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Startup = Growth

paulgraham.com

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Re: Startup = Growth

#201

Post by nostrademons »

ryanwaggoner wrote: post #164
andrew_null wrote: post #160

Earlier quoted context omitted.

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…

That also depends on the terms of your funding. It's your choice to give up board control; you can negotiate for a majority voting stake, but you have to have negotiating leverage. Zuckerburg not only kept sole control of his company, he also took cash off the table, so even if Facebook tanked in 2006 he would still end up a millionaire.

Re: Startup = Growth

#202

Post by drumdance »

readyfounder wrote: post #142
apinstein wrote: post #138

Earlier 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…

Couldn't agree more. PG's definition of "startup" aside, there are plenty of high growth businesses that started at a measured pace, with little or no outside capital, found a market sweet spot, then scaled rapidly (usually with later stage capital)... Maybe they're not startups, but they are highly successful businesses with high impact and wealthy founders. Not easy to do, but perhaps at least as likely to succeed…

Microsoft comes to mind. They didn't really have a sustainable revenue model for four years and I believe didn't take any VC until right before their IPO.

Re: Startup = Growth

#203

Post by nostrademons »

edanm wrote: post #168

This 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…

Interesting observation, but I'd extend it to posit that maybe there is no "best" vehicle for hackers to become wealthy. It depends on the particular options available to you, and your "best" strategy is simply to consider all the options and pick the ones that seem most promising.

In an efficient market, eventually you'd expect that you'd be paid the same amount for equal amounts of value created. In today's low-capital, target-rich hacker environment, it seems like good hackers would eventually become indifferent to the particular corporate structure used, and would instead choose whatever corporate structure lets them work on the highest-impact problems. Sometimes that'll be a startup, sometimes it'll be a consulting firm, and sometimes it'll be employment at a large tech company.

Personally, I'm a plain old employee of a large tech firm. I see some of the financials that patio11 posts, and I'm making significantly more than that (we're the same age). I'm not nearly as well-off as tptacek, thanks to Matasano's acquisition, but I have a few years to catch up. I see rumors posted to HN about engineers at large tech companies making outlandish amounts of money, and I'm making more than that, and yet the comments are all "Wow. This seems unbelievable, it can't be true." I also know coworkers that are rumored to have those multi-million-$ retention grants; I'm fairly certain they exist.

Re: Startup = Growth

#204

Post by nostrademons »

krrrh wrote: post #194
philwelch wrote: post #74

Earlier quoted context omitted.

> 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 t…

The other insight Bezos had about books was that the extent of the market was limited by a physical constraint in how big a store could get. It was a perfect product to exploit unmet demand for long tail titles. Groceries don't seem to suffer this problem to such a degree. Most of what people want to eat is available in local stores.

Is that actually true? I remember my dad always complaining that the supermarket had stopped carrying his favorite snacks & meals. And I can think of a few of my childhood favorite foods that are only available in New England, and I very much miss them now that I'm out in California. People do home-cooked meals all the time that combine ingredients in ways that store-bought food doesn't have, and they have family recipes handed down through generations for things that can't be bought in stores.

I suspect that most of what people want to eat is in local stores only because their wants are constrained by what's available. Typically, people don't continue to want what they can't have for long periods of time, because it just makes them unhappy. I suspect that if you solved the perishability problem, there'd be a huge untapped market for long-tail foods.

Re: Startup = Growth

#205

Post by nostrademons »

staunch wrote: post #107
drewrv wrote: post #84

Earlier quoted context omitted.

Duck duck go is doing just fine.

Judged by growth rate it's not doing very well: https://duckduckgo.com/traffic.html

Isn't that circular reasoning:

"Startups that constrain their growth..."

If it's cited as an example of a startup that constrains its growth, of course its growth rate is going to be low. The real question is whether it stays in business and is a worthwhile investment for its founder.

Re: Startup = Growth

#206

Post by nostrademons »

staunch wrote: post #102

> And the probability of a group of sufficiently smart and determined founders succeeding on that scale might be significantly over 1%. For the right people—e.g. the young Bill Gates—the probability might be 20% or even 50%. So it's not surprising that so many want to take a shot at it. Which means that even Bill Gates may have failed repeatedly at creating a successful startup. Just as in poker even great players wi…

Microsoft was Bill Gates's 4th venture. His first was consulting for CCC, finding bugs in their software in exchange for free computer time. His second was a payroll program in COBOL for Information Sciences. His third was Traf-O-Data, a startup with Paul Allen to make traffic counters. He'd already been programming for 6 years by the time he started Microsoft.

Similarly, Facebook was Mark Zuckerburg's 3rd startup, and Apple was Steve & Steve's 2nd.

Re: Startup = Growth

#207

Post by josephagoss »

photon137 wrote: post #148
apinstein wrote: post #138

Earlier 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…

Couldn't agree more - let the entrepreneurs define and live the term "startup" - not the VCs. (PS: After sleeping over pg's essay, I found it much less convincing the next day - implicitly, he's mixing up price with value, ignoring the temporal nature of markets and of opportunities - Google couldn't have been a startup in 1989 and Ford was a startup in the 1910s - and disregarding multi-product and B2B startups (pre…

Yeah I agree, but I think you dilute your point by saying "Period" at the end. I tend to find people that say period like that have a week argument and want to close discussion, but you have a good point, so probably remove it in future, it might make you look less aggressive.

(Maybe this is just something that irritates me, But I am sure others get a bad impression from saying Period like that)

Re: Startup = Growth

#208

Post by anovikov »

ryanwaggoner wrote: post #181
grellas wrote: post #179

A few thoughts: 1. This is a superb essay delineating the attributes of a fast-growth, all-or-nothing type of startup. No surprise here. Who besides pg has had the depth and breadth of quality first-hand experience with such ventures over such a sustained period and in such an explosive context as that of recent years? He has here given us a classic analysis of the prototypical, Google-style startup. 2. I think the i…

I strongly agree with your #2. PG's essay makes it sound like you're only a startup if nothing else matters but growth. But if all you care about is growth, does that make it acceptable to exploit your users Zynga-style? Obviously not to all startups, so even for many startups that are heavily growth-oriented, they are still constrained by other priorities. So why would balancing lifestyle, minimizing dilution, and m…

Most of the time, startup founders do not have the luxury of 'balancing lifestyle'. It is not themselves who decide how much they work, it is their competition, and it means they have to spend pretty much all the time they have (frequently ruining their families/relationships).

Same about remaining within the legal field: it is true only as long as overwhelming majority of the competition also does so. Otherwise you become a criminal, or go out of business, that simple (not related to startups at all, but common for general businesses in many countries). This point is just to explain that the constraints you have are seldomly morally defined, they are set by the environment you operate in (unless you are a total outlier - the idea is exceptionally brilliant, or you have some kind of other competitive advantage which puts you in a totally different league from others).

Re: Startup = Growth

#209

Post by edanm »

nostrademons wrote: post #203
edanm wrote: post #168

This 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…

Interesting observation, but I'd extend it to posit that maybe there is no "best" vehicle for hackers to become wealthy. It depends on the particular options available to you, and your "best" strategy is simply to consider all the options and pick the ones that seem most promising. In an efficient market, eventually you'd expect that you'd be paid the same amount for equal amounts of value created. In today's low-cap…

(You work at Google if I remember correctly, right?)

Your situation with your employer might be more uncommon throughout the rest of the world as you think. Silicon Valley has a huge shortage of good hackers, but the rest of the world isn't quite as programmer friendly as all that. It's still very good for programmers, but not as good as some posts would have you believe.

In any case, you are of course correct that there is no single "best" vehicle for hackers to become wealthy. But 5 years ago, starting a startup was the only way I knew about or considered seriously. The same is true of some friends today. I'm just happy the word is out that: a) startups fail, a LOT, and b) there are other ways of making large sums of money, including just being a highly-compensated employee.

Re: Startup = Growth

#210

Post by danielharan »

hasenj wrote: post #62
pmarca wrote: post #52

Earlier quoted context omitted.

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

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.

We could have said the same thing about search engines. Banner ads are never going to pay the costs for all that traffic and all the needed engineers...
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