Berlin, Bullshit Startup Capital

For the second time in a year, a friend of mine has been unceremoniously fired from a job at a startup in Berlin. Without the two weeks of notice that was in her contract. No, in fact, it was a firing from one day to the next, which is highly unusual in Germany. The fact that her firing occurred one day before the end of her 6-month probationary period and several weeks after the founders had successfully attracted fresh investment was sketchy as hell, but not out of the ordinary for Berlin (at least not anymore).

When she asked one of the founders why the notice had been so late and so abrupt, his “excuse” was that they’d been meaning to fire her sooner, but had gotten too busy with the investor search. Gee, thanks. It takes a particularly clueless person to both admit that they were exploiting you for their benefit and to think that it was a reason you would find acceptable.

It also takes a particular breed of asshole to say that my friend wasn’t sufficiently devoted to the success of the startup, after she spent a year earning a 450 EUR/month pittance wage working a full-time “internship” for them. (And didn’t leave them after getting the full-time “permanent” position, with heaps of mandatory unpaid overtime, because she was tied to the startup due to visa restrictions.)

It’s an open secret in Berlin that companies will talk up the chance of a full-time position, or a working visa sponsorship, or some promotion in the nondescript future when funding arrives, or the “valuable” experience you will gain, as a way to keep you on the hook, right until they pull the hook out and let you go. Nevermind equity, you will never see it offered, and no one here thinks to ask.

So what was the reason given for my friend’s termination? None, except, uhh, well actually one of the founders thought he would be a better lead designer for the firm, even though he has no design experience besides having attended a single Google design workshop after the new Material Design guidelines release. (Someone’s been drinking the flat-design, everything-looks-like-a-Google-App Kool Aid, without thinking about the importance of design or consistency in unique branding and positioning.)

No one’s reaction in the company was positive, upon hearing this news.

If I were an investor, and I knew that your pitch deck was full of mostly bullshit anyway about your conversion rate, retention rate, monthly active users, ARPU, CAC, burn rate, KPIs, and whatever, and that you just fired the only competent designer in your company, and that you were about to load up one of the cofounders with lead design duties (not delegated), I sure as hell would not invest a cent in your dipshit startup.

But this is Berlin, a city full of moron investors with more money than sense, and a negative interest rate policy in the Eurozone that all but assures misallocation of capital from zero yield to any idea you can write down on a napkin in the next coffee shop at the (one of the five) corners of Rosenthaler Platz. As long as it’s Other People’s Money you’re losing, who cares? Let’s go all-in on another sentiment analysis company, and build it with other people’s unpaid overtime! Let’s build another company with an entirely assailable business model in a saturated market! Let’s close the books on this investment fund and rollover into another, newer, fresher, better, investment fund with fresh suckers from Southern Germany!

This reminds me a bit of my brief stint in Startupland here (which also ended with me being cheated out of a fair sum of money by two very unscrupulous people). One of the pitch decks the cofounders I worked with forwarded to potential investors made it all sound so good. A solid team, solid technology, a real chance at capturing a market niche. Nevermind that the entire technology stack had been built by an endless stream of inexperienced undergraduate interns. No one ever came to talk to us, to do any due diligence, to figure out if we knew what we were talking about. I started questioning who was running the show at these various investment funds. Did they have people who knew technology? Did they have people who knew the right questions to ask? It certainly didn’t seem so.

I remember once looking over a webpage full of startup mentor biographies, at one of the startup incubators in town, with some other founders: “Useless, useless, useless, good, sketchy, useless, loudmouth, this guy almost cheated us out of a huge amount of equity,” and on it went as we looked at the biographies of mostly people with zero technical background, who were offering their services to technical startups. Of course all of this backstory information is hidden, you can’t read it in the bio statements, you can’t read it on the mentors’ faces, it’s information stored in people, and people aren’t talking enough.

If there’s one thing I’ve learned (or should I say, been taught) this year, it is this: The line between a decent person and a scoundrel is very thin and easily crossed.

So this is the situation Berlin finds itself in. The boom times are good, as long as interest rates don’t rise. And as long as the boom times are good, there will be asshole founders firing the few people in their companies who have clue.