‘Tis the season for … caps and gowns!
Nearly three and a half million kids will graduate from high school this year and millions more will mark the transition (now also called a graduation) from middle school to high school. A couple of million young adults will graduate from college, too. The odds are probably pretty good that you’ll be invited to a graduation party of some kind over the next few weeks – and will dutifully participate in the $5.4 billion commerce opportunity that marks those important life passages.
At some point during the festivities, the conversation around the punch bowl will turn to the perfunctory (and let’s face it, also sometimes snarky) analysis of the celebrant’s graduating classmates: who was the smartest, nerdiest, most athletic, cutest, funniest, hardest to get along with, most and least likely to succeed, and the beacon of acceptance for high school graduates, most popular.
Being popular in high school, psychologists say, is a really big deal – and more than a third of kids in high school say they’d rather be popular than have real friends. Being popular is important because it means that kids are automatically enrolled in the highly coveted and always envied cool kid’s club.
Everyone wants admission into that cool kid’s club, but few can make the cut, which makes the appeal that much stronger. Hoping to get noticed by the cool kids, or <gasp> invited to join them, cool kid wannabes start to dress, talk, walk and eat just like them. They laugh at their jokes (funny or not), read the same books and watch the same shows — all in the hopes of also being labeled as “cool.”
Teachers and principals like the cool kids, too, which means that cool kids can sometimes get away with things that the nerdy or smart or cute kids can’t or get opportunities that the nerds or even cute kids don’t. All of that just adds to the mystique of being a cool kid – privileged, invincible, untouchable and even better than the rest.
No doubt about it, “cool kids” have the tailwinds of cool behind and draft on it.
Not surprisingly, perfecting the art of being a cool kid is so important that there are even websites that provide important tips for how to achieve cool kid’s status, offering insightful tips like being clean, smelling good, having great hair and wearing clothes that match. And the very pragmatic advice to make friends with a cool kid in order to fast track admission to the exclusive cool kid’s club.
But psychologists at the University of Virginia, who’ve tracked a bunch of cool kids between the ages of 13 and 22 over a 10-year period, recently threw a bit of shade on the whole cool kid’s phenomenon.
Their research concludes that many of the coolest kids in high school end up as complete and total deadbeats within four years of graduation.
Now, it doesn’t take a 10-year study and a couple of Ph.D’s to come to this conclusion. It seems quite logical to conclude that it takes a lot more than being put on a cool kid’s pedestal to become successful – whatever course one chooses to pursue.
“I Can’t Help It That I’m So Popular.” (“Mean Girls,” 2004)
I started thinking about this in between the raindrops this weekend and couldn’t help but being reminded of the cool kid similarities in the startup world.
It seems that, just like high school, it’s the cool kids who get the attention, along with the perks and privileges of being cool.
Cool kids get invited into the elite cool kid’s funding circle, which literally becomes a tradable currency just for being in the club. That begets PR, which elevates the cool kid status further, adding to the mystique. That drives interest from the “right” people to take a meeting which drives more funding which creates more PR opportunities, which drives more invites to more meetings, which drives more PR that just makes the cool kids so much cooler!
Everybody remembers the name of the most popular kid in class, but no one remembers that geeky guy who sat in the corner with his face in a book or tapping away on his computer screen. Or the class valedictorian who said what again during her speech?
Being a cool kid gets your name remembered!
“I Don’t Hate You Because You’re Fat, You’re Fat Because I Hate You.” (“Mean Girls,” 2004)
So, in the spirit of the graduation rites of passage that we’re all going to celebrate (or have already celebrated) in the coming weeks, I thought it would be fun to take a look at those cool startup kids in the Class of 2012 to see where they are now at that critical four-year juncture — that point in time when those UVA Ph.D’s say that the wheels seem to fall off the cart — to see whose names are remembered, and who really benefited from being in that all-important club.
First off, it wasn’t easy finding “the list” of hot startups since there are lists just about everywhere you turn. I ended up settling on one that is published each year by Business Insider, which appropriately enough is called “Hottest San Francisco Startups.” These lists are said to be compiled on the basis of feedback from investors, VCs and others familiar with the space and the ventures themselves. The ventures didn’t have to start in 2012, they just had to be “hot” that year, as judged by those that BI reached out to. And since BI has been one of the cool kids, too, I figured, why not use their list.
You will immediately notice one thing about this list – 15 of the 24 are no longer around. More than 62 percent of the cool kids of the Class of 2012 derailed – and some within the year following their appearance on the list. That even beats the high school cool kid’s derailment rate of 45 percent. Oops.
Of those still alive and kicking, seven still seem a little shaky – if you ask me. Peep, which pivoted from an app-based version of an adult peep show, is now one of the many video-sharing apps; that’s sort of Highlight’s story too, but with a social network component to it. Group video chat (Airtime) also seems like a tough business to scale with other well-developed platforms like BlueJeans and Google Hangouts.
And maybe I’m not really cool either, but the notion that I’m going to lend my car to someone for $10 a hour to run errands (Get Around), and that anyone would even want to when there’s this thing called Uber and Lyft to get me where I want to go without the hassle of parking – I’m not convinced. But that hasn’t stopped them from racking up $42.5M in funding. The all-in-one inbox is a puzzle (Minbox) – no disclosed investors or funding amounts, but a website inviting participants.
Payments for content (Gumroad) and Rewards for running 3 miles (Kiip) as all of us in payments know, are beasts to scale and monetize – not happening folks. And the money raised so far suggests that their investors may no longer see it either.
That leaves us with just two of the Class of 2013 with VC backing and the hopes of being a cool kid for a while longer: an EdTech platform and a health care testing platform. Both operate in seemingly hot spaces where, in one case, there’s a business model and a need (health care testing) yet a tough slog to scale given the regulatory environment that surrounds health care, and one where there’s scale (according to its website) yet a lack of clarity in the crowded space now regarding the monetization opportunity and profitable and differentiated use cases.
I guess the other interesting aspect of this story is who didn’t make the cool kid’s list.
Lyft, Meerkat, Oculus Rift, Snapchat, and Medium are among the many San Francisco-based companies founded a year or two earlier, and that were in the market with a product. One could argue then and even with the benefit of 20/20 hindsight that they command lots of attention at the cool kid’s table, wherever they happen to be sitting.
“On Wednesdays We Wear Pink” (“Mean Girls,” 2004)
Just for kicks, I decided to check out the same list for the Class of 2016 – to get a feel for how well that class might do a few years from now.
Well, that’s a pretty well-funded list of cool kids! It looks like the price of admission to the cool kid’s club has gone up in the last three years! I guess that there’s nothing like crappy returns in the market to drive venture money straight to the cool kids.
The devil’s always in the details, of course, but at first glance, there are several ventures on this list that look like they’ll defy the curse of the cool kids with clever solutions that solve real problems – if they can execute well and find a path to revenue.
But just like the Class of 2012, hardly any of them will survive much past their 4-year post-cool kid’s designation anniversary if they even get that far. But that hasn’t stopped the flow of money and PR attention from being directed their way, in the interim – ginning up interest, meetings, more funding and more lists of cool startups to get on.
Remember The New York Times article on the Juicero founder and his quest to disrupt the juicing industry with his $700 juicer? The venture that has scooped up at least $90M so far? Yes, the world has been waiting for this ever since the boiled egg squarer came on the market.
“So You Agree, You Think You’re Really Pretty?” (“Mean Girls,” 2004)
There’s no doubt about it, being a “cool kid” has its perks.
Being labeled a cool kid is a fast track to millions in funding on the basis of being cool. It can get you an interview with Lesley Stahl on 60 Minutes and the PR bona fides that go along with it. Cool kids can wear black turtlenecks and paint a vision for a whole new future without producing any scientific evidence to prove it’s real – while raking in hundreds of millions in funding and a valuation that’s worth nine unicorns. They can start companies intended to “break” traditional industries while playing fast and loose with regulation and compliance issues – and banking more than a hundred million in funding.
The tech press is a never-ending stream of coverage touting these “revolutionary” [fill in the blank] innovations by the latest crop of cool kids waiting to disrupt [fill in the blank] industries overnight. VCs, with their portfolios of cool kid companies, become magnets for the cool kid wannabes who want the cool kid branding, too, and all of the perks that go along with it.
Yet, for every cool kid company that makes a “hottest new list,” there are many more earning their bona fides in a different way – making stuff that works. Look, frankly, we all know the odds are against all these companies, cool or not, and that hardly any of them succeed, and most VC-funded companies end up returning zippo to their investors.
Still, I wonder whether whether being labeled a “cool kid” company is a big, flashing warning sign. Just like the cool kids in high school, the cool kid company lets it go to their head, doesn’t buckle down and apply themselves, and thinks they can get by just a little too much on their coolness and charm offensive. Until they can’t, like when investors want to see real returns, which requires less cool and more gruel(ing) work to make things happen.
If I’m going to gamble on a startup, I think I’ll pass on the cool kids and hang with the kids with their heads down. I’ll even remember your name, too.