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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

#141

Post by nostrademons »

rokhayakebe wrote: post #128
nostrademons wrote: post #43

Earlier quoted context omitted.

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.

Exactly, and several unicorns are doing things exactly like that:

http://blog.samaltman.com/the-tech-bust-of-2015

I could drop the market cap of Google down to $3.4M right now. All I have to do is sell one of my shares for $0.01. The thing is, it would pop right back up again to $483B within a few milliseconds, and I'd just be out $690, so there's kinda no point to it.

(Pedantic note, since I know there's gonna be someone in the financial industry that corrects me: no, I couldn't, technically. When I put in a sell order, it goes into the order book, and buyers are required by law to take the best offer, which is probably more than mine. I'd have to place my order at a time when there are no outstanding limit offers. This has actually happened during flash crashes and technical glitches, but is not a normal occurrence.)

Privately traded companies are similar, but because there's less liquidity, the price doesn't necessarily correct on any reasonably time scale.

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

#142

Post by rokhayakebe »

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.…

But here is the thing: it's the same 8-14 working hours. If your product/company has the potential, why spend those same hours targeting $x million, when you could target 100x. You could be shorting yourself and your team out of several millions.

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

#143

Post by mmaunder »

rsp1984 wrote: post #134
mmaunder wrote: post #129

Earlier quoted context omitted.

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…

I think we're in two different realities here. You've misinterpreted what I've said. I've raised VC. We really seem to be missing each other. I don't agree with much of the way you see the world.

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

#144

Post by ransom1538 »

dasil003 wrote: post #107
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…

Unfortunately I don't have numbers, but "a few thousand" strikes me as low.

Yahoo had around ~11,700, they did follow through the cuts of %10 last week. That is 1100 right out the gate. Yahoo is huge as far as local employee count. Google probably wont bother doing cuts. Facebook wont bother. Apple maybe a few low level poeple. HP will cut to the bone [1]. There are 800k people stuffed in sf. For the cuts in SF (not all SV) to matter, I would estimate 20% job cuts would be required. That is 160k jobs. We wont get to 160k job loses. Not even close.

http://www.businessinsider.com/hp-layoffs-hit-on-monday-more...

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

#145

Post by [deleted] »

dasil003 wrote: post #107
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…

Unfortunately I don't have numbers, but "a few thousand" strikes me as low.

[deleted]

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

#146

Post by jacalata »

georgemcbay wrote: post #115
zepto wrote: post #90

Earlier quoted context omitted.

Given that iOS has a 40%+ market share in the US, no.

The market for smartphones is only about mid-60% of all Americans, though, from what I've read. So still not 10%, but more like 25%-ish.

Well, the original comment was "10% of earners" and I'd bet that smartphone penetration is higher among earners (eg 20% of Americans are under 14, 0% of them are earners and ??~10% of them have a smartphone). So you could perhaps push it up to more like 1/3 earners use iOS, which is starting to be a healthy potential market share.

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

#147

Post by [deleted] »

malisper wrote: post #68
cubano wrote: post #64

Earlier quoted context omitted.

This seems pretty objective, to me at least. [1] "The latest data from PitchBook show that VC investing in U.S. companies dipped to $9.3 billion in the first quarter of 2016, down from $17.6 billion in the fourth quarter. "There's significant uncertainty in the market right now and (we) would advise companies looking to raise capital to close quick and — while financing is available — maybe close on more capital than…

> VC investing in U.S. companies dipped to $9.3 billion in the first quarter of 2016, down from $17.6 billion in the fourth quarter. How is the first quarter of 2016 measured? We're only half way through it.

[deleted]

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

#148

Post by kevan »

rokhayakebe wrote: post #128
nostrademons wrote: post #43

Earlier quoted context omitted.

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.

Yep, 37 signals recently did something like that [1]

[1] https://signalvnoise.com/posts/1941-press-release-37signals-...

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

#149

Post by code777777 »

mindcrime wrote: post #56

On a related note, now's probably a good time to remind people of pg's famous "How Not To Die" essay, which is at least tangentially related to the topic at hand. http://www.paulgraham.com/die.html

Thanks, great read! His words from 2007 still ring true today. It was also nice to see how some of the startups turned out.

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

#150

Post by debacle »

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…

> Enterprises don’t want to pay a different higher price, why would they.

If you can't convince an "enterprise" why they should pay more than a standard customer you're bad at sales. It's simple math.

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