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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

#121

Post by mathattack »

eldavido wrote: post #47

What goes unspoken is how tiny the overall effect of this will be. Yes, it will bring some concentrated pain to investors, CEOs, and employees of lots of companies. But how many people will be genuinely, life-alteringly affected by this? 1000? Maybe a few thousand? 1-2% of SF's population? By way of comparison Google has what, 50,000 employees? I keep having to remind myself that the big companies are the elephants i…

There are hints of systemic risk. Look at what's happening in Financial Services. Many firms (example: Deutsche Bank) are trading below their bottom in the financial crisis. A banking crash will have a big impact on real estate.

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

#122

Post by mathattack »

davidjgraph wrote: post #53
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.

When the market takes off again, I'm sure you'll see the flip-side posts from VCs, explaining how startups need to push for higher valuation and better terms, proving you wrong 8-).

It depends on which side of the transaction they are. :-) New investors will keep pushing for lower prices, existing investors will talk up the values!

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

#123

Post by pklausler »

mathattack wrote: post #120
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…

Yes - much of the world is indeed willing to wait an hour to save a few dollars. One lesson from 2001 is that Startups who Serve Startups tend to get hurt in the downturn as their customer are unable to pay them. Case in point Exodus. [0] This is especially relevant given the "Build something you want to use yourself" ethos. The flip side is that if you make something that saves General Mills, Coca-Cola and P&G money…

It's "case in point".

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

#124

Post by nostrademons »

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

Also relevant:

https://www.youtube.com/watch?v=s9Bg4UU76so

"I need you to start throwing off cash as quickly as possible."

"But you said generating revenue was exactly what we shouldn't be doing."

"But now that I'm spelling 'billion' with an 'm', I'm saying 'Do the exact opposite.'"

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

#125

Post by rokhayakebe »

lowglow wrote: post #63
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've called these the 10% startups. They typically only serve people in the top ~10% of earners in the US.

Most lawyers serve the top 10%, yet they are here in good and bad times.

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

#126

Post by duaneb »

eldavido wrote: post #47

What goes unspoken is how tiny the overall effect of this will be. Yes, it will bring some concentrated pain to investors, CEOs, and employees of lots of companies. But how many people will be genuinely, life-alteringly affected by this? 1000? Maybe a few thousand? 1-2% of SF's population? By way of comparison Google has what, 50,000 employees? I keep having to remind myself that the big companies are the elephants i…

> 1000? Maybe a few thousand?

Do you have a source for these numbers? Because it looks a lot like they were just pulled out of your ass.

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

#127

Post by mjevans »

throwawayank333 wrote: post #37
rpgmaker wrote: post #31

Earlier quoted context omitted.

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.

Office Space should be /required viewing/ in high school. That movie taught me more about what to expect in the typical American office than any other experience in my life.

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

#128

Post by rokhayakebe »

nostrademons wrote: post #43
tdaltonc wrote: post #27

Earlier quoted context omitted.

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

There is no "objective way" when it comes markets, there is only what the market will give you. If the market will give you $450M for 5% of a product that doesn't work (a la Theranos), then objectively you're worth $9B, at least until you go bankrupt and then you're worth nothing. If the market is dead but you somehow manage to IPO anyway, save the company, and sell for $1.5B, you're worth $1.5B (a la LoudCloud/Opswa…

So technically you can raise $1M for 0.1% of your startup and give the VC some crazy 20x liquidation preference. Now the market has you at $1B in valuation.

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

#129

Post by mmaunder »

rsp1984 wrote: post #116
mmaunder wrote: post #66

So the above is obviously written through a VC lens. Through an entrepreneur's lens - who also survived the dot-com bust (at etoys.com) and has since run several failed and now successful businesses - I'd add the following: The most valuable advice in this post reminds me of Marc A's awesome blog entry. Quote: "Companies that have a retention problem usually have a winning problem. Or rather, a "not winning" problem.…

Good points here but lots of questions remain: What happens when you have competition with 10x or 50x the VC funding? What happens to long-term product development when all you do is short term / small-scale improvements in order to 'better serve' your customers? What happens to your core IP advantage that may be several years now but will have disappeared after doing long stretches of "feature" developments to chase…

  What happens when you have competition with 
  10x or 50x the VC funding?
Money doesn't solve all problems. I've been in a startup that raised $250M and one that raised $55M where all innovation had stalled. Don't assume they're kicking ass because they're rich. There are plenty of professional money burners out there. But if you're faced with a competitor that has their act together (I am and they've raised 360 times what I have) you need to differentiate and move quickly. You'd be surprised the constraints that some startups operate under e.g. boards who want them to be something that you're not even if what you're doing is clearly more lucrative. Or legacy (even in startups) customers they brought on free where it would be akward or embarrasing to explain to them why they're now doing what you're doing in the way you're doing it.

  What happens to long-term product development when all 
  you do is short term / small-scale improvements in order to
  'better serve' your customers?
Don't do that. Always play the long game.

  What happens to your core IP advantage that may be several 
  years now but will have disappeared after doing long 
  stretches of "feature" developments to chase after customers?
I have no idea what you're talking about. Sounds like you've misinterpreted 'serving customers' as some kind of short sighted feature focused strategy?

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

#130

Post by poof131 »

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…

I’m not sure I agree 100% with your thesis on the B2B side.

I’ve seen a few companies recently that seem to be getting strangled by the long tail. They have large numbers of low paying, price conscious customers draining resources. They can’t raise prices to a level that enterprises would be happy to pay since this would kill their established customers. Enterprises don’t want to pay a different higher price, why would they. The companies usually skimp on sales, especially field sales, so they have trouble competing in larger deals. And they can become arrogant that their niche solution, while better at one thing, can take on larger platforms that solve multiple problems.

Not saying your points are invalid, just that there seems to be a bit more at play and going from the long tail to the enterprise doesn’t seem trivial and shouldn’t be an after thought. In B2B it does seem like all the biggest winners have generally nailed the enterprise, but not necessarily the long tail.

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