December 13, 2019

We don’t need another WeWork

It's time for more alternatives to venture capital cash, argues Omidyar Network's Sarah Drinkwater — and for more startups focused on making positive contributions to the world.

Sarah Drinkwater has been an Atomico scout

Who wants to be the next WeWork?

The failed flotation of the troubled office scaleup — once valued at $47bn for its “energy and spirituality” — has become symbolic for a certain kind of “growth at all costs” mentality that’s beginning to feel not just old fashioned but downright damaging for our society. 

You can blame WeWork’s complicated year on many, many factors but the crux of it seems to be how the expectations of its expansion and growth shifted gears after SoftBank and its Vision Fund handed it $10bn and joined its cap table. 

The playbook for startups used to be comparatively linear (even if it felt nothing like that for those directly on the rollercoaster). It usually went like this: you’d have an idea, start testing, charm some angels into giving you cash, grow, get your first venture funding and repeat. 

We’re starting to question so many of the dominant narratives and models, and prioritise thoughtful growth.

But what’s exciting about the global startup scene as we head into 2020 is that we’re starting to question so many of the dominant narratives and models, and prioritise thoughtful growth. 

Take Zebras Unite (disclosure: Omidyar Network are proud funders) — a global community of entrepreneurs and startups who define themselves in opposition to the unicorns we used to look to. Zebras are both black and white: they make money and contribute positively to the world, and they won’t sacrifice one for the other. Zebras are cooperative and community-focused. And, unlike unicorns, zebras are real; they’re already sustainable and growing at a pace and scale set by them, and not their investors. 

They’re part of a growing movement away from conventional venture capital, often fuelled by minority founders, who are so often overlooked within conventional venture capital. Partly because it’s never been so easy or cheap to start something. Yes, if you’re building in verticals like health or finance you’re going to need serious capital, but if you’re testing something simpler and have a sense of who your customers are a direct-to-consumer business could hack together with Webflow and Shopify or Stripe and have customers by nightfall. 

Beyond that there are many paths to raise money now, from crowdfunding to pursuing “alternative capital” like Clearbanc or Earnest, who invest through a shared earnings agreement, or Tinyseed, a remote accelerator for software as a service bootstrappers. And leaders like Basecamp prove you can be a great, sustainable business without raising venture capital. 

Simply put, if you’re already generating revenue why give up control? 

In large part this movement is about the expectations and ties certain kinds of money brings. Look at the recent exposé on luggage company Away’s intense work culture, which revealed how the chief executive demanded that her customer experience team cancel holidays to work harder, and the venture capital tweets that followed, emphasising their support for her methods to prioritise fast growth. To quote one, “to build a $1B+ disruptive business requires speed & intensity. Startups are hard, period”. 

But does a luggage company need to be a unicorn? 

For the venture capital model to work it does. Venture capital needs companies to go big or bust, and for companies to get to the same scale as Uber, the “speed and intensity” it takes can create Uber-like standards and behaviours, even in companies that I’d argue perhaps shouldn’t be on the unicorn path — Away for example. 

What kinds of companies do we want to start, back and build?

As US venture capital increasingly looks to Europe, this is a question we need to ask ourselves: what kinds of companies do we want to start, back and build? 

One model doesn’t fit all companies or all founders. Startups have to grow in a way that’s not only right for them, but for the communities they sell to and the societies they live in. And there are great investors out there, ones who bring both large chequebooks and an eye for conscious growth to help their portfolio companies scale thoughtfully. 

Ultimately, this path of dissent from venture capital is a good thing for the ecosystem. It encourages founders to consider who they are and how they want to grow. It encourages innovation and creativity, whether you pursue an alternate route to getting it done or not. It encourages the best kinds of venture capital fund, who compete on purpose as one of the value-adds they bring to their founders. And, at heart, it gives us more models of what success looks like; not success as defined by Silicon Valley or the media, but the satisfaction of building a brilliant business customers love.