Note: Since the author still works at the venture-backed startup mentioned in this article, this post is being published anonymously.
I desperately want to believe in the venture-backed software industry. Like many others, I came to programming from a place of genuine interest and a real belief in its ability to impact the world. I deeply enjoy the experience of problem solving, creating systems, and sharing something cool with another person. I am in awe of software’s potential to create new systems and efficiencies that free the world up to focus on what they truly love. I’ve been a beneficiary of that reach – over 150,000 people have visited websites that I personally made in the past year alone. That many people experiencing something I’ve made (and potentially getting joy or value out of it) would have been fundamentally out of reach in the not-too-distant past, and it’s something I don’t take for granted.
Despite all of this, I have never felt myself as disillusioned in my own industry as I am now.
I care about stability. I care about building things that will last. I care about making something for a group of people, having them find it useful, and having them be able to trust that it’ll be around in a few years. I care about the efficiencies that software brings, how cheap it is to run relative to the number of people it can impact, and how it enables us to serve both groups of people that have never been served and people in places that have been historically forgotten. These beliefs are what inform whether I am proud to work on a piece of software or not. These beliefs are irreconcilable with everything about a venture-backed software company.
Venture capital cares about putting a lot of money into a company selling shovels, receiving at least a 10x return on their investment, and moving on to the next gold rush. Venture capital cares about creating artificial bubbles, funding every company that takes advantage of those bubbles, and cashing out when the rest of us get in. Venture capitalists will give second chances to the worst among us, change their politics to whatever serves them that year, and destabilize our democracies.
Venture capital demands a rate of growth irrespective of the market you are serving. If you are serving a small market that you care about, a venture capital firm or accelerator may give you money on the merits of your abilities, but then demand you “pivot” to a bigger market once they have influence over your company direction. Startups that have genuine initial success are encouraged or forced to grow until they are subject to a version of the Peter principle: the startup will grow until it hits a revenue plateau and a valuation that is higher than the value it can provide to its users, which will lead the company down the path of deceptive business practices, quietly selling user data, and enshittification to keep the house of cards afloat.
You can be the purest person with the best of intentions, but these intentions go out the window the moment you give the venture capital vulture a seat at your table.
I work at a venture-backed startup now. Like many companies in their space, they pitch their platform as one that is helping their users make a living. There are people I work with that care about this goal, and enjoy seeing these users succeed. I also care about this goal: I love seeing someone be able to follow their passion, and there are a lot of users in this space that I deeply respect. There is no chance to make this care a true reality under the venture-backed startup system.
As a venture-backed startup, my company’s real goal is to hit a specific growth trajectory that will continue to let them raise money from investors at a steady clip. A common refrain you will hear at a venture-backed startup is that you must “triple your revenue the first three years, then double your revenue the next two years”. This will give the company the option to either be acquired or to go public, allowing everyone involved to sell their stock on the open market for moderate to life-changing amounts of money.
What does this plan mean in practice? Real, tangible solutions for the users my startup alledgedly serves are discarded due to them being too incremental. Instead, we build towards solutions with “network effects” and features that are “AI-powered”, as these are seen as the directions with the highest potential for massive growth. Despite the network effects being unproven and the AI-features woefully unjustified, we keep plodding ahead. Much of this failure of product planning is the responsibility of the founding team, but the understanding that “this is the only way” comes directly from necessity of and expectation for venture-scale growth.
You will be told that venture capital is enabling the free market system to operate at its most pure: a group of people with money identifying and then enabling small groups of talented people to compete for success by creating new solutions to the world’s most pressing problems. In reality, this ecosystem is structured around a “king of the hill” fight for power, not for impact – at the levels of growth startups are targeting, the only option is to become a monopoly and extract value from that position of total control. The ideal startup for venture capital is one that gains majority market share, builds a moat around that market share, and extracts value from its users to make up for the money it burned getting there.
You may wonder then why I, as a self-professed venture-backed startup hater, am at a venture-backed startup. The answer is quite simple – I value being someone who can have an idea and execute on it fully, and I have found nowhere else better to grow as that kind of engineer than at a startup. Being at a startup provides a level of agency and an exposure to wide-ranging engineering experience that is difficult to find anywhere else.
Venture-backed startups also have had a stranglehold on the mindshare of talented engineers and people looking to “change the world” for the better part of two decades. My experience with startups is complicated for this exact reason: for years, I have been noticing deep structural issues within the venture-backed startup ecosystem, and yet I also see the value in and need for an environment that attracts like-minded people together. It’s similar to a common experience I and my friends had with our respective colleges: we chose our colleges based on their purported missions, realized they are deeply flawed as institutions, but formed lifelong connections with others who also believed in those original missions and had chosen those schools as a result.
All of the most talented and driven people I have met at my job fall into this bucket. They are here because venture-backed startups are the primary place that promises growth, agency, and impact for engineers – not because of the structural damage those startups will cause years down the line if they succeed. If a different kind of company or organization can match that brand of “innovation”, they would give these engineers a better place to grow and apply their talents.
I refuse to believe that the venture-backed promise of limitless money upon success is the only motivator for innovation or societal value. In looking for antidotes given by engineers to this “money-ridden industry that has lost touch with what people need”, the first solution you’ll run into is to turn towards open source software. There are parts of me that agree with that deeply – open source software ensures open access to tools, giving anyone access to the work you’ve done and the ability to modify it to their own needs. At the same time, I understand why this comic is the most commonly shared one in every engineering circle I’ve ever been in. Engineers in open source are by-and-large woefully underpaid, both due to a lack of corporate funding relative to the value corporations gain from open source, and also due the tendency of open source maintainers to have a savior complex for the sanctity of software, leading to them viewing compensation as an afterthought – something that will “figure itself out”. As someone who would like to continue to have a career as a software engineer, I believe finding a sustainable funding model to support yourself and whatever you are working on isn’t optional – it is essential if you care about yourself, the people around you, and the people you’re building for.
In looking alternatives to venture-backed companies, I’ve been looking to the journalism ecosystem for guidance. Written media on the internet is in a tailspin right now, which provides many useful examples of writers trying out just about everything to find an environment in which they can have journalistic integrity and support themselves. Many of these writers have gone independent, turning to platforms like Substack to publish their own work. This has been hit or miss for many, but it has been transformative for those who have found success. It is hard to find more integrity than only being accountable to yourself and your readers, and only needing to sustain yourself makes it the simplest path to financial stability. This path has a lot of parallels to the “indie hacking” community for engineers, where an engineer will build their own SaaS app, monetize it, and try to make enough money to support themselves.
While becoming a solo engineering entrepreneur is the most obvious path to “break out of the venture capital ecosystem and gain my independence”, I don’t think it’s the best path for me – at least in the long term. I want to find an environment with talented and thoughtful engineers, solving real problems people are facing, and sharing equitably in the fruits of that labor. While I could attempt to build something on my own, there is real value in having other people to plan with, bounce ideas off of, find flaws in your ideas, and create something greater than the sum of its parts. It enables you to take real vacation time, have support when things aren’t going well, and not have to shoulder the operations of an entire business and software platform yourself.
Looking back at independent journalism, the most promising model I’ve found for sustainability and independence is in worker-ownership. There have been a number of promising success stories here in the last few years, and I have been keeping close tabs on these publications as they’ve grown from a shot in the dark to a real level of sustainability and independence. The size and focus of these publications appeals to me deeply – journalists there have a real level of integrity and agency, but paired with the guidance, support, and insight of other like-minded people. By expanding their horizons to a small team, they gain significantly more resources, reach, and stability for little sacrifice.
I believe this model is the future for mission-driven, independent, empathetic startup-inclined people who are disillusioned with the venture-backed ecosystem. A worker-owned company replaces the stock pittances you may receive (when compared to the founding team) with true profit sharing and mutual benefit, aligning your incentives with those of your coworkers. It is a model that encourages closeness and transparency with your users, with the goal of finding the right solution for the people you care about over the biggest market you can milk for cash. Worker-ownership has the potential to create the same personal growth and independence of a small startup without the bitter aftertaste of moving fast, breaking things, and never cleaning up.
Moving to a less funded company is not giving up the ability for impact or innovation. There is a tendency in the startup world to brand everything that isn’t venture-backed as a “lifestyle business”, a somewhat pejorative phrase designed to minimize the perceived possible impact that non-venture companies can make. If a couple people at a new and small upstart journalistic publication can impact policy at social media behemoths and get right-to-repair legislation passed, your small software company can make a significant impact too.
You may still be unconvinced about worker-ownership or the broader need for ecosystem-wide change. I can’t change your mind for you, and I can’t tell you that the transition is easy. I haven’t been able to make the transition yet, and there is no guarantee that I’ll be able to. I can promise you one thing, however – the pursuit of change is worth it, and that you will leave a better mark on this world through a mission-driven, worker-owned company than you will at an all-or-nothing, venture-backed startup.