BEC

The future is hard to predict, applied

Almost a year ago, I favorited a twit from my friend @ourielohayon that had a nice potential for future controversy, the kind of enjoyment I like. Here’s the twit:

OurielOhayon    10 startups i think will be acquired soon: evernote, posterous/tumblr, twitter, animoto, tweetdeck/seesmic, stardoll, etsy, apture. agree?

9:54 AM Aug 11th, 2009 via Seesmic

As you can read, it is about startups bound to be acquired. Living in the same high-tech environment as Ouriel, I figured out that a reasonable estimate of “soon” for the prophecy accomplishment opportunity period is 1 year . We’re almost there.

As far as I know, none of the 10 companies listed above has been acquired in the past 12 months.

The usual reaction to that is to consider that Ouriel is very bad at predicting the future. He took the risk to be very precise in his statement and failed. But who wouldn’t? Can you predict the future a year from now (and not be a gazillionnaire)? Analysts and consultants regularly fail at even remotely assess the evolution of things to come. And they are supposed to be experts in their field.

So is Ouriel. The guy deeply knows what he’s talking about. He picked up a “blue ribbon” list of startups, backed by the most famous VCs (Index, USV, Benchmark, Accel, to name a few) and angels, startups that were all the rage a year ago. What could possibly went so wrong with this ivy league?

Let’s first put aside the idea that Ouriel was indeed trying a self-fulfilling prophecy to help some of the companies in the list find their exit. We had this repeatedly with Netvibes which was supposed to be acquired any time soon and is still an independant company, profitable and growing. No matter if Ouriel has or not an interest in some of the above mentioned startups, an individual cannot influence a market, even in private equity.

I think that the explanation for this failure is more revealing for us all. A quick look at Crunchbase shows that those 10 startups raised a total of $268M (partly thanks to the whooping $160M raised by Twitter) which means a decent $12M each on average (putting the fat whale aside) and were less than 3 years old when Ouriel wrote his prediction. Those companies are pretty young and well funded. They have no interest in a fire sale. Instead, they all choose to refine their model, grow their user base, ramp up their business and execute according to their founding spirit and vision.

I find it very comforting that we are in a market where entrepreneurs really want to have an impact and find the means to do so on the long term. Even at the expense of Ouriel’s prediction skills ;)