Runaway train: why startup founders shouldn’t chase the hype

Blockchain, AI, VR, and other tech buzzwords are flooding the market and everyone’s throwing money at The Next Big Thing™. You can thank hype machines LinkedIn, Twitter, and Facebook for overblowing the usefulness of “next gen tech”. Hype is a part of human nature. But startup founders must avoid getting caught in the trap.

Investment in AI, ML, QC, and a bunch of other two-letter abbreviations have defined tech trends of the early the 21st century.

With the novelty of great new inventions comes something with much less substance: hype.

While leading edge tech is exciting, chasing after the hype surrounding emerging tech is risky business.

When a technical breakthrough occurs, we tend to inflate expectations of what this new shiny thing is capable of and how it’s going to save the world. 

A hype train gathers steam, stakeholders hop on board, and if it flops, startups can fall from great heights. 

It’s that lack of substance that separates hype from valid excitement. Mark Zuckerberg hyped up the Metaverse as “the next chapter of the internet,” prompting snowballing investment in the web3 shift. Epic Games announced a USD $2 billion funding round to develop its Metaverse-mimicking ambitions and SoftBank announced a USD $150 million investment in a South Korean virtual world.

But after USD $177 billion in investment, all Zuckerberg’s VR paradise delivered was shitty graphics, motion sickness, and a crashing virtual real estate industry.

Can chasing hype as a startup founder ever provide a route to success?

The ethics of hype

Tech hype often has less to do with the technology itself, and more to do with the narrative surrounding it.

Quantum Computing promises to revolutionise dozens of industries. In 2022, public and private investments in quantum computing hit USD $35.5 billion.

There’s only one issue: It has zero practical usage today.

Oxford physicist Nikita Gourianov blames it all on hype: “The quantum computing industry has yet to demonstrate any practical utility. Why then is so much money flowing in? Well, it is mainly due to the fanfare.”

The problem with new technological breakthroughs is that it’s difficult for people not to get swept up in the hype – you and your team included.

Piling on the pressure to strike hype gold – whether it’s in the form of a successful moonshot product launch, securing a huge investment sum, or going viral online – can result in some very burned out employees, and bad feelings when things go south.

For conscientious founders, breaking promises to customers and letting down investors is a worst-case scenario that takes a similar mental toll.  

Founders must ground themselves in reality, communicating with developers or engineers to determine limitations and concerns. They should positively reinforce pushback or the raising of concerns rather than shooting messengers.

All business decisions should be customer-centric. If it isn’t, you’re developing new stuff made to sit on a shelf, along with a huge financial burden wasted on a pet project, not to mention the environmental implications. 

Excitement over life-saving vaccines or devices is one thing. Hype over plastic products (fidget spinners) or the overconsumption of fashion items that aren’t needed and can’t be recycled just results in burning carbon to pump out material goods.

Social hype

Articles shared on LinkedIn, Facebook, and Twitter proliferate hype behind specific technologies, magnifying them through sponsored content and digital advertising.

Twitter is a notorious vehicle for this. Tweets are used as a basis for business decisions

Between 2008 and 2017, 37 technologies and 4,600 VC financing rounds were analysed to determine how strongly Twitter influenced startup success. It was found Twitter hype around a specific technology was beneficial to obtain higher capital valuations.

But before you start courting the crowned heads of Twitter, this strategy may only work in the short term. Professor of Management and Digital Transformation Dr. Andranik Tumasjan believes “the sentiment signals on Twitter say nothing about the long-term investment success of such a start-up.” The platform works as a hype man and little else.

Today, software startups are receiving valuations that are massively disproportionate to their annual revenue. Even big-name companies like Uber have been valued at almost USD $100 billionhigher than the top 7 US airlines combined and the top 3 automakers combined – despite failing to return a profit after a decade of trading.

To bring or not to bring the hype

Jumping into the deep end of emerging tech just because it’s cool is a huge gamble on whether the tech will deliver true value and customer demand will last. The answers are often not realised until you’ve poured time and money into launching an MVP and people start using it in the real world.

Market research is unreliable for the same reason. You might get an overwhelmingly positive response expressing excitement about your product – again, until it hits the shelves (or app stores) and people realise they didn’t need it.

A safer strategy is to merge new tech into the core functions of your existing, more heavily researched, market tested idea, e.g. offering cryptocurrency as a payment method. Surfeasy founder Chris Houston provides VPN services to large businesses but successfully implemented ML tech to get rid of spam. 

It’s possible to build a tech startup around emerging tech, but doing so invites heavy competition and tends to blur the lines between hype and innovation.

Voice technology is valued at USD $13 billion and has 700+ startups going after a piece of the speech and voice recognition pie.

But if you’re dead-set on creating a startup based on hyped-up tech, remember to marry the hype with a customer-centric and research based view.

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