The Muddied Lexicon Of Startups

For a variety reasons I can’t go into in this post, entrepreneurship (worldwide) is in the rise and likely will not stop. As a result of this increased level of company formation, it brings with it new investors, new media personalities, and new conventions. All of this is good. One issue, however, is that what it means to engage in all of these activities is in flux, and the result is that founders, investors, and those in the tech media can begin, can frame, and can dictate conversations or interactions where each party may hold a different connotation for the same words they all use.

One example is “bubble.” There are a bunch of people on Twitter who have been calling it a “bubble” since 2011. Like Gordon Gekko mused, “Like a rooster trying to take credit for the dawn.” But, a “bubble” generally means that assets are overpriced, that people are beginning to take on debt to obtain equity, and that any popping of said “bubble” would trigger a widespread effect. More nuanced, you have some people who don’t believe any popping would be widespread, but that still assets are overpriced — hence, they called it a “bubble.” These are just two definitions — I’m sure there are at least eight more credible definitions.

Another example of a word used in different ways is “Bitcoin.” To some, Bitcoin is like a currency. To others, Bitcoin is a way to program money for it to have stored value. And, to others, Bitcoin represents a protocol that solves a key problem in computer science, a protocol that can be used — independent of the market price of Bitcoin — to execute autonomous tasks against a public ledger. Get into a discussion around “Bitcoin” and God help you that both parties are thinking of the word in the same way.

Finally, the most painful is around the monikers we attach to fundraising stages and milestones. We go from bootstrapped to friends & family to angels to super angels to microVCs to seed funds to traditional VC funds and all the way up to growth funds, private equity, hedge funds, mutual funds, and eventually out to the public markets. Along the way, founders and investors have picked up the lexicon, and when they two sides meet, each side comes into the conversation with their own frame about what constitutes their current stage. “We’re heads down working to prepare for our Series A.” Really? What does that even mean? And, especially in an environment when products are launched for little or no money, and when seed rounds are left open indefinitely to a long-term rolling close, when does one round end and another begin?

There’s no shortage of examples. What does the viral proliferation of this divergent language all mean?

It means that in order for two parties to be on the same page, they have to use the same words in the same way. Each conversation and interaction needs to be framed in a way such that the other side understands. Today, we are mostly experiencing the opposite. Today, we expect funding rounds to happen in a linear fashion, up and to the right; we expect that investors don’t have to change their position in the market, despite market forces pushing them in different directions; and we expect that the people who are tasked with reporting all of this “for the official record” will see it our way.

Hence, our expectations are out of whack, and need to be fundamentally reset. Perhaps the transparency of AngelList profiles will nudge the crowd into this direction. Perhaps the next Mike Arrington blogger/reporter who has a full grasp on the intersection of where founders, investors, and the press meets will come up with a new lexicon. Until then, we are likely to engage in more conversations where the other side uses the same words, but those words mean very different things to them. The result? More noise, and less signal. Grab your noise-cancelling headphones.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2018 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus