Disclaimer. This article is a metaphor – it is only for entertainment, no disrespect is intended to anyone.
For a few years now, I’ve been in the somewhat unique position of being both an entrepreneur and an active angel investor. I’ve watched the challenges that both sides face, and experienced them as an insider. During this time, I haven’t met anyone else doing the same thing in quite the same way. I’ve certainly met investors who have been very successful entrepreneurs, and even investors who are actively involved with startup companies, but none of them are current founder CEOs driving their own business forward and dealing with all of the challenges that that entails.
This position has allowed me to garner some insights, and to have a more comprehensive understanding of the ecosystem than individuals on either side. There is one unfortunate, but rather interesting, feature of the technology startup world that I want to relate here, in the form of a metaphor.
There exists an entirely different world – one that rarely crosses paths with the technology one. It’s a world of sheikhs, oligarchs, celebrities and hedonistic playboys. Their world revolves around holidays in beautiful locations, private jets, yachts, supercars, and parties in extravagant night clubs. For them, on the surface at least, life seems to be a source of effortless pleasure. They don’t need to work, and they have the luxury of choosing what they spend their time on. Some of them are more fun, some are more easy going. Some are better connected and throw the best parties. But most importantly, they all have what is seemingly the most important commodity – the money.
Yet to them, there is one commodity that is even more important. And this commodity is known as the table ho. It’s a technical term, rather than one of derision – before anyone starts writing angry comments. These are not “ladies of the night”, a certain profession as old as the world itself. Instead the table ho is a member of its own special species – a girl whose aim in life is to go out to night clubs, or yacht parties, with the playboys I’ve just been talking about. To get into the most exclusive nightclubs, you need to go on a table which costs an absurd amount of money, so it is this that gives them their name. And they are all different. Some table hos are unknown, or seem simple at first, but then turn out to be genuinely great company, while others are extremely glamorous and popular, but soon turn nasty.
A playboy who wants to go out needs to have some table hos. Where is the fun in being in a night club on your own. And where is the fun in owning a yacht the size of a cruise ship if you have no one to join you on it.. But the table ho needs a playboy. You don’t get anywhere by standing outside a nightclub, trying to get in. Or walking past a boat party, not being invited.. The day goes by, both groups leave the beach or the pool, plans start getting made for the evening, and the easy life of both suddenly becomes stressful. They realise there is information asymmetry in the market.
The playboys want the best table hos – they want the popular ones, the ones that everyone knows of and has tried to invite to their party. They want the ones that are the best company. And they want to try and work this out before they make the invitation. And on the other hand, the table hos don’t just want to go to any nightclub, or on any yacht. They want to go on the best table, or the biggest yacht – they want to be seen with the best-connected, and best-respected playboys. If they present themselves well, and they get an invitation from some well-known playboy, then the other playboys will take notice and start clambering over each other to get them onto their table instead. They need to be just as selective over whose invitation they accept, as they playboy needs to be about who they offer invitations to.
And both groups face this issue over and over. The night comes to an end, the sun rises, and the playboy needs to find more table hos. This may be the same ones again, if things are going well, or it might be new ones. Meanwhile the table ho needs to find more playboys whose tables to go on. Each thinks that the other has it easy, and each keeps putting serious effort into finding the other. The process never ends.
The market I am describing, and its metaphorical equivalent, is one based entirely around people, and those people’s perceptions. The fundamentals matter in the long run – the table hos have to be good company, while the playboys have to pay and deliver. If these things don’t happen, then they don’t get, or offer, the invitation next time. But that comes after the process of them getting together, so is not actually relevant for the process itself. What matters is what’s on the surface – the presentation of the table ho, and the perceived wealth and social standing of the playboy. Only this, as well as how well they gel during the initial meeting, determines whether the invitation gets offered and accepted, or not. The incentive for both sides is to focus on this short-term goal. What happens afterwards is almost entirely uncorrelated to this. It’s unfortunate, but that is the way the economics of the market incentivise the participants.
The smart ones understand all of this, and know how to play the game. The playboys get better table hos as time goes by, until they have a choice of all of the best ones. And the table hos have their pick of playboys offering them invitations. And one day, the table ho meets a playboy who falls in love, and marries her. Do you know what she got? She got herself an exit.