capital Network. They invest across industry verticals, and a bad reputation in one doesn’t concern them much. They have their own buddy circles.
And, even when someone is ‘found out,’ and the warnings start spreading via private social networks, the ethos of modern capitalism is NOT to dis someone or pass along second-hand gossip in the spirit of greasing the capitalist machine. We have fallen victim to an implied oath of positivity that has neutered social surveillance in business life. Even employers today will never comment on why they fired an employee.
THEREFORE, the CPG ecosystem remains mostly a wild place, unlike medicine, where licensing boards and disciplinary boards plus organizational standards and reviews routinely squeeze out bad actors and the incompetent.
A real human community has moral accountability internally. It polices behavior. In other words, leaders within natural communities call out bad behavior publicly and insist on a response. Dan Lubetzky did this well when he castigated New Hope Media for not immediately canceling and refunding booth fees to small startups in March of 2020. The highly delayed and initially greedy reaction was appalling to many who witnessed it, including some Informa employees who couldn’t do anything about it. ‘Anglo-Saxon management’ did eventually change its mind, but the delay in doing so did a lot of permanent damage to the New Hope brand. I don’t offer a solution but rather a warning that with greater resources comes a more considerable burden for you to properly vet stakeholders well before you think you might need them