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Sequoia Capital: Armchair quarterbacks

37signals.com

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Re: Sequoia Capital: Armchair quarterbacks

#11

Post by axod »

This was a pretty predictable and lazy post... "We were right all along. We are the best in the world, 37s kicks ass!!! We're awesome... we're wildly successful etc etc"

Reading the embedded slideshow was more interesting than the 37s ego post, so thanks for posting that anyway.

The point for me was that before, you could wait maybe 2 years or something building something awesome, building up traction before making profit. Now, you should try to achieve that a lot faster, as investment will be harder to come by. I think that's pretty sound advice.

Re: Sequoia Capital: Armchair quarterbacks

#12

Post by smakz »

mixmax wrote: post #2

This seems like blatant linkbaiting from 37signals, and frankly I think it's childish. They know quite well (or at least they should) that the reason some companies get a huge cash injection from investors is to grow fast and grab marketshare. This costs a lot of money. It's a risky strategy but if it works it pays off bigtime. The get fast big strategy is obviously not for 37signals, but I'm sure they are aware that…

Just curious, can you think of another company besides Amazon where 'get big fast' actually worked?

"Get big fast" was actually a rather symbolic phrase for the excesses of bubble spending. It worked for amazon and few others.

Re: Sequoia Capital: Armchair quarterbacks

#13

Post by mixmax »

smakz wrote: post #12
mixmax wrote: post #2

This seems like blatant linkbaiting from 37signals, and frankly I think it's childish. They know quite well (or at least they should) that the reason some companies get a huge cash injection from investors is to grow fast and grab marketshare. This costs a lot of money. It's a risky strategy but if it works it pays off bigtime. The get fast big strategy is obviously not for 37signals, but I'm sure they are aware that…

Just curious, can you think of another company besides Amazon where 'get big fast' actually worked? "Get big fast" was actually a rather symbolic phrase for the excesses of bubble spending. It worked for amazon and few others.

I'm not on firm ground here, but I would think that ebay, Cisco and paypal are all in that category.

Re: Sequoia Capital: Armchair quarterbacks

#14

Post by qhoxie »

pg wrote: post #3

This is an attack on a strawman. What the Sequoia presentation says is: Economic conditions vary. In bad times you can't take as much risk. Bad times are here. Stop taking risks. Though I don't endorse Sequoia's conclusions (I don't know how bad the economy will get, or how long it will stay that way), the chain of reasoning is just common sense. It doesn't make them hypocrites, or imply that what they had been telli…

I really agree on the straw man comment. If they wanted to disagree with Sequoia's stance on this, that's fine, not everyone is on the same page. The problem is that they didn't approach this sensibly. Sequoia never really made most of the claims Jason takes issue with. The root of it all is just sustain rather than grow for the time being, which is a fair argument given the circumstances.

Re: Sequoia Capital: Armchair quarterbacks

#15

Post by smoody »

Let's say it's boom times and money is cheap and plentiful and there are a stable of eager acquirers looks for companies to buy. Why not grow fast in that case? It didn't seem like it hurt the guys who started YouTube. And there are more examples where that came from. Then, when the economy slows, cut back. Seems like a good approach to me.

A lot of the innovations we take for granted today are the result of people with big dreams and no clear path to profitability. If we didn't have big dreamers and investors to fund them based on... gasp... a leap of faith, then the web would probably consist of nothing more than simple project management services, enterprise chat services, and single page editors.

"If you had to keep borrowing to stay afloat, were those good times?"

I know the good people at 37s understand what venture investment is, but they keep trying to prove that they don't. If you're taking money from Sequoia, you're not borrowing money, you're exchanging money for ownership.

Re: Sequoia Capital: Armchair quarterbacks

#16

Post by fallentimes »

sabat wrote: post #9
pg wrote: post #3

This is an attack on a strawman. What the Sequoia presentation says is: Economic conditions vary. In bad times you can't take as much risk. Bad times are here. Stop taking risks. Though I don't endorse Sequoia's conclusions (I don't know how bad the economy will get, or how long it will stay that way), the chain of reasoning is just common sense. It doesn't make them hypocrites, or imply that what they had been telli…

It's not an attack on a straw man. It's an attack on Sequoia's logic and its presumptions -- a valid attack, if you ask me. Except for Sequoia's recommendation for stasis (bad advice in any conditions), all of its suggestions are how you run a startup . If you aren't doing everything that the deck suggests, your startup probably isn't going to do well. As a startup, you should not be taking stupid risks. Smart risks:…

It's not like this is the first time Sequoia has said this to their entrepreneurs. They've been doing it in private and in meetings.

This just represented their first public stance on the issue. In good times, it can (but not always) make sense to spend more money on marketing and headcount for experimentation purposes and because a really talented person is available (even if you don't have an immediate role for them). And while most of their advice applies regardless of economic situation, running a business in a recession is not the same as running a business in a boom.

Edit: This was also discussed here: http://news.ycombinator.com/item?id=327937

Re: Sequoia Capital: Armchair quarterbacks

#18

Post by namcos »

37signals have been extremely successful in their niche and I think they have a wonderful product. However I think their biggest mistake is to try and extrapolate their experience to what seems like all tech businesses and start-ups, with the diversity we see in funding requirements, growth strategies and segments start-ups appeal to chances are slim that the 37signals model is for everyone. Furthermore considering Sequoia Capitals track record this post is unimaginably arrogant, you need to come up with a better argument than that to take them on in a business model ideology war.

Re: Sequoia Capital: Armchair quarterbacks

#19

Post by bad_user »

smoody wrote: post #15

Let's say it's boom times and money is cheap and plentiful and there are a stable of eager acquirers looks for companies to buy. Why not grow fast in that case? It didn't seem like it hurt the guys who started YouTube. And there are more examples where that came from. Then, when the economy slows, cut back. Seems like a good approach to me. A lot of the innovations we take for granted today are the result of people w…

Yeah, but Youtube got acquired, and it really hasn't had a business model.

I think this getting big fast is really useful when you want to get bought.

Re: Sequoia Capital: Armchair quarterbacks

#20

Post by webwright »

sabat wrote: post #9
pg wrote: post #3

This is an attack on a strawman. What the Sequoia presentation says is: Economic conditions vary. In bad times you can't take as much risk. Bad times are here. Stop taking risks. Though I don't endorse Sequoia's conclusions (I don't know how bad the economy will get, or how long it will stay that way), the chain of reasoning is just common sense. It doesn't make them hypocrites, or imply that what they had been telli…

It's not an attack on a straw man. It's an attack on Sequoia's logic and its presumptions -- a valid attack, if you ask me. Except for Sequoia's recommendation for stasis (bad advice in any conditions), all of its suggestions are how you run a startup . If you aren't doing everything that the deck suggests, your startup probably isn't going to do well. As a startup, you should not be taking stupid risks. Smart risks:…

I disagree that it's a valid attack. They aren't telling people to stop taking any risks-- they are telling people to prepare for a down market, which DOES affect the trajectory of a startup (even if they are on the right track). Pasting bits from my comment on SvN:

In a happier financial times, customers are flush and buying. Buyer confidence is high. Growth is easier, your sales/marketing spend can be a touch lower, etc.

In happier financial times, VC-backed startups can count on more investment if they are generally moving in the right direction. Whether you think VC-backed startups are stupid or not, that’s how the game they are playing works. Funding in a down market is scarce and terms are rougher.

In happier financial times, VC-backed startups have a better shot at an exit (IPO, M&A). Again, whether you think it’s stupid or not, that’s the game.

Your Google/Pets.com argument is kinda strawmanny itself. Pets.com died because they didn't create much value. There were times in Google's growth that they would've DIED if they couldn't get funding. Growth costs money and revenue can be realized months or years after smart spending. If you don't have a big war chest and capital is scarce (and expensive) it makes sense to grow a touch slower.

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