The Away Luggage Saga Shows Venture Capital Needs a Reality Check
Silicon Valley is indeed changing the world, and not always for the better
Yesterday the millennial-beloved luggage brand Away came under fire after TheVerge exposed its internal culture, which former employees described as bullying, cutthroat, and clique-y. A VC came to Away’s defense, dismissing the accusations by stating: “to build a $1B+ disruptive business requires speed & intensity. Startups are hard, period.”
Rather than a heartfelt defense of visionary entrepreneurs chasing their dreams and breaking a few things in the process, this sentence reveals the deeply faulty foundations of VC investing today.
It has long been known that the short time horizon of the VC model stifles true innovation. While a new luggage or CBD brand can (and regularly does, per the Verge’s article) speed up their growth to meet exits, startups working with A.I., blockchain, or biotechnology require longer implementation horizons. They are unlikely to have a breakthrough within the timelines enforced by VCs. Couple this with a decrease in federal funding of science over the last 40 years, and it’s clear that we need a new model of investment.
VCs rarely seem to think about how ideas they fund fit within the existing social and economic infrastructures.
But the VC industry needs a reality check beyond reckoning with the pace of scientific advancements. As Uber, Tesla, Deciem, WeWork, and now Away and Equinox show, VC-fueled startups aren’t held to the same business and operational standards as their publicly traded counterparts.
The fact that it’s never been easier and cheaper to start and grow a venture should force us to be disciplined about addressing their negativeexternalities. VCs rarely seem to think about how ideas they fund fit within the existing social and economic infrastructures. “There is nothing innovating about underpaying someone for their labor and basing an entire business model on misclassifying workers,” California State Senator Maria Durazo said of Uber. Benefits of Amazon’s two-day (and soon to be one-day) shipping were welcome until they started clogging our streets and our landfills and killing passers-by. Airbnb and Instagram turned cities and neighborhoods into consumable, picture-perfect destinations.
Companies ignore problems like treating employees unfairly and failing to build a nurturing work culture. Those problems don’t get fixed as the companies scale.
VC industry seems unwilling to acknowledge network externalities that don’t benefit it. It also seems unwilling to admit that it’s destroying economic value by rewarding growth metrics versus profitability metrics. The result is a breakneck push for growth at all costs, which can make companies ignore problems like treating employees unfairly and failing to build a nurturing work culture. Those problems don’t get fixed as the companies scale. Lavishly funded by venture capital, startups are in the position to undercut incumbents on price and service, all the while being unprofitable. The result is that money-losing companies can go on undercutting competition far longer than before.
There is a lot of VC money around, but not all money is the same, as MIT Media Lab’s connections with Jeffrey Epstein and Saudi Arabia-fueled Softbank’s Vision Fund illustrate. When we use products and services funded by Epstein and Saudi Arabia, we enrich bad actors. This wouldn’t be so noteworthy if it weren’t for Silicon Valley’s mythology of changing the world.
Silicon Valley is indeed changing the world, and not always for the better. We can scapegoat Away’s leadership, but that won’t solve the problem that is systemic and that goes beyond inexperienced executives and points towards the VC industry. This industry is destroying social value and devaluing labor at a large scale, so why are we surprised when its core benefactors — the founders — behave the same?