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Has the Startup Scene Jumped the Shark?

Are you familiar with the term “Jump the Shark?” I can’t think of a better expression to describe the modern startup scene.

Full House, The Brady Bunch and Happy Days

“Jump the Shark,” at least in its original form, first referred to a television with falling ratings and whose producer should probably stop making new episodes; instead, the producer attempts a gimmick or introduces a new character to stem the decline.

It’s an homage to the Happy Days episode in which Fonzie water-skied over sharks.  The Brady Bunch jumped the shark when cousin Oliver came to live with the Bradys. Full House jumped the shark when Jessie and Rebecca had twin boys.

The term has been used to describe other situations. I commonly say that a business, for example, that has outlived its usefulness but keeps trying new gimmicks to stay afloat has jumped the shark.

Not to throw the figurative baby out with the figurative bath, but I see more and more startups seeking to solve problems that do not exist or that are otherwise proposing to address problems with solutions that make little-to-no sense.  It’s with this in mind that I have to ask:  has the startup space jumped the shark?

Yes, Cousin Oliver Visits Many – Not All – Startups

Well, a bit, yes.  There certainly are many worthwhile investment opportunities among startups.  But, there are more that are not worth your time or money.  It doesn’t take a lot for someone to start a startup and there is so much money chasing deals in the space that there is plenty of motivation to try.  Financial Poise’s Accredited Investor Markets wrote about the similar phenomenon of pre-IPO shares here more than a year ago.

Winston Club Makes Me Laugh

I’m still invested in the space, but I find myself laughing more and more at some of the startups I see trying to raise money – and commonly succeeding.   Here’s one that caught my eye:  a startup called Winston Club.  Fox News described it back in December 2015 thusly:

[A] members-only travel website set to launch in early 2016, will offer travelers the opportunity to book a room in Seattle, Las Vegas, Portland, San Francisco or Los Angeles for half the market price.

There’s just one catch: You will have to share the room with someone you’ve probably never met.  The booking site will connect strangers looking to share the cost –and space–of a traditional hotel room.

You can read the Fox article here. As to security concerns, the interview that the Fox article cites as its primary source quotes its co-founder, Bryon Shannon, as explaining:

Safety is a top priority and it goes right along with ensuring we have a well-vetted community of members. All of our members must produce five forms of verification: phone number and professional email at account setup, one verified social media account and credit card at booking, and one photo ID at check-in. Rather than staying with an anonymous stranger, you’re sharing a space with someone who has been screened and is accountable for their actions. Of course, this comes along with all the safety you’d expect at a top hotel including a 24/7 front desk, secure entry to your room and common areas, and being located in great neighborhoods.

I bet myself a nickel (I am pretty risk averse and I don’t have too many friends) that Winston Club would be out of business by the time I wrote this.  I checked, and I seem to owe myself a nickel: its website is functioning and its blog was updated as recently as May 12.  My curiosity is not easily satiated, however, plus I don’t get out much, so I did a little more research.

Shannon’s bio on LinkedIn reveals he is a 2009 University of Wisconsin-Madison graduate who spent his first two years after college helping to start and sell a fashion brand that generated about $325,000 of revenue and then spent two years at Target as a merchandise planning business analyst.  His co-founder, Mark Tarbutton, according to Tarbutton’s LinkedIn bio, is a 2012 graduate of Eastern Washington University who spent his first three years after college working in various capacities for a resort/casino in Washington State before moving to Starwood for about a year as a marketing and PR coordinator.

I don’t know these guys and I certainly have nothing against them.  I also see no evidence that they have raised money from anyone or are seeking to.  So, if they are putting their own hard-earned money into the venture, all the more power to them.  But if I were asked to invest, I would take a pass.

[And yes, Mark and Bryon – I know the mistakes made by the likes of Ross Perot (re Apple), Blockbuster (re Netflix), and countless others who were as dead wrong as you hope I will- and as I may- be.]

How I Like My Entrepreneurs

But still, as a threshold matter, I like my entrepreneurs to be a bit more seasoned, at least in their chosen space.  And one cannot forget statistics:  most startups fail.  Indeed, most VC-backed businesses also fail (read this for more).  Please do yourself a favor.  Before you invest in any startup for the first time, read this short library of plain English and unbiased articles.

My fundamental issue with this company, however, is that I just think the idea is bad.  Really, really bad- from the potential user’s perspective and from the hotel’s perspective; what a way to push down room occupancy, to create potential liability issues and to create a host of other practical problems when two paired hotel-mates simply don’t get along.

So, yeah, because I see more and more startups that make as much sense as Winston Club, I’d say that a bunch of startups jumped the shark.

About Jonathan Friedland

Jonathan Friedland is a partner with Sugar Felsenthal Grais & Hammer, a law firm with offices in Chicago and New York City. Born and raised in a New York suburb, Friedland graduated SUNY-Albany magna cum laude in three years and then earned his law degree from the University of Pennsylvania Law School. Friedland clerked for…

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