Erica Bits

The public’s perception of the relative competitive positions of several start-ups in the same field is increasingly determined by a popularity contest in tech blogs and Twitter posts. Sure, some of these new channels contain very well-informed analyses. But as soon as their effect on the public’s and ultimately investors’ perceptions is taken into account, we end up with self-fulfilling prophecies and exacerbated “superstar” effects: a few companies attract all the attention and, therefore, investor financing, while the rest labor in obscurity and, as a result, have fewer chances of success. This cannot be a good thing, especially with new, difficult, and unproven technologies. Entering a popularity competition too early can be very detrimental to orderly progress. It also makes it hard if not impossible to stay under the radar, which is crucial for start-ups creating disruptive technologies. To some extent, this is similar to Facebook creating social pressure on people (fortunately, this seems to vary widely by generation!) to participate and share details of their daily activities. Just like one might worry that teenagers spend too much time writing posts about doing and learning and too little time actually doing and learning, investors may be legitimately concerned that companies are spending too much time posturing on social media as opposed to producing useful things.