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Stop Looking for a Cofounder

dontscale.com

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Re: Stop Looking for a Cofounder

#91
post #72

Too many people who are new to entrepreneurship only see startups as their entry point. Part of this is media coverage, everyone is talking about funding mega rounds and the VC fueled entrepreneur world. I think many entrepreneurs are less interested in building Billion dollar companies and are more seeking freedom from suppressive corporate jobs. But when the only narrative you see is mega startups it starts to seem…

Agree completely based on my own limited observations. This emphasis on scaling up (with risk seen as a necessity), combined with an attractive definition of 'entrepreneur' vs 'small business owner' [1], cause people to forget that value can be unlocked in so many more ways. Trading your time for an income could work well for many even if it does not scale or fit the definition of 'entrepreneurship'. [1] http://www.i…

The best definition of entrepreneur I know of is the original by Jean-Baptiste Say (https://de.wikipedia.org/wiki/Jean-Baptiste_Say):

“The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield”

Re: Stop Looking for a Cofounder

#92
post #28

As others have noted, this is addressing a different type of business than PG was talking about. The author is talking about bootstrapped businesses. There are many niches where a well run business can earn revenue of $100,000-$500,000 per year, and be ably run by a single person. These niches do require upkeep, but they are not so likely to be invaded by major competitors or large companies. The returns are too smal…

A bootstrapped business does not have to be exclusive with larger revenue streams.

Guy Kawasaki says that he's seen many more businesses die because they tried growing too fast (e.g. using VC money to scale the company) than because they grew too slow.

Joel Spolsky is famously a critic of the SV VC-based model as well. He put his money where his mouth is with Stack Exchange, which only recently raised VC money. He says the obvious, that if take things as far as you can without VC money, then you get better terms when/if you finally do take it.

There are a bunch of companies, especially those with strong network effects like social companies, that face a very real risk of growing too slow. There are others, especially hardware companies, where the startup costs are high. So the bootstrapped model is definitely not for everyone!

I think it's best to stay small and agile until you've found a strong product-market-fit that can the company can be scaled up into. You may or may not need VC money during that stage. When your biggest problem is you lack the resources to scale up as fast as your real product demand, then you should be looking for VC money (or a alternative financing like a loan.) Before then it may well do you more harm than good.

Re: Stop Looking for a Cofounder

#93

Too many people who are new to entrepreneurship only see startups as their entry point. Part of this is media coverage, everyone is talking about funding mega rounds and the VC fueled entrepreneur world. I think many entrepreneurs are less interested in building Billion dollar companies and are more seeking freedom from suppressive corporate jobs. But when the only narrative you see is mega startups it starts to seem…

tl;dr: owning a business does funny things to people. Make sure you're one of the ones who can handle it in a healthy manner.

Reality is having a couple million a year business can really lead to a fantastic lifestyle if done properly.

Emphasis on the "if done properly." I know a man who own his own american manufacturing company (yes, they still exist). They specialize in electric motors. They do good business despite having fewer than 50 employees and gross about $5M a year. I'm not sure how much of that is profit, but I'm going to guess most of it. The owner is fanatic about keeping costs down.

On the other hand, he doesn't have the temperament for business. He's a ball of stress all the time. He's always getting angry over what many here would consider standard business practices. He micromanages his company, especially his IT staff (which is one guy). He's had 4 heart attacks in the past 10 years. He has fewer than 50 employees because he refuses to pass the minimum to qualify for Obamacare (which would raise his costs considerably). He's a good guy, normally, but business ownership has been a net negative on his health and mental status.

I knew one other small business owner that was similar. He owned a successful comic book store at the local mall. He did great business and made a lot of money. Then, about 6 month after he opened the store, he noticed that shoplifting was increasing. He then became obsessed about limiting his losses. The idea that somebody could easily steal his merchandise stressed him out beyond measure. Business started going down around then because the changes he made to limit shoplifting also limited his exposure to passers by and made the storefront look unwelcoming. He eventually moved the store to the first floor of a single family home just outside of the city limits. His profits dropped considerably, but so did his losses. His stress also went away; he was no longer worried or obsessed about it. The tradeoff was worth it to him; he literally traded high profit for low stress.

Re: Stop Looking for a Cofounder

#94

Too many people who are new to entrepreneurship only see startups as their entry point. Part of this is media coverage, everyone is talking about funding mega rounds and the VC fueled entrepreneur world. I think many entrepreneurs are less interested in building Billion dollar companies and are more seeking freedom from suppressive corporate jobs. But when the only narrative you see is mega startups it starts to seem…

And it's not like being bootstrapped ensures a business won't be a home run.

Microsoft, Oracle, Ebay and Github were all bootstrapped.

Re: Stop Looking for a Cofounder

#95

I am going on a rant, but can we stop using the term lifestyle business for non-VC startups? Almost anything would be better - I came up with the term founder focused as an alternative [1], but almost anything would be better than the term lifestyle. A serious business is a serious business no matter the funding source. 1. http://www.tillett.info/2014/11/24/lets-kill-the-term-lifest...

Not disagreeing with you in the slightest, but how about just calling them all "businesses" and adding the qualifier "VC-funded" if they've taken funding? It makes more sense to qualify based on VC funding, rather than lack there of, since taking venture capital is the exception in business, not the norm.

Terminology aside, Silicon Valley's argument that this is a what a real business looks like, not that, is ridiculous. They're all businesses. And if you really want to play that game, it's often the VC-funded startups that aren't "real" businesses (no profits, revenue, etc), not the derisively labeled "lifestyle" businesses.

Re: Stop Looking for a Cofounder

#96
post #95

I am going on a rant, but can we stop using the term lifestyle business for non-VC startups? Almost anything would be better - I came up with the term founder focused as an alternative [1], but almost anything would be better than the term lifestyle. A serious business is a serious business no matter the funding source. 1. http://www.tillett.info/2014/11/24/lets-kill-the-term-lifest...

Not disagreeing with you in the slightest, but how about just calling them all "businesses" and adding the qualifier "VC-funded" if they've taken funding? It makes more sense to qualify based on VC funding, rather than lack there of, since taking venture capital is the exception in business, not the norm. Terminology aside, Silicon Valley's argument that this is a what a real business looks like, not that , is ridicu…

I agree that having to preface the term business is stupid, but since this is the current terminology it is hard to get people to change back to just using business. Even the term startup is redundant as a startup is just a new business.

The problem is if you don’t preface then someone else will do it for you. Letting the VC industry choose the preface is not ideal - I don’t run a lifestyle business, I run a serious and highly profitable technology business with the aim of maximising my returns as the founder. The fact that I don’t have outside investors is irrelevant to what my business does or the value it offers my customers.

Re: Stop Looking for a Cofounder

#97
post #95

Earlier quoted context omitted.

Not disagreeing with you in the slightest, but how about just calling them all "businesses" and adding the qualifier "VC-funded" if they've taken funding? It makes more sense to qualify based on VC funding, rather than lack there of, since taking venture capital is the exception in business, not the norm. Terminology aside, Silicon Valley's argument that this is a what a real business looks like, not that , is ridicu…

I agree that having to preface the term business is stupid, but since this is the current terminology it is hard to get people to change back to just using business. Even the term startup is redundant as a startup is just a new business. The problem is if you don’t preface then someone else will do it for you. Letting the VC industry choose the preface is not ideal - I don’t run a lifestyle business, I run a serious…

> Letting the VC industry choose the preface is not ideal

This actually touches on an important point. The whole reason that, "No no, that's not a real business," gets bandied around is because it benefits VCs. If founders think that they need to take VC money to assuage their insecurities about being a "real" business, that doesn't help the founders. It helps the VCs' deal flow.

Re: Stop Looking for a Cofounder

#98
post #94

Too many people who are new to entrepreneurship only see startups as their entry point. Part of this is media coverage, everyone is talking about funding mega rounds and the VC fueled entrepreneur world. I think many entrepreneurs are less interested in building Billion dollar companies and are more seeking freedom from suppressive corporate jobs. But when the only narrative you see is mega startups it starts to seem…

And it's not like being bootstrapped ensures a business won't be a home run. Microsoft, Oracle, Ebay and Github were all bootstrapped.

Microsoft may have been bootstrapped (I will go with what you are saying without verifying) however it also had the backing and full faith and credit of a somewhat wealthy and connected family.

Re: Stop Looking for a Cofounder

#99
post #97

Earlier quoted context omitted.

I agree that having to preface the term business is stupid, but since this is the current terminology it is hard to get people to change back to just using business. Even the term startup is redundant as a startup is just a new business. The problem is if you don’t preface then someone else will do it for you. Letting the VC industry choose the preface is not ideal - I don’t run a lifestyle business, I run a serious…

> Letting the VC industry choose the preface is not ideal This actually touches on an important point. The whole reason that, "No no, that's not a real business," gets bandied around is because it benefits VCs. If founders think that they need to take VC money to assuage their insecurities about being a "real" business, that doesn't help the founders. It helps the VCs' deal flow.

The is exactly why I hate the term lifestyle business - it make it sound like you are running a beach bar on some tropical island.

With technological change the need for VC money is much less than the past. With a relatively small amount of money these days you can start and build a very serious tech business (assuming you have the skill and drive) all on your own. I am not running a lifestyle business - I am running a business 100% focused on hitting my end value target and providing my customers with the best product possible.

Re: Stop Looking for a Cofounder

#100

Too many people who are new to entrepreneurship only see startups as their entry point. Part of this is media coverage, everyone is talking about funding mega rounds and the VC fueled entrepreneur world. I think many entrepreneurs are less interested in building Billion dollar companies and are more seeking freedom from suppressive corporate jobs. But when the only narrative you see is mega startups it starts to seem…

tl;dr: owning a business does funny things to people. Make sure you're one of the ones who can handle it in a healthy manner. Reality is having a couple million a year business can really lead to a fantastic lifestyle if done properly. Emphasis on the "if done properly." I know a man who own his own american manufacturing company (yes, they still exist). They specialize in electric motors. They do good business despi…

$5M gross is kinda low for 50(ish) employees. That works out to $100k apiece fully-loaded (healthcare, taxes, etc). He would need to be paying them each substantially less than $60k a year.... and that's ignoring all his other costs: materials (it's a physical good), inventory, taxes (property, sales, income), and service fees (attorney, accountant, etc). Only then do you get to his net income. It's likely not very good. Perhaps that's causing all the stress?!

Maybe not a fair comparison.... but look at Google, which does $50B in revenues with 50,000 employees -- i.e. $1M in revenue (in a high-margin, software-centric business) per employee.

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