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Hard Startups

blog.samaltman.com

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Re: Hard Startups

#171

Post by Animats »

FiatLuxDave wrote: post #63
pjdemers wrote: post #7

The problem with startups building hard tech is it takes a long time to fail. Failures that take decades doesn't work in the startup model. Image working on a fusion reactor. It might take 25 years to fail. The failure may not be that your idea doesn't work, but because some other kind of reactor comes along that is a better business (ie, cheaper). At this point, you are now a world class expert at a technology that…

Former fusion startup founder here. This is a very good point. My startup took 6 years to fail and much of our competition at the time is still at it 20 years later. There are a number of things which are also impedance mismatches between the typical SV startup mode and hard startups. One of these is the failure path. When an adtech startup fails, the founders just go get well-paying jobs at a FAANG, or at least that…

That came up recently in connection with a VR-related startup. They've been working for years, and they just canned the project and laid off about 60 people.

It's all in-house code. So now the people laid off have to find new jobs. They don't have any of the buzzwords resume scanners want. Heroku? No. React? No. Unreal Engine? No. Unity? No. SpatialOS? No. WebAsm? No. Kubernetes? No. Docker? No. AWS? No. Javascript? No. Go? No. Rust? No? Android? No. IOS? No. Mobile? No. Tensorflow? No? C++? Yes. Maybe they can get a job fixing legacy C++ applications. Going to a company that has its own in-house technology is a real career risk today.

Re: Hard Startups

#172

Post by pfdietz »

The problem with long term goals is that you've permanently screwed yourself if the goal is bad. With short term goals, you get unavoidable feedback quickly that keeps that from happening.

Re: Hard Startups

#173

Post by im_down_w_otp »

ablekh wrote: post #146
im_down_w_otp wrote: post #134

Earlier quoted context omitted.

You want to pitch to VCs who you can get to believe you're solving a real problem that exists (or will obviously exist) in the market, the solution to that problem that you're providing scales super-linearly when money is added to the pot (i.e. is a product, not a service), and that the actual market opportunity is huge in total Dollars. It helps then if they're familiar-ish with the markets you're addressing so they…

I appreciate you sharing your opinion. So, essentially, you don't seem to think that potential cons of approaching VCs with domain knowledge that I mentioned above (inherent "bias" and lack of belief in possibility of certain solutions) outweigh relevant potential pros. Regarding other aspects, I certainly realize VCs' market size and financial upside considerations.

It could present issues if you're speaking to a particularly disagreeable VC, but you're unlikely to convince that person anyway. They've decided they've got an axe to grind and they're going to use you as the grindstone.

If you're in a situation where you're having to overcome objections in your pitch, most of the time you've already lost, and you should just move on. The goal for your pitch is to figure out how to sidestep or head off at the pass any of the objections you've heard before.

Re: Hard Startups

#174

Post by robocat »

hef19898 wrote: post #59
jiofih wrote: post #50

Earlier quoted context omitted.

That’s not exactly what he is aiming for; the quote is most likely related to Instagram which reached a $1bn valuation with ~10 people. A lifestyle business is worthless to VC (and unsustainable if it decides to take VC money).

Slowly I having my doubts about that. At least for early stage and angle investment. Investors need a 10x exit. Now imagine an early stage investment of 250k in a small business that grows to 10 million revenue. Healthy, because it is a lifestyle business not geared towards hyper growth. Assuming the company is profitable and cash positive, buying back the investor for 2.5 million through a bank loan is a reasonable…

VC investors look aim for 12% return, approx 3x over 10 years. But returns are hugely variable (power law?), so returns heavily dependent on one winner e.g. one success at 30x out of 10 investments gives 3x.

Your numbers don't work unless you can get 10x returns on 3 out of 10 investments (which seems unlikely).

https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...

Edit: And how far is that $250k going to stretch on salaries, especially over a few years!

Re: Hard Startups

#175

Post by jarjoura »

Just 10 years ago the dominant message was, startups today are lucky that they are easy and cheap to spin up. It makes testing hypothesis easy. That brought in a flood of small angel and seed investors with thousands of bonkers ideas.

When I think of hard startups, I think of FitBit, GoPro, or even Oculus. Yet, all those companies did was prove that people want fitness trackers or smart cameras, or screens wrapped around eyes.

Those companies early employees were all specialized PhD employees with very specific skill-sets. You aren't going to go to an 8 week bootcamp and come out able to contribute meaningful to the research needed to pull off those products. Sam is right, yes, you will have an enthusiastic group of people knocking on the door to work there, but the bar is exceptionally high to hire the people you need to be successful.

Google, Facebook, Amazon, Microsoft, Apple, AMD, Nvidia, etc, they are all paying top salaries with great perks to work on hard problems with the resources to be successful. Want to build custom servers, Amazon has a dedicated Gravitron engineering team and internal customers salivating at deploying them. Microsoft is currently already shipping AR glasses with a cohort of trained developers already able to write software for them. Apple, well, there's a rumor they are building an ARM laptop, and we know only Apple will be able to shift the industry in that direction. No hard startup could do that. On and on...

Anyway, not trying to be cynical, but I do think the problem is deeper and VCs will need to give huge initial rounds, with really long several years runways, just to bring in the talent needed to compete against the established players. Then, these hard startups need to be prepared for the sea of copycats who will swoop in for free after all the hard research was done.

Another example of what I mean by huge rounds: https://techcrunch.com/2019/12/23/rivian-adds-1-3-billion-in...

Re: Hard Startups

#176

Post by _gwlb »

fenwick67 wrote: post #159
killjoywashere wrote: post #126

Earlier quoted context omitted.

Detroit has deep, fundamental problems. the weather, the utilities, the failed neighborhoods. You can cut costs significantly just by moving to San Diego and not have to explain to prospective applicants why living in a windswept frozen wasteland half the year is appealing.

San Diego has deep, fundamental problems. the cost of living, the homelessness, the failed neighborhoods. You can cut costs significantly just by moving to Detroit and not have to explain to prospective applicants why living in a feces-riddled yet expensive nightmare is appealing.

San Diego is one of the best places to live in the US. Cost of living, homelessness, and failed neighborhoods are no worse in San Diego than in Seattle or Austin. Benefits are perfect weather, proximity to Silicon Valley VCs, recruiting from the University of California system, and a willingness from talent to relocate to join your startup.

Everywhere has challenges. Attracting real talent in the midwest is challenging. Cost of living in industry hubs is also challenging. There's no perfect location to start a startup.

Source: 7 years at startups in the midwest, the south, Seattle, and now San Diego.

Re: Hard Startups

#177

Post by ublaze »

kristiandupont wrote: post #4

Before I started Submotion, I did a fairly thorough analysis of what kind of startup I wanted to create. I decided that I wanted to create something that - was B2B. Consumers are fickle, things can explode but they can also go out of style just as fast. It's more sexy and makes for better smalltalk but my assessment is that they are much more difficult to grow predictably. - targets SME's. I am somewhat extroverted f…

Once you decided what kind of startup you want to make, how did you actually find a problem that fits that criteria? That's the part where I'm stuck now.

Re: Hard Startups

#178

Post by adenverd »

arkades wrote: post #55
ssivark wrote: post #32

“When all you have is a hammer, everything looks like a nail.” Seems like Sam Altman’s hammer is startup investing, so he tries to solve everythin... even the most challenging/ambitious problems through those means. Doesn’t necessarily mean it’s a bad approach, but that seems to be his bias. It’s worth having a more nuanced discussion. The current piece sounds more like cheerleading than advice.

Strong agree. I found Sam Altman's writing on quora and followed it off-and-on long, long before I found out "who he is." And his advice is so overly-positive and one-note that, honestly, I thought he was a snake oil salesman or self-help guru. I would never have guessed he was actually a VC / successful entrepreneur. Frankly, his arguments and writing continue to sound like Self-Help Guru shined through the lens of…

Optimism is arguably a form of error, just as pessimism is. And yet it is one of the most valuable qualities you can have when undertaking ambitious projects.

Re: Hard Startups

#179

Post by pfdietz »

jimkri wrote: post #77
jrkelly wrote: post #24

"If you want to start a company working on a better way to build homes, gene editing, artificial general intelligence, a new education system, or carbon sequestration, you may actually be able to get it funded, even if you don’t have a degree or much experience." I encourage anyone to give hard startups a shot, but there are tons of PhDs/Postdocs out there who would make amazing founders -- they should make the leap!…

I'm currently in the research phase for an idea using algae/other plants that sequester CO2 rapidly and continue to have questions, which lead to more questions. Thankfully there is a ton of research that has been done, which makes diving into the topic easy. But having someone to work with that has a PhD/postdoc in this area could help build the idea faster. How can I meet someone with a PhD/postdoc in a specific fi…

I suggest you look at algae that live in highly alkaline lakes, like soda lakes in Africa. The high pH means the water scrubs CO2 from the air, which is then available (as carbonate and bicarbonate) for the algae to use.

(Mass transfer is an underappreciated limit on photosynthesis. A corn field in still air becomes CO2 limited pretty quickly in bright sunlight.)

Re: Hard Startups

#180

Post by est31 »

tr00586 wrote: post #48
sp527 wrote: post #9

It’s odd (read: motivated by self-interest) that he didn’t make any attempt to establish the failure rate of these startups and the distribution of outcomes for employees. Further, he didn’t even argue for a referendum on equity comp. He’s blatantly peddling the same broken model of “sell them your fugazzi so they can’t tell their talent is being plundered for (founder/investor) economic gain”. It’s downright insulti…

Is it really so crazy that people might care about more things than money when considering what to work on? If I were given the opportunity to go back in time and work at Bell Labs or Xerox PARC, I would probably do so even if paid no money at all. This seems rational to me, both in terms of how much knowledge I could accumulate and just the self-actualization of working on such interesting problems. I imagine the ca…

Where do former Bell labs people like Yossi Matias, Sean Quinlan, Sean Dorward, Rob Pike or Ken Thompson work now? Hint: It's not a no-name startup.

This gives you a list of the subset tracked by Wikidata:

https://query.wikidata.org/#SELECT%20%3Fhuman%20%3Femployers...

A bit of processing gives stats on how often each employer appears: https://gist.githubusercontent.com/est31/d299c473c694700144b...

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