Gary Vaynerchuk says that startups are so over-leveraged that they don’t really have businesses, they have VC arbitrage machines for the next fundraising. He suggests to young VC funded entrepreneurs that they should realize this and actually build a business focused on profit, not just appeasing VC’s who have no vested interest in the business.

Gary Vaynerchuk recently talked about building businesses with legendary Hollywood dealmaker Michael Ovitz at Summit.

This is the Easiest Time to Run Your Own Company

Running your own company is hard right? Well guess what, this is the easiest time to do it. The amount of fucking money that’s in the system and the amount of you that have bullshit businesses that actually aren’t businesses but are funded, being serious, this is something we have to talk about if you think it’s hard now.

One of the things that I’m most proud of is that from the day I started running my dad’s business 20 plus years ago to this moment I’ve been running a company and I’ve never had a credit line that I took from Wine Library. I never raised capital. I have paid my bills weekly in perpetuity. I have never lost six million dollars this year and did all my behavior to get enough CAC an LTV to get the next fundraising round.

Everybody’s So Over-Leveraged They Don’t Have Businesses

You do understand that everybody’s about to get smoked the fuck out right? Everybody’s so over-leveraged they don’t have businesses, they have VC arbitrage machines for the next fundraising. I’ll see you all working at Bank of America in a couple of years. It’s a hundred percent true. Let me say this I’m not sitting up here like I’m cool and I’m razzing you. I’m hoping that that hits you in a way that says maybe I should actually build a business, not something that appeases the VC’s who have no vested interest in my business to get the next fundraising round. That’s how you’ll navigate the shit, you’ll be practical.

One of the things I’m most fascinated by right now is there’s so much money in this system. If you follow where the money comes from that’s an interesting thing to debate in the first place, but let’s leave that for another day. I am fascinated by people thinking that not making more profit than expenses is not something you need to think about a lot more. I’m just watching people spend all their time on like you know influencer marketing and tack and M&A.

Influencers Are Going to Have to Go Get a Job

When the money dries out like they’re a lot of young people in the system. You didn’t live through 2007 as an operator, you were in college having fun. You didn’t live through 2001. We have never been this over-leveraged. When the dominoes fall and there’s no next fundraising round or when you’re an influencer and nobody’s got $8,000 for you to take a picture with a fucking toothpaste in your hand, it’s not gonna be fun to go from traveling the world as an influencer to no money in the system and you have to go get a job. I want people to be prepared and everyone’s living in la-la land. We’ve been living in la-la land for a decade which makes me nervous as fuck.