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Enter the Start-up Hype Machine: TechCrunch Disrupt

It's one of Silicon Valley's biggest and most watched start-up events. But is it getting too big for its own good?
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Backstage at TechCrunch Disrupt last week, preparing for his talk with the founder of Frontback--an app that lets you take pictures with both of your iPhone cameras at the same time--Michael Arrington, the founder of TechCrunch, is reflecting on the six-year history of this start-up launch conference.

"It's grown over the years," Arrington says. "It's cemented its place in San Francisco as the tech event of the year for start-ups."

He's right. According to Ned Desmond, TechCrunch's chief operating officer, last week's event drew in more than 3,000 registered attendees--its biggest conference yet. It's grown so big, in fact, that starting in 2011, TechCrunch organizers moved the event to the 125,000-square-foot Concourse Exhibition Center--a.k.a. the San Francisco Design Center--in order to accomodate all the new attendees and exhibitors. The hackathon, which takes place the previous weekend, had 263 registered participants.

Like a start-up itself, Disrupt is in the midst of a major growth phase--and some are beginning to wonder if the event has potentially outgrown itself. 

The Backstory

Conceived in 2007 over a dinner with Jason Calacanis and longtime journalist Steve Gillmor, Disrupt was originally named TechCrunch40. The first year, 40 start-ups--hand-selected by Arrington and Calacanis--launched on-stage. Mint.com, which later would be acquired for $170 million, was the event's winner. The next year, Yammer--which was acquired last year by Microsoft for $1.2 billion--won the Audience Choice award and $50,000. In 2010, Arrington and Calacanis had a very public break-up, and the event was spun off into TechCrunch Disrupt. From there, it only continued to grow.

Like many publishers looking for alternate revenue streams, events have become a considerable part of the overall TechCrunch business. The bi-annual events have taken place in Beijing, New York, and San Francisco. The goal seems, the bigger, the better. Last year, Mark Zuckerberg gave his first post-IPO interview on stage at TechCrunch Disrupt. This year, he spoke again, along with Marissa Mayer, Ron Conway, Vinod Khosla, Max Levchin, and dozens of other other notable entrepreneurs, CEOs, and venture capitalists. Next month, TechCrunch will launch its first event in Berlin. While Desmond won't give me precise numbers, he tells me that the cost of this particular five-day Disrupt in San Francisco is "north of $1 million"--and that the event is quite profitable for the company. 

According to Desmond, about half of the event's revenue comes from sponsors, while the other half comes from ticket prices--both from general attendees, and start-ups that participate in Startup Alley, the exhibitor portion of the event. Those tickets cost between from $2,000 to $3,000.

Start-ups that want to participate in Startup Alley must be less than two years old, with less than $2.5 million in funding, according to TechCrunch. Though many of them have technically launched before, few have had much interaction with the public or media, so the event functions as a kind of coming-out party.

"In my mind, it's the perfect theater for people in love with start-ups to engage with each other and that's the way it was designed," Desmond says. "We always have to be very careful to remember this is about the entrepreneurs to give them the best opportunity to make partners, and meet investors."

"It can't get too much bigger than this, because it would begin to feel like a gigantic, out-of-control start-up event," he adds.

To some, it's already reached that point.

A Start-up Circus?

Startup Alley has a collegiate-like feel. Picture rush week during freshman year of college, or a job fair on steroids. Founders compete for attention, so there's a fair bit of theater involved. John Gonzalez, the founder and CEO of myWebroom.com, for instance, dressed up as Mario. Another dressed as Walter White from "Breaking Bad." 

Plenty of start-up founders I spoke with say the event is an effective place to network, recruit, meet VCs, and make partnerships. But as the event scales, Disrupt is losing its luster for some founders. It's too big and the competition for attention from media and VCs is overwhelming--if not altogether ridiculous.

One entrepreneur--who asked not to be named for this piece--says he pays to come to the event to network, but would never want to be an exhibitor at the event. "It would be bad for our brand," he says, referencing the costumes and outlandish stunts. "And it would make us look like just another start-up."

Another entrepreneur wrote of his regret about attending Disrupt in 2011:

There just wasn't much value. I talked to a bunch of folks and even some VCs. However, Startup Alley (for me anyways) had this aura of desperation. While not entirely uncommon for start-ups (we're desperate by nature, right?), many of the people I talked to were really just networking or interested in telling me about their service.

It's true--there are literally hundreds of start-ups in Startup Alley, and, after a while, it becomes difficult to distinguish between them. I tried counting them all on TechCrunch's website, but lost track after about 200.

The Credibility Question

This year the event's size, in addition to creating visibility issues for founders, also likely contributed to the most cringe-worthy moment. The organizers didn't vet or pre-screen against inappropriate presentations. So no one knew what was coming when last Sunday, an Australian duo presented "Titstare," a misogynistic and juvenile app that probably needs no other explanation.

"To some extent, 22-year-olds are going to do stupid things," Arrington said. 

"It was unfortunate," Desmond offered. "It doesn't represent us--we had 263 hackathon participants and it's not been our custom to ask people what they're doing." That, however, will change--at the next event, Desmond says TechCrunch editors will pre-screen participant presentations. 

Titstare wasn't the only controversial part of the event, either. This year, the winner of the "Startup Battlefield" was Layer, a messaging app--and a company Michael Arrington himself had invested in.

"Conflict of Interest 3.0: the winner of TechCrunch's vaunted Disrupt Battlefield startup competition is financially backed by TechCrunch's pugnacious founder, Michael Arrington--it is a matter of pure coincidence that Arrington judged the competition. How much longer are we going to take this seriously?" wrote Sam Biddle of ValleyWag.

When I reached out to TechCrunch for comment on the issue, co-editor Alexia Tsotsis responded in an email that these sorts of conflicts are a natural result of few seed investment vehicles in the Valley, with multiple limited partners, including Arrington himself and the CrunchFund. And when they arise--which they do often--TechCrunch handles them appropriately. 

"Arrington disclosed his Layer investment and informally recused himself from judging that specific startup onstage," she wrote. "What made Layer win was the overwhelming, near-unanimous position of the other judges, not our desire to capitulate to Mike. The CrunchFund conflict has happened before, with winners Shaker in 2011 and YourMechanic in 2012. Regalii, a YCombinator startup, had a clear conflict in judges David Lee and Chris Dixon--through SV Angel and Start Fund. "Our policy is transparency," she added. "Arrington did express his opinion, and we took it with a healthy dose of skepticism considering his disclosure and conflict."

The Future of Disrupt

There is a widespread belief among tech entrepreneurs that attending Disrupt is part of the road to start-up success--it's where you make your consumer debut and where you meet press and investors, all of which may be the catalyst your start-up needs to get to the "next step." And for some that may be true.

But Disrupt itself is a business--and that business needs to make money. A bigger, more raucous event may make it harder for your start-up to get attention, but that's not really TechCrunch's problem. After all, the events are only profitable when they scale because sponsors aren't particularly interested if it's only a couple hundred people. 

"There are an awful lot of start-up events that are too small," Desmond says. "The economics don't work out well."

Indeed. But a launch event that's too large and too outrageous comes with its own problems. The first things to go are exclusivity and seriousness--the very qualities that initially made Disrupt into the must-attend event of the year. Without those qualities, where's the value for entrepreneur who's in this game for the long haul?




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