“You are making a major mistake,” said the prominent startup exec who was trying to convince us to give up on Context Optional and be “acqui-hired” by his well funded and highly praised startup. To be fair, it was something that we approached them with, when we were basically out of money and looking for a mercy killing. However, as our talks continued, our business started taking off. We had become experts in the then-burgeoning field of Social Marketing, and our services were highly sought after. Looking at our new revenue stream compared to their offer, we turned them down.
Prominent Startup Guy then proceeded to trash our business for its initial focus on revenue instead of building a product. The ultimate insult was thrown down. We had a nice “lifestyle business” but it would never be interesting to VCs. He told me that if I didn’t join a well-known startup by the time I was 30, I would never be successful. I was 31 at the time. Ouch.
A few days later, I had coffee with a friend – at the time, an up-and-coming VC. “That guy’s a jerk.” he said, “So what if you have a lifestyle business? That’s not a bad thing.” Now even my friends were trashing my business!
The Worst Possible Insult
As I drove home, I thought about why this label bothered me so much. At its surface, “lifestyle” makes it sound like you’ve got things pretty well figured out. But clearly, Prominent Startup Guy didn’t mean it as a compliment.
And why were we being labeled this way anyway? Was it because we weren’t taking a big enough risk? Because we weren’t following the Valley model of raising a bunch of money and getting huge before making money? Because we did work-for-hire? Was it simply because we had revenue?
None of those things have anything to do with a lifestyle, though. Those are characteristics of a consulting business. Though I denied it at the time (“We’re just doing consulting to figure out market needs before we build a product!”), we were a consulting business.
I didn’t feel like I had a particularly attractive lifestyle. At the time, I was spending all day answering emails, meeting with customers, and establishing our relationship with Facebook. I was spending all night coding, and occasionally taking a break to try to get my newborn son back to sleep. We oscillated between being flush with cash, and nearly out of business.
When people say “lifestyle business,” they have a certain picture in their mind. They probably picture you in a small back office tallying up sales and expenses by hand in a ledger. You pay yourself a modest salary and have modest children playing with modest toys in a modest house. You’re modestly happy, because you don’t have a boss but you still have enough money to get by. You’ll never be rich because nobody could sell such a business, but you’ll be content. And for a modest guy like you, that’s enough.
And that’s why it’s insulting. The implications of telling someone they run a lifestyle business are:
1) You won’t have a big win, and that’s okay, because you’re not the type of person who needs that sort of thing.
2) You won’t be working hard, and that’s okay, because you’re sustaining a life that works for you.
3) You’ll be happy all the time and spend quality time with your children, and that’s great because family is important.
“Lifestyle Businesses” Threaten the Silicon Valley Model
Entrepreneurship is about risk, and the perception is that if you’re building a business based on revenue, you aren’t taking a big enough risk. Startups are hit-driven. The notion of a small team building something new and crazy, making it huge, and changing the world is the norm. If there’s no clear path for that to happen, people don’t know what to do with you.
For a place that exists to “disrupt” entire industries, Silicon Valley can be a tough place to be “different.”
As our business developed, we eventually made good on our promise to use consulting as a way to learn about our customers and develop a product. Our competitors also got to pretty much the same place, but through a different (more capital intensive) path. We sold Context Optional to Efficient Frontier in 2011, and EF was soon acquired by Adobe.
The stigma still stuck with us, though. Potential investors always wanted to “better understand” all this revenue we had. And even long after we had sold the business, friends would still ask “How’s that consulting lifestyle business going?” Sigh.