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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 g

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 entrepreneurs are still talking about their plans to the next round. What if there is no next round? Don’t you still want to survive? Yes, some companies are ‘moon shots’ (DFJ has a fair number of those in our portfolio) where this is simply not possible. But for the vast majority of startups, this should be possible. What is the point of calling them start ups anymore. Remove the high risk/high reward aspect and new companies are simply small businesses that receive small business loans from banks. A lot of the "wow" factor of the startup ecosystem was the mind boggling user growth/high valuation/massive losses phenomenon that a few companies weathered through to IPO and monetization. I think I saw someone advocating for better terminology on HN recently. I vote to call any close-to-profitable <2 yr old company a small business. Likewise, any portfolio that holds mostly safe small business loans and equity should simply be called a bank. Leave the unicorn/VC/startup lingo in the past, or use it to describe actual risk profiles, and things will be a lot less confusing.

andreasklinger 11y ago
i would love if a term for this kind of small businesses would establish given that more and more startups go niche + traction first and often are ok w/ staying there there is also the need for a different finance model imo
Disruptive_Dave 11y ago
I started writing this then got distracted. Everyone not only needs to collectively define what a "startup" is, but more importantly, don't blow sunshine up my ass by telling me to act like an SMB. Because I don't run into many investors who get excited about my company's reasonable P&L. There's a significant difference between a company running like a small biz and a hyper-growth-at-all-costs one. It would be quite helpful to know which investors are interested in each, all the BS put to the side. edit: I do realize (and hope) that the current financial environment helps to bring everyone back down to earth a bit.
rgbrgb 11y ago
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 side note, getting profitable while maintaining growth would seem to put you in the best possible position to pursue more funding if you wanted it. Edit: I'll also add that according to pg's "Startup = Growth" [0], profitability doesn't really come into the definition. Hence the existence of bootstrapped startups. [0]: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- roymurdock 11y ago
  > 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 off as simple, sensible advice. > in most cases profitability is not orthogonal to growth It absolutely is. The longer you can offer a service for free, or for cost below margin, the more users you can attract to your business. It's pretty simple economics - build a nice free garden, let people play in it and invite their friends, get investments to pay your operating costs while improving the garden, keeping it open and free, then close it off and advertise once your ecosystem is strong enough to prevent substantial churn. This is not to say that all companies follow this path, but high growth companies certainly tend to, as it gives them a huge monopolistic advantage by putting profitability off into the future.
  - mindcrime 11y ago
    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.
notahacker 11y ago
A company that raises millions of dollars of equity funding to try to corner a market is not a "small business", and it's certainly not a smaller business for having non-trivial revenues so that any follow-on rounds are reinvested in expansion rather than survival.
- roymurdock 11y ago
  > to try to corner a market The author's point seems to be - don't try to corner the market, the days of us investing in 5% success rate "moonshots" that do corner the market is over because that 5% is now down to 0.5%, and easy liquidity events such as IPOs and acquisitions are getting harder to come by. Just make a decent product and swim along with all the other little fishes because we don't want any risky market-cornering equity on our balance sheet given the current exit environment.
  - notahacker 11y ago
    That is, to put it mildly, an uncharitable way of interpreting a statement that most well-funded startups ought to be able to find a route to profitability without further growth capital if it's not forthcoming. If there's one single reason why 5% moonshots are in danger of becoming 0.5% moonshots it's the palpable contempt for the concept of a route to profitability that you're displaying. Having enough revenue to be able to grow [more slowly] once the VC cash has all been spent is not a bad thing, and it doesn't make you a "little fish". It's even arguable a startup is not really that close to cornering a market if there's no route to breakeven point without taking on further funding. That basically means they're either too tiny to enjoy any economies of scale, not competitive enough to be able to price their product at breakeven point or haven't opened the money valve enough to actually have a real market at all yet. Sure, any startup keen on cornering a market should have estimates of just how much additional CLV can be realised if they raise another $50m to scale up the sales team rather than continuing on their current growth path with the smaller team, but few of them should need that Series C to keep the lights on.
sharkweek 11y ago
"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo
- Disruptive_Dave 11y ago
  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).
  - throwawayank333 11y ago
    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 can understand why some founders don't want to have any at all - in order to not have the more silly investors be distracted by looking at it. There is a little truth to what he's saying - Once you have more than $0 in revenue, you have to make that number go up every month to keep investors happy and have nice numbers to bring in new ones, which makes it harder for the startup to invest in longer term projects that could bring much more revenue but with a slower buildup.
    - api 11y ago
      I solve this by not wanting silly investors.
    - maehwasu 11y ago
      Anchoring is real.
logicallee 11y ago
Couple of points. First, The idea of risk-reward trade-off is stupid. (This is demonstrated in my footnote.)[1] Second: startups aren't startups because they have a high risk of failure. Simply because they expect to be much bigger in 24 months than they are today. Someone making an app they want to sell on Android and iOS for $2 to all of the people who use smart phones is not a "small business", it's a startup. Why? Because there are 3 billion people on mobile phones. At Internet-scale, there's really nothing between the two. There's no such thing as a mom and pop mobile game. Doesn't exist. If it's a mobile game, everyone can play it. Either you're in business around it or you aren't. if you're in business on the world stage, you're not a small business, you're a startup. the only thing that matters is whether you would like to address the world's population or not. i.e. whether you're "trying" (to hyper-grow.) If you're trying to be much bigger later than you are now (by many orders of magnitude) then you're a startup. By the same token, anyone who has a plan to eventually make a million of anything is a startup. doesn't matter where you are today. - [1] You can show yourself that risk/reward is not true. Suppose that I transport from the future to today the entire faculty of MIT and Cal Tech, who know all of the major technology breakthroughs that have happened between our time and theirs. It stands to reason that they are worth more the farther from the future you transport them. 12 months is worth less than 24 months is less than 72 months is a lot less than 70 years. Does it stand to reason that the more value they're bringing with themselves, the higher the risk of failure? No, of course not. It's just objectively higher value. So stop talking about risk/reward, I've just proven that it doesn't exist. The only thing that matters is the value you're bringing to the table. You don't automatically run a higher risk of failure if you bring the world $1 billion of value versus bringing the world $100,000 of value. Doesn't exist. No law makes this the case. Zuckerberg didn't suddenly increase his risk by 1,000,000 when he decided to target a million times as many people (the world's population versus Harvard's student body). It's just false. You don't need to go through a million zuckerbergs to get another facebook. You don't even have to go through fifty thousand of them. You just need people targeting the world's population who know what they're doing. This is why VC works.
- logicallee 11y ago
  I was watching this comment carefully as I thought I might have to delete it (due to people not understanding the arguments therein). It started rising to +2 or +3, so I stopped watching it. Now that I've checked again, I see that a few downvoters got it down to -1. Since it is too late, I am happy to explain the thoughts in the above comment. I studied this area of economics from formal sources as well as having exposure to startups. To summarize. One might think that if, say, a guy might be able to get a pizzeria off the ground, and it's 50/50, if it works he'll make a business with an enterprise value of $20,000 using his $5,000 investment, that's our assumption -- then if he wants to raise his sights and make the same investment, but this time is targeting $200,000 - his chances of success drop to 5%. And if he targets $2M then they drop to 0.5%. And if he targets $200M then they drop to $0.005%. If he targets $2B then they drop to $0.0005%. And if he targets $20B then it drops to $0.00005%. If he targtes $200B then it drops to 0.000005% But 0.000005% is 1 in 20,000,000. There are 318 million people in America, so by those odds, the number of people in America who are capable of building a $200 billion business is exactly 15. Yet there are more than 15 American companies that had those kinds of valuations in the past couple of years; Apple alone would account for 3 of them. So with these kinds of large-scale successes, the risk-reward equation clearly doesn't actually work. And this ignores all of the home-run hits short of $200 billion. Clearly, risk does not increase at the same rate that reward does. The risk-reward trade-off is just not a model that you can successfully employ when it comes to startups. --- Secondly (this is not directly related to the above) the world is super-connected. There is 0 chance that if I find a pizzeria run by some guy in the city with 1 location as a small business, that 14 months from now it will have 50 locations that he personally operates. But if you find some guy with 2,000 downloads today from the Google Play store, there is no reason this same guy can't make something else and get 200,000 downloads. That is a factor of 100. So the whole IDEA of a "small-business" just doesn't apply to online startup-like economies. The only question is whether the guy who made a niche app with 2,000 users is even interested in trying to use his same skills making something innovative and new, which he gets good press for, but which addresses the whole global smartphone audience. The thing that makes it a startup is this hyper-growth component, like whether he's trying to roll out at that scale. If someone doesn't understand either of the two (quite distinct) arguments above, or has any type of comments or rebuttal, I can follow up. Thanks for your time.
morgante 11y ago
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 doesn't magically make them a startup. Aspiring towards profitability does not mean abandoning plans for growth (if anything, it often means doubling down on revenue growth). Small businesses don't double in size, startups do. Very little of what's relevant to my mom's small landscaping business is relevant to a technology startup, even if both are aiming to be profitable. What benefit do derive from purposefully distorting terminology? [1] http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- mindcrime 11y ago
  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.
  - morgante 11y ago
    Fair enough, I think it results in the same categorization in the end.
  - jt2190 11y ago
    > How fast it gets there is an implementation detail. Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company?
    - mindcrime 11y ago
      Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company? If you define "investors" as only VC's then I'd say that's a fair point. But just to paint a different scenario... for us, the only investors are the founders (so far). So why invest in building a company as opposed to putting that money in index funds? I can't speak for all the others, but besides still expecting a larger financial reward in the end, a lot of it is about the joy in the process of building something, and about having the opportunity to do things our own way. This way we get to build a company based on the principles we believe in and that will operate by our standards. And to top it all off, I would say that even if we fail and never make a dime, we'll all have benefited from the process itself simply in terms of learning and experience. So yeah, sure, VC's want "fast" at all costs. No argument there. I guess what I'm saying is, the "take VC money and grow fast model isn't the only model."
InclinedPlane 11y ago
The difference between a startup and a new small business is novelty. A startup is innovating, a small business is not. More so if a startup is establishing or growing a market versus competing in an existing market. Granted, a lot of tech "startups" in SV are not innovating and should probably not be classified as true startups, nevertheless, that's the differentiating factor.

andreasklinger 11y ago

i would love if a term for this kind of small businesses would establish given that more and more startups go niche + traction first and often are ok w/ staying there there is also the need for a different finance model imo

Disruptive_Dave 11y ago

I started writing this then got distracted. Everyone not only needs to collectively define what a "startup" is, but more importantly, don't blow sunshine up my ass by telling me to act like an SMB. Because I don't run into many investors who get excited about my company's reasonable P&L. There's a significant difference between a company running like a small biz and a hyper-growth-at-all-costs one. It would be quite helpful to know which investors are interested in each, all the BS put to the side. edit: I do realize (and hope) that the current financial environment helps to bring everyone back down to earth a bit.

rgbrgb 11y ago

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 side note, getting profitable while maintaining growth would seem to put you in the best possible position to pursue more funding if you wanted it. Edit: I'll also add that according to pg's "Startup = Growth" [0], profitability doesn't really come into the definition. Hence the existence of bootstrapped startups. [0]: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

roymurdock 11y ago
> 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 off as simple, sensible advice. > in most cases profitability is not orthogonal to growth It absolutely is. The longer you can offer a service for free, or for cost below margin, the more users you can attract to your business. It's pretty simple economics - build a nice free garden, let people play in it and invite their friends, get investments to pay your operating costs while improving the garden, keeping it open and free, then close it off and advertise once your ecosystem is strong enough to prevent substantial churn. This is not to say that all companies follow this path, but high growth companies certainly tend to, as it gives them a huge monopolistic advantage by putting profitability off into the future.
- mindcrime 11y ago
  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.

notahacker 11y ago

A company that raises millions of dollars of equity funding to try to corner a market is not a "small business", and it's certainly not a smaller business for having non-trivial revenues so that any follow-on rounds are reinvested in expansion rather than survival.

roymurdock 11y ago
> to try to corner a market The author's point seems to be - don't try to corner the market, the days of us investing in 5% success rate "moonshots" that do corner the market is over because that 5% is now down to 0.5%, and easy liquidity events such as IPOs and acquisitions are getting harder to come by. Just make a decent product and swim along with all the other little fishes because we don't want any risky market-cornering equity on our balance sheet given the current exit environment.
- notahacker 11y ago
  That is, to put it mildly, an uncharitable way of interpreting a statement that most well-funded startups ought to be able to find a route to profitability without further growth capital if it's not forthcoming. If there's one single reason why 5% moonshots are in danger of becoming 0.5% moonshots it's the palpable contempt for the concept of a route to profitability that you're displaying. Having enough revenue to be able to grow [more slowly] once the VC cash has all been spent is not a bad thing, and it doesn't make you a "little fish". It's even arguable a startup is not really that close to cornering a market if there's no route to breakeven point without taking on further funding. That basically means they're either too tiny to enjoy any economies of scale, not competitive enough to be able to price their product at breakeven point or haven't opened the money valve enough to actually have a real market at all yet. Sure, any startup keen on cornering a market should have estimates of just how much additional CLV can be realised if they raise another $50m to scale up the sales team rather than continuing on their current growth path with the smaller team, but few of them should need that Series C to keep the lights on.

sharkweek 11y ago

"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!" https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo

Disruptive_Dave 11y ago
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).
- throwawayank333 11y ago
  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 can understand why some founders don't want to have any at all - in order to not have the more silly investors be distracted by looking at it. There is a little truth to what he's saying - Once you have more than $0 in revenue, you have to make that number go up every month to keep investors happy and have nice numbers to bring in new ones, which makes it harder for the startup to invest in longer term projects that could bring much more revenue but with a slower buildup.
  - api 11y ago
    I solve this by not wanting silly investors.
  - maehwasu 11y ago
    Anchoring is real.

logicallee 11y ago

Couple of points. First, The idea of risk-reward trade-off is stupid. (This is demonstrated in my footnote.)[1] Second: startups aren't startups because they have a high risk of failure. Simply because they expect to be much bigger in 24 months than they are today. Someone making an app they want to sell on Android and iOS for $2 to all of the people who use smart phones is not a "small business", it's a startup. Why? Because there are 3 billion people on mobile phones. At Internet-scale, there's really nothing between the two. There's no such thing as a mom and pop mobile game. Doesn't exist. If it's a mobile game, everyone can play it. Either you're in business around it or you aren't. if you're in business on the world stage, you're not a small business, you're a startup. the only thing that matters is whether you would like to address the world's population or not. i.e. whether you're "trying" (to hyper-grow.) If you're trying to be much bigger later than you are now (by many orders of magnitude) then you're a startup. By the same token, anyone who has a plan to eventually make a million of anything is a startup. doesn't matter where you are today. - [1] You can show yourself that risk/reward is not true. Suppose that I transport from the future to today the entire faculty of MIT and Cal Tech, who know all of the major technology breakthroughs that have happened between our time and theirs. It stands to reason that they are worth more the farther from the future you transport them. 12 months is worth less than 24 months is less than 72 months is a lot less than 70 years. Does it stand to reason that the more value they're bringing with themselves, the higher the risk of failure? No, of course not. It's just objectively higher value. So stop talking about risk/reward, I've just proven that it doesn't exist. The only thing that matters is the value you're bringing to the table. You don't automatically run a higher risk of failure if you bring the world $1 billion of value versus bringing the world $100,000 of value. Doesn't exist. No law makes this the case. Zuckerberg didn't suddenly increase his risk by 1,000,000 when he decided to target a million times as many people (the world's population versus Harvard's student body). It's just false. You don't need to go through a million zuckerbergs to get another facebook. You don't even have to go through fifty thousand of them. You just need people targeting the world's population who know what they're doing. This is why VC works.

logicallee 11y ago
I was watching this comment carefully as I thought I might have to delete it (due to people not understanding the arguments therein). It started rising to +2 or +3, so I stopped watching it. Now that I've checked again, I see that a few downvoters got it down to -1. Since it is too late, I am happy to explain the thoughts in the above comment. I studied this area of economics from formal sources as well as having exposure to startups. To summarize. One might think that if, say, a guy might be able to get a pizzeria off the ground, and it's 50/50, if it works he'll make a business with an enterprise value of $20,000 using his $5,000 investment, that's our assumption -- then if he wants to raise his sights and make the same investment, but this time is targeting $200,000 - his chances of success drop to 5%. And if he targets $2M then they drop to 0.5%. And if he targets $200M then they drop to $0.005%. If he targets $2B then they drop to $0.0005%. And if he targets $20B then it drops to $0.00005%. If he targtes $200B then it drops to 0.000005% But 0.000005% is 1 in 20,000,000. There are 318 million people in America, so by those odds, the number of people in America who are capable of building a $200 billion business is exactly 15. Yet there are more than 15 American companies that had those kinds of valuations in the past couple of years; Apple alone would account for 3 of them. So with these kinds of large-scale successes, the risk-reward equation clearly doesn't actually work. And this ignores all of the home-run hits short of $200 billion. Clearly, risk does not increase at the same rate that reward does. The risk-reward trade-off is just not a model that you can successfully employ when it comes to startups. --- Secondly (this is not directly related to the above) the world is super-connected. There is 0 chance that if I find a pizzeria run by some guy in the city with 1 location as a small business, that 14 months from now it will have 50 locations that he personally operates. But if you find some guy with 2,000 downloads today from the Google Play store, there is no reason this same guy can't make something else and get 200,000 downloads. That is a factor of 100. So the whole IDEA of a "small-business" just doesn't apply to online startup-like economies. The only question is whether the guy who made a niche app with 2,000 users is even interested in trying to use his same skills making something innovative and new, which he gets good press for, but which addresses the whole global smartphone audience. The thing that makes it a startup is this hyper-growth component, like whether he's trying to roll out at that scale. If someone doesn't understand either of the two (quite distinct) arguments above, or has any type of comments or rebuttal, I can follow up. Thanks for your time.

morgante 11y ago

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 doesn't magically make them a startup. Aspiring towards profitability does not mean abandoning plans for growth (if anything, it often means doubling down on revenue growth). Small businesses don't double in size, startups do. Very little of what's relevant to my mom's small landscaping business is relevant to a technology startup, even if both are aiming to be profitable. What benefit do derive from purposefully distorting terminology? [1] http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

mindcrime 11y ago
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.
- morgante 11y ago
  Fair enough, I think it results in the same categorization in the end.
- jt2190 11y ago
  > How fast it gets there is an implementation detail. Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company?
  - mindcrime 11y ago
    Only if the investors aren't looking for a better than market average return on investment. And if they're only looking for an average return, why risk their money investing in an unproven company? If you define "investors" as only VC's then I'd say that's a fair point. But just to paint a different scenario... for us, the only investors are the founders (so far). So why invest in building a company as opposed to putting that money in index funds? I can't speak for all the others, but besides still expecting a larger financial reward in the end, a lot of it is about the joy in the process of building something, and about having the opportunity to do things our own way. This way we get to build a company based on the principles we believe in and that will operate by our standards. And to top it all off, I would say that even if we fail and never make a dime, we'll all have benefited from the process itself simply in terms of learning and experience. So yeah, sure, VC's want "fast" at all costs. No argument there. I guess what I'm saying is, the "take VC money and grow fast model isn't the only model."

InclinedPlane 11y ago

The difference between a startup and a new small business is novelty. A startup is innovating, a small business is not. More so if a startup is establishing or growing a market versus competing in an existing market. Granted, a lot of tech "startups" in SV are not innovating and should probably not be classified as true startups, nevertheless, that's the differentiating factor.