pg, just out of curiosity what was the (approximate) weekly growth rate of Viaweb ? Did you focus on this metric when you were building Viaweb?
Just curious if you were aware of this factor when building Viaweb.
Startup = Growth
161–170 of 220 posts
Re: Startup = Growth
#162The discussion of expected return sounds good from an investors perspective, but founders have no diversification, so a 1% chance of $100m or 99% chance of wasting five years sounds pretty lousy. This is my biggest issue with the VC world from a founder's standpoint. The situation gets even worse once you throw the decreasing marginal utility of money into the mix, because now the expected value of $100m is not worth…
Yes, if you value money at log($) like microeconomics says you should, then you should start something less risky than a startup.
As Charlie Stross's essay (http://www.antipope.org/charlie/blog-static/2012/09/on-the-d...) points out, there's another level. Elon Musk might get to retire on Mars. Bill Gates will probably cure malaria and several other big world problems.
So if your goal in life is not just having enough food & toys but changing the world, the big money comes in handy.
Re: Startup = Growth
#163PG's definition of startup is self selecting. Increasingly, startups do not need VCs nor Angels as the cloud (Azure, outsourcing what used to be IT for pennies, etc.) quashes the cost curve of startups.
This is pushing angels, seed round, and VCs farther and farther up the enterprise growth curve where costs become something that the founders can't bootstrap. For virtual enterprises, this is leaving them with a smaller and smaller set of companies as software eats all of the historical infrastructure costs.
Basically, he is defining startup in a way that YC is a necessary component - but increasingly, it isn't.
Re: Startup = Growth
#164The discussion of expected return sounds good from an investors perspective, but founders have no diversification, so a 1% chance of $100m or 99% chance of wasting five years sounds pretty lousy. This is my biggest issue with the VC world from a founder's standpoint. The situation gets even worse once you throw the decreasing marginal utility of money into the mix, because now the expected value of $100m is not worth…
The whole 1% of $100M versus 10% of $10M calculation vastly oversimplifies the outcome of these companies as binary. This is totally wrong. In my experience in silicon valley, people start with building something small/simple (but in a big market), get little drips of funding from investors as they show progress. If they fail at any point along the way, there's value in what they've created, and they exit for whateve…
At any inflection point in the business, you have lots of options: you can sell, raise more money, raise more and cash out some shares, you can quit, you can make yourself chairman and have your cofoudner run it, you can do nothing and grow it organically, etc., etc.
Ah, but this is only true for bootstrapped companies or very early stage companies with little funding. Once you raise a Series A or B, your options are basically to grow as fast as possible or get fired and replaced by someone who will.
And this narrowing of options and loss of control is another thing I dislike. A successful bootstrapped company can always go raise money at great terms. But once you do, you can't go back.
To be clear, I'm not blaming investors or saying anyone is being cheated. But I do think that many young, naive, overly-optimistic people end up taking a path they wouldn't take if they saw the world a little more realistically. It's the same situation with early startup employees, who almost always get shafted.
Re: Startup = Growth
#165The discussion of expected return sounds good from an investors perspective, but founders have no diversification, so a 1% chance of $100m or 99% chance of wasting five years sounds pretty lousy. This is my biggest issue with the VC world from a founder's standpoint. The situation gets even worse once you throw the decreasing marginal utility of money into the mix, because now the expected value of $100m is not worth…
Yes, if you value money at log($) like microeconomics says you should, then you should start something less risky than a startup. As Charlie Stross's essay ( http://www.antipope.org/charlie/blog-static/2012/09/on-the-d... ) points out, there's another level. Elon Musk might get to retire on Mars. Bill Gates will probably cure malaria and several other big world problems. So if your goal in life is not just having eno…
Do it on your second venture, especially since now you're talking about levels of wealth that offer odds of first-time-founder success far, far below 1%.
Re: Startup = Growth
#166pg 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.
That's a poor example, because "search engine" is the kind of business that is necessarily out on the far end of the scale.
If we start travelling down the continuum, next you'd hit something like "an app that makes lawyers more effective", then further than that "an app that makes patent lawyers more effective", etc. At each increment, you trade off market size and ultimate growth potential for less competition and lower marketing costs. Each of these niches can still be extremely lucrative (from the perspective of the entrepreneur, possibly less from the perspective of a VC who wants to make 100x).
What's more, individual businesses leap up the continuum all the time. The first McDonalds was a barbershop-like business.
Re: Startup = Growth
#167Earlier quoted context omitted.
We need a "slow startup" movement. pg's definition of a startup is just one kind of startup. I like to call it the VC startup. It's an organization whose goal is to succeed big or fail, and fast. This "charter" is driven by the needs of investors, and I get that. It makes perfect sense, and from where pg's sitting, it's the attitude he needs to have to successfully manage his portfolio. But it's not the only way to g…
"pg's definition of a startup is just one kind of startup." Most important is that PG's definition of a startup (or Fred Wilson's or Steve Blanks or pmarcas or Doug McClure's etc.) is to serve a purpose of what is good for them in their business model which is to make money off of people who take chances with their time hoping for a certain outcome. It's not about what is good for any particular person or for society…
Businesses that are good for society need to grow quickly to actually reach a large fraction of society. To get from 100 users to 100 million, you need to double 20 times. If you only double once a year, it'll take 20 years before you benefit a lot of people. If you can double 5 times a year, you benefit a lot of people after only 4 years.
So no, rapid growth isn't just something investors like. If your product helps people, you want it to help the most people possible as soon as possible.
Re: Startup = Growth
#168This article is, for me, more proof of a general phenomenon that's happening recently - startups are no longer considered the best vehicle for hackers to become wealthy.
Maybe it's just my own history and confirmation bias speaking here (recently switched from startups to a Consulting business). But lately, the whole "bootstrap" movement is getting much more popular around here. More and more, I'm seeing articles and comments from tptacek, patio11, and others talking about how programmers could make vastly more money, especially by doing freelancing. I think the message is starting to sink in - the kind of people who read this site can start very profitable businesses, make loads of cash, and do this without the high risk of startups. No chance of a working 5 years and then striking a goldmine of an exit, but much higher chance of working 5 years and putting aside large amounts of money.
This pg article is a great one, and a very honest one too. To me it reflects the changing times, and the changing understanding of what a startup means. No longer, like in previous articles on wealth, is pg very clearly advocating that all hackers should be starting startups. This essay, to me, reads as a much more precise explanation of what someone can expect if they start a startup. And it makes it much clearer when people should not start a startup.
Re: Startup = Growth
#169Flattr?
Re: Startup = Growth
#170pg 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 is no continuum. The point is that the startup values growth over all else, really limitless growth if possible. A "barbershop" is some business comfortable plateauing at a certain point, or confining itself in other ways (these being business for which growth is not the foremost goal). A barbershop could be a small chain of barbershops in a metro area, the analogy holds.
But limitless growth is never possible. Eventually you bump up against the limits of your market.
If a business is aggressively trying to grow in a $100 million market instead of a $100 billion market, they are "limiting themselves". But they're still functionally a startup.
Keep taking it down a notch. At what market size do they stop being a startup? It's fuzzy.
As your target market goes from "everyone" to "doctors" to "radiologists" to "radiologists at research hospitals", you may be intelligently trading off market size for lower competition, lower marketing costs, and better product/market fit.
What if you had a brilliant idea for a piece of software that would help discover oil deposits? I contend that you have all the ingredients of a technology startup, but it will be impossible to measure your business in the simplistic way the essay describes. There may be only a dozen customers in the world who are positioned to pay you what you're worth, and your growth is likely to be an impulse function: until the moment you get bought by an oil major, there's no growth to measure.
His ultimate distinction is fundamentally fuzzy. Eventually, every business stops growing explosively. It's only a question of at which size it happens. And that size is necessarily a continuum.