There is a phenomenal series of essays from Venkatesh Rao over at Forbes.com which discusses the domestication of the tech entrepreneur:
Entrepreneurs are the new labor
The articles are over a year and a half old, but they are still exceedingly relevant. As the economy continues to to produce 20 somethings with college educations and no significant job prospects, there will continue to be an influx of people wanting to be come entrepreneurs. Understanding how the growing waves of these so called tech-entrepreneurs incorporate themselves into the economy is extremely important and by no means a settled matter.
In Part III of his essay, Rao recognizes the importance of this issue asking:
how might the new laborer-entrepreneur class moving through the acqui-hiring pipeline evolve into a new institution that is recognized as legitimate rather than criticized as a corrupted parody of entrepreneurship?
He sees a continuation of the current accelerators > angel > acqui-hire progression as a new acceptable norm rather than the graceful failure that is seen as today.
While these institutions will continue,I don’t necessarily think that we will see regulatory reinforcement of this trend benefiting the acquirers like Facebook, Google, etc.
More likely we will see organizations arise that reduce the transaction costs at each of these stages. And the transaction costs are indeed high in both time and money. Raising a round of funding can take 3-4 months and 5 figures in legal fees.
These costs are reasonable given the current model, but if you were to compare these costs to how existing firms bring products to market, they immediately seem unreasonable.
If we’re talking about entrepreneurs becoming the new labor, we’re talking about minimizing the risk in the system and creating a repeatable, low transaction cost process for creating tech-products. The accelerators > angel > acqui-hire model doesn’t completely address these issues.
There are firms that are beginning to internalize many of the functions that we currently see being carried out by different actors in the accelerators > angel > acqui-hire ecosystem. The best examples are German Venture Capital firms like Springstar and Rocket Internet.1 Both of these organizations internalize many of the functions that are carried out by separate entities in the US: They provide their own capital, they have their own pool of engineers, marketers, and business types, and they recruit entrepreneurs out of the various business schools across the country.
While the market forces that created these firms are different than those in Silicon Valley or the US more broadly, they have created a model for what a de-risked technology innovation ecosystem could look like. In this model, execution risk is all but eliminated, and the only concern is product risk.
By limiting the role of the entrepreneur to simply that of idea generator and general manager, the balance of power is very clearly shifted to the capital—the so-called entrepreneurs in the German system get a much smaller ownership stake than is common in the US—and the role of the entrepreneur is much more similar to that of hired labour.
The professionalization of the entrepreneur in the US is likely to happen in a similar fashion.2 While many will continue to progress up the career ladder by participating in accelerator programs, these incubator programs are going to resemble their german style counter parts more and more. Each new accelerator class will act as a hiring bootcamp to fill out the ranks of the incubators internal capacity for marketing, design, and engineering, while the successful companies will be able to take advantage of these services.
The transition of the tech entrepreneur from idolized cowboy to mere product manager will be complete when institutions of higher education being to offer under graduate majors in entrepreneurship. These programs are likely to have close relationships with the regional incubator offering internship opportunities across all job descriptions of the start up not replaced by online services.
Rao is absolutely right in saying that entrepreneurs are the new labor force. The next step in this evolution will bring firms organizing around this labor supply and building companies that can compete with the current tech giants in repeatedly bringing novel and very different products to market.
1 - It’s also interesting to note that both of these firms are very strong at international expansion, each having 20+ international offices. This is a feat that not even Silicon Valley has been able to achieve.
2 - Shops like Thinktiv re already beginning down this path. While their services are somewhat different. It’s easy to see them going down this path as they produce successful products/companies.