Why Rappers Are Smarter than Startups

Society tends to think little of rappers. Very rarely do their lyrics go beyond a certain range of topics. As Biggie Smalls once (or twice) put it: “money, hoes and clothes, blunt smoke coming out the nose is all a nigga knows“.

Despite the unflattering depiction, I feel these are individuals start-ups need to embrace as role-models. Not because Ben Horowitz loves raps and writes big cheques to start-ups. Not because rappers can get your whole team to actually come into the office. It’s a lot simpler and more important than all that:

There is no rapper who isn’t about making money.

BiggieSmalls22

For all their industry-disrupting visions, start-ups tend to borrow enormous sums of cash just to stay in “business”. They put every single thing except making money on their Trello boards. User Acquisition. User Analytics. Scalability. Big Data. Machine Learning. Literally every single thing you can imagine is far more important than making money to start-ups.

To make matters worse, they’re actually easily placated by the illusion of having money! It’s actually downright insane to me. Work extremely hard for many years only to get … drumroll please … a valuation.

“We think your start-up is worth $10 Million so we’ll give you $500,000 for a percentage of your company”.

Really? That’s all it took? Some guys to pat you on the back and tell you you’re worth something, no matter how imaginary the figure is? You know which people aren’t this dumb? Rappers.

If a rapper was the CEO of a start-up, the very first thing on their mind is solving cash-flow issues.

Snoop Dogg has professed an interest in becoming chief executive of Twitter after the announcement that current chief Dick Costolo is to step down.

The rapper, briefly known as Snoop Lion during a short-lived reggae phase, tweeted: “I’m ready to lead @twitter!”, following up with: “First order of business, get that moolah!”

Source: The Guardian

Business strategies may be complicated, but business itself is really simple. Get people to pay you for something you have at more than the cost it took for you to acquire it in the first place. It’s so simple even kids can do it.

Keitz-Lemonade-Fin-Jpeg-002(pp_w610_h406)

This little girl isn’t going to give away her lemonade for free so that some deep-pocketed individuals see her user acquisition going off the charts and they offer her a whole lot of money for a percentage of her stand based on a valuation. She wouldn’t do that because it doesn’t make sense.

If making money is a concept rappers and little girls understand, why is it so hard for start-ups to grasp?

If I haven’t been able to convince you that valuations are bs and profit is king, maybe this might: Basecamp is now worth $100 Billion!

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  • Umar Farouq

    Was interested in the writeup mainly because the title itself is a clickbait. You made pretty bold assertions, this “Why Rappers Are Smarter than Startups?” and the Trello board thing. Burden of proof does lie on you to prove those assertions. Then you referenced this https://m.signalvnoise.com/press-release-basecamp-valuation-tops-100-billion-after-bold-vc-investment-c221d8f86ad7#.2xcbkdizs, which in itself is just satire.

    So at this point, I’m confused. Anyways, I get the message, startups should care a lot more about money.

    • How many of your favorite start-ups bootstrapped themselves to profitability without VC loans?

      Can valuations be worth taking seriously if they basically boil down to (total shares / shares sold) * price of shares sold?

      (note basic yet important business metrics like profit and operating cost are missing from the equation)

      Also .. can it really be considered “burden of proof” if it took almost no effort to locate the proof? 😉

      • Umar Farouq

        I really don’t care much for all the noise about startups. IMHO, it seems it’s no more about value but instead about who makes the loudest noise/raises the largest sum.

        What proof? You’ve presented no proof that rappers are smarter than startups. Ditto for the Trello boards. You’re the one making a bold assertion. Burden is on you to prove it else we call BS.

        That said, I do get your point. Startup needs to start caring/care more about money. I agree. No contest there.

        • You caught me.

          This isn’t a peer-edited paper with citations to back up my claims. It’s just my opinion on the matter.

          Thankfully we agree on the core point here: Making Money Matters. Value over Valuations.

          Doesn’t matter (to me) which route we came about those sentiments. The important thing is I’ve found someone else I can relate with on this matter 🙂

          • Umar Farouq

            LOL at peer-edited paper.

            I can be a bit overbearing with asking for proof. Maybe that’s the curse of a machine learning guy.

            Cheers mate

          • Disqus doesn’t have a way to keep the conversation going and I’d really like to chat a bit more about machine learning and the other interesting things you’re doing, if you don’t mind.

            Twitter? (@akamaozu)

            Or some other platform of your choice?

  • Adim Ofunne

    You know I definitely agree with what your saying, but I feel you might be over generalizing here a bit, as in this does not apply to all start-ups. As in yeah a lot of startups especially the social network kind, never try to make money for several years, they just try and get more and more users. One thing I have found is that the concept of getting funding is originally about helping a business grow faster than it normally would. Like my old CEO will say, it is like throwing Jet fuel on fire. Thats that idea. Collecting money is not bad, valuating a company is not bad. It is just that tech companies have somehow convinced VCs that EVERY single tech startup is a viable candidate for funding. Funding is not new, businesses take out loans everyday or sell shares for capital. We just dont hear about it in the Guardian, or the New York Times. There are two crimes I see. Startups making borrowing cash look fly when they should sometimes try to hustle it on their own and tech media sensationalizing getting funding. But some startups do NEED VC fund to actually succeed. REAL innovation is backed up by R&D which is backed up by money. If you dont have money it is hard to make something that can quickly change the world. Yes you can change the world without money, not just as quick or on the same scale as if you do.

    • There’s two intertwining points here that you’re isolating.

      1. Start-ups focus more on borrowing money, not making money.

      2. Borrowing money from investors is a bad idea.

      In retrospect i definitely should have made them stand-alone points. Would have been less confusing.

      Here’s the rub:

      The act of borrowing money itself isn’t bad. Why you are borrowing is what makes it good or bad.

      A business that borrows money to increase their profit margin is understandable. Basically they’re borrowing to get ahead in business.

      Start-ups typically borrow to stay in business.

      They haven’t found how to make money and they are borrowing just to stay in the game.

      I appreciate the fact that not every start-up idea can work without borrowing money. I get it.

      Thing is I get the feeling a lot of them aren’t even trying to consider making money at all.

      I think the act of earning money grounds you. Take for instance the shop selling single indomie packets.

      They have a fixed cost on the carton and they have an idea how long it takes to sell them individually. They know their profit margin and how long it takes to get it so they plan accordingly.

      Start-ups are like an indomie retailer that just got N1,000,000. They haven’t gotten the discipline of running the business profitably.

      They’ll go and buy ipads to use for the point of sale. They’ll buy an inverter and have dstv subscription.

      They haven’t yet realized that location can only turn a profit of N30k in a month.

      Worse yet is they never realize that because they keep looking at some pie in the sky future and borrowing money against it. Some do luck out but the number of profitable start-ups with multiple funding series under their belt is slim to none.

      Can’t remember where I read this but I think it’s a perfect summary of my thoughts.

      “The best time to borrow money is when you don’t need it”

      When your start-up doesn’t know to stay in business, borrowing money isn’t the solution. That’s like getting a new credit card to pay off your old credit card and maintaining your old lifestyle isn’t of finding a better paying jobs and cutting costs.