Codie Sanchez Profile picture
Apr 6 24 tweets 6 min read Read on X
Everyone talks about the same companies every day.

Uber. Google. Facebook. Tesla.

It's corrupting our youth.

Here’s how Silicon Valley misled an entire generation about startups and wealth (and what you can do about it):
Remember Bird?

Slick e-scooter company that was the fastest company to reach unicorn status.

They raised close to a billion dollars and went public - before filing for bankruptcy earlier this year.

But this isn't a unique phenomenon…
In 2023, 3200 startups shut down - nearly double the amount in 2022.

You've probably heard of the biggest failures:

• WeWork
• Convoy
• Zume

What's going on?
Let's start at the very start.

Usually, good companies start by identifying a problem people have.

Only then do they build the solution to that problem, knowing people will want it.

Michael Seibel, founder of Twitch, explains this well:
So say you've identified a problem & found some traction. With some outside cash, your company could grow faster.

This makes sense.

But media outlets report as if the funding rounds ARE the end goal.. As a founder, you've "made it" if your company hits a 8-10 figure valuation.
This completely alters incentives.

Now, young founders are glorifying fundraising and a phenomenon Paul Graham calls "playing house."

Rather than solving a problem and turning a profit, founders just "go through the motions" of doing a startup:
The main problem with raising VC money?

VCs want companies they invest in to potentially 100x in valuation within 10 years.

For most companies, that's an INSANE amount of growth that turns founders upside down.

Most companies shouldn't raise VC:
But it gets even worse.

A cycle emerges whereby:

• Startup raises money
• VC wants startup to grow fast
• Money is invested into (unprofitable) growth
• Startup can only survive by raising more
• Other VCs continue to invest because the startup is growing
Chamath explains here how the interconnected Silicon Valley ecosystem enables this Ponzi situation:
That's what leads to these huge failures.

Remember Fast?

The company raised $120 million - including from Stripe - but generated only $600 THOUSAND before shutting down.

They kept burning millions for the sake of growth until it caught up to them:
There are going to be many, many startups left in this graveyard.

Our VC fund @CTVentureCap invested in a startup winddown company (@sunsethqdotcom) largely for this reason.
@CTVentureCap @sunsethqdotcom But you know who ends up suffering most?

The founders.

The young people who WANT to be in business, but have been sold this Silicon Valley nightmare.

They're looking for a new way...
@CTVentureCap @sunsethqdotcom If you're reading this and thinking of building a company, you've been warned.

Raising money is a tool. Not the end goal.

And with it comes expectations of growth you might not be comfortable with.

The good news?
@CTVentureCap @sunsethqdotcom Venture-backed tech firms “changing the world” have held the spotlight for decades.

But tides shift, and we’re shifting them now.

Builders are waking up to the SV trap and choosing sustainable over skyrocket...
@CTVentureCap @sunsethqdotcom Just have a look at these headlines: Image
@CTVentureCap @sunsethqdotcom It goes even further - here’s what we’ve started to see TONS of recently:

• New podcasts on all kinds of biz-buying subjects
• Business owners posting tricks of the trade on TikTok
• SMB lawyers/brokers building 100k+ influencer-like followings
@CTVentureCap @sunsethqdotcom When I started Contrarian Thinking several years ago, few talked about this.

It was - actually - a contrarian idea to BUY your profits rather than build them.

Now, it's borderline mainstream.

Why's this happening?
@CTVentureCap @sunsethqdotcom Two words:

Cash Flow.

Unlike VC-backed startups that might not profit for years (if ever), Main Street businesses provide returns from day 1.

It gets even better:
@CTVentureCap @sunsethqdotcom When you start a startup, you do EVERYTHING from scratch.

Find an idea. Build a product. Get your first customers. Make marketing collateral.

Going from zero to one is the hardest part - but when you buy a biz, that work is done for you.
@CTVentureCap @sunsethqdotcom Your job is maintaining the success - not manufacturing it.

Plus, once something's succeeded for a while, it's more likely to continue succeeding...
@CTVentureCap @sunsethqdotcom Now you're thinking, "Great Codie, you scare me out of a VC raise then tell me to pull out my wallet to fund an acquisition."

But there are pretty nifty funding options:
@CTVentureCap @sunsethqdotcom • Seller financing: the owner lets you pay them over time with the biz's cash flows
• SBA loans: gov-backed loans with low interest, long terms and minimal money down
• Investors: many folks eager to fund solid deals

The last one's my least favorite (I'm selfish...)
@CTVentureCap @sunsethqdotcom Listen, if you're truly hell bent on starting the next SpaceX and changing the world, I tip my hat to you.

But, if like the rest of us, you want to build a biz with as few headaches as possible?

Don't fall into the Silicon Valley trap.

Look at a small biz instead.
@CTVentureCap @sunsethqdotcom What do you think?

Would love to hear anyone's experience with Silicon Valley the past few years.

You can follow me @Codie_Sanchez for more & share here for others to read this:

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More from @Codie_Sanchez

Apr 2
Before you get into business, just know...

You will get lied to, cheated, tricked, sued, and you'll make plenty of mistakes too.

Having a business partner can make this 10x better.. or 10x worse.

Here's my process for starting partnerships (so you can avoid a bad one):
Ownership is a lonely road.

It can suck. But what sucks even more?

Starting a BAD partnership...
My 4 biggest rules on partnerships:

• No 50/50 deals. Someone is in charge.
• Everyone else has to earn into the deal.
• Strict nonsolicit & nondisclosure, both sides.
• Both sides need to put money into the deal if at all possible.

Other lessons you might learn from:
Read 17 tweets
Mar 28
How to spot a scam...

They promise "passive income."

Here's the problem with passive income (and what you need to build instead:):
I've spent my career investing in & buying biz's.

First at huge investment firms, then on the side, and now for my own funds.

To date, I've built a $50M+ portfolio of small businesses in boring industries. And there's a truth I need to share with you:
Passive income is a myth.

If money for nothing was real, wouldn't everyone be doing it?

In reality, generating "passive" income ALWAYS requires significant work upfront. Take real estate: Image
Read 22 tweets
Mar 26
The average person thinks having a job is safer than starting a company.

They're wrong.

Here’s why:
There’s a secret the gurus on social media don’t want you to know…

It's okay to prefer the comfort of a 9-5.

Society would collapse if we were ALL entrepreneurs.
BUT, you need to understand a salary job comes with its own major risk.

Here’s what I mean:
Read 12 tweets
Mar 23
Want to set yourself up for a successful week?

Start on Sundays.

This routine will change your life:
We are all busy, so this is short.

No 2 hour meditation followed by chanting needed.
I try to do this every Sunday.

But I don’t beat myself up if I miss some weeks.

It’s a series of questions I base off the 1 in 60 rule.
Read 16 tweets
Mar 16
If you need answers from:

- CEOs
- Investors
- Founders
- Executives
- Other rich/busy/important people

The 12 best ways to get them to talk to you:
Be short and to the point with them.

They simply don’t have time to read your manifesto, memoir, or 5-paragraph essay.
The 3-email rule.

If you’ve messaged back and forth 3 or more times, just pick up the phone.

Take notes during and send afterward if you need it in writing.
Read 14 tweets
Mar 14
Owning a small business isn’t what it was like 30, 20, or even 5 years ago.

If you have ever wanted your own small business, you need to read this:
1. MBAs in 2015 vs today

Institutions have their eye on small businesses now more than ever.

There is serious opportunity here.

And it's being recognized.
Image
Image
2. Age of US business owners

This is the true opportunity.

Cashflowing biz's should always be desirable assets.

The difference right NOW?

There are about to be a LOT of cashflowing boomer businesses flooding the market. Image
Read 12 tweets

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