4 ms·

But wait, some people start a pizza place or a grocery store or something similar. Those kinds of businesses are definitely new businesses, and people who start

by edanm 11y ago

But wait, some people start a pizza place or a grocery store or something similar. Those kinds of businesses are definitely new businesses, and people who start these kinds of businesses is what was traditionally meant by the word "entrepreneur". But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.

jacquesm 11y ago
Sure, but a start-up is more of a determination after the fact than something you decide to build. The only reason it works out for YC is because they start so many companies that a few of them due to the expected distribution end up being home runs. They still influence things as much as they can in that direction but there are absolutely no guarantees and quite a few of the go-big-or-go-home companies end up going neither big nor home, they end up being normal companies. So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB. > But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups. Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it. The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow? And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example. If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.
- nl 11y ago
  The Steve Blank definition of a start-up is "a startup is a temporary organization used to search for a repeatable and scalable business model." It's possible to form other successful businesses of course. But I like the way this definition calls out the scalability as an important factor. It doesn't make you point about betting against it working any less valid though.
- TeMPOraL 11y ago
  Another angle is that the label "startup" is being applied retoractively to companies that, at their beginnings, were in no way similar to contemporary startups. I can't picture the founders of Google, Apple or Microsoft frequenting "startup events" of their time, spending time on figuring out valuations, or "growth hacking" strategies, or drinking beer together and dreaming out loud of the world domination they're going to achieve. From what I remember reading, the founders of those companies simply did the work and were focused on it. They didn't dream of taking the world until they already found themselves in the groove, being half-way into orbit and already after first stage separation. Contrast that with what we call startups today - companies that deliberately attempt to be that "evergreen book", trying out every trick in the book to force themselves onto growth path. They live within an ecosystem, a big part of which is a mutual adoration society, with additional large layers of parasitic actors trying to suck out some money and status by just hanging around. And surely a good strategy was found - hence contemporary standard business plan of bullshiting customers with half-made shell of a product to quickly reach the point of getting acquired. It seems to work better than "just" starting a company, at least for the founders. Not necessarily for the world at large. In a way, I think that early Apple and Google had more in common with a pizza place than with a contemporary Instagram clone.
- edanm 11y ago
  I agree with a lot of what you wrote, but I do disagree quite strongly on your first (main?) point, as I understood it. You wrote: "[...] a start-up is more of a determination after the fact than something you decide to build." I totally agree with your point about companies normally not being able to "grow fast", and I agree with you that luck is a major factor. However, I think you're wrong in saying that people don't try to deliberately build "grow-big" companies. Believe me, I'm a proponent of building small-growth "bootstrapped" companies, and I've had many conversations with founders about going that route. The vast majority, who had it in their heads that they wanted to be a startup, were deliberate in pursuing "grow-big" strategies. As one easy example, almost every company that raises VC money is either implicitly or, often, explicitly, chasing a grow-big strategy. I completely agree that the vast majority of companies end up not being able to grow big, and have to decide between becoming a small company and "milking the cow" as you put it, or closing the company. This doesn't mean that they didn't set out, in the first place, to build a "grow big" company! In fact, you can see that this is true in the way that so many of these companies choose not to continue the small business, which could be profitable, but instead choose to fold the company instead. In fact, reading the writings of YC, or talking with most honest VCs, will easily prove my point - they constantly tell you they are aiming to fund companies striving for $1b+ valuations, and they're fine with 99% of the startups they fund not getting there as long as 1% succeed. They are quite explicitly optimizing for "grow big" strategies. Btw, I'd like to point out nl's comment below about Steve Blank's definition of a startup, which I always thought was the absolute best definition. A startup is an organization in search of a business model. When someone opens a pizzeria or a software consultancy, say, they're not searching for a business model - they're just executing one. But VC-backed "grow big" startups are very explicitly trying something new. EDIT: Just to make sure we're not arguing over definitions - I'm claiming two things: 1. That what people, especially on HN, mean when they startup is a company pursuing a "grow big" strategy, and deliberately so vs. a non "grow big" strategy. 2. Regardless of 1, I also think that the majority of modern-day companies (let's say founded in the last 20 years?) that have grown big were deliberately started with the intention of growing big, ala Amazon, as opposed to say FB or Google, which wouldn't fall into this category. I'm less sure about this point, but it is a factual question that we should probably be able to answer.
MaysonL 11y ago
VC-funded companies, almost 100%.
- smileysteve 11y ago
  I was thinking exactly this. How many articles are we reading about extreme VC preferred stock, raising such high valuations that the only option is to go public after the first months. Raising so much money on terms that you require a big exit.
fsloth 11y ago
"But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast" Usually a startup is understood to be any venture in search of a sustainable businessmodel. To grow very large, very fast requires only lots of capital. A lot of companies have confused a large capital investment with a sustainable businessmodel and gone bust soon.

by edanm 11y ago

jacquesm 11y ago

Sure, but a start-up is more of a determination after the fact than something you decide to build. The only reason it works out for YC is because they start so many companies that a few of them due to the expected distribution end up being home runs. They still influence things as much as they can in that direction but there are absolutely no guarantees and quite a few of the go-big-or-go-home companies end up going neither big nor home, they end up being normal companies. So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB. > But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups. Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it. The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow? And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example. If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.

nl 11y ago
The Steve Blank definition of a start-up is "a startup is a temporary organization used to search for a repeatable and scalable business model." It's possible to form other successful businesses of course. But I like the way this definition calls out the scalability as an important factor. It doesn't make you point about betting against it working any less valid though.
TeMPOraL 11y ago
Another angle is that the label "startup" is being applied retoractively to companies that, at their beginnings, were in no way similar to contemporary startups. I can't picture the founders of Google, Apple or Microsoft frequenting "startup events" of their time, spending time on figuring out valuations, or "growth hacking" strategies, or drinking beer together and dreaming out loud of the world domination they're going to achieve. From what I remember reading, the founders of those companies simply did the work and were focused on it. They didn't dream of taking the world until they already found themselves in the groove, being half-way into orbit and already after first stage separation. Contrast that with what we call startups today - companies that deliberately attempt to be that "evergreen book", trying out every trick in the book to force themselves onto growth path. They live within an ecosystem, a big part of which is a mutual adoration society, with additional large layers of parasitic actors trying to suck out some money and status by just hanging around. And surely a good strategy was found - hence contemporary standard business plan of bullshiting customers with half-made shell of a product to quickly reach the point of getting acquired. It seems to work better than "just" starting a company, at least for the founders. Not necessarily for the world at large. In a way, I think that early Apple and Google had more in common with a pizza place than with a contemporary Instagram clone.
edanm 11y ago
I agree with a lot of what you wrote, but I do disagree quite strongly on your first (main?) point, as I understood it. You wrote: "[...] a start-up is more of a determination after the fact than something you decide to build." I totally agree with your point about companies normally not being able to "grow fast", and I agree with you that luck is a major factor. However, I think you're wrong in saying that people don't try to deliberately build "grow-big" companies. Believe me, I'm a proponent of building small-growth "bootstrapped" companies, and I've had many conversations with founders about going that route. The vast majority, who had it in their heads that they wanted to be a startup, were deliberate in pursuing "grow-big" strategies. As one easy example, almost every company that raises VC money is either implicitly or, often, explicitly, chasing a grow-big strategy. I completely agree that the vast majority of companies end up not being able to grow big, and have to decide between becoming a small company and "milking the cow" as you put it, or closing the company. This doesn't mean that they didn't set out, in the first place, to build a "grow big" company! In fact, you can see that this is true in the way that so many of these companies choose not to continue the small business, which could be profitable, but instead choose to fold the company instead. In fact, reading the writings of YC, or talking with most honest VCs, will easily prove my point - they constantly tell you they are aiming to fund companies striving for $1b+ valuations, and they're fine with 99% of the startups they fund not getting there as long as 1% succeed. They are quite explicitly optimizing for "grow big" strategies. Btw, I'd like to point out nl's comment below about Steve Blank's definition of a startup, which I always thought was the absolute best definition. A startup is an organization in search of a business model. When someone opens a pizzeria or a software consultancy, say, they're not searching for a business model - they're just executing one. But VC-backed "grow big" startups are very explicitly trying something new. EDIT: Just to make sure we're not arguing over definitions - I'm claiming two things: 1. That what people, especially on HN, mean when they startup is a company pursuing a "grow big" strategy, and deliberately so vs. a non "grow big" strategy. 2. Regardless of 1, I also think that the majority of modern-day companies (let's say founded in the last 20 years?) that have grown big were deliberately started with the intention of growing big, ala Amazon, as opposed to say FB or Google, which wouldn't fall into this category. I'm less sure about this point, but it is a factual question that we should probably be able to answer.

MaysonL 11y ago

VC-funded companies, almost 100%.

smileysteve 11y ago
I was thinking exactly this. How many articles are we reading about extreme VC preferred stock, raising such high valuations that the only option is to go public after the first months. Raising so much money on terms that you require a big exit.

fsloth 11y ago

"But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast" Usually a startup is understood to be any venture in search of a sustainable businessmodel. To grow very large, very fast requires only lots of capital. A lot of companies have confused a large capital investment with a sustainable businessmodel and gone bust soon.