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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

#71

Post by jt2190 »

mindcrime wrote: post #50
morgante wrote: post #38

Earlier quoted context omitted.

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…

Startups are companies designed to grow fast. I would disagree with this terminology. I posit that a "startup" is a company designed to grow big . How fast it gets there is an implementation detail. Many startups aim for fast growth, but not all do. To me, the distinction between "the corner laundromat" and a slow-growing startup is that the startup still intends to be a Really Big Company.

  > How fast it gets there is an implementation detail.
Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company?

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

#72

Post by morgante »

roymurdock wrote: post #69
morgante wrote: post #61

Earlier quoted context omitted.

> You're leaving out all of the companies between the two extreme poles that you just set down. Of course there are lots of nuances. I wouldn't say that Atlassian is an extreme pole though—it actually contradicts a lot of the narratives people tell about startups. > What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. TC is absolutely…

I see your thesis - that "startup" implies a desire to be big some day. I'd assume that most small business owners intend to do the best they can and make their companies as successful as possible. But who can really know these things. Maybe we can agree on "slow startups" as a good way to describe companies slogging through this new investment environment.

Yes, "slow startups" is definitely a good term.

In general, I don't think most small business owners have any goal or aspiration to "make their companies as successful as possible" if that means turning them into a huge corporation. Most of my relatives own small businesses and none of them aspire to grow huge. In fact, my mother specifically sold her stake in her original landscaping company when it was getting too big (at 30 employees) to open a new, smaller one.

If you look at surveys of small business owners, most of them go into it from a desire to have more flexibility or to be their own boss—not necessarily to create a large and financially rewarding company. In fact, exponential growth is frequently at odds with the primary goals of small business owners.

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

#73

Post by ChuckMcM »

dsugarman wrote: post #57

> If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I’d be worried. That's the most beautifully I've heard this thought articulated. I constantly hear people in SV talk publically talk about how they're living years in the future due to getting services from startups that haven't yet hit other markets. These people are very wealth…

I agree with that, but I also have the experience of visiting my sister in 1995 and asking her if she understood the funny string at the bottom of a Toyota commercial that was a URL. She did not. And her only email address was one she had for work, because everyone else either wrote letters or talked with her on the phone.

The point I'm trying to make is that many things of the current wave will pass into obscurity and perhaps ridicule, however some core concepts may emerge as foundational for the next wave. Further, experience with those concepts in the Bay Area may inform what is core and what isn't, and so launch better products.

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

#74

Post by mindcrime »

jt2190 wrote: post #71
mindcrime wrote: post #50

Earlier quoted context omitted.

Startups are companies designed to grow fast. I would disagree with this terminology. I posit that a "startup" is a company designed to grow big . How fast it gets there is an implementation detail. Many startups aim for fast growth, but not all do. To me, the distinction between "the corner laundromat" and a slow-growing startup is that the startup still intends to be a Really Big Company.

> How fast it gets there is an implementation detail. Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company?

Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company?

If you define "investors" as only VC's then I'd say that's a fair point. But just to paint a different scenario... for us, the only investors are the founders (so far). So why invest in building a company as opposed to putting that money in index funds? I can't speak for all the others, but besides still expecting a larger financial reward in the end, a lot of it is about the joy in the process of building something, and about having the opportunity to do things our own way. This way we get to build a company based on the principles we believe in and that will operate by our standards. And to top it all off, I would say that even if we fail and never make a dime, we'll all have benefited from the process itself simply in terms of learning and experience.

So yeah, sure, VC's want "fast" at all costs. No argument there. I guess what I'm saying is, the "take VC money and grow fast model isn't the only model."

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

#75

Post by nostrademons »

dsugarman wrote: post #57

> If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I’d be worried. That's the most beautifully I've heard this thought articulated. I constantly hear people in SV talk publically talk about how they're living years in the future due to getting services from startups that haven't yet hit other markets. These people are very wealth…

The idea behind "living in the future" is that products generally get cheaper and easier to use as early adopters contribute feedback, founders learn more about their market, and outside capital puts more minds to work on the problem. Hence, products that are only for "wealthy folks in SV with no free time" eventually become cheap enough that everybody can use them.

Uber certainly followed this growth curve - it started out as a service to call a black car to drive you around town, something that even the founders called a luxury for 1%ers. So did computers as a whole ("I think there is a world market for maybe five computers." - Thomas Watson, 1943), smartphones (at $600, the iPhone was considered a toy for luxury consumers when it came out), Facebook (initially only for Harvard University undergraduates), and LinkedIn (started with wealthy professionals who had lots of contacts).

It doesn't mean all startup ideas for wealthy, time-poor consumers will cross the chasm, but it seems to be a lot more feasible to go from wealthy consumers to poor ones than the reverse.

(Interestingly, it's the opposite story with B2B startups, where it's easier to add functionality than cut prices or improve ease of use. Hence the low end eating the high end, per Innovator's Dilemma. Actually, this effect in B2B markets may be behind the cost-reduction effect in B2C markets, as consumer firms start finding cheaper alternative suppliers that have recently moved up-market.)

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

#76

Post by mathattack »

ojbyrne wrote: post #49
mathattack wrote: post #7

Earlier quoted context omitted.

I am a cynic about VCs "Talking their books" but this is a little different: - The stock market is off 20%. - Very few IPOs. - Many hot IPOs are under the offering price. - Most of the public market investors that have entered late in the game (Fidelity, etc) are marking down their positions, and holding off on new investments. Every solid company should have a "What would we need to do to get cashflow positive?" sce…

Which stock market is off 20%? When I look at the Dow or S & P , I see a roughly 10-12% decline from its peak value. And after 2 days of up 2%, suddenly there's a headline saying "the bulls are back."

NASDAQ's high to low was approximately 20%. After today's rally it's perhaps 16%? NASDAQ is the better index since that's the more likely liquidity source.

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

#77

Post by CPLX »

nostrademons wrote: post #75
dsugarman wrote: post #57

> If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I’d be worried. That's the most beautifully I've heard this thought articulated. I constantly hear people in SV talk publically talk about how they're living years in the future due to getting services from startups that haven't yet hit other markets. These people are very wealth…

The idea behind "living in the future" is that products generally get cheaper and easier to use as early adopters contribute feedback, founders learn more about their market, and outside capital puts more minds to work on the problem. Hence, products that are only for "wealthy folks in SV with no free time" eventually become cheap enough that everybody can use them. Uber certainly followed this growth curve - it star…

> it seems to be a lot more feasible to go from wealthy consumers to poor ones than the reverse

This appears to be the crux of your comment, and it's an excellent point.

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

#78

Post by aledalgrande »

This is based on the "Techcrunch" concept that being successful and continuing business for a startup depends heavily on external funds.

That couldn't be farther from the truth, for a real startup with a real business. Maybe growth will not be as fast without VC funds, but I don't think real businesses will notice shrinking investments.

Correct me if I'm wrong.

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

#79

Post by rco8786 »

Ftuuky wrote: post #20

What? One of the advice is to get cash flow positive with the money you already have. Isn't that basic knowledge? You can't spend more than you have and you only ask for other people's money when you don't need it. Idk, maybe this is an american thing, with all the capital you have but here (Portugal) you can't get series A funding without being at least cash flow positive, no way.

I'd venture to guess that the vast, vast majority of American startups that raise a series A are not cash flow positive.
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