Startup = Growth

I did not think about the definition of a startup too much but in fact I always thought about it as 'product business' as opposed to 'service business'.

Given this definition of a startup I don't want to start a startup anymore. My aim is a product business. I am into products which make me money when I sleep. Even if the income rate stops growing at $100.000 per year because of the relatively small market.

- Venture Capital pouring millions into untried businesses.

- The crazy valuations.

- The recent complains of VCs that "Entrepreneurs aren't working on enough big ideas".

It all actually makes sense now. It's all in the name of Big Risk = Big Reward style ventures. Especially after defining a "startup" as a company meant to grow rapidly and to massive proportions. Not necessarily a tech business. Not an online store for your company. But instead an extreme-expantion-potential style company. I wish Startups were defined like this from the beginning.

It also further pushes me away from the whole Startup / Silicon Valley thing. Growing that fast means a lot can go wrong and there's very little time to learn from mistakes. I'm a slower thinker, I like to analyze and enjoy, learn and understand, build and live, not sacrifice my life and grow my company like a lunatic.

Thank you Paul. You've actually freed me from a dream that I now realize will never make me happy. I can finally let go of my plan to abandon my family, move to the bay area, drain my life savings, live in a shoebox, stumble from one conference and event to the next hoping to network and find my messiah & co-founder, try to get funded, grow my business to someone else's expectations, all for a tiny fraction of a chance to succeed and be either a slave to my own company or lose control of my baby and walk away with diluted equity. I think I'll stay here in St. Louis with my aging family and build my businesses slowly and calmly.

You freed me Paul. You gave me back my life, my real one.

pg explicitly wrote that active users are a proxy for revenue (in an early stage startup). In the early stages of your business, measuring revenue is hard because there is not enough data points yet. But you need to measure something that approximates your potential revenue to judge impact of your actions.

First, let's accept that freemium is a good honest business model that by its nature is a good fit for many Internet services. If you build freemium model similar to DropBox, conversion to paid users is typically around 1-10% from the active users. Thus, it doesn't necessarily make sense to introduce a paid plan and implement integration to payment systems (a task which was PITA before Stripe) until you have a way over 10k active users. Furthermore, something like 30k active users might mean that you need over 300k signups, which will take a while if you don't have explosive takeoff. Thus it makes sense to approximate potential revenue by measuring active users, when your actual revenue stream is still not fully in action.

As I said in another comment, the same approximation philosophy works in enterprise sales too. You measure the performance of your sales pipeline, which works as a proxy for revenue even before you close your first $100k deal.

I don't think he's trying to make any moral judgements. He's just making observations about what actually works within the context of our capitalist system. Capitalism has produced this period of explosive growth centered around technology in the USA and Silicon Valley in particular. And if you are trying to participate in that ecosystem, then you should understand what he says (IMO).

There wasn't any part of the essay which says you should start a startup, or that it is a morally valuable thing to do.

I somewhat agree with you that capitalism doesn't produce optimum value for society. Zynga's maybe an example of that -- I'm sure the are worse ones. But as the saying going, we have the worst system except for all the other ones that have been tried. For all the Zyngas there are some pretty good companies too.

Also, I think your question is essentially hypothetical or philosophical: "should be allow it to?" Who's we? Short of an overthrow of the US government, I think this segment of the economy will exist for a long time.

If you want to have an interesting reflection on capitalism, read "The Idea Factory", about Bell Labs. That is the other end of a spectrum -- a single company holding a monopoly for 50+ years. But it actually produced immeasurable value. It's interesting to think on which model produces more value -- a monopoly where people are free from competitive pressures, or an intensely competitive market.

While the definition "a company designed to grow fast" makes his point clear, it's not as accurate as Blank's. There are lots of companies "designed to grow fast" that are not at all startups. The "search for a business model" is essential to the definition of a startup.