Startup = Growth • Hacker News Board

Re: Startup = Growth

#71

Post by gfodor » Sat, Sep 22, 2012, 5:54 AM UTC

dchichkov wrote: post #61

gfodor wrote: post #15

This 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.…

Your math is looking wrong. Because working in a startup is an investment.

Obviously I meant investment in the traditional sense, the deployment of capital with the expectation of yield and preservation of principal. Working for a startup is an "investment" in the figurative sense, since you are trading your time for equity instead of cash, but what I meant here was literally putting money into some asset or security to increase your wealth or income.

Re: Startup = Growth

#72

Post by hasenj » Sat, Sep 22, 2012, 5:55 AM UTC

daniel_levine wrote: post #63

hasenj wrote: post #62

Earlier quoted context omitted.

Yes, that's why VCs are hoping for. I doubt that a free photo-sharing app is going to be as profitable as Apple, for example.

just because something starts as a free photosharing app doesn't mean it stays that way. One of pg's main points is that entrepreneurs see a way in that is often undervalued by others for a variety of reasons. When MSFT came along people underestimated the value of the OS, for Apple it was the PC, in Intel's second coming (first being memory) it was the microprocessor which even Intel itself underestimated for a whil…

PG's essay makes it perfectly clear: it's not about creating technology, it's about user acquisition.

Read my original reply again.

The startup's goal is to acquire users fast. Why? To lure VCs.

I don't want to be a part of that.

I want to create a business, not a startup (in the sense defined by PG's essay).

Re: Startup = Growth

#73

Post by gfodor » Sat, Sep 22, 2012, 5:56 AM UTC

pcwalton wrote: post #65

gfodor wrote: post #15

This 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.…

Most people can't just invest in startups. You need to be an accredited investor, which rules out most people who haven't had a liquidity event or are independently wealthy. The restrictions on what your net worth needs to be are here: http://startuplawyer.com/startup-law-glossary/accredited-inv...

Right, I specified that when I said they were already likely wealthy. The point being however that even once you have had a liquidity event, it might not make sense to invest in startups, it might make sense to build wealth via another startup, but reserve your capital for less risky investments. I think there's a tendency for founders who have had an exit to immediately transform into angel investors. But, this only makes sense if you have a knack for picking winning ideas and identifying founder talent, which is probably only somewhat correlated with, if at all, with what is necessary to be successful at building a startup yourself.

Re: Startup = Growth

#74

Post by philwelch » Sat, Sep 22, 2012, 5:56 AM UTC

erichocean wrote: post #33

pixelmonkey wrote: post #12

One 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…

> 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.

Books are fantastic for other reasons: easy to ship, relatively non-perishable, mass-produced, and even affordable. Webvan, for instance, would always have a harder time because groceries fail at least three out of these four criteria (as well as the two you cited).

Amazon is trying its hand at groceries now, of course, but even they're having a hard time at it.

Re: Startup = Growth

#75

Post by friendstock » Sat, Sep 22, 2012, 5:57 AM UTC

paulsutter wrote: post #3

I gotta say, "a company designed to grow fast" is not only more concise, but broader and more on point than Steve Blanks' definition ("an organization formed to search for a repeatable and scalable business model"[1]) An epic essay with tremendous depth. Love the ending: "A startup founder is in effect an economic research scientist. Most don't discover anything that remarkable, but some discover relativity." [1] htt…

I love this essay... but I'm concerned that the emphasis on growth so early on will cause some new startup founders to put their focus on vanity metrics, as opposed to spending time to talk with users and build a product that has true product-market fit and organic growth.

Re: Startup = Growth

#76

Post by philwelch » Sat, Sep 22, 2012, 5:59 AM UTC

pmarca wrote: post #50

erichocean wrote: post #33

Earlier quoted context omitted.

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…

Amazon of course not only raise venture capital but also raised an enormous amount of money after that. They didn't get to where they are today by constraining their access to capital to their float.

They also reinvested their revenues very aggressively. It was years after IPO before they became profitable, and even now they're remarkably low-margin.

Re: Startup = Growth

#77

Post by DanielRibeiro » Sat, Sep 22, 2012, 6:01 AM UTC

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?

From the three engines of growth[1]:

- virality index

- retention rate

- customer lifetime value / customer aquisition cost

Having more than one is hard, so optmizing for one is much simpler (don't kid yourself, it is hard on any of them, and not all business can pick all of them).

[1] http://www.deviantbits.com/blog/engines-of-growth.html

Re: Startup = Growth

#78

Post by pitchups » Sat, Sep 22, 2012, 6:01 AM UTC

erichocean wrote: post #33

pixelmonkey wrote: post #12

One 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…

> 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.

That 1% difference per week makes a huge difference in a year. A startup growing at 7% a week it is 34x bigger at the end of the year, but at 8% it is 55x - or 62% bigger. And at 10% it is 142x - or over 4 times larger than the 7% growth rate.

>> no company can catches up to 7% growth, so wasting your equity on 8% growth just makes you poorer, and the VCs richer.

Not true, since a company takes the VC money to achieve the higher growth rate, will catch up precisely because of the exponential impact of that 1%. With a 10% growth rate they will be far ahead of you, and capture a bigger slice of the market, even after starting later than you.

Re: Startup = Growth

#79

Post by dchichkov » Sat, Sep 22, 2012, 6:15 AM UTC

gfodor wrote: post #71

dchichkov wrote: post #61

Earlier quoted context omitted.

Your math is looking wrong. Because working in a startup is an investment.

Obviously I meant investment in the traditional sense, the deployment of capital with the expectation of yield and preservation of principal. Working for a startup is an "investment" in the figurative sense, since you are trading your time for equity instead of cash, but what I meant here was literally putting money into some asset or security to increase your wealth or income.

What I meant is that there is no 2x2 matrix like this. You can: work for/be a founder. And you can invest.

There are no 'figurative sense investments'. You can't 'invest time'. Nobody cares about your time. You can only invest money [or hours * your market rate, which is money].

Re: Startup = Growth

#80

Post by shashashasha » Sat, Sep 22, 2012, 6:19 AM UTC

It's a little Pop Science, but as Geoffrey West notes, other things that follow an S-curve growth are people. We start small and weak, at some point start rapidly growing, and as we reach a certain age we level off. West then extends this to the inevitable deaths of corporations:

http://www.ted.com/talks/geoffrey_west_the_surprising_math_o...