From FOMO to F U Pay Me: innovation is different in a downturn

The innovation economy swings from FOMO to F U Pay Me every 10-15 years. When that shift happens it can be brutal for entrepreneurs.

The FOMO economy is led with lofty, utopian visions of an abundant future. Technologies like crypto and the metaverse are the building blocks of this future. And you better act fast. The largest funding rounds of 2021 are pure FOMO: six of the 8 largest raises were in #crypto, #blockchain, and the #metaverse (gaming).

The F U Pay Me economy is about making money right now by solving real, unsexy problems. Value trumps valuation. In 2023 the largest funding rounds behind OpenAI are companies in construction, healthcare, energy, and data storage. They're practical and pragmatic.

In this article I talk about how innovators can navigate the shift from FOMO to F U Pay Me.

Every seasoned entrepreneur can point to their first “f*** you, pay me” meeting. 

They present to their board, or investors and realize that time, money, trust, and patience has run out. All at once. 

The entrepreneur protests, “we are changing the world with AI / the blockchain / the metaverse.” They reference some innovation folklore like Netflix vanquishing Blockbuster, or the demise of Nokia. They talk about Moore’s Law and the power of exponential innovation. They throw out metrics about active users, and improving conversion rates

“F*** you. Pay me” the investor responds. “We didn’t invest $76 million so you could conduct a science experiment. We have mouths to feed, bankers to placate, and tuition to pay.” 

Right now, many entrepreneurs are having their first “F*** You, Pay Me” baptism. 

VC dollars invested declined by $105bn from $345bn in 2021 to $241bn in 2022

• Tech layoffs increased 4-fold from 1H 2022 to 2H 2022 for a total of 283,402

• The scandals surrounding Elizabeth Holmes, Sam Bankman Fried, and Adam Neumann have cast suspicion on other entrepreneurs.

• X, Google’s Moonshot division closed down half of its 120 projects under pressure from TCI, an activist investor. X, in my view, is a corporate #innovation bellwether. 

The F U Pay Me meeting is the innovation equivalent of graduating from West Point and then getting shot at in combat for the first time. It’s terrifying and it forces you to rethink many of your foundational beliefs. You realize that much of what you’ve been taught was wrong.

As hard as it is, it is not an innovation or creativity straight jacket. Far from it. There are different constraints, sources of capital, and outcomes that can be a springboard for incredible growth and essential change if you get it right.  

How to shift from a FOMO to a F U Pay Me Entrepreneur

Before we continue, write down these eight words and promise you'll stop using them: 

“Innovation”

“Disruption”

“Moonshot”

‘Pre-revenue”

“Lab”

“Blockchain”

“Metaverse”

“Exponential”

Use these words instead:

“Profit”

“Sales growth”

“De-risk”

“Improved efficiency”

“Defensible”

“AI”

“Cashflow”

Here are some other tenets of F U Pay Me Entrepreneurship:

“Here are all the reasons not to invest in us…” - no one trusts you when the economy shifts from Fomo to F U Pay Me. You must conduct a thorough excavation of all the $hit keeping you up at night, and then share it. Why are you flawed, why is the timing tricky, what are the conditions that need to be true for this to work that aren’t currently true. If the investor still wants to continue the meeting after you bare your character defects, then you’re starting from a foundation of trust. 

Pitch Outcomes Not Ideas - No one cares about your deck, or TAM SAM SOM. They care that you’ve built something that people will pay money for because it solves their problem. So build something that creates that outcome and then show people using it. You’re then implicitly saying, “this is built, it’s working, do you want to participate in its growth or not?” You're not asking anyone to imagine anything.

The least sex appeal contains the most money - The largest fundraising rounds so far in 2023 were in construction, energy, healthcare, and generative AI. These companies solve real, unsexy problems. Medical billing, insurance claims settlement, treasury management at big banks, and management consulting decks are four multi-billion dollar problems where incumbents are slow, complacent, and politically dysfunctional. Who gives a $hit about crypto? Don’t make me think about a utopian future state when the present state is so bad.

If you’re still talking to me you should:

• subscribe to my newsletter,

• Book me to speak,

• Learn about the vetted community I run, Punks & Pinstripes, where everyone has passed the F U Pay Me test. Many times.