Real vs. Fake Startups: A Cognitive Reconstruction of the Essence of Entrepreneurship

Deep thoughts on AI and aspirations —— ByteDance Deep Thinking Circle

Have you ever wondered whether what you’re doing is a real startup or a fake one? This isn’t a moral judgment, but a fundamental question about resource allocation efficiency. Recently I came across an interview with two Y Combinator partners, Dalton Caldwell and Michael Seibel, who discussed the heart-wrenching topic of “real startups vs. Fake startups” in a remarkably straightforward way. After listening, I suddenly realized that this seemingly simple dichotomy actually touches on the essence of entrepreneurship: are we creating value, or are we performing entrepreneurship?

The reason I find this topic worth exploring in depth isn’t to extract some secret to startup success. What really concerns me is the deeper cognitive trap it reveals. In today’s highly developed startup ecosystem, we have too many templates and paradigms for “what a startup should look like.” These templates themselves aren’t problematic, but when people start imitating these surface forms as a substitute for genuine value creation, a dangerous misalignment occurs. This misalignment not only wastes the entrepreneur’s own time, but more importantly, it distorts the resource allocation mechanism of the entire startup ecosystem.

Cargo Culting: The Trap of Imitation in Startups

Dalton mentioned a particularly apt concept in the interview: cargo culting. This term originates from a real phenomenon on Pacific islands during World War II. Local natives, seeing Allied aircraft bring vast quantities of supplies, believed that by imitating Allied behavior—building fake runways, wearing wooden headphones, waving signal batons—they could summon aircraft to land. This metaphor fits startups perfectly.

We can understand this phenomenon as a “reversal of causality.” Successful startups do have beautiful offices, provide free lunch, and have comprehensive benefit systems, but these are results of success, not causes of it. The real causal chain is: they built outstanding products, gained market recognition, secured ample funding, and then could provide these benefits. But cargo culting entrepreneurs see the logic in reverse: as long as I first establish these external forms, success will naturally follow.

Dalton gave an extreme but vivid example to describe fake startups: never writing code, never having a real product, but hiring a bunch of people. They raised money, but have neither product nor customers. The whole thing is like performance art, like a contemporary artist trying to deconstruct startup culture. Michael used a particularly apt metaphor: it’s like watching the Broadway musical Hamilton instead of actually experiencing that history. The whole thing is a performance, not reality.

This reminds me of the sociological concept of “ritualization.” When a behavior is repeated enough times, people gradually forget the original purpose of that behavior and treat performing the behavior itself as the goal. There are many such ritualized behaviors in the startup ecosystem: participating in Demo Days, creating polished pitch decks, sharing startup stories on social media, attending various startup events. These behaviors themselves are fine, but when they become the main content of entrepreneurship rather than serving actual product development and user growth, entrepreneurship becomes a ritual performance.

The deeper problem is that this cargo culting is often unconscious. As Dalton said, humans are social animals, and we learn by observing what people around us are doing. If your understanding of startup culture comes entirely from Twitter or media reports, then depending on who you follow, you might form a distorted perception of entrepreneurship. You see founders on magazine covers, speaking at conferences, company valuations skyrocketing, but you don’t see the countless sleepless nights, difficult product iterations, and pain of customer rejection behind it all. So you’ll unconsciously imitate those superficial things, thinking that’s what entrepreneurship is. You might not even realize you’re performing; you’re just trying to follow what others appear to be doing.

The Paradox of Starting Conditions and Urgency

Michael made a particularly profound observation: people fall into fake startups often because of “poor starting conditions but strong urgency.” This combination is particularly dangerous. When your starting conditions are bad—say you’re in the wrong place, can’t work full-time—but you feel you must start immediately, that’s when you’re most likely to fall into the trap of fake startups.

There’s a deep psychological mechanism behind this. When people face unfavorable starting conditions, there are two coping strategies. The first is to improve the starting conditions themselves, such as moving to a city with a better startup ecosystem, committing full-time, finding suitable co-founders. The second is to compensate for the disadvantage of the starting point by “trying harder,” such as creating a pitch deck to raise money even though you don’t yet know what you’re doing.

On the surface, the second strategy demonstrates the entrepreneur’s resilience and perseverance—isn’t that good? But Michael’s insight is that perseverance itself is a scarce resource, and different ways of using it produce completely different leverage effects. Using perseverance to fight against poor starting conditions is like forcibly planting seeds on land full of rocks where nothing can grow. You might indeed achieve some output through extraordinary effort, but the efficiency of that output is extremely low. But if you use the same perseverance to improve starting conditions—say spending three months finding truly suitable co-founders, or moving to the Bay Area to join a better startup network—that’s a higher-leverage use of perseverance.

There’s an interesting paradox here: those who most need to “start immediately” often should least start immediately. Urgency usually comes from two sources. One is external pressure, such as seeing peers all starting companies, feeling like you’ve missed a trend, investors showing interest. The other is internal anxiety, such as worrying that someone will steal your idea first, feeling that your age means the opportunity window is closing. But none of these pressures are real market signals; they’re psychological urgency, not business urgency.

Real business urgency should come from market demand itself. If you’ve discovered a real user pain point, and that pain point is big enough and urgent enough, then even if you spend three months improving starting conditions, that pain point won’t disappear. Conversely, if an opportunity requires you to seize it immediately under insufficient starting conditions or else miss it, then that opportunity itself may not be solid enough. This is what Michael calls “doing high-leverage work”—improving starting conditions is often the highest-leverage work because it makes all subsequent efforts more effective.

The Mythologization of Success and Selective Cognition

Dalton particularly emphasized one point that I think hits at the cognitive root of fake startups: don’t create myths about successful companies and then use those myths as your north star. He gave a very specific example. Many technical entrepreneurs believe Google never did marketing, never did sales, and everything was organic product growth. So they also refuse to do sales and marketing, believing “good products speak for themselves.” But this is a completely false myth.

In fact, Google is one of the best sales companies in the world because it has a massive advertising business. Similarly, Stripe is perceived as a purely self-service product, but it’s actually one of the best enterprise payment software companies in the world, with a strong sales team serving major clients. How do these cognitive biases form? I think several mechanisms are at work.

First is “survivorship bias.” The successful company cases we see are companies that have already succeeded. In the early days they may have done lots of “dirty work” we don’t see—cold emails, cold calls, selling to customers one by one. But when they succeed, these early difficult attempts are downplayed, replaced by a more glamorous narrative: “We focused on the product, and users naturally came.” The founders aren’t necessarily lying; it’s just that memories after success have already gone through a round of reinterpretation.

Second is “visibility bias.” Certain characteristics of successful companies are highly visible—such as their office environment, corporate culture, brand image—while others are invisible—such as their internal sales processes, operational details, failed attempts. Media coverage also tends to focus on elements that are more visually impactful and easier to spread. The result is that the image of successful companies people see is severely simplified and beautified.

Third is “confirmation bias.” When entrepreneurs already have certain beliefs—such as “tech startups don’t need to do sales”—they tend to seek and interpret evidence that supports this belief while ignoring or downplaying contrary evidence. So even if they hear that Google has a strong sales team, they’ll find reasons to say “that’s because Google does advertising business, we do technical products, it’s different.”

The overlay of these cognitive biases creates a series of myths about successful startups. And the most dangerous thing about these myths is that they’re often “partially true.” Google does have a strong technical culture, Stripe’s product is indeed easy to use. But the problem is that these “partial truths” are amplified into “the whole truth,” while equally important but less glamorous parts—sales, operations, customer service—are systematically ignored.

The Core of Real Startups: Doing Unnatural Things

So how do you avoid falling into fake startups? The core advice Dalton and Michael give is surprisingly simple: do some things that are unnatural for you. Michael said it clearly: the most helpful advice should be things you would never think to do on your own. If it’s just telling you to do what you would do anyway, that’s not useful.

Behind this advice is a profound insight: success in startups requires multidimensional capabilities, and most people only have talent in a few dimensions. Technical founders are good at writing code, optimizing architecture, designing systems, but may not be good at sales, marketing, and storytelling. Business-background founders may be great at fundraising, building relationships, branding, but may not be sensitive enough to product development and technical details. Everyone has their comfort zone, and the key to real startups is that you must constantly step out of that comfort zone.

Dalton gave a good example. YC tends to select teams that are more willing to focus on building products rather than crazily fundraising—teams that lean more toward “real startups.” Therefore, the advice YC gives often leans toward sales and revenue, which may surprise many technical teams. They might expect YC to give them more advice about technical architecture or product design, but YC is more focused on pushing them to do sales, talk to customers, actively promote their products.

Why? Because in the things they’re good at, they’re already doing well and don’t need much guidance. YC’s value is in making excellent teams better at things they’re not good at. If YC just told technical teams “you should write better code,” that’s completely useless because that’s what they already know and are doing. But telling them “you need to talk to at least ten potential customers every week” might be transformative advice because that’s not something they would naturally do.

This reminds me of a broader principle: growth often happens at the boundaries, not the center. If you imagine a startup team’s capabilities as a multidimensional space, their strengths are dimensions in that space that have already extended far, while weaknesses are dimensions that are still short. Real growth opportunities aren’t in improving strengths from 90 to 95 points, but in improving weaknesses from 30 to 60 points. Because the latter has a much greater impact on overall competitiveness.

Dalton also particularly emphasized one point: the best tech companies are also the best marketing companies, whether you’re willing to admit it or not. He listed several examples: Stripe is good at marketing, Google is good at marketing, PostHog does lots of developer marketing. These companies can’t just sit in ivory towers waiting for others to discover them; they must actively tell the world they exist. If no one knows your technology exists, that’s basically game over.

This observation made me realize that “good products speak for themselves” might be one of the most harmful clichés in the startup world. It’s not completely wrong—there are indeed a very few products good enough to spread purely by word of mouth—but it sends a dangerous signal to most entrepreneurs: you don’t need to actively market, just focus on the product and that’s enough. The reality is that even the best products need to be seen, understood, and spread. And in this era of information overload, passive waiting is almost equivalent to invisibility.

Returning from Ritual to Substance

After listening to this interview, I gained some new insights about startups. The difference between real and fake startups essentially isn’t about what technology you use, what product you make, or where you have your office, but whether you’re honestly facing reality, whether you’re doing things that truly create value.

Fake startups exist largely because startup culture has been over-symbolized. We’ve created too many symbols and rituals about what startups “should look like”: polished pitch decks, trendy office spaces, social media presence, participating in various startup events. These symbols themselves aren’t problematic, but when people start substituting performing these rituals for genuine value creation, entrepreneurship becomes a performance.

The deeper problem is that this symbolization creates a false feedback mechanism. In the real market, feedback is brutal but clear: users either use your product or they don’t; they either pay or they don’t. But in the symbolized startup ecosystem, you can get positive feedback through other means: media coverage, social media likes, investor interest, joining accelerators. This feedback may be completely disconnected from real market success, but it’s enough to give entrepreneurs the illusion that “I’m on the right track.”

This reminds me of philosopher Baudrillard’s concept of “simulation.” In his view, contemporary society is full of various “simulacra”—they don’t imitate reality; they create an alternative reality, and this alternative reality is more real than reality itself. Fake startups are such a simulation. They create a world that “looks like startups,” and in this world, you do all the things “entrepreneurs should do,” but these things may have nothing to do with genuine value creation.

So how do you break this simulation? I think the key is to re-establish direct connection with the real market. Ask yourself a few brutal but necessary questions: Of the work I did last week, how much actually advanced product progress? Of the users I contacted, how many are truly willing to pay for my product? Of the meetings I attended and social media content I posted, how much actually generated business value? If you answer these questions honestly, you’ll quickly discover whether you’re doing a real or fake startup.

I particularly agree with Michael’s final statement: if you find yourself in the fake startup camp, do something to change it. It’s never too late. This isn’t about morality, only efficiency. Startups are hard enough, success rates are already low. If we’re even wrong about direction, spending most of our energy on performance rather than creation, then the probability of success becomes even lower.

In a sense, the distinction between real and fake startups reflects two fundamentally different worldviews. Fake startups believe in the power of symbols—as long as I do all the surface things right, success will come. Real startups believe in the power of causality—only if I truly solve user problems and create value will the market give returns. The former is magical thinking, the latter is rational thinking.

In this era when startups are highly romanticized and symbolized, maintaining sensitivity to reality becomes especially important. Less pursuit of external symbols, more focus on intrinsic value. Less performance, more practical work. This may not make you an immediate media darling, but in the long run, this is the only path to genuine success. After all, startups aren’t a show; they’re a sustained journey of value creation. Those who can laugh last are often not those with the most glamorous start, but those who can persist in doing the right things.