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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

#131

Post by rokhayakebe »

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.

I agree. It's more about getting big than growing fast. A startup could spend years perfecting its model and technology before going full force.

Perfect example: YC funds startups only. YC funded a company working to cure HIV. That is going to take a decade probably. When they are ready they will be big in an instant.

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

#133

Post by melted »

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

Same thing is easy to see in established companies: management is more inclined to throw piles of cash at businesses that don't make money while at the same time cutting costs in the "cash cow" divisions to show better growth numbers on the balance sheet.

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

#134

Post by rsp1984 »

mmaunder wrote: post #129
rsp1984 wrote: post #116

Earlier quoted context omitted.

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 w…

Well often times as a tech entrepreneur you have the choice between

a) working on something that generates revenue in the short term (by adding features, improving the interface, improving your market reach or even doing some service work) and

b) something of more impact that generates revenue in the long-term (like investing in R&D, creating entire new products, etc..).

Note that b) most often does not include a), i.e. choosing b) explicitly means that you're foregoing some short term revenue opportunities for possibly larger revenue down the road.

This is precisely the case for VC (which you've argued against) so I was interested in how you'd solve this dilemma.

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

#136

Post by nostrademons »

poof131 wrote: post #130
nostrademons wrote: post #75

Earlier quoted context omitted.

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 wou…

Central to the Innovator's Dilemma thesis is that the company has to be profitable on the low end. The idea is that by going after low-margin customers, it forces them to cut their cost structure to the point where this is profitable, usually by investing heavily in automation & UX. Then when they want to move upmarket, this cost structure is a competitive advantage they can leverage.

Note that successful applications of this theory usually don't try to sell the same low-margin, self-service product to enterprises. Rather, they create a new "enterprise" product, priced according to what enterprises will pay. They get to leverage all the infrastructure, R&D costs, and ecosystem that's already gone into the mass-market product, but then apply that (with some additional features, and usually hardened security & reliability) to beat incumbent enterprise software on price.

Curious which companies you're thinking of - I can think of a few other mass market SaaS companies that have stumbled recently for the reasons you mentioned, but they have other things going on too.

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

#139

Post by rokhayakebe »

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.

That is a great but that can stop you from producing an Uber, Facebook, or new drugs, a Tesla, an Apple, and more.

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

#140

Post by mathattack »

pklausler wrote: post #123
mathattack wrote: post #120

Earlier quoted context omitted.

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".

Merci!
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