4 ms·

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

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."
- rokhayakebe 11y ago
  I agree. It's more about getting big than growing fast. A startup could spend years perfecting its model and technology before going full force. Perfect example: YC funds startups only. YC funded a company working to cure HIV. That is going to take a decade probably. When they are ready they will be big in an instant.
  - mindcrime 11y ago
    A startup could spend years perfecting its model and technology before going full force. Yeah, that's really exactly it. The way I've put it before is that you choose the model that fits where you are in your lifecycle. Or you grow slow, until you choose to (try to) grow fast. I'm not opposed to VC per-se or anything, but our mindset has always been "do it when the time is right". We get a handful of paying customers, real revenue and feel convinced that we've nailed the whole "product /market fit" thing, then we might decide it's time to turn on the afterburners or whatever. But right now, while more money would make some things easier, I wouldn't feel good about taking that on.
  - AstralStorm 11y ago
    It's the thing about startups - everybody talks like they actually succeed. It should be "if", not "when". The actual measure of success is both size and revenue. Without the former it's a small company, without the latter it's going to get bankrupt unless it changes - with implosion proportional to size. "An instant" is a huge hyperbole, let's start with verification, legislation, distribution, certification and all other kinds of legal nightmare to get a treatment on the market. Not to mention politics if it's (not) affordable.
roymurdock 11y ago
You're leaving out all of the companies between the two extreme poles that you just set down. What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. Or a chain of coffee shops that experiences huge growth and raises high-visibility funding rounds, such as Philz Coffee? What is Palantir? Companies that are designed to grow fast by swapping profitability for free, user-attracting features will not do well in the current investing environment. That is the point of the article. The investor is looking for less risky, less high-growth oriented companies - aka slow startups. While you may not agree with my call to revisit terminology, it is poor form to insinuate that I am an idiot whose goal is to derail conversations by torching old terms. The hostility is unnecessary.
- morgante 11y ago
  > You're leaving out all of the companies between the two extreme poles that you just set down. Of course there are lots of nuances. I wouldn't say that Atlassian is an extreme pole though—it actually contradicts a lot of the narratives people tell about startups. > What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. TC is absolutely not a prerequisite for being a startup (it's essentially a fashion show, which is relatively orthogonal to business). If this 5% margin software business has a realistic plan to grow into a large company and has strong growth then it absolutely is a startup, even if it's not fashionable. > Or a chain of coffee shops that experiences huge growth and raises high-visibility funding rounds, such as Philz Coffee? What is Palantir? Both are absolutely startups, their business model just isn't selling ads. They were both designed to grow big and used funding to get there. > The investor is looking for less risky, less high-growth oriented companies - aka slow startups. Yes, the investor is becoming more risk-adverse. That doesn't mean they're suddenly a bank looking to fund small businesses. I could walk up to her with a plan for opening a laundromat which was guaranteed to turn a profit in year 1, but I guaranteed she'd still be uninterested. Likewise, banks are generally uninterested in funding my tech endeavors even if they have a pretty reasonable path to profitability. "Slow startups" is a much better term than small businesses. They still intend to be big some day, but aren't rushing as fast to get there. > The hostility is unnecessary. I apologize for coming off as overly hostile. I'm mostly just frustrated with people muddling terminology, and you certainly don't deserve the blame for that.
lmm 11y ago
Words are tools for communication. A word will always be a simplification of reality (and will always have edge cases), but the best words are labels for clusters of similar things. When a word describes a group of things that really do form their own cluster then it's a good word; when it describes a group that really splits into two or more distinct groups, or describes part of a group but not other equally similar things, then it's a bard work. In many real-world aspects I'd argue that Atlassian is more similar to the corner laundromat than it is to e.g. Snapchat. How would you evaluate them when considering making a business loan? How would you consider the prospect of working for them? How would you sell services to them? What do you think their HR plans look like? Their client relationships? Their regulatory situation? Wherever you draw the line there will be companies that straddle it. But in my book there is a relatively clean distinction between companies that operate in a way that's sustainable in the short term and companies that operate at a high burn rate, and it is well worth reserving the term "startup" for the latter.

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."
rokhayakebe 11y ago
I agree. It's more about getting big than growing fast. A startup could spend years perfecting its model and technology before going full force. Perfect example: YC funds startups only. YC funded a company working to cure HIV. That is going to take a decade probably. When they are ready they will be big in an instant.
- mindcrime 11y ago
  A startup could spend years perfecting its model and technology before going full force. Yeah, that's really exactly it. The way I've put it before is that you choose the model that fits where you are in your lifecycle. Or you grow slow, until you choose to (try to) grow fast. I'm not opposed to VC per-se or anything, but our mindset has always been "do it when the time is right". We get a handful of paying customers, real revenue and feel convinced that we've nailed the whole "product /market fit" thing, then we might decide it's time to turn on the afterburners or whatever. But right now, while more money would make some things easier, I wouldn't feel good about taking that on.
- AstralStorm 11y ago
  It's the thing about startups - everybody talks like they actually succeed. It should be "if", not "when". The actual measure of success is both size and revenue. Without the former it's a small company, without the latter it's going to get bankrupt unless it changes - with implosion proportional to size. "An instant" is a huge hyperbole, let's start with verification, legislation, distribution, certification and all other kinds of legal nightmare to get a treatment on the market. Not to mention politics if it's (not) affordable.

roymurdock 11y ago

You're leaving out all of the companies between the two extreme poles that you just set down. What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. Or a chain of coffee shops that experiences huge growth and raises high-visibility funding rounds, such as Philz Coffee? What is Palantir? Companies that are designed to grow fast by swapping profitability for free, user-attracting features will not do well in the current investing environment. That is the point of the article. The investor is looking for less risky, less high-growth oriented companies - aka slow startups. While you may not agree with my call to revisit terminology, it is poor form to insinuate that I am an idiot whose goal is to derail conversations by torching old terms. The hostility is unnecessary.

morgante 11y ago
> You're leaving out all of the companies between the two extreme poles that you just set down. Of course there are lots of nuances. I wouldn't say that Atlassian is an extreme pole though—it actually contradicts a lot of the narratives people tell about startups. > What about a small, 5% gross margin software "startup" that takes on small investments with decent YoY growth that never makes TC news. TC is absolutely not a prerequisite for being a startup (it's essentially a fashion show, which is relatively orthogonal to business). If this 5% margin software business has a realistic plan to grow into a large company and has strong growth then it absolutely is a startup, even if it's not fashionable. > Or a chain of coffee shops that experiences huge growth and raises high-visibility funding rounds, such as Philz Coffee? What is Palantir? Both are absolutely startups, their business model just isn't selling ads. They were both designed to grow big and used funding to get there. > The investor is looking for less risky, less high-growth oriented companies - aka slow startups. Yes, the investor is becoming more risk-adverse. That doesn't mean they're suddenly a bank looking to fund small businesses. I could walk up to her with a plan for opening a laundromat which was guaranteed to turn a profit in year 1, but I guaranteed she'd still be uninterested. Likewise, banks are generally uninterested in funding my tech endeavors even if they have a pretty reasonable path to profitability. "Slow startups" is a much better term than small businesses. They still intend to be big some day, but aren't rushing as fast to get there. > The hostility is unnecessary. I apologize for coming off as overly hostile. I'm mostly just frustrated with people muddling terminology, and you certainly don't deserve the blame for that.

lmm 11y ago

Words are tools for communication. A word will always be a simplification of reality (and will always have edge cases), but the best words are labels for clusters of similar things. When a word describes a group of things that really do form their own cluster then it's a good word; when it describes a group that really splits into two or more distinct groups, or describes part of a group but not other equally similar things, then it's a bard work. In many real-world aspects I'd argue that Atlassian is more similar to the corner laundromat than it is to e.g. Snapchat. How would you evaluate them when considering making a business loan? How would you consider the prospect of working for them? How would you sell services to them? What do you think their HR plans look like? Their client relationships? Their regulatory situation? Wherever you draw the line there will be companies that straddle it. But in my book there is a relatively clean distinction between companies that operate in a way that's sustainable in the short term and companies that operate at a high burn rate, and it is well worth reserving the term "startup" for the latter.