Dear Startups: Here’s How to Stay Alive

I was watching this comment carefully as I thought I might have to delete it (due to people not understanding the arguments therein). It started rising to +2 or +3, so I stopped watching it. Now that I've checked again, I see that a few downvoters got it down to -1.

Since it is too late, I am happy to explain the thoughts in the above comment. I studied this area of economics from formal sources as well as having exposure to startups.

To summarize. One might think that if, say, a guy might be able to get a pizzeria off the ground, and it's 50/50, if it works he'll make a business with an enterprise value of $20,000 using his $5,000 investment, that's our assumption -- then if he wants to raise his sights and make the same investment, but this time is targeting $200,000 - his chances of success drop to 5%. And if he targets $2M then they drop to 0.5%. And if he targets $200M then they drop to $0.005%. If he targets $2B then they drop to $0.0005%. And if he targets $20B then it drops to $0.00005%. If he targtes $200B then it drops to 0.000005%

But 0.000005% is 1 in 20,000,000. There are 318 million people in America, so by those odds, the number of people in America who are capable of building a $200 billion business is exactly 15.

Yet there are more than 15 American companies that had those kinds of valuations in the past couple of years; Apple alone would account for 3 of them.

So with these kinds of large-scale successes, the risk-reward equation clearly doesn't actually work. And this ignores all of the home-run hits short of $200 billion. Clearly, risk does not increase at the same rate that reward does.

The risk-reward trade-off is just not a model that you can successfully employ when it comes to startups.

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Secondly (this is not directly related to the above) the world is super-connected. There is 0 chance that if I find a pizzeria run by some guy in the city with 1 location as a small business, that 14 months from now it will have 50 locations that he personally operates. But if you find some guy with 2,000 downloads today from the Google Play store, there is no reason this same guy can't make something else and get 200,000 downloads. That is a factor of 100.

So the whole IDEA of a "small-business" just doesn't apply to online startup-like economies. The only question is whether the guy who made a niche app with 2,000 users is even interested in trying to use his same skills making something innovative and new, which he gets good press for, but which addresses the whole global smartphone audience.

The thing that makes it a startup is this hyper-growth component, like whether he's trying to roll out at that scale.

If someone doesn't understand either of the two (quite distinct) arguments above, or has any type of comments or rebuttal, I can follow up. Thanks for your time.

The show is everything Big Bang Theory isn't.

BBT makes fun of stereotypes, in the way only outsiders can make fun of stereotypes: The jokes don't make sense, the writing seems to have no real compassion for the group that they are lampooning at all, and I've never actually seen people behave like the characters do.

Instead, SV makes sense for people in startups: It doesn't really spend most of its time making fun of how maladjusted startup workers are, like BBT does, but instead makes fun of the theater we all are surrounded by. By just turning the tech into star trek style technobabble, the show can focus on things that are relatable and real.

Take, for instance, a conversation they have, in an early episode of this year, about the problems of high valuations and down rounds. There were articles written about it that hit the very top of HN, because the conversation was so very real. The craziness you see in the GPs video? It seems deranged, but it's said by a character more than loosely based on Mark Cuban, and it's reflecting the values of the time when Cuban made his money! And his story covers a huge issue in entrepreneurship: Does the fact that you managed to get an amazing exit in one company really mean you will be any good later as a venture capitalist? Were you lucky or good?

If you take away all the laughs, the series tackles realistic problems all the time. So the series is not about easy laughs at the expense of people: It's a story about a culture, that happens to have laughs to make sure people that aren't interested in the culture are still entertained by it. Just like The Wire, it's not a documentary, but it sure seems to rhyme with reality.

Risk/reward is generally measured for a specific time frame, because there is the value of time.

>> it is not to a bootstrapper's advantage to publish what they're doing to people other than their customers

Good point.