The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.
Their argument would be that this hurts their portfolio companies as well so they are not incentivized to drive prices down.
Dear Startups: Here’s How to Stay Alive
161–170 of 200 posts
Re: Dear Startups: Here’s How to Stay Alive
#162> 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.
Almost everything, service or product, begins by first appealing to the top 10%. It moves down the line from there. It holds true to a nearly universal point.
AWS, for example, was so expensive initially as to be ridiculous for most purposes unless you had a lot of money to waste. It was a 10% service. Now it's a 50% service. Tomorrow it'll be a 75-90% service.
The examples that don't follow this pattern, are usually riding on previous examples of the pattern that already became cheaper (such as mobile phones -> smart phones).
Re: Dear Startups: Here’s How to Stay Alive
#163Re: Dear Startups: Here’s How to Stay Alive
#164You 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
Nice speech though I note Snapchat and Pinterest that he says have no revenue presently each have of the order of $100m.
Re: Dear Startups: Here’s How to Stay Alive
#165What 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.
Please don't be uncivil. The question was sufficient.
Re: Dear Startups: Here’s How to Stay Alive
#166DFJ has had some great exits over the years. But looking at their current active portfolio, they're a little exposed.... and certainly not investing in any early rounds. It's not surprising to hear they plan to slow down investing. But that's not necessarily a reflection of the overall market. http://dfjgrowth.com/portfolio
Yeah I was wondering if overall funding has dropped that much.
Re: Dear Startups: Here’s How to Stay Alive
#167> 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 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.
See also:
Tesla Roadster -> Model S -> Model X -> Model 3
Re: Dear Startups: Here’s How to Stay Alive
#168Earlier 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.
They would. The people buying products on behalf of enterprises aren't spending their own money, they're spending their company's. They'd happily spend an extra 10-30% (or more) if it means better support, easier setup and all-around less stress or headache for them.
Re: Dear Startups: Here’s How to Stay Alive
#169What 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…
Google has ~60,000 employees worldwide . From various online sources, they have +/- a few thousand who live in San Francisco. Twitter and Yelp and Square and Dropbox and AirBnB and the other unicorns each employ somewhere in the mid hundreds to low thousands (e.g. 500-2,000) -- again, worldwide. The local numbers are lower. I don't know reliable this [1] is, but it suggests that there are ~50,000 tech employees total…
But even if a full 50% of the people working at small tech companies moved out of the city (10k by your count), how would that have any effect whatsoever on the economy? It would bring the population back to where it was about a year ago and employees of smaller companies aren't even among the highest paid.
Re: Dear Startups: Here’s How to Stay Alive
#170Earlier quoted context omitted.
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.
There's a brief clip of pornography near the beginning. We watched it on the bus ride for a high school trip. The teachers quickly turned it off upon noticing.