diaspora, Mr. Brainwash, and Why An Article in the NY Times Won’t Ruin Your Start-Up

An interesting piece discusing how group-funding sensation diaspora which had potentially tapped into a well of anti-Facebook sentiment with its open-sourced alternative. The central point of his post was to muse over how this might be a watershed moment for Facebook rather than a validation of diaspora one way or the other.

At the time diaspora had amazingly raised $40K compared to a goal of $10K… But that was just the start. By the weekend they had raised an astounding $170K. At that point, I began to see a fair bit of traffic about the money diaspora had raised and the media coverage it had gotten. Curiously, most of what I saw tilted decidedly toward pronouncements of doom – and, in some cases, outright hostility.

Two general themes emerged in these discussions 1.) grousing about how diaspora was unworthy of its media coverage – cutting in front of more worthy efforts in the same space; 2.) diaspora would fail because it had raised too much money and garnered too much attention too quickly.

A new start-up team reading some of these discussions might think that, given the backlash against diaspora, it might be better served to pass on some coverage by the NY Times or aim to raise too little money for fear being assigned the same fate – and that would be a mistake.

The chorus of “How dare diaspora have the temerity to raise a bunch of money and get covered by the NY Times when they haven’t done anything and here’s how it seals their demise” is curious to me on several levels – a.) why exactly is everyone so upset that this firm has been successful in garnering support – don’t they have things actually under their control to worry about? – or maybe that’s the problem – that by working outside of the “system” diaspora has a level of independence from the taste-makers and illuminaries of the start-up world that might undermine their influence in the future. b.) it appears lost on many that the NY Times article was about the path that diaspora has taken to getting funded – a populist piece about the people backing David v. Goliath – and not an endorsement of the merits of the project outside of this context – I don’t think diaspora gets and article without the interesting funding option – so the idea that other more worthy efforts to build similar networks is irrelevant. c.) having just seen “Exit Through the Gift Shop” – I couldn’t help comparing the outrage over diaspora’s “good fortune” to the art community’s dismay over the success of Mister Brainwash – a publicly successful, critically suspect, street-artist that jumps to the front of the line ahead of more dues paying and “legitimate” artists.

The delicious irony is what is lost on both diaspora naysayers and the artists in Exit, is that in the end, regardless of merit of the project (which I may point out a this point is only being determined by the group of self-congratulatory insiders that are leading the litany of complaints), the unworthy protagonist is in a position of success because they did something that any self respecting “serious” artist or “serious” entrepreneur would not – and that act (more than the substance of the underlying project) ultimately drew enough attention that the project (for better or worse) got noticed – and that being noticed has its perks. Does that mean one should engage in constant real-politik to manage the media – no – but by the same token, ignore or disdain the media at your own peril.

What is not comical, however, is how wrongheaded some of the advice and conclusions have been around the diaspora situation – some of which could lead start-ups to pass on real opportunity.

Take for instance, Jason Fried’s (of 37signals), analysis – which basically argues that getting covered in the NY Times was a bad thing for diaspora for four reasons – each of which is flawed:

1. Exposes Their Plan Prematurely to Competitors: To quote:“Competition that kills isn’t pre-announced — it catches an unsuspecting incumbent by surprise.” Stealth for start-ups has its place, but this isn’t one of them. First off diaspora is positioned as an open-source project – so by definition the concept of stealth would be a silly thing to employ. Second, true innovation that kills incumbents almost never does so by sneaking up on them to unleash a killer blow that would be unsuccessful without the element of surprise – instead those innovations expose a weakness that the incumbent is structurally incapable of pivoting to protect. Stealth with regard to the incumbent such cases is irrelevant – so the idea of diaspora passing on a NY Times article to protect itself from competitive scrutiny by Facebook would be a mistake. If Facebook is nimble enough to pivot and crush diaspora – it will be so warning or not. If this is the case, then the diaspora idea was flawed from the start.

Where keeping mum does make sense is in situations where multiple start-ups are shooting for the same opportunity – the importance of stealth however is to avoid tipping your hand to other insurgents not incumbents. And even then, and I really don’t mean to pile on, but part of the rationale for being stealthy is to help build a buzz in an effort to leap ahead of insurgent competitors – something which by definition would have to include “getting a featured article in the NY Times” as a wildly successful outcome.

2. Has Allowed Them to Raise Too Much Free Money: I am not certain how $170K is significant enough to instill a level of comfort that somehow destroys motivation or will give them the luxury of over analysis rather than action – I mean it’s $170K not $10MM. This belief that start-ups with no resources will outperform start-ups with resources because they are “hungrier” or more motivated is a canard. What is actually going on is an evaluation of the quality of management. Given the chance, good managers will actually use extra resources, and the time freed from chasing further funding, to accelerate the pace of innovation, or wisely hold them in reserve until necessary to put more pressure on competitors – poor managers will spend $170K to get done what they could have done for $10K… The problem for investors, however, is determining if a company’s success is due to good management or because they threw $170K at a problem. So if you keep a team lean and they succeed it takes away the second variable. A second argument against raising too much early money has to do with the ratio of value to time – the more you get done early with a low valuation – the less you dilute and the easier time you have raising a future round because you don’t need to jack up your valuation to cover an overly aggressive earlier valuation used to raise too much money. But that’s only important when taking investments – not donations. This was FREE money when looking at it from a dilution standpoint.

If I have a problem at all with the amount raised its that at some point the hassle of serving the marginal donation exceeded the marginal value of the money raised from that donation – but then again Kickstarter doesn’t let you shut off the funding so its hard to put that on diaspora.

3. Has Put a Spotlight On Them: I can’t effectively predict how the diaspora team reacts to pressure – but then again neither can other observers. It certainly possible that attention becomes a distraction – but one has to weigh that risk against the publicity and potential opportunities that this project has garnered due to the media attention. Far more projects die a slow death fading away in obscurity than implode due to pressure from too much media exposure – by a large margin. Not taking a one time opportunity for a NY Times piece is stupid… that opportunity will almost certainly not avail itself again – so if the timing is less than ideal – so be it. Remember, part of the reason for the publicity was to raise visibility for the fundraising – that it became overly successful is again something that is hard to put on diaspora.

Besides – its not like diaspora has all of a sudden become Lindsey Lohan suffering a meltdown from an overly prying media. In fact it’s the opposite. In today’s short attention news cycle media world, diaspora is already yesterday’s news. So I don’t see how there is a media maintenance component from this brief fame that will drag on their efforts – but the name recognition and other benefits of the brief exposure e.g. CASH, will endure.

4. Sets Expectations that diaspora Won’t Be Able to Meet: Whose expectations? diaspora is under no obligation to anyone in the pursuit of success – not even investors. That potential users that would have never heard of diaspora except for the Times might ascribe their wishes to this effort and ultimately be disappointed has little bearing on the success of diaspora. Why? Because users will either find the service useful or not – those that do will stay – those that don’t won’t and wouldn’t have otherwise regardless of expectations. To the degree diaspora has a expectations problem (or more appropriately focus problem) is completely separate from the publicity generated by the NY Times. Those expectations weren’t set by the piece – they existed before the article in the diaspora business plan – and if that lack of focus leads to unfulfilled expectations that become a problem – the article didn’t amplify their impact. In fact, the article actually pushed the reckoning day back some by providing extra cash to extend the company’s runway – which actually might give the team enough time to figure out a strategy to deal with this issue (not that I am saying they will.)

In the end, there are about 1000 things that will likely go wrong with diaspora – things that the group-funding process at Kickstarter isn’t designed to surface or address. As such, I will be very surprised if it succeeds. If diaspora does fail it will not be because they got into the NY Times and ruined their chance for success by being overly eager to promote – the failure will have been pre-determined well before that. However, if for some reason they do succeed, it would be hard to argue that the NY Times article didn’t play an important part in giving the project a few more bites at the apple than they might have gotten otherwise.

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