Growing expectations

Like I mentioned, I’ve been watching The Dropout; and I think one of the recurring theme is around what it takes for a CEO to raise capital, and also to what extent should the entire company operations be subjugated to the whole fund-raising process that it is just about window-dressing what investors want and have come to believe.

On one hand, there are dangerous stories in the mind of a founder-CEO which needs to be addressed. But on the other hand, what is the extent the overall operations of a company should just follow the story? How can reality catch-up and what are the mechanisms in Wall Street, or Silicon Valley to create that cut-loss mechanism.

In some sense, Theranos mocks Tesla and Elon’s other ventures. It is a more extreme version where some of the scientific fundamentals were still on shaky grounds. Elon Musk worked hard to rebuild supply chains from scratch in order to get components and materials the way he wanted. He could very well have failed and he did break promises on production or delivery dates often. How do we know when that is a red flag for a startup or not?

Sometimes it is more about the escalation of expectations. The way it escalates can give us a good sense of how likely it is going to fail just as the way a market bubble pops. Looking at a startup, it is important to observe the size of the ambitions, properly size up the problem it is trying to solve. Ambitions need to be match by resources and time.