A 'startup' is simply a new business. That's what the word means. You can't just take a word that has an existing meaning and say it means something else.
Startup = Growth
31–40 of 220 posts
Re: Startup = Growth
#32"We usually advise startups to pick a growth rate they think they can hit, and then just try to hit it every week. The key word here is "just." If they decide to grow at 7% a week and they hit that number, they're successful for that week. There's nothing more they need to do. But if they don't hit it, they've failed in the only thing that mattered, and should be correspondingly alarmed." This is the gem.
I'm curious if PG encourages a "discovery" stage where they don't have growth targets but rather are learning about the market/customer and building a product? And if so, how long of a "discovery" stage is encouraged?
Re: Startup = Growth
#33One of my favorite pg essays of all time. Loved this: "Almost every company needs some amount of funding to get started. But startups often raise money even when they are or could be profitable. It might seem foolish to sell stock in a profitable company for less than you think it will later be worth, but it's no more foolish than buying insurance. Fundamentally that's how the most successful startups view fundraisin…
self-funding growth from profitability pretty much guarantees you are locked into a relatively slow growth rate
That's an unwarranted assumption. Part of designing a startup business model is organizing growth so that you are unconstrained, so that more input produces greater output, earlier -- whether it's capital, users, employees, or support. All it takes is for one component of your business to not scale and you won't hit your growth numbers despite the brilliance of every other part.
Capital is just one of the areas you have to look at. Amazon is a decent example. Bezos chose books because it was (a) accessible (catalogs existed), and (b) he got 6 months to pay back booksellers, which meant he could afford to grow the more he sold, by using the money owed to the booksellers as float.
Startups would do well to evaluate all possible constraints on growth, capital and otherwise. Many times small tweaks to how you sell your product (or what product you sell) can produce large variations in the amount and timing of capital needed.
Here's an example: do you have customers pay for the first 30 days up front, with an option to cancel within that time? Or do you charge your customers after the first 30 days are up?
Now, you'd think the latter would always be better for "growth", because it involves a weaker commitment -- no money changes hands early.
But it also has a huge capital cost differential, if the service costs a substantial amount of money to deliver. In order to grow the latter model, you'll have to obtain more and more capital over time as you grow.
But if you do the former, you can "fund" your company's growth off of its earlier growth. Although this might impact growth negatively, by turning away customers that "won't pay" for the first 30 days up front, but who would have become customers the other way.
So which is better? It really depends. If your growth rate is already 7% with the pay-up-front model, that's better IMO than getting, say, an 8% growth rate with the pay-after model. The latter will require raising increasingly greater amounts of capital, despite the fact that it's growing "faster" initially, ultimately hurting your growth or wiping out your equity, or both.
Both approaches will still have their "S" curves end up at the same place (the market size doesn't change), but let's be blunt here: no company can catches up to 7% growth, so wasting your equity on 8% growth just makes you poorer, and the VCs richer.
Sustainable growth is just as important, and treating capital as something you "have to" raise is exactly what VCs want you to think, since, hey, that's what they sell. Venture capital is a financial tool, not the only (real) way to capitalize a startup during and after growth.
Re: Startup = Growth
#34"We usually advise startups to pick a growth rate they think they can hit, and then just try to hit it every week. The key word here is "just." If they decide to grow at 7% a week and they hit that number, they're successful for that week. There's nothing more they need to do. But if they don't hit it, they've failed in the only thing that mattered, and should be correspondingly alarmed." This is the gem.
I'm curious if PG encourages a "discovery" stage where they don't have growth targets but rather are learning about the market/customer and building a product? And if so, how long of a "discovery" stage is encouraged?
The sixth footnote appears to address this a bit. You of course need to have something that could possibly grow before you can hope to achieve growth.
During Y Combinator we measure growth rate per week, partly because there is so little time before Demo Day, and partly because startups early on need frequent feedback from their users to tweak what they're doing. [6]
...
[6] This is, obviously, only for startups that have already launched or can launch during YC. A startup building a new database will probably not do that. On the other hand, launching something small and then using growth rate as evolutionary pressure is such a valuable technique that any company that could start this way probably should.
In other words, if a startup hasn't launched yet they quite sensibly don't measure growth rate--but it's a good idea to launch early so you can measure growth and optimize for it.
Re: Startup = Growth
#35pg makes his point clearly at the cost of oversimplifying his definition. Scalability is a continuum. There is a continuum between barbershop and search engine.
VCs have every incentive to hit the far high end of the continuum. But a young, hungry entrepreneur probably gets higher expected value by not straying quite so far out.
Re: Startup = Growth
#36Earlier quoted context omitted.
I'm curious if PG encourages a "discovery" stage where they don't have growth targets but rather are learning about the market/customer and building a product? And if so, how long of a "discovery" stage is encouraged?
The sixth footnote appears to address this a bit. You of course need to have something that could possibly grow before you can hope to achieve growth. During Y Combinator we measure growth rate per week, partly because there is so little time before Demo Day, and partly because startups early on need frequent feedback from their users to tweak what they're doing. [6] ... [6] This is, obviously, only for startups that…
Another option is if you need time to build your product, you can launch another "something"... like the legendary mvp video from Dropbox or the finance blog from Mint.com they used to draw in signups several months before launching.
Re: Startup = Growth
#37One of my favorite pg essays of all time. Loved this: "Almost every company needs some amount of funding to get started. But startups often raise money even when they are or could be profitable. It might seem foolish to sell stock in a profitable company for less than you think it will later be worth, but it's no more foolish than buying insurance. Fundamentally that's how the most successful startups view fundraisin…
self-funding growth from profitability pretty much guarantees you are locked into a relatively slow growth rate That's an unwarranted assumption. Part of designing a startup business model is organizing growth so that you are unconstrained, so that more input produces greater output, earlier -- whether it's capital, users, employees, or support. All it takes is for one component of your business to not scale and you…
Craiglist might be an example of a self-funded growth model that was able to scale. Maybe rare, but possible.
Re: Startup = Growth
#38This essay highlighted something for me, you actually end up having a 2x2 matrix for "work for" vs "invest in" and "startup" vs "non-startup." For example, a certain person may try increasing their wealth by investing in startups, but prefer working in a non-startup. Or another person may prefer investing in non-startups (safe, dividend paying stocks or bonds), but try increasing their wealth by working for startups.…
Yes. Every startup guy must save and invest in traditional stocks to mitigate risk.
One other investment that a startup guy should consider is investing time into building good a freelancing business as a side business from their startup.
Re: Startup = Growth
#39Question about measuring weekly growth rate: A lot of YC startups are centered around an iPhone app. If it rides up the charts, it will likely get a huge bump in whatever metric you are trying to measure. But the bump's very often temporary, since more than likely the app will slide back down the charts in a week. How do you measure growth when this happens?
Re: Startup = Growth
#40more blah, blah on what made google, fb, etc. great,
what's the point?