When Your Customer is VCs, Your Product is the Stock

There’s an exchange in Season 2′s final episode of HBO’s SIlicon Valley that I haven’t been able to shake.

After deciding to change the focus of the business, Richard confronts Action Jack, the CEO installed by the board, about the compromises that are being made to the product to fit their new focus on the enterprise market.

The following exchange ensues:

Jack Barker: Do you know what Pied Piper’s product is Richard?

Richard Hendricks: Is it me?

Jack Barker: Pied Piper’s product is its stock. Whatever makes the value of the stock goes up is what we are going to make. Maybe sometime in the future, we can change the world and perform miracles and all of that stuff. I hope we do. But like I told you before, I am not going to mortgage the present for that.

Today, First Round released a phenomenal report on The State of Startups for 2016. It’s filled with a treasure trove of gems and insights from over 700 startup founders. But there was one jewel in particular that grabbed my attention; namely, that the #1 reason most founders would attribute to their startup failing was their inability to raise money.

In fact, the top 3 reasons all circled around this theme of troubles that would make fundraising problematic. The least worrisome reason their businesses would fail? They couldn’t make their customers happy.

In the same survey, majority of founders noted that they were focused on growth over profitability and independence.

Yes, HBO’s Silicon Valley is a parody of the Bay Area’s Silicon Valley but there’s a reason the startup community nods and winces along with every episode.

When your #1 fear, priority and focus is attracting follow on capital, the product founders are far more acutely focused on selling is the stock.

Sometimes the punchline really does write itself.