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Dear Startups: Here’s How to Stay Alive

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Re: Dear Startups: Here’s How to Stay Alive

#31

Post by rpgmaker »

sharkweek wrote: post #18
roymurdock wrote: post #4

You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

Huh, Gabe is on that show. How good is that tv show anyways? I've been meaning to binge watch it but it seems like its raison d'être is to take cheap shots at SV.

Re: Dear Startups: Here’s How to Stay Alive

#32

Post by gyardley »

tarr11 wrote: post #3

The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.

Oh, it's decent advice for right now.

Of course, you probably need that decent advice because you listened to your VCs' previous decent advice in better economic conditions - "don't worry about profit, just grow grow grow as fast as you can."

The cynical side of me thinks that it's this flip-flopping between two extremes that ends up disproportionately benefitting investors, and that entrepreneurs would be better served by always assuming economic conditions will change and preparing accordingly.

Re: Dear Startups: Here’s How to Stay Alive

#33

Post by throwawayank333 »

Disruptive_Dave wrote: post #23
sharkweek wrote: post #18

Earlier quoted context omitted.

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

Out of every scene in those two seasons, no sentiment captured what I've witnessed in startups as precisely as this one. Straight up perfect. I wonder who was the main advisor for that speech (this was pre-Dick Costolo, I believe).

It is a ridiculous sentiment, but my startup has had revenue from early on, and I've talked to investors who have wanted to value us on revenue multiples because of that - whereas without having any revenue they would have taken a guess at our potential. (They'd have had to, they can't apply a multiple to $0!)

It's stupid, $2000/month in revenue shouldn't mean you are valued at less than if you had $0/month, but I can understand why some founders don't want to have any at all - in order to not have the more silly investors be distracted by looking at it.

There is a little truth to what he's saying - Once you have more than $0 in revenue, you have to make that number go up every month to keep investors happy and have nice numbers to bring in new ones, which makes it harder for the startup to invest in longer term projects that could bring much more revenue but with a slower buildup.

Re: Dear Startups: Here’s How to Stay Alive

#34

Post by ojbyrne »

rpgmaker wrote: post #31
sharkweek wrote: post #18

Earlier quoted context omitted.

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

Huh, Gabe is on that show. How good is that tv show anyways? I've been meaning to binge watch it but it seems like its raison d'être is to take cheap shots at SV.

SV deserves some satire, and a lot of the shots aren't really that cheap, they're dead on.

Re: Dear Startups: Here’s How to Stay Alive

#35

Post by ojbyrne »

sharkweek wrote: post #18
roymurdock wrote: post #4

You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

And this article's "moon shots" are the new "pure plays."

Re: Dear Startups: Here’s How to Stay Alive

#36

Post by rcarrigan87 »

tdaltonc wrote: post #27
tarr11 wrote: post #3

The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.

Is there no objective way to tell if things are really cooling? Or for what types of startups things cooling?

I can see B-2-C apps, anything social, chat, or apps where the monetization strategy is primarily advertising revenue running into trouble raising money.

Good B-2-B biz most likely still get funded.

Re: Dear Startups: Here’s How to Stay Alive

#37

Post by throwawayank333 »

rpgmaker wrote: post #31
sharkweek wrote: post #18

Earlier quoted context omitted.

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

Huh, Gabe is on that show. How good is that tv show anyways? I've been meaning to binge watch it but it seems like its raison d'être is to take cheap shots at SV.

It's very, very good. Mike Judge isn't the biggest fan of Silicon Valley, but he knows it well. (See Office Space for another example of that).

It might seem like cheap shots if you have only seen short clips of it though.

Re: Dear Startups: Here’s How to Stay Alive

#38

Post by morgante »

roymurdock wrote: post #4

You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…

Can you really not tell the difference between the corner laundromat (a profitable small business) and Atlassian (a startup which was profitable for most of its history)?

Startups are companies designed to grow fast. [1] Frequently, that means spending more than comes in but it's definitely not a prerequisite.

Likewise, there are plenty of small businesses which take years to reach profitability (some never do)—that doesn't magically make them a startup.

Aspiring towards profitability does not mean abandoning plans for growth (if anything, it often means doubling down on revenue growth). Small businesses don't double in size, startups do. Very little of what's relevant to my mom's small landscaping business is relevant to a technology startup, even if both are aiming to be profitable.

What benefit do derive from purposefully distorting terminology?

[1] http://www.paulgraham.com/growth.html

Re: Dear Startups: Here’s How to Stay Alive

#39

Post by Shengbo »

rpgmaker wrote: post #31
sharkweek wrote: post #18

Earlier quoted context omitted.

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo

Huh, Gabe is on that show. How good is that tv show anyways? I've been meaning to binge watch it but it seems like its raison d'être is to take cheap shots at SV.

I haven't heard any complaints, the humour is on point, the characters are great and it's even more amusing if you have some insight into how ridiculous certain things in real life SV are. This bit is definitely my favorite: https://www.youtube.com/watch?v=IJIAOosI6js

Re: Dear Startups: Here’s How to Stay Alive

#40

Post by rhino369 »

sbov wrote: post #26
bkjelden wrote: post #14

Earlier quoted context omitted.

Scaling without revenue makes sense if you're in an industry with strong network externalities or large economies of scale. In those cases, expensive customer acquisition is okay because customers have a very high lifetime value. During the "unicorn boom", I think we all had this belief that network externalities were very common in tech - a belief driven by the rise of facebook, google, and others. But now we're rea…

How can you calculate lifetime value without revenue?

Estimated revenue for the future. It's really tough, but even using revenue for a start up is very tough. Your growth rate is essentially estimating future revenue.
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