6 ms·

Ning, free, eyeballs, layoffs

41 points by malbiniak 17y ago

johnrob 17y ago
Worth pointing out: a) Facebook used the same 'fat' strategy and is winning big. b) Swinging for the fences increases the odds of striking out. c) Marc Andreessen is not interested in creating 37 signals.
- runevault 17y ago
  While I tend to roll my eyes a fair bit at how... set the 37 signals guys are in many of their opinions, the whole lottery idea I agree with completely. Even if FB has hit it big, what were the odds going in of them being the billion dollar winner, vs another failure that left them with unhappy VCs who they didn't make money for. To me at least, swinging for the fences seems to be something you should do after you've already made some sexy cash on other stuff or at least made a name for yourself, if you REALLY want to go that route.
  - kgrin 17y ago
    > something you should do after you've already made some sexy cash on other stuff or at least made a name for yourself You mean like cofounding Netscape?
    - startuprules 17y ago
      I'd like to think Andreessen as the guy who never made profits, only products
      - sriramk 17y ago
        You do know of OpsWare, right? :)
        startuprules 17y ago
        Doesn't look like it did. http://www.tracked.com/company/opsware/financials/income/?t=annual http://www.tracked.com/company/opsware/financials/income/?t=...
        nl 16y ago
        I'll take your url and raise it with: http://voices.allthingsd.com/20100317/the-case-for-the-fat-startup/ http://voices.allthingsd.com/20100317/the-case-for-the-fat-s... OpsWare was very deliberately spending money to make sure they were the market leader. Read the link I posted - it's a perfect example of why 37Signals is both wrong and right at the same time. OpsWare was a typical Silicon Valley start-up (per the Steve Blank definition: Total available market > 500M, Company can grow > 100M/year etc - see slides 10-12 in http://steveblank.com/2010/04/15/why-accountants-dont-run-startups/ http://steveblank.com/2010/04/15/why-accountants-dont-run-st...) OpsWare quite deliberately took a high risk strategy in order to aim for high rewards. 37Signals is a small business. Profitable, comfortable, but no prospects of explosive growth. To quote from the link above: What is start-up purgatory, you ask? Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business (see Navisite). From the entrepreneur’s point of view, this can be worse than start-up hell since you are stuck with the small company. 37Signals seem to be quite fine with their business. However, they appear not to understand that many others are quite deliberate in choosing riskier strategies because the rewards can be higher.
- dhh 17y ago
  a) Facebook is a definitely the odd man out. They made something happen that very, very few other eyeball companies have managed. b) Facebook isn't winning shit for their investors YET. They've allegedly just turned cash flow positive, but they're still $750MM in the hole from VC infusions over the past SIX YEARS. Add interest and risk premium and Facebook has to make a TRUCK load of money to pay back their investors. Not just break even. c) Fashions change. Remember when Myspace was the golden goose? Friendster? It is far from a guarantee that Facebook will remain hot shit for long enough to pay back $750MM with interest and premium.
  - rortian 17y ago
    Poor VCs not getting quick cash from their investments. They truly are victims for getting a stake in a hugely successful company. VCs are not private equity. I'm sure they didn't mind quick cashouts during the late 90s, but expecting to get major money from an up and comer in a short timespan is delusional. Equity is not debt. By your dichotomy MySpace is simply amazing for paying investors (interest?) and facebook is a drain on the preciously scarce resources of wealthy individuals and institutions.
    - dhh 17y ago
      What metric are you using to define success? It seems not to be the traditional capitalist one. The score card for Facebook currently says minus $750M. Breaking even or a small profit is not going to change that. Facebook totally COULD be a successful, but they'll need to get some serious PROFITS (not revenues!) going to make that happen. Certainly within the realm of possibilities, but it hasn't happened yet.
      - rortian 17y ago
        Where did this $750M come from? Traditional capitalists. What rubes right? I have a hard time with someone trying to assert facebook isn't a success. However, if you think success is 'profitable in 2010' then far out they are a failure. This obsession with equity as debt is very strange to me. By this metric Apple is a hugely indebted company. When you break down a company you look at assets and liabilities. Facebook has few liabilities in the form of debt because so many wealth individuals and institutions think having a stake in its future is a desirable proposition. I would call most of their assets the intangible ones of being of the most visited, used, and widely-known websites in the world. If you think this is worthless, okay. But I think its a little bizarre to assert they are $750M in the hole.
- ajg1977 17y ago
  Also worth pointing out: a) Facebook only recently became cash flow positive after years of burning cash like it was the end of days. b) Their revenue per user is miserably low c) If the advertising market ever tanks, they're screwed. Holding Facebook up as an example of a worthy business model to follow is horribly naive.
  - deleted 17y ago
    [deleted]
  - rortian 17y ago
    >c) If the advertising market ever tanks, they're screwed. You know that has happened recently right? People at facebook, and prominent investors like Andreessen, have pointed out repeatedly that they could raise a lot more revenue. However, most of these methods would simply destroy the site by making the user experience much less bearable. >b) Their revenue per user is miserably low This might be a problem if they didn't have an enormous number of users and a very impressive amount of active users. >Holding Facebook up as an example of a worthy business model to follow is horribly naive. Is an incredibly nasty statement that reeks of jealousy. Sort of silly too. I think you could say a similar thing about Microsoft, since there will really only be one PC OS monopolist.
    - tokenadult 17y ago
      Their revenue per user is miserably low This might be a problem if they didn't have an enormous number of users and a very impressive amount of active users. Somehow this reminds me of the old joke about the guy who lost money on every sale but made it up in volume. Yes, Facebook might make money enough to recover the investment of the first investors someday (I can remember when Amazon looked like it would never do that), but that all depends on the overall net earnings per user being positive. To date, even Facebook's own press releases don't report a situation that makes it clear the initial investors will ever be able to recover their investments. I like Facebook well enough, but unlike my early interaction with Amazon I have never made a payment to Facebook for anything.
      - 17y ago
- techiferous 16y ago
  "Swinging for the fences increases the odds of striking out." Not a law. Good entrepreneurs are game changers and it's easier to just play a different game where there is not a high reward/high risk correlation rather than play this losing game that assumes that high reward must mean high risk. In my opinion good entrepreneurs are not risk takers, they are risk managers. The best ones are money takers.
  - johnrob 16y ago
    How do you explain Marc Andreessen's company laying off half its staff? Is he not a good entrepreneur?
    - techiferous 16y ago
      I'm not qualified to judge his entrepreneurial abilities; my main point is to question the correlation between high reward and high risk and also to make sure risk is not glamorized. (The only reason you take a risk is that it is a necessary means to a greater benefit.)
hooande 17y ago
This is flagrant linkbait. I start to write a witty comment responding to this post, but then I realized that's exactly what they want us to do. They even told us, explicitly in their book, that their forumla for success was to create controversy in order to attract attention to their business. I'm still waiting for the day when I see a 37Signals post about how they intend to build great collaboration software, and not about how people should run their businesses. Making inflammatory statements statements about other people's companies is definitely one way to make it. But so is thinking and talking about your actual product.
- dhh 17y ago
  We have a whole weblog dedicated to talking about our product and calling out new feature launches: http://productblog.37signals.com/ http://productblog.37signals.com/ Most people aren't that interested in just reading an infomercial, though. Lots of people are apparently interested in reading opinions and discussions about industry topics. Be they VC funding or whatever.
- axod 17y ago
  Best just to flag it and move on IMHO. (I agree completely)
- dennis_forbes 16y ago
  You had something super clever to say, but instead you just fall back to essentially calling the target a troll. Sorry, but that tactic is one of the weakest, most trollest techniques going. I'm surprised that anyone still falls for it. As far as "making inflammatory statements about other people's companies", given that ning is all other the tech news sites its hardly like it came out of left field. And really the "get enough eyeballs" tactic has been the recipe for countless massive failures, yet still people keep saying "FACEBOOK FACEBOOK FACEBOOK!" Before people reference facebook, contemplate where Facebook would be if instead of being propped up by VCs desperate to flip it to the next guy, they had to get bank loans. They would have been dead in the water years ago. Instead now they're getting more and more desperate to raise revenue, and the results aren't good. Facebook is not a good example of anything.
gsmaverick 17y ago
This is just more blindness from the folks at 37s. I would like to know how much David pays Google to use their service? That's right he doesn't, so why doesn't he put his money where his mouth is and pay for each and every web service he utilizes.
- dhh 17y ago
  WTF are you talking about? I pay for plenty of services. In fact, I love paying for good services. Dropbox is a great example. So is Campaign Monitor, Zendesk, and Survey Monkey. Give shit away for free and people will take it for free.
  - gsmaverick 17y ago
    How much do you pay for a search engine? You think that the 37s business model applies to every web business out there and it doesn't!
    - deleted 17y ago
      [deleted]
    - jasonfried 17y ago
      The 37signals business model, also known as "a business", is the business model employed by about 99% of all businesses on the planet. They make a product or offer a service and their customers pay them for it.
      - gsmaverick 17y ago
        But you think it works for all 100% of businesses. And that's where you're wrong. A search engine is a perfect example of a product which would fail if they tried to sell access. But you can continue to pad your ego and think you know everything there is to know about business.
        startuprules 17y ago

41 points by malbiniak 17y ago

Worth pointing out: a) Facebook used the same 'fat' strategy and is winning big. b) Swinging for the fences increases the odds of striking out. c) Marc Andreessen is not interested in creating 37 signals.

runevault 17y ago
While I tend to roll my eyes a fair bit at how... set the 37 signals guys are in many of their opinions, the whole lottery idea I agree with completely. Even if FB has hit it big, what were the odds going in of them being the billion dollar winner, vs another failure that left them with unhappy VCs who they didn't make money for. To me at least, swinging for the fences seems to be something you should do after you've already made some sexy cash on other stuff or at least made a name for yourself, if you REALLY want to go that route.
- kgrin 17y ago
  > something you should do after you've already made some sexy cash on other stuff or at least made a name for yourself You mean like cofounding Netscape?
  - startuprules 17y ago
    I'd like to think Andreessen as the guy who never made profits, only products
    - sriramk 17y ago
      You do know of OpsWare, right? :)
      - startuprules 17y ago
        Doesn't look like it did. http://www.tracked.com/company/opsware/financials/income/?t=annual http://www.tracked.com/company/opsware/financials/income/?t=...
        nl 16y ago
        I'll take your url and raise it with: http://voices.allthingsd.com/20100317/the-case-for-the-fat-startup/ http://voices.allthingsd.com/20100317/the-case-for-the-fat-s... OpsWare was very deliberately spending money to make sure they were the market leader. Read the link I posted - it's a perfect example of why 37Signals is both wrong and right at the same time. OpsWare was a typical Silicon Valley start-up (per the Steve Blank definition: Total available market > 500M, Company can grow > 100M/year etc - see slides 10-12 in http://steveblank.com/2010/04/15/why-accountants-dont-run-startups/ http://steveblank.com/2010/04/15/why-accountants-dont-run-st...) OpsWare quite deliberately took a high risk strategy in order to aim for high rewards. 37Signals is a small business. Profitable, comfortable, but no prospects of explosive growth. To quote from the link above: What is start-up purgatory, you ask? Start-up purgatory occurs when you don’t go bankrupt, but you fail to build the No. 1 product in the space. You have enough money with your conservative burn rate to last for many years. You may even be cash-flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business (see Navisite). From the entrepreneur’s point of view, this can be worse than start-up hell since you are stuck with the small company. 37Signals seem to be quite fine with their business. However, they appear not to understand that many others are quite deliberate in choosing riskier strategies because the rewards can be higher.
dhh 17y ago
a) Facebook is a definitely the odd man out. They made something happen that very, very few other eyeball companies have managed. b) Facebook isn't winning shit for their investors YET. They've allegedly just turned cash flow positive, but they're still $750MM in the hole from VC infusions over the past SIX YEARS. Add interest and risk premium and Facebook has to make a TRUCK load of money to pay back their investors. Not just break even. c) Fashions change. Remember when Myspace was the golden goose? Friendster? It is far from a guarantee that Facebook will remain hot shit for long enough to pay back $750MM with interest and premium.
- rortian 17y ago
  Poor VCs not getting quick cash from their investments. They truly are victims for getting a stake in a hugely successful company. VCs are not private equity. I'm sure they didn't mind quick cashouts during the late 90s, but expecting to get major money from an up and comer in a short timespan is delusional. Equity is not debt. By your dichotomy MySpace is simply amazing for paying investors (interest?) and facebook is a drain on the preciously scarce resources of wealthy individuals and institutions.
  - dhh 17y ago
    What metric are you using to define success? It seems not to be the traditional capitalist one. The score card for Facebook currently says minus $750M. Breaking even or a small profit is not going to change that. Facebook totally COULD be a successful, but they'll need to get some serious PROFITS (not revenues!) going to make that happen. Certainly within the realm of possibilities, but it hasn't happened yet.
    - rortian 17y ago
      Where did this $750M come from? Traditional capitalists. What rubes right? I have a hard time with someone trying to assert facebook isn't a success. However, if you think success is 'profitable in 2010' then far out they are a failure. This obsession with equity as debt is very strange to me. By this metric Apple is a hugely indebted company. When you break down a company you look at assets and liabilities. Facebook has few liabilities in the form of debt because so many wealth individuals and institutions think having a stake in its future is a desirable proposition. I would call most of their assets the intangible ones of being of the most visited, used, and widely-known websites in the world. If you think this is worthless, okay. But I think its a little bizarre to assert they are $750M in the hole.
ajg1977 17y ago
Also worth pointing out: a) Facebook only recently became cash flow positive after years of burning cash like it was the end of days. b) Their revenue per user is miserably low c) If the advertising market ever tanks, they're screwed. Holding Facebook up as an example of a worthy business model to follow is horribly naive.
- deleted 17y ago
  [deleted]
- rortian 17y ago
  >c) If the advertising market ever tanks, they're screwed. You know that has happened recently right? People at facebook, and prominent investors like Andreessen, have pointed out repeatedly that they could raise a lot more revenue. However, most of these methods would simply destroy the site by making the user experience much less bearable. >b) Their revenue per user is miserably low This might be a problem if they didn't have an enormous number of users and a very impressive amount of active users. >Holding Facebook up as an example of a worthy business model to follow is horribly naive. Is an incredibly nasty statement that reeks of jealousy. Sort of silly too. I think you could say a similar thing about Microsoft, since there will really only be one PC OS monopolist.
  - tokenadult 17y ago
    Their revenue per user is miserably low This might be a problem if they didn't have an enormous number of users and a very impressive amount of active users. Somehow this reminds me of the old joke about the guy who lost money on every sale but made it up in volume. Yes, Facebook might make money enough to recover the investment of the first investors someday (I can remember when Amazon looked like it would never do that), but that all depends on the overall net earnings per user being positive. To date, even Facebook's own press releases don't report a situation that makes it clear the initial investors will ever be able to recover their investments. I like Facebook well enough, but unlike my early interaction with Amazon I have never made a payment to Facebook for anything.
    - 17y ago
techiferous 16y ago
"Swinging for the fences increases the odds of striking out." Not a law. Good entrepreneurs are game changers and it's easier to just play a different game where there is not a high reward/high risk correlation rather than play this losing game that assumes that high reward must mean high risk. In my opinion good entrepreneurs are not risk takers, they are risk managers. The best ones are money takers.
- johnrob 16y ago
  How do you explain Marc Andreessen's company laying off half its staff? Is he not a good entrepreneur?
  - techiferous 16y ago
    I'm not qualified to judge his entrepreneurial abilities; my main point is to question the correlation between high reward and high risk and also to make sure risk is not glamorized. (The only reason you take a risk is that it is a necessary means to a greater benefit.)

hooande 17y ago

This is flagrant linkbait. I start to write a witty comment responding to this post, but then I realized that's exactly what they want us to do. They even told us, explicitly in their book, that their forumla for success was to create controversy in order to attract attention to their business. I'm still waiting for the day when I see a 37Signals post about how they intend to build great collaboration software, and not about how people should run their businesses. Making inflammatory statements statements about other people's companies is definitely one way to make it. But so is thinking and talking about your actual product.

dhh 17y ago
We have a whole weblog dedicated to talking about our product and calling out new feature launches: http://productblog.37signals.com/ http://productblog.37signals.com/ Most people aren't that interested in just reading an infomercial, though. Lots of people are apparently interested in reading opinions and discussions about industry topics. Be they VC funding or whatever.
axod 17y ago
Best just to flag it and move on IMHO. (I agree completely)
dennis_forbes 16y ago
You had something super clever to say, but instead you just fall back to essentially calling the target a troll. Sorry, but that tactic is one of the weakest, most trollest techniques going. I'm surprised that anyone still falls for it. As far as "making inflammatory statements about other people's companies", given that ning is all other the tech news sites its hardly like it came out of left field. And really the "get enough eyeballs" tactic has been the recipe for countless massive failures, yet still people keep saying "FACEBOOK FACEBOOK FACEBOOK!" Before people reference facebook, contemplate where Facebook would be if instead of being propped up by VCs desperate to flip it to the next guy, they had to get bank loans. They would have been dead in the water years ago. Instead now they're getting more and more desperate to raise revenue, and the results aren't good. Facebook is not a good example of anything.

gsmaverick 17y ago

This is just more blindness from the folks at 37s. I would like to know how much David pays Google to use their service? That's right he doesn't, so why doesn't he put his money where his mouth is and pay for each and every web service he utilizes.

dhh 17y ago
WTF are you talking about? I pay for plenty of services. In fact, I love paying for good services. Dropbox is a great example. So is Campaign Monitor, Zendesk, and Survey Monkey. Give shit away for free and people will take it for free.
- gsmaverick 17y ago
  How much do you pay for a search engine? You think that the 37s business model applies to every web business out there and it doesn't!
  - deleted 17y ago
    [deleted]
  - jasonfried 17y ago
    The 37signals business model, also known as "a business", is the business model employed by about 99% of all businesses on the planet. They make a product or offer a service and their customers pay them for it.
    - gsmaverick 17y ago
      But you think it works for all 100% of businesses. And that's where you're wrong. A search engine is a perfect example of a product which would fail if they tried to sell access. But you can continue to pad your ego and think you know everything there is to know about business.
      - startuprules 17y ago