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Why to Start a Startup in a Bad Economy

paulgraham.com

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Re: Why to Start a Startup in a Bad Economy

#71

Post by zandorg »

mariorz wrote: post #66
fallentimes wrote: post #60

Earlier quoted context omitted.

Ugh that getting real shit makes me barf. Applying blanket statements like "you shouldn't need to take VC money" only demonstrates the tunnel vision of working on one business for so long. Much of their advice is very good, but there's too many absolutes for my liking.. Anyway, all I'm saying is too many people are applying the blanket statement "worry about monetization later" when not all of them should be. In my o…

>In My opinion, it can be easier for businesses to reach the tipping point of paying customers (i.e. break even) vs. the tipping point of users (???, profitability?, acquisition?). I think MM touched on this. Completely agree, but the possible payoff in the latter case tends to be quite higher. >Myspace hasn't show itself to be a real business yet and either has Youtube. I still can't think of user based acquisitions…

Don't forget WebTV @ 400 million and god knows whether that was a success.

Re: Why to Start a Startup in a Bad Economy

#72

Post by mariorz »

fallentimes wrote: post #69
mariorz wrote: post #66

Earlier quoted context omitted.

>In My opinion, it can be easier for businesses to reach the tipping point of paying customers (i.e. break even) vs. the tipping point of users (???, profitability?, acquisition?). I think MM touched on this. Completely agree, but the possible payoff in the latter case tends to be quite higher. >Myspace hasn't show itself to be a real business yet and either has Youtube. I still can't think of user based acquisitions…

" Take hotmail for example, while it might have not generated a $100 mil in revenues yet" I'd bet it's way more than that due to volume, brand recognition and since it directly circulates hotmail users to microsoft properties. But similar to you, I don't know either. However, I think that's a great example of a user acquisition that has worked so far - thank you - I was having problems thinking of examples. Not to so…

I think it's great, but don't see it as a viable option for some products.

I also think micro-payments can be an option one day when someone gets around to making it less painful and more available. I think this will probably involve cellphone companies but I digress.

In any case, I think selling ads can be a very profitable route for others.

Re: Why to Start a Startup in a Bad Economy

#73

Post by aaronblohowiak »

Alex3917 wrote: post #55
shimon wrote: post #25

Earlier quoted context omitted.

Think of it as an easy way to screen out people who would be uncreative and uncommited. Less signal, but a higher signal to noise ratio.

Intuitively that makes sense but I'm not sure if it's actually true. It's relatively easy to convince someone who would otherwise go into hedge funds to instead do a web startup with you. It's much more difficult, however, to convince that person to do a startup to the field of, say, ethnic pharmacology. That doesn't mean the hedge fund guy would necessarily make a bad partner for a web startup though. (Stereotypes a…

... then move.

Re: Why to Start a Startup in a Bad Economy

#75

Post by robg »

mapleoin wrote: post #22

pg was a lot more fun when he used to talk about other things than making money all the time.

Can you point to one essay where he uses the phrase "make money" or some variant thereof?

More to the point: To me, a startup isn't about money. It's about freedom. That's where I've found much to like in his essays.

Re: Why to Start a Startup in a Bad Economy

#76

Post by netcan »

davi wrote: post #37
brk wrote: post #2

Good article, but I disagree with the Microsoft/Apple example in the beginning. MS and Apple happened to come along when the microcomputer was really starting to take off, and they were able to ride that wave (while 1000's of other microcomputer startups crashed). One thing that worries me personally about starting the "stereotypical" HN startup right now, is that I think the free/fremium model is going to lose steam…

I wonder if a cooler external economy might actually give a startup more time to stabilize its platform, find its market, etc. etc. before exiting. This might actually produce better startups, on average. (Here, "better" = chance of becoming profitable, and relevant to the web, for the long term; "better" != chance of cashing out for megabucks within a year or two; i.e. "better" for me as a web user.)

Or for buyers?

Re: Why to Start a Startup in a Bad Economy

#77

Post by nostrademons »

YuriNiyazov wrote: post #35

Wow, way to call me out just as I am preparing for the GREs and grad school applications. In my defense, I've previously wanted to go to grad school also, and even then, because I wanted to meet more people that would be potentially good cofounders.

The cofounder issue is also why I'm not starting another company (yet). I thought about going to grad school, but now am looking more towards getting a job at one of the big tech companies in the Valley. That at least will get me into the right geographic area, and with any luck I'll find some smart coworkers or friends there.

Re: Why to Start a Startup in a Bad Economy

#78

Post by mattmaroon »

"investors tend to be less willing to invest in bad times. They shouldn't be. "

Angels probably should. Many of them just had a 20%+ decrease in their net wealth. Investing is an activity for them, like golf, not a profession. They shouldn't make themselves feel uncomfortable financially.

There's a difference between which action has the highest EV and which one you should take.

Re: Why to Start a Startup in a Bad Economy

#79

Post by emmett »

fallentimes wrote: post #67
emmett wrote: post #65

Earlier quoted context omitted.

Google and Yahoo are both obvious successes. Amazon is another. One Google outweighs hundreds or thousands of failures. You can't dismiss them as merely "anomolous" - among the biggest internet companies most of them followed this strategy. MySpace's acquisition hasn't failed: it's a profitable enterprise for NewsCorp and still growing. It paid back the purchase price in the first year! So that's a success, not a fai…

Amazon had a business model from day 1. I don't think they really apply to this conversation. They weren't profitably early on, but that's way different from not having business model. "Among the biggest internet companies, most of them followed this strategy." You could be right, but I honestly have no idea. What sources are you using? How are you measuring this? "It paid back the purchase price in the first year!"…

From the Alexa top 20 global (http://www.alexa.com/site/ds/top_sites?ts_mode=global&la...):

Yahoo - users before revenue, success

Google - users before revenue, success

YouTube - users before revenue, undecided

Microsoft - revenue before users, although their internet properties consistently lose money. Not really an internet company.

MySpace - users before revenue, success (MySpace is profitable already)

Facebook - users before revenue, undecided

Blogger - users before revenue, probably a success although google doesn't release numbers so it's hard to say how much money they make on it

Orkut - same as Blogger

RapidShare - users before revenue, success (very profitable freemium model)

Baidu - I'm not sure. I presume they follow the same path as Google did, but with an obvious example of how to succeed already in place.

QQ - users before revenue, success (virtual goods turn out to be a great way to monetize a free chat product in China)

eBay - revenue before users; they didn't make auctions free

Hi5 - users before revenue, undecided

In addition to being the biggest internet companies, these are among the most profitable. Several of the top 20 were acquired by other companies, making it difficult to judge how successful they would be independently. Several are still so new it's hard to tell. There's exactly one which took money over user growth (eBay).

Re: Why to Start a Startup in a Bad Economy

#80

Post by fallentimes »

emmett wrote: post #79
fallentimes wrote: post #67

Earlier quoted context omitted.

Amazon had a business model from day 1. I don't think they really apply to this conversation. They weren't profitably early on, but that's way different from not having business model. "Among the biggest internet companies, most of them followed this strategy." You could be right, but I honestly have no idea. What sources are you using? How are you measuring this? "It paid back the purchase price in the first year!"…

From the Alexa top 20 global ( http://www.alexa.com/site/ds/top_sites?ts_mode=global&la... ): Yahoo - users before revenue, success Google - users before revenue, success YouTube - users before revenue, undecided Microsoft - revenue before users, although their internet properties consistently lose money. Not really an internet company. MySpace - users before revenue, success (MySpace is profitable already) Facebook…

Not sure it's statistically significant, but very insightful overview - thank you.

One quick nitpick: I'd argue Rapidshare had a business model before users, even if it technically had users before revenue.

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