When the Eco-System Becomes an Ego-System: The Impact on Startups and Investors

Ego is the single biggest obstruction in the achievement of anything.

The current startup ecosystem unfortunately is plagued with ego-driven communities that prioritize creating a marketing stunt over serving entrepreneurs. While these communities claim to provide support and guidance to startups, in reality, they are more focused on creating hype and promoting their brand. Selling memberships, courses, sponsorships, wasting money on events, promising media coverage and claiming to have investors on their back which is usually nothing more than a database curated from online sources or other networking events, the organizers and leaders of these networking communities lack providing practical support; victims are Founders and Investors alike. This often results in a negative impact on the startup ecosystem, as real investors and investment firms are pushed back and unable to make meaningful connections with entrepreneurs.

One of the main issues with these communities is their lack of focus on the practical needs of entrepreneurs. Rather than providing tangible resources and support, they often focus on creating a superficial image of success. This can be seen in the countless networking events and pitch competitions that are organized by these communities. While these events may generate buzz and media coverage, they rarely result in practical and meaningful connections, conversations and expert advice between startups and investors. Most of the times, it's a click show of selfies where the organizers are upselling to both Founders and Investors who have spent time and money to essentially grow their business through forging solid partnerships.

Moreover, these communities often create a culture of fear among entrepreneurs, which can be detrimental to their growth and success. The hype of investors is over represented and founders are misguided to only focus on their pitch, whereas there is no one to advise Founders to first focus on ideation and business modeling. Accredited investors and investment firms who are willing to invest and source deal flow are showered with a hard sell to first sponsor or pay heavy fee, which essentially is discouraging for both Founders and Investors as it becomes a barrier to connect. When investment firms finally agree to sponsor and request for taking a deeper dive, these organizers refrain from transparency due to their fear of exposure when it comes to inefficiencies and real substance. This lack of transparency and accountability can result in startups not receiving the support they need to thrive.

According to aggregated global surveys, majority of startups are unable to secure funding from venture capitalists. They end up with family and friends round or angel investors, yet they fail. Imagine the money and time which is posted as a loss only because the business acumen, ideation, business modeling, Go-To-Market strategy, team management or finances are not practically taught by professionals, business owners, investors or serial entrepreneurs. This is largely due to the unwelcoming nature of the startup ecosystem, which is driven by ego-driven communities that prioritize hype over substance, not giving a chance to real business leaders extend their knowledge and expertise. The broken education system and its mafia does not allow this democratization to make imparting education more inclusive but is ruled by professors who lean towards bookish knowledge. This not only affects startups, but also the wider economy, as it limits the potential for innovation and growth.

To address this issue, there needs to be a shift towards a more supportive and transparent startup ecosystem. This requires communities to prioritize practical support over marketing stunts and to create an environment where startups can thrive. Investment firms and mentors also need to be more transparent and accountable in their dealings with startups, to ensure that they are providing the support that is truly needed.

Over the past decade, I have had the opportunity to attend a plethora of startup conferences globally, and have invested in some of the smartest founders and scalable business ideas, currently holding a position of 26 board seats in the startup space. However, I've always been curious as to why startups in developing countries struggle to raise investments despite having all the right factors in place: large consumer bases, immense opportunities for leveraging technology, cheaper resources for designing and developing, a multitude of niche markets to operate in, and smart entrepreneurs with solutions.

After two years of operating in the developing countries trying to invest in scalable startups, I've come to the conclusion that it is the EGO of the startup ecosystem in these countries that is holding them back from realizing their full potential. For every single conference, investors are asked to first pay subscriptions to become part of the community, donate, invest their time, give lame interviews and then they are finally asked to sponsor an event or conference to become a judge or showcase themselves as a VC or investor. With all this money wasted which is in thousands of dollars, at the end of the day these monies never reach the startups because they are now spend on personal branding. 25,000 Dollars to 100,000 Dollars is something which could have been easily invested in pre-seed and seed-stage startups in developing countries, but this money is sucked by the so called startup community leaders, their media wings and organizers which profit through selling magazine spaces (with no vetted distribution) and offering social media reels with podcast interview which are hardly ever heard or watched. The impact of this unwelcoming culture and overly dramatized personal branding stunts, takes away the money from investors and investment firms which could have been invested directly into startups.

The flip side of the coin is equally interesting which is, the attitude and values of the startup founders. Often misguided by social media stars and irrelevant motivational speakers sharing content which is completely impractical, it is the ill-advice which has formed stubborn mindsets of Founders. Top it up with lack of exposure to the wider world, leading to a reluctance to work in close collaboration with international partners or hiring multi-cultural teams or accepting foreign investors, most of the Founders are simply not ready to invest in themselves and learn from real entrepreneurs. Lack of discipline and not valuing time is one of the leading issues specially in developing countries, resulting in poor processes and inefficient teams. Lastly, but unfortunately, some startups are guilty of spending investor money irresponsibly, focusing more on funding their lifestyle and raising more investment, rather than scaling the business towards profitability.

With over 70% businesses failing during the first year of launch and over 40% failing within the first 3 years, this highlights the need for a more supportive and transparent startup ecosystem, where practical support is prioritized over marketing stunts, where accountability and transparency are paramount.

In conclusion, the current startup ecosystem is driven by ego-driven communities that prioritize hype over substance. This is not only detrimental to startups, but also to the wider economy. To create a more supportive and transparent ecosystem, there needs to be a shift towards practical support and accountability. This will help to ensure that startups receive the support they need to thrive and that the potential for innovation and growth is fully realized.

Shafaat Hashmi & Amna Razzaq

Board Members & Partners , Stalliongates Investments