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Startup = Growth

paulgraham.com

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Re: Startup = Growth

#51

Post by pmarca »

ef4 wrote: post #35

pg 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.

There really isn't a continuum in most technology markets. Startups that constrain their growth tend to get pounded into the ground by startups that don't. Try being a small search engine competing with Google.

Re: Startup = Growth

#52

Post by pmarca »

hasenj wrote: post #48

So basically a startup is a company whose goal is not to create a profitable business, but a company whose goal is to grow a large userbase rapidly and lure VCs to pump more money into it, because VCs just dream about finding the next google or apple and funding it in an early stage. This just emphasizes why I do not want to be a part of this scene. As DHH says: fuck doing a startup. http://vimeo.com/3899696#t=1290

I won't argue against you selecting yourself out, but your argument is incorrect. Google and Apple are insanely profitable.

Re: Startup = Growth

#53

Post by nwenzel »

Based on required growth rates and measurement intervals (5-10% per week), there would seem to be a pretty heavy bias towards the consumer space.

B2B or so-called Enterprise Companies, especially industry-specific new companies, would have a hard time qualifying on several fronts (market size, growth rate, growth interval). I am particularly interested in the B2B style of startup because I run an Enterprise Startu-er... Enterprise New Company focused on serving the insurance industry. A B2B Startup, it would seem, would have to link customer charges to something that can grow without a new sales contract. I guess, the trick to achieving high growth rates is to create viral growth inside an existing account. Growth in the B2B space will be large jumps (with a new contract) followed by organic growth or not (within the bounds of the existing sales contract). It seems to follow then that since the purchase agreement is the painful and tough and slow part, a B2B Startup would want to have a Freemium or some other type of contract with low/no startup costs and higher per user/GB/account/server/unit costs.

Gives me some new direction on pricing.

On an unrelated note, I'll disagree with other comments of "favorite pg essays" and say that "Wealth" was the best by an order of magnitude. http://paulgraham.com/wealth.html

Re: Startup = Growth

#54

Post by [deleted] »

smalter wrote: post #5

Question: w.r.t. weekly revenue growth, are we talking about growth rate of monthly revenue run rate (assuming billing happens monthly) or something else? For instance, something like this: new signup revenue in the current week x historical conversion to paid divided by revenue of paying customers + sum of estimated revenue of recent previous weeks who haven't yet hit the date of conversion? (if that makes sense) I'…

[deleted]

Re: Startup = Growth

#55

Post by pmarca »

vegashacker wrote: post #39

Question 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?

That is a great point, and one of the things VCs see a lot are startups that perform all kinds of contortions to boost their app store chart rankings right before they raise money.

Because there are not very many ways to boost your rankings legitimately aside from true organic growth, sometimes this means paying for sketchy marketing techniques that can actually result in Apple banning your app when they find out.

I think the honest thing to do is probably to measure actual user engagement in the app. The high quality app startups that pitch us use something like Mixpanel (disclosure: one of our investments itself) to do this -- in fact, this is one of the reasons we invested in Mixpanel.

Re: Startup = Growth

#56

Post by pmarca »

tstyle wrote: post #24

"It's the same with other high-beta vocations, like being an actor or a novelist. I've long since gotten used to it. But it seems to bother a lot of people, particularly those who've started ordinary businesses. Many are annoyed that these so-called startups get all the attention, when hardly any of them will amount to anything." I see so many comments on HN poking fun at VC backed startups with underdeveloped busine…

I think that's true. I also think that the cliche of the venture-backed entrepreneur who goes for growth yet has no idea how the company will generate revenue is mostly false. Most of the smart entrepreneurs I know who are apparently pursuing that strategy actually know exactly how they're going to make money, they just don't say much about it up front.

Re: Startup = Growth

#57

Post by pmarca »

batgaijin wrote: post #18

I think it's missing the idea of bootstrapping. I think it makes a much rougher environment for fledgling startups, but I think it should be considered more like a hot forge. The more the odds are stacked against you, the better you get. I guess people sometimes miss that when they are aiming for Twitter/Facebook level revenue accountability.

That's a little bit like saying the optimal strategy for running the Boston Marathon is to start running naked from the Arctic Circle three weeks prior.

Re: Startup = Growth

#58

Post by aston »

bdr wrote: post #21

I don't understand this part: "For founders who are younger or more ambitious the utility function is flatter." Does flat mean O(1) or O($)? I'd guess the former, but the latter seems to fit more with the conclusion.

I think the intended idea is U($) = k*$, a linear relationship between dollars earned and utility, or (its derivative) a horizontal line on marginal utility. Typical economically rational adults have utility curves that eventually flatten out, with the marginal utility falling to zero.

Re: Startup = Growth

#59

Post by pmarca »

dave1619 wrote: post #13

For a startup measuring users (not revenue), what's the right thing to measure to know your growth rate? Is is DAUs, MAUs, daily sessions, length of session, total signups?

The typical metrics are DAUs and MAUs, with attention paid to DAU:MAU ratio, and then some gauge of activity within each session. For some companies that means length of session, but for other companies you'd want something else (e.g. services that actually want users to leave, like search engines).

One of the things that impresses us in pitches is when the entrepreneur has really thought through what the best metrics are for that particular service.

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