|| Dan Lyons
Dan Lyons knows disruption. After spending decades as a tech
reporter, eventually landing a plum position as a technology
editor at Newsweek, in 2012, Lyons suddenly found
himself out of a job at age 51 when the magazine eliminated his
position. A father of two young children and the sole
breadwinner of his family, Lyons decided, having spent a career
chronicling the absurd fortunes of dot-com employees, to follow
the money. He ditched journalism to take a job in marketing at
a then-fledgling start-up, HubSpot, which makes inbound
marketing and sales software. But almost from the moment he
arrived, Lyons sensed he was a bad fit for HubSpot, which he
found deeply dysfunctional, at best — and at worst,
indicative of bigger problems with technology start-ups in
general. Lyons tells Alpha why he’s more skeptical
than ever of the valuations of many pre-IPO tech companies,
some of which have become popular investments with hedge funds
in recent years.
Q. You wrote that many of today’s tech
start-ups don’t even have products behind them.
Why is that?
A. My take on how it works was shaped by the early companies
I covered. Compaq was created to build basically an IBM clone
computer. Microsoft started off with a product, and so did
Apple. Oracle’s Larry Ellison had the idea that
you could build a company on a relational database; it started
with a product. I think there are companies now that raise
money that start with just the team, and they’re
often just trying to figure out what the product is. They
don’t even really know what the product is, and
it’s fairly protean — in the early days,
at least. That’s not the same thing as having a
product and then doing a pivot. I mean there are companies that
start really not knowing or caring what they’re
going to make.
Q. What else do you find troubling about
A. Another thing that I’ve found interesting is
this disregard for profit. I don’t know if
I’m just the old Grampa Simpson guy shaking my
fist and yelling at clouds or if the old rules do still apply
and profit still does matter. Ultimately, you need to make a
profit. I don’t tend to get into arguments with
people on Twitter, but I certainly have seen the
pro–Silicon Valley argument, which is that, "Oh no,
you’re just stupid and naive and you
don’t get it. These guys are investing in growth
in the future and blah, blah, blah."
Q. Why are these companies raising so much
A. Because there’s just so much money floating
around now looking for a home. It’s upside down
from 20, 30 years ago, when you had more people looking for
money than there was money. Now you have more money than there
are ideas. So you have people looking to park money in any
place they can. Now you find a team that has a track record in
a previous company and think, "Well, that’s good
enough; I’ll put money in them."
Q. If we’re truly in a bubble, when is
it going to burst, and what happens then?
A. The thing I find fascinating is this time around a lot of
companies haven’t gone public, or
they’ve done late-stage [pre-IPO fundraising]
— I don’t know who comes in, if
it’s a Fidelity or a T. Rowe Price. The
interesting thing this time is the amounts are so big and you
don’t really know who’s holding the
I watched The Big Short, and it’s kind
of like that in the sense that you know all this
money’s been put into these companies that
aren’t really worth what anyone had said they
were. And yet you don’t know who invested.
It’s all kind of private and secret.
It’s this big shadow bubble where you
don’t know who’s committed to what. I
feel like someone’s going to get stuck holding the
bag. I just don’t know who.