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Dear Startups: Here’s How to Stay Alive

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Re: Dear Startups: Here’s How to Stay Alive

#51

Post by BinaryIdiot »

jorgecurio wrote: post #15

> You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrep…

That practically triggers PTSD from some of my experiences with similar types of people.

I know in start-ups making revenue is a bit of a dirty word but that's what the business is ultimately supposed to do anyway! Why the hell not build to support the revenue model(s) early so you can turn them on and test them as soon as possible? better to test your bets early before you're laying off hundreds of people because your guesses ended up being wrong.

Re: Dear Startups: Here’s How to Stay Alive

#52

Post by roymurdock »

morgante wrote: post #38
roymurdock wrote: post #4

You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…

Can you really not tell the difference between the corner laundromat (a profitable small business) and Atlassian (a startup which was profitable for most of its history)? Startups are companies designed to grow fast. [1] Frequently, that means spending more than comes in but it's definitely not a prerequisite. Likewise, there are plenty of small businesses which take years to reach profitability (some never do)—that…

You're leaving out all of the companies between the two extreme poles that you just set down. What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. Or a chain of coffee shops that experiences huge growth and raises high-visibility funding rounds, such as Philz Coffee? What is Palantir?

Companies that are designed to grow fast by swapping profitability for free, user-attracting features will not do well in the current investing environment. That is the point of the article. The investor is looking for less risky, less high-growth oriented companies - aka slow startups.

While you may not agree with my call to revisit terminology, it is poor form to insinuate that I am an idiot whose goal is to derail conversations by torching old terms. The hostility is unnecessary.

Re: Dear Startups: Here’s How to Stay Alive

#53

Post by davidjgraph »

tarr11 wrote: post #3

The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.

When the market takes off again, I'm sure you'll see the flip-side posts from VCs, explaining how startups need to push for higher valuation and better terms, proving you wrong 8-).

Re: Dear Startups: Here’s How to Stay Alive

#54

Post by mindcrime »

roymurdock wrote: post #16
rgbrgb wrote: post #11

Earlier quoted context omitted.

Doesn't matter what they're called. If you're running a startup right now and have the option to be profitable vs pursue expensive growth, OP says now is the time to choose profitability. The funding climate has changed and hence risk/reward ratio needs to be recalibrated. Whether this climate change is real or not is maybe up for debate but I'd guess that in most cases profitability is not orthogonal to growth. As a…

> Doesn't matter what they're called. It absolutely does matter. Important terms need to be well-defined before you can have any sort of intelligent conversation about them. This is a rule in academic research for a reason, it clears up a lot of unnecessary confusion and vitriol. Reframe this post as a bank talking to a small business owner about not taking on too much liability without proving a concept and it comes…

Important terms need to be well-defined before you can have any sort of intelligent conversation about them.

But the term "startup" isn't well-defined. Just go back through the history of the (many) debates on this very point here on HN. Sure, you could just declare pg the ultimate arbiter of all things startup, and use his definition; but there still isn't really industry-wide agreement on it.

I would argue that "startup" by itself just doesn't convey enough information and that it needs additional qualifiers to be useful. "VC funded startup" vs "bootstrapped startup" or "retail startup" vs. "tech startup", etc.

Words exist, let's not be scared to use as many as we need to be precise.

Re: Dear Startups: Here’s How to Stay Alive

#55

Post by morgante »

mindcrime wrote: post #50
morgante wrote: post #38

Earlier quoted context omitted.

Can you really not tell the difference between the corner laundromat (a profitable small business) and Atlassian (a startup which was profitable for most of its history)? Startups are companies designed to grow fast. [1] Frequently, that means spending more than comes in but it's definitely not a prerequisite. Likewise, there are plenty of small businesses which take years to reach profitability (some never do)—that…

Startups are companies designed to grow fast. I would disagree with this terminology. I posit that a "startup" is a company designed to grow big . How fast it gets there is an implementation detail. Many startups aim for fast growth, but not all do. To me, the distinction between "the corner laundromat" and a slow-growing startup is that the startup still intends to be a Really Big Company.

Fair enough, I think it results in the same categorization in the end.

Re: Dear Startups: Here’s How to Stay Alive

#57

Post by dsugarman »

>If you are in Silicon Valley and your customers are mostly well-paid consumers with no free time, or other venture-backed startups, well, I’d be worried.

That's the most beautifully I've heard this thought articulated. I constantly hear people in SV talk publically talk about how they're living years in the future due to getting services from startups that haven't yet hit other markets. These people are very wealthy and very short on free time; they incorrectly assume the rest of the world is as well. The reason Uber became so successful was because it became cheaper than a cab in most major markets with world class service. You have to really dig deep to justify most other on demand startups having the ability to jump the shark and it's because they don't have a plebeian offering.

Re: Dear Startups: Here’s How to Stay Alive

#58

Post by Swizec »

Ftuuky wrote: post #20

What? One of the advice is to get cash flow positive with the money you already have. Isn't that basic knowledge? You can't spend more than you have and you only ask for other people's money when you don't need it. Idk, maybe this is an american thing, with all the capital you have but here (Portugal) you can't get series A funding without being at least cash flow positive, no way.

Uber's financials leaked a few months ago. They lose millions of dollars per quarter. They were able to raise 10 billion dollars according to CrunchBase [1].

[1] https://www.crunchbase.com/organization/uber#/entity

Re: Dear Startups: Here’s How to Stay Alive

#59

Post by mindcrime »

jedicoffee wrote: post #45

Found the problem! "It is going to be hard (or impossible) for many of today’s startups to raise funds." You don't need to take on millions in debt to start a company.

Strictly speaking, raising VC money isn't taking on debt. You're selling equity and if the company fails you don't - as a general rule - repay the investors anything.

That said, I agree with your overall point about not needing to raise millions of dollars to start a company. That's one way of doing things, but hardly the only way. Another choice would be to just take a regular job and start your company as a nights and weekends side project (deal with any potential IP issues, of course), or do consulting in your area of business and gradually transition from a service company to a product company. I'm sure there are others.

Re: Dear Startups: Here’s How to Stay Alive

#60

Post by api »

throwawayank333 wrote: post #33
Disruptive_Dave wrote: post #23

Earlier quoted context omitted.

Out of every scene in those two seasons, no sentiment captured what I've witnessed in startups as precisely as this one. Straight up perfect. I wonder who was the main advisor for that speech (this was pre-Dick Costolo, I believe).

It is a ridiculous sentiment, but my startup has had revenue from early on, and I've talked to investors who have wanted to value us on revenue multiples because of that - whereas without having any revenue they would have taken a guess at our potential. (They'd have had to, they can't apply a multiple to $0!) It's stupid, $2000/month in revenue shouldn't mean you are valued at less than if you had $0/month, but I ca…

I solve this by not wanting silly investors.
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