8 ms·

I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your i

by Aqueous 11y ago

I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your investors before too long. Whatever happened to growing slowly, proving the revenue stream before you throw millions of dollars at something? Why is that such a bad thing? I understand from a VC's point of view why it's a bad thing, and that's the point of view which YC and other incubators are coming from. But why is it a bad thing for the entrepeneurs? Taking time to consider what you're building is important. Taking time to grow is also important.

jryan49 11y ago
Because the point of starting startups isn't to create a successful business. It's to trick VCs into giving you money to burn! /s
- JonFish85 11y ago
  I think this comment still stands without the "/s". The extension is that VCs pawn the company off to the public markets, take their money and are long gone when reality catches up (Twitter, Square, GoPro, Zynga, Groupon...).
  - daniel_levine 11y ago
    definitely... MSFT, Facebook, Google, Apple, Salesforce...
    - JonFish85 11y ago
      I'll give you Facebook and Salesforce, they're the only ones comparable
    - slededit 11y ago
      MSFT was profitable from almost day 1. I don't think its a good comparison.
    - smacktoward 11y ago
      Except Microsoft and Apple are both in the business of making things and then selling them to people for more than they cost to make.
- pbreit 11y ago
  If that's what you think, why are you even here? Maybe assume positive intent and you'll have better luck understanding all this.
  - beat 11y ago
    I don't think assuming "positive intent" is the problem here. Read pg; he's talked about exactly this problem. A lot of would-be founders think that you "win" when you land that investment and get some publicity. It's easy and alluring to think, "Hey, we got a Series A! We're millionaires!" when the truth is nothing of the sort. It's actually, "Crap... that's all the money we have to get us to that next goalpost that soooo far away." Taking investment is, at best, a necessary evil for startups. It's not a victory. It's never a victory. It's a compromise. It's "I just sold a hundred million dollars for a million dollars" - with the awareness that if you hadn't sold it, you wouldn't get the other hundreds of millions either.
WalterSear 11y ago
>I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your investors before too long. You need to grow quickly because the world is a big place and technology concepts unfold more or less sequentially, with each iteration building on the past. As a result, the world is full of people who are going to have similar ideas to you and similar opportunities to take advantage of them, around the time you do, and whoever gets established first will get to take most, if not almost all, of the pie.
- edgyswingset 11y ago
  I don't think it's really about that, especially because getting most of the pie doesn't really matter if your business collapses a year later, or users move on because they got bored with the product or service. I think it's really just the nature of so many startups acting in the consumer space, where you need to have tons of users otherwise your business has no purpose.
  - WalterSear 11y ago
    If you customers 'get bored' with your product or service, it won't matter whether you go fast or slow: you aren't chasing a real opportunity.
- Aqueous 11y ago
  I guess I get that but the marketplace is also a big place and often times there is room for more than one player. Apple and Samsung, Gillette and Schick, Pepsi and Coke. You don't need to totally wipe out competition in order to be a successful company. Furthermore, when there are totalizing effects, it's because the technology benefitted from massive built-in network effects (i.e. Facebook, Uber.) Many (possibly even most) start-ups don't rely on those.
  - WalterSear 11y ago
    > Apple and Samsung, Gillette and Schick, Pepsi and Coke. None of which got started during the current technology cycle. >Many (possibly even most) start-ups don't rely on those. I disagree. In fact, IMHO, the overwhelming majority of startups benefit from organic methods of growth that come from word-of-mouth and reputation. Any startup with more than one customer, pretty much. Owning the market means owning that, in your respective field of business.
fossuser 11y ago
Startup as PG defines it in his essays is a company that's experiencing rapid growth - often to support growing rapidly you need a lot of money. I think growing rapidly can have certain advantages - in Facebook's case it allowed them to take over the social environment for all colleges and then eventually everything else. Slow growth in trying to do this may have not allowed them to win. Since VCs are betting on the exponential growth wins (AirBNB, Facebook) they're only interested in hypergrowth companies which YC narrowly defines as startups. Going slow doesn't mean you can't make a great company, it's just not a 'startup'. Of course you need to be 'making things people want' and iterating with users before you can grow, which is what I think sama is talking about.
- geofft 11y ago
  > Startup as PG defines it in his essays is a company that's experiencing rapid growth - often to support growing rapidly you need a lot of money. I see this response a lot, but that just begs the original question. Why is a startup with VC money a good model for a business? Why not a bootstrapped, "lifestyle" company? What empirical data do we have that effective long-term wins for investors and employees and the world (and not for VCs, who are simply artifacts of the startup ecosystem) are more effectively or efficiently accomplished by startups and not by slow-growth business—or by nonprofits, or bored hobbyists working on things "just for fun", or anonymous pseudonyms who post research papers and then disappear, or anything else? Facebook was a slow growth case in the early days: you had to be a member of certain colleges, and eventually all colleges, and only later the general public. Unlike Airbnb or Uber or another business with a good reason to start in new cities slowly, Facebook's closed registration prevented them from getting any of their users' complete social network for little obvious benefit. There were a good handful of systems at the time with open registration and a similar target user base that are nowhere near as successful (like MySpace, LiveJournal, Xanga, etc.). It might even be possible to make the argument that Facebook's slow growth was important to getting the product right, but in any case, it was certainly the nature of the product more than the ability to grow that helped it.
  - morgante 11y ago
    I think you're arguing against a straw man. Nobody in this community (including pg) thinks there's something wrong with small businesses. They likely patronize many small businesses every week. The point is that's not what they're doing. Startups are categorically different from small businesses and there's a lot of advice for my tech startup which isn't applicable to my mom's landscaping business (and vice versa).
codingdave 11y ago
They don't need to grow quickly. But this community has set their own definition of 'startup', which includes rapid growth, and this is a member of YC talking about what they tell their startups, so it is falling within that context. Outside of the 2-letter acronym world (YC/VC/SV/HN), absolutely entrepreneurs should set their own speed -- they only have to answer to themselves.
- jessriedel 11y ago
  > But this community has set their own definition of 'startup', This is reasonable though, right? We already have words for such ventures and venturers when they don't necessarily grow fast: "small business" and "entrepreneur". The reason "startup" has entered the lexicon is because there seems to be something categorically different about a large fraction of tech small businesses these days, and rapid growth seems to be a the correct differentiator.
  - OopsCriticality 11y ago
    This community seems to have its own definition for a lot of words, startup included. Nothing wrong with that, so long as one recognizes that. The trouble for me tends to be when the wider press gets involved, and it isn't clear if the "two-letter acronym world" (nice expression!) definition is intended, or the definition used by others is intended. What does one call a new company formed to develop a pharmaceutical candidate? I would call it a startup, but I don't know that such a company has much at all in common with what people around these parts call a startup.
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  - idlewords 11y ago
    A startup is a company with a new type of product or business model. That experimental aspect is the salient difference from a vanilla small business. Having a brand new thing to offer the world often entails rapid growth (and the VC funding model demands it), but the idea that growth is synonymous with startups is peculiar to this here community.
pbreit 11y ago
If you want to grow slowly, that's fine. It's just a different game. With technology, there's so much leverage, the winner can achieve massive spoils and that typically requires growing rapidly.
ssharp 11y ago
There are obviously lots of businesses that benefit from VC investments, and for lots of reasons. For example, at some point, hopefully, you're going to have a product that lots people are willing to pay for, but those people don't really know about it. You could reinvest revenues from existing customers in order to fund growth, but that could take many multiples longer than if you got an influx of cash to do that. There are lots of first-mover advantages as well. Or if you're taking on a big competitor, that faster you grow, the less time they'll have to adapt. There are also a lot of businesses that eventually become profitable that simply cannot be profitable early on. I personally don't like these types of businesses and would much rather bootstrap a lifestyle company or companies, but that's a personal preference and I know it limits the types of businesses I could start.
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cabinguy 11y ago
If you are a VC backed startup, growth solves all of your problems (at this particular point in history). If you are a non-VC backed startup, sales/profit solve all of your problems. Either way, growth is a wonderful thing and I think you should grow as fast as you can.
- shostack 11y ago
  >"If you are a VC backed startup, growth solves all of your problems (at this particular point in history)." What I think you're alluding to here is that growth solves all your problems as long as interest rates are still low so money is pouring into VC without a requirement of seeing revenue, and as long as the company is not in the process of taking the company public since the public markets have wisened up to the "all growth, no profit" game. Is that accurate?
  - cabinguy 11y ago
    Yes.
- throwaway98172 11y ago
  I find profits to be way more fulfilling than growth/sales. Growth does not increase my happiness. Pressure from third-party investors does not. Money in my pocket, free time, decision freedom does.
nlh 11y ago
I think about this question a lot because and will eventually write something longer-form on it, but here's a short summary that builds on what others have said: It's not that startups "need to grow quickly" -- when VCs say that, they're coming at it from the wrong perspective, and it's a source of a lot of confusion. It's that a good idea WILL grow quickly if you let it, and what you NEED to do is not get in the way of the natural growth of an explosively successful idea. The perfect model that (most) VCs are trying to match is Facebook, Instagram, or WhatsApp. A new innovative product that takes the world by storm and relatively quickly monetizes into something worth $billions. VCs want the next Facebook/Instagram/WhatsApp. That's why they're giving you $millions, and they know 9 out of 10 shots aren't going to hit. Because of the way VCs frame their desire for success, it's often confusing to folks on the frontlines and they hear it as "your mission is growth" vs. "your mission is to build something everyone on earth wants and then give it to them quickly." Rapid growth is almost more a RESULT of a successful startup than it is a pathway. It's a symptom, not a task. So what investors mean when they say "you need to grow quickly!" is more like: "We want to see you growing quickly, because that's a sign to us that you've hit the nail on the head." Facebook/Instagram/WhatsApp didn't have growth hacking teams. They didn't sit around saying "We need to stop working on the product and figure out how to grow! grow! grow!" They nailed it, they saw that everyone on earth wanted their product, and they enabled it to happen by not getting in their own way.
throwaway98172 11y ago
Right on. Makes sense for YC and Sam to say "you need to grow fast" because they're investors, and understandably want return. But for an entrepreneur, Sam's rationale is not yours. How much $$ do you need to make a happy living per year? Put that number down. The number of opportunities to achieve that goal is much much higher than unicorn opportunities. TAKE NO INVESTMENT, and pursue that opportunity. Once you make that number/year, you will just think about working less, rather than making more money. And you'll be happier than most unicorn-founder who need to grow X% more next quarter because of their investors. Yes: easy to say. But it is is much easier to do than building Facebook or Uber. A bit sad for Sam and YC, but much better for you. Have been doing that for a while. It's working. No big press articles, no fame, but I am spending weeks skiing with family right now instead of growing faster. And making really good money. Like many SMB founders, it's a throwaway account, not wanting to give away too much... Just a bit tired of reading of the "growth bible" as being the only way to be an entrepreneur.

by Aqueous 11y ago

jryan49 11y ago

Because the point of starting startups isn't to create a successful business. It's to trick VCs into giving you money to burn! /s

JonFish85 11y ago
I think this comment still stands without the "/s". The extension is that VCs pawn the company off to the public markets, take their money and are long gone when reality catches up (Twitter, Square, GoPro, Zynga, Groupon...).
- daniel_levine 11y ago
  definitely... MSFT, Facebook, Google, Apple, Salesforce...
  - JonFish85 11y ago
    I'll give you Facebook and Salesforce, they're the only ones comparable
  - slededit 11y ago
    MSFT was profitable from almost day 1. I don't think its a good comparison.
  - smacktoward 11y ago
    Except Microsoft and Apple are both in the business of making things and then selling them to people for more than they cost to make.
pbreit 11y ago
If that's what you think, why are you even here? Maybe assume positive intent and you'll have better luck understanding all this.
- beat 11y ago
  I don't think assuming "positive intent" is the problem here. Read pg; he's talked about exactly this problem. A lot of would-be founders think that you "win" when you land that investment and get some publicity. It's easy and alluring to think, "Hey, we got a Series A! We're millionaires!" when the truth is nothing of the sort. It's actually, "Crap... that's all the money we have to get us to that next goalpost that soooo far away." Taking investment is, at best, a necessary evil for startups. It's not a victory. It's never a victory. It's a compromise. It's "I just sold a hundred million dollars for a million dollars" - with the awareness that if you hadn't sold it, you wouldn't get the other hundreds of millions either.

WalterSear 11y ago

>I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your investors before too long. You need to grow quickly because the world is a big place and technology concepts unfold more or less sequentially, with each iteration building on the past. As a result, the world is full of people who are going to have similar ideas to you and similar opportunities to take advantage of them, around the time you do, and whoever gets established first will get to take most, if not almost all, of the pie.

edgyswingset 11y ago
I don't think it's really about that, especially because getting most of the pie doesn't really matter if your business collapses a year later, or users move on because they got bored with the product or service. I think it's really just the nature of so many startups acting in the consumer space, where you need to have tons of users otherwise your business has no purpose.
- WalterSear 11y ago
  If you customers 'get bored' with your product or service, it won't matter whether you go fast or slow: you aren't chasing a real opportunity.
Aqueous 11y ago
I guess I get that but the marketplace is also a big place and often times there is room for more than one player. Apple and Samsung, Gillette and Schick, Pepsi and Coke. You don't need to totally wipe out competition in order to be a successful company. Furthermore, when there are totalizing effects, it's because the technology benefitted from massive built-in network effects (i.e. Facebook, Uber.) Many (possibly even most) start-ups don't rely on those.
- WalterSear 11y ago
  > Apple and Samsung, Gillette and Schick, Pepsi and Coke. None of which got started during the current technology cycle. >Many (possibly even most) start-ups don't rely on those. I disagree. In fact, IMHO, the overwhelming majority of startups benefit from organic methods of growth that come from word-of-mouth and reputation. Any startup with more than one customer, pretty much. Owning the market means owning that, in your respective field of business.

fossuser 11y ago

Startup as PG defines it in his essays is a company that's experiencing rapid growth - often to support growing rapidly you need a lot of money. I think growing rapidly can have certain advantages - in Facebook's case it allowed them to take over the social environment for all colleges and then eventually everything else. Slow growth in trying to do this may have not allowed them to win. Since VCs are betting on the exponential growth wins (AirBNB, Facebook) they're only interested in hypergrowth companies which YC narrowly defines as startups. Going slow doesn't mean you can't make a great company, it's just not a 'startup'. Of course you need to be 'making things people want' and iterating with users before you can grow, which is what I think sama is talking about.

geofft 11y ago
> Startup as PG defines it in his essays is a company that's experiencing rapid growth - often to support growing rapidly you need a lot of money. I see this response a lot, but that just begs the original question. Why is a startup with VC money a good model for a business? Why not a bootstrapped, "lifestyle" company? What empirical data do we have that effective long-term wins for investors and employees and the world (and not for VCs, who are simply artifacts of the startup ecosystem) are more effectively or efficiently accomplished by startups and not by slow-growth business—or by nonprofits, or bored hobbyists working on things "just for fun", or anonymous pseudonyms who post research papers and then disappear, or anything else? Facebook was a slow growth case in the early days: you had to be a member of certain colleges, and eventually all colleges, and only later the general public. Unlike Airbnb or Uber or another business with a good reason to start in new cities slowly, Facebook's closed registration prevented them from getting any of their users' complete social network for little obvious benefit. There were a good handful of systems at the time with open registration and a similar target user base that are nowhere near as successful (like MySpace, LiveJournal, Xanga, etc.). It might even be possible to make the argument that Facebook's slow growth was important to getting the product right, but in any case, it was certainly the nature of the product more than the ability to grow that helped it.
- morgante 11y ago
  I think you're arguing against a straw man. Nobody in this community (including pg) thinks there's something wrong with small businesses. They likely patronize many small businesses every week. The point is that's not what they're doing. Startups are categorically different from small businesses and there's a lot of advice for my tech startup which isn't applicable to my mom's landscaping business (and vice versa).

codingdave 11y ago

They don't need to grow quickly. But this community has set their own definition of 'startup', which includes rapid growth, and this is a member of YC talking about what they tell their startups, so it is falling within that context. Outside of the 2-letter acronym world (YC/VC/SV/HN), absolutely entrepreneurs should set their own speed -- they only have to answer to themselves.

jessriedel 11y ago
> But this community has set their own definition of 'startup', This is reasonable though, right? We already have words for such ventures and venturers when they don't necessarily grow fast: "small business" and "entrepreneur". The reason "startup" has entered the lexicon is because there seems to be something categorically different about a large fraction of tech small businesses these days, and rapid growth seems to be a the correct differentiator.
- OopsCriticality 11y ago
  This community seems to have its own definition for a lot of words, startup included. Nothing wrong with that, so long as one recognizes that. The trouble for me tends to be when the wider press gets involved, and it isn't clear if the "two-letter acronym world" (nice expression!) definition is intended, or the definition used by others is intended. What does one call a new company formed to develop a pharmaceutical candidate? I would call it a startup, but I don't know that such a company has much at all in common with what people around these parts call a startup.
- deleted 11y ago
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- deleted 11y ago
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- idlewords 11y ago
  A startup is a company with a new type of product or business model. That experimental aspect is the salient difference from a vanilla small business. Having a brand new thing to offer the world often entails rapid growth (and the VC funding model demands it), but the idea that growth is synonymous with startups is peculiar to this here community.

pbreit 11y ago

If you want to grow slowly, that's fine. It's just a different game. With technology, there's so much leverage, the winner can achieve massive spoils and that typically requires growing rapidly.

ssharp 11y ago

There are obviously lots of businesses that benefit from VC investments, and for lots of reasons. For example, at some point, hopefully, you're going to have a product that lots people are willing to pay for, but those people don't really know about it. You could reinvest revenues from existing customers in order to fund growth, but that could take many multiples longer than if you got an influx of cash to do that. There are lots of first-mover advantages as well. Or if you're taking on a big competitor, that faster you grow, the less time they'll have to adapt. There are also a lot of businesses that eventually become profitable that simply cannot be profitable early on. I personally don't like these types of businesses and would much rather bootstrap a lifestyle company or companies, but that's a personal preference and I know it limits the types of businesses I could start.

deleted 11y ago

[deleted]

cabinguy 11y ago

If you are a VC backed startup, growth solves all of your problems (at this particular point in history). If you are a non-VC backed startup, sales/profit solve all of your problems. Either way, growth is a wonderful thing and I think you should grow as fast as you can.

shostack 11y ago
>"If you are a VC backed startup, growth solves all of your problems (at this particular point in history)." What I think you're alluding to here is that growth solves all your problems as long as interest rates are still low so money is pouring into VC without a requirement of seeing revenue, and as long as the company is not in the process of taking the company public since the public markets have wisened up to the "all growth, no profit" game. Is that accurate?
- cabinguy 11y ago
  Yes.
throwaway98172 11y ago
I find profits to be way more fulfilling than growth/sales. Growth does not increase my happiness. Pressure from third-party investors does not. Money in my pocket, free time, decision freedom does.

nlh 11y ago

I think about this question a lot because and will eventually write something longer-form on it, but here's a short summary that builds on what others have said: It's not that startups "need to grow quickly" -- when VCs say that, they're coming at it from the wrong perspective, and it's a source of a lot of confusion. It's that a good idea WILL grow quickly if you let it, and what you NEED to do is not get in the way of the natural growth of an explosively successful idea. The perfect model that (most) VCs are trying to match is Facebook, Instagram, or WhatsApp. A new innovative product that takes the world by storm and relatively quickly monetizes into something worth $billions. VCs want the next Facebook/Instagram/WhatsApp. That's why they're giving you $millions, and they know 9 out of 10 shots aren't going to hit. Because of the way VCs frame their desire for success, it's often confusing to folks on the frontlines and they hear it as "your mission is growth" vs. "your mission is to build something everyone on earth wants and then give it to them quickly." Rapid growth is almost more a RESULT of a successful startup than it is a pathway. It's a symptom, not a task. So what investors mean when they say "you need to grow quickly!" is more like: "We want to see you growing quickly, because that's a sign to us that you've hit the nail on the head." Facebook/Instagram/WhatsApp didn't have growth hacking teams. They didn't sit around saying "We need to stop working on the product and figure out how to grow! grow! grow!" They nailed it, they saw that everyone on earth wanted their product, and they enabled it to happen by not getting in their own way.

throwaway98172 11y ago

Right on. Makes sense for YC and Sam to say "you need to grow fast" because they're investors, and understandably want return. But for an entrepreneur, Sam's rationale is not yours. How much $$ do you need to make a happy living per year? Put that number down. The number of opportunities to achieve that goal is much much higher than unicorn opportunities. TAKE NO INVESTMENT, and pursue that opportunity. Once you make that number/year, you will just think about working less, rather than making more money. And you'll be happier than most unicorn-founder who need to grow X% more next quarter because of their investors. Yes: easy to say. But it is is much easier to do than building Facebook or Uber. A bit sad for Sam and YC, but much better for you. Have been doing that for a while. It's working. No big press articles, no fame, but I am spending weeks skiing with family right now instead of growing faster. And making really good money. Like many SMB founders, it's a throwaway account, not wanting to give away too much... Just a bit tired of reading of the "growth bible" as being the only way to be an entrepreneur.