8 ms·

Navigating Mid-Success

201 points by craigcannon 10y ago

deleted 10y ago
[deleted]
pdog 10y ago
Silicon Valley is a place where founders need to be reassured that building a company that's profitable but only worth $100 million is "nothing to be ashamed of."
- CyrusL 10y ago
  I don't think the article is about founders needing reassurance or emotional support. It's advice for founders to navigate the dynamic with investors that are pushing them to go for a bigger outcome.
  - jessriedel 10y ago
    It doesn't have to be the main focus of the article for it to be revealing about silicon valley and the author.
    - geoka9 10y ago
      You mean the readers?
      - jessriedel 10y ago
        All three. A half-time locker room pep talk gives information about the coach, the players, and football culture generally.
  - adam 10y ago
    Or perhaps we can just stop referring to them as "medium success" companies. "Medium success" for whom? $100M in revenue/year to anyone but a very very small percentage of people in the world is a wildly successful business you just built.
    - kozikow 10y ago
      Article speaks about $100M valuation. It's much different from $100M/year.
- notahacker 10y ago
  Silicon Valley is a place where founders need to be reassured that building a company that's profitable instead of being valued at around $100m before liquidation preferences etc are considered is nothing to be ashamed of :)
- Alex3917 10y ago
  You're missing the point. This was written for folks who have already raised at least a seed round.
  - jv22222 10y ago
    But, are there so many thousands of those types of people that it needs to be broadcast as a blog post? I mean, couldn't he walk around the halls of YC and pat a few people on the shoulder and say that same thing? Not trying to be facetious.
    - Alex3917 10y ago
      > Are there so many thousands of those types of people that it needs to be broadcast as a blog post? Yes. There are a ton of SaaS startups with two or three clients each paying a few hundred thousands of dollars per year. This is the area where it doesn't make sense to shut down the business because with even a couple more clients it would be worth $20M+, but where even if you could it probably wouldn't make sense to raise money. For people who have already put in the 10+ years to develop the skillset to build a huge company (e.g. learned marketing, coding, sales, etc.), this may actually be the most common outcome. The point is that once you raise even a seed round you're now a wealth manager who is getting judged on your ability to generate IRR and cash-on-cash return and liquidity, not just your ability to make something cool and use it to support yourself. Yes, starting a $100M business is impressive, but once you decide you want to be in the business of being a wealth manager then it becomes a means to an end rather than being the end goal itself.
- deleted 10y ago
  [deleted]
beat 10y ago
The flip side of this is that if you're not planning on a unicorn, don't get hitched to the VCs that are hunting unicorns. There are other investors who'd be quite happy to get that 5x back and build a $100M company, or even a $20M company.
- jarjoura 10y ago
  Even still, those $20-100M companies still get bought out by bigger conglomerates. If you look just at Google and Facebook's acquisition list, it's pretty much all the deals they did the last 2 years.
  - beat 10y ago
    Right. The larger you grow, the shorter the list of potential suitors for a liquidation event/buyout becomes. On the other hand, the businesspeople in charge of buyouts tend to like large, within their budget. It's about the same amount of due diligence work whether buying a $10M company or a $100M company, so if they need to hit certain numbers, then larger is better.
  - newbear 10y ago
    Does an acquisition list exist?link? Any resources on how to get acquired?
    - the_watcher 10y ago
      https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Alphabet https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Facebook https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... They may not be comprehensive, but it's a good starting point.
- SatvikBeri 10y ago
  Huh, are there really a significant # of investors who put money into $20MM companies looking for 5x returns? That's surprising.
ashbrahma 10y ago
Quite often you find entrepreneurs getting sucked into the mindset of building for investors and not necessarily building for customers. Entrepreneurs and their teams are too focused on valuation and not enough on business fundamentals.
cookiecaper 10y ago
This is a very investor-centric article. It assumes that successful founders will one day want to "hit it out of the park" by the investor's definition (moreso than they have with a $100M company), as if founders live to serve the interests of the investors. I'd suggest that founders who have a profitable $100M company get themselves free from the chain of their investors as quickly as possible and go about their lives running a successful company, never worrying about what investors think or want again. Remember which party is actually engaged in creating something valuable here. You might need their money to start, but if you do things right, you don't need it to live. The other caveat here is that sama says many founders are surprised when potential acquirers don't consider them "legitimately valuable". That's because founders typically think of value in technical terms. AFAIK, acquisitions happen only because you have something that the company can't just rip off: either you already have a large/significant installed base in a segment the company wants, a recognizable brand, or you have some intellectual property that the acquiring company couldn't recreate by stuffing 3-4 engineers in a closet for a year (which costs ~$1M, much cheaper than any type of exit you're hoping for) (this basically means patents that they want to own for themselves, not really patents on interesting technology, because such patents can normally be circumvented).
squidlogic 10y ago
This seems to be a much more apt analogy for most startups: Rather than being pushed off a cliff and asked to build a rocket, they are being strapped to the rocket (of VC funding) and asked to make it to the moon. Not to diminish the hard work that goes into building a successful startup. Not all rockets make it to the moon, as the difficulty of a moon shot isn't really in generating thrust, but thrust is a necessary but not necessarily sufficient condition.
ajamesm 10y ago
> When you start a startup, you get pushed off the side of a cliff with a bag of aerospace parts. Here's a pain point for someone to solve: why the fuck does the VC process necessitate pushing unequipped people off cliffs?
- jeremymims 10y ago
  There are actually a number of VCs showing up right now to address this pain point. They're tending to fund profitable B2B companies with $5-40m in annual revenue and explicitly state that they're content with the option of 3-5X returns (while still hoping for more).
  - nikanj 10y ago
    Could you drop a few names here?
    - jeremymims 10y ago
      My e-mail is in my profile and I'd be happy to help you get in touch with them if you meet their parameters. Most of them are looking to do just a few deals a year.
    - pquerna 10y ago
      one example i know of: http://scaleworks.com/ http://scaleworks.com/ they bought Filestack (formerly Fileppicker), Chargify and a few more Lew wrote about basically the same thing as sama earlier this month: https://medium.com/@lewmoorman/not-venture-scale-get-over-it-282e93c4f873#.z06m9ejoo https://medium.com/@lewmoorman/not-venture-scale-get-over-it...
rmason 10y ago
It's like a kid playing basketball. He beats the odds and make his high school team. He beats the odds and is a starter. He beats more odds and is the star. He beats even more odds and wins an athletic scholarship to college. He not only makes the team but becomes a starter and eventually the star of the team. He further beats the odds and is drafted by an NBA team. He not only makes the team but becomes a starter. Imagine telling that guy he's a failure because he's no LeBron James. Apparently if you're not a unicorn founder you've achieved nothing.
- dgfgfdagasdfgfa 10y ago
  Not to mention "unicorn" is meaningless in the long term.
  - zedero 10y ago
    I think I like this statement but could you elaborate on what you mean?
    - dgfgfdagasdfgfa 10y ago
      Meaning, it doesn't matter if you grow very fast if you can't make the business sustainable.
- corry 10y ago
  Good analogy, but without taking into account the financing side of things it's only a partial picture. Imagine if that player was borrowing and spending Other People's Money since High School, based on the EXPECTATION that one day he'll be the next LeBron James and pay it all back with sufficient return or forced into bankruptcy. He had natural talent, but needed money for better shoes, trainers, better nutrition, etc in order to achieve the top level as quickly as possible. So he found some people to loan him the money. In that scenario, it's not so much a question of whether playing in the NBA is a desirable outcome -- it's certainly better than if he hadn't made it that far -- but one would have to also consider the financial outcome for his investors and him personally. There are lots of bankrupt NBA players (for different reasons, but still). This is the article's point: if you're not LeBron, don't choose a trajectory that requires that level of outsized outcome in order to be successful.
CPLX 10y ago
"A company that has profitability within reach and is on track to be worth $100 million with several more years of hard work. This is nothing to be ashamed of" I wonder if there's some vague sense of how disconnected one has to be from normal conceptions of reality to consider building a $100MM company something to be ashamed of.
- nikanj 10y ago
  I was reading this, and nodding along, until I saw that number. Is SV really that inflated? Your average entrepreneur, say Bob from Bob's Plumbing, would be really happy to have his company build to $10MM over a decade or two.
  - derefr 10y ago
    I've always interpreted this sort of valuation as more about "potential best-case acquisition price" than about real market cap. Instagram was "worth" a billion dollars, because Facebook said so; that doesn't mean it had a $1bn market cap. But when VCs talk about you having a "$100MM company", that's what they mostly mean: that there might be a Facebook or two around who would pay that. I'm actually curious, since we've seen a few (not many, but a few) tech IPOs of these SV darlings in the last five years: how well does their publicly-traded market cap today align with the projected valuations VCs invested at?
aetherson 10y ago
This advice is valuable to more than just "airplanes," because the truth is that there aren't just two classes of companies -- "airplanes" and "spaceships" -- there are infinitely many. And it's just as important to realize that your $2B company is not a $20B company as it is to realize that your $200M company is not a $2B company. If your company can plausibly be $50M, and you realize that, you can get wealthy and your investors can have positive outcomes (not "wildest dream" outcomes of course). But if your company is plausibly $2B, but you try to make it a $20B company, you and your investors will end up less happy than $50M guy, even though his company was worth 1/40th of what yours is. I think that the story of a lot of companies during the Great Recession is of over-funding themselves to their eventual detriment -- even companies that are objectively very valuable.
achou 10y ago
I'm a founder of a company that had "mid-success" (a few times over). I mostly agree with this article and when I see companies in my former market raising $100M+ rounds I always cringe. > But as a general rule, the longer you delude your investors here, the worse shape you’ll be in. This is true, but the real problem is not deluding your investors but deluding yourself. It's often necessary to have unreasonable optimism to overcome every hurdles along the way. Knowing when that optimism crosses the line can be difficult especially in the bubble of fundraising. > Very often I’ve seen cases where founders know in their hearts they have an airplane but are able to convince good investors it might still be a spaceship. This really causes a lot of heartache, and often precludes your opportunity for a good acquisition later. The point about over-raising limiting future options really resonates. It's one of the saddest things that can happen: all of the hard work has been done to build a viable business, but in the rush to get there too much money was raised, so the the cap table has gotten to the point where any reasonable exit will yield the founders and employees almost nothing. So frustrating. > Let’s define a “really good airplane” as a company that has profitability within reach and is on track to be worth $100 million with several more years of hard work. Here's the thing. Airplanes can get much bigger than $100M, they just take longer to get there. They have to fight their way there and rarely get the spotlight. That's just the way some markets are, no matter how great the product, no matter how smart the team. It's a shame when founders build a real company but destroy the value of its equity by trying to make it something that it's not.
benjamincburns 10y ago
Anybody have any advice for those who are actually aiming to build a perfectly serviceable airplane, preferably with a reliable-enough autopilot? Articles containing such advice are also welcome.
- civilian 10y ago
  Don't take money from VCs who are expecting a 10-20x return?
  - throwaway91111 10y ago
    Hell, avoid VCs entirely if you can avoid it.
- the_watcher 10y ago
  You're probably best off avoiding investors looking for venture level returns. Private equity and debt funding are an option, but you'll need to show traction first.
- ahartman00 10y ago
  @patio11 's blog is pretty good. he tells the story of building a micro isv, then another. at the end of this page is a link to his first post. http://www.kalzumeus.com/start-here-if-youre-new/ http://www.kalzumeus.com/start-here-if-youre-new/
blizkreeg 10y ago
Fuck building a $100M. Can you build a $10M or just a $1M company? Just do that (first). I read somewhere - first get comfortable, then get rich (or change the world). This insane focus on the wrong metric (valuation/size of your company) is going to hurt nearly every first-time founder, which I presume most of you will be. Once in a while, you do hit the jackpot, but let it happen to you, let it come to you as you make progress and hit bigger and better milestones. Pretty sure even Zuck, Gates, Jobs, or you-name-it-unicorn-founder had no fucking clue that theirs would be the unicorn company.
- the_watcher 10y ago
  This article isn't about building a $1M or a $10M company. It's about companies who have done that already.
  - blizkreeg 10y ago
    Thank you for the nitpick. I wasn't talking about the article either.
tptacek 10y ago
The subtext to this piece is the mathematics of venture capital investing. 1. Most companies fail. Not "turn into airplanes"; plow into the ground at terrific speed leaving an unrecognizable smoking crater. 2. VC investors survive this by investing in a portfolio of companies, not just one or two. 3. For the math of a portfolio to work out, the winners have to pay for the losers. 4. The majority of the portfolio is losers. Because they invest so little in such a large portfolio of companies, YC can afford to cultivate startups that are aiming for 8-digit outcomes. But VC firms, as a general rule, can't: for your startup's success to make their math work, you need an outstanding return. They'd rather you return something than nothing --- but they wouldn't rather by much. There's a lot not to like about this model, but it's not really a moral question. There isn't a model where just a couple of investors plow millions of dollars into your startup all at once where simple mathematics aren't determining everyone's positions. So when we talk about the difference between shoot-the-moon companies and "airplanes" or "lifestyle businesses" or whatever dumb term we're using for them this week, we'd do well to keep in mind that the people pushing you away from these kinds of outcomes really don't have a choice.

201 points by craigcannon 10y ago

deleted 10y ago

[deleted]

pdog 10y ago

Silicon Valley is a place where founders need to be reassured that building a company that's profitable but only worth $100 million is "nothing to be ashamed of."

CyrusL 10y ago
I don't think the article is about founders needing reassurance or emotional support. It's advice for founders to navigate the dynamic with investors that are pushing them to go for a bigger outcome.
- jessriedel 10y ago
  It doesn't have to be the main focus of the article for it to be revealing about silicon valley and the author.
  - geoka9 10y ago
    You mean the readers?
    - jessriedel 10y ago
      All three. A half-time locker room pep talk gives information about the coach, the players, and football culture generally.
- adam 10y ago
  Or perhaps we can just stop referring to them as "medium success" companies. "Medium success" for whom? $100M in revenue/year to anyone but a very very small percentage of people in the world is a wildly successful business you just built.
  - kozikow 10y ago
    Article speaks about $100M valuation. It's much different from $100M/year.
notahacker 10y ago
Silicon Valley is a place where founders need to be reassured that building a company that's profitable instead of being valued at around $100m before liquidation preferences etc are considered is nothing to be ashamed of :)
Alex3917 10y ago
You're missing the point. This was written for folks who have already raised at least a seed round.
- jv22222 10y ago
  But, are there so many thousands of those types of people that it needs to be broadcast as a blog post? I mean, couldn't he walk around the halls of YC and pat a few people on the shoulder and say that same thing? Not trying to be facetious.
  - Alex3917 10y ago
    > Are there so many thousands of those types of people that it needs to be broadcast as a blog post? Yes. There are a ton of SaaS startups with two or three clients each paying a few hundred thousands of dollars per year. This is the area where it doesn't make sense to shut down the business because with even a couple more clients it would be worth $20M+, but where even if you could it probably wouldn't make sense to raise money. For people who have already put in the 10+ years to develop the skillset to build a huge company (e.g. learned marketing, coding, sales, etc.), this may actually be the most common outcome. The point is that once you raise even a seed round you're now a wealth manager who is getting judged on your ability to generate IRR and cash-on-cash return and liquidity, not just your ability to make something cool and use it to support yourself. Yes, starting a $100M business is impressive, but once you decide you want to be in the business of being a wealth manager then it becomes a means to an end rather than being the end goal itself.
deleted 10y ago
[deleted]

beat 10y ago

The flip side of this is that if you're not planning on a unicorn, don't get hitched to the VCs that are hunting unicorns. There are other investors who'd be quite happy to get that 5x back and build a $100M company, or even a $20M company.

jarjoura 10y ago
Even still, those $20-100M companies still get bought out by bigger conglomerates. If you look just at Google and Facebook's acquisition list, it's pretty much all the deals they did the last 2 years.
- beat 10y ago
  Right. The larger you grow, the shorter the list of potential suitors for a liquidation event/buyout becomes. On the other hand, the businesspeople in charge of buyouts tend to like large, within their budget. It's about the same amount of due diligence work whether buying a $10M company or a $100M company, so if they need to hit certain numbers, then larger is better.
- newbear 10y ago
  Does an acquisition list exist?link? Any resources on how to get acquired?
  - the_watcher 10y ago
    https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Alphabet https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Facebook https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... They may not be comprehensive, but it's a good starting point.
SatvikBeri 10y ago
Huh, are there really a significant # of investors who put money into $20MM companies looking for 5x returns? That's surprising.

ashbrahma 10y ago

Quite often you find entrepreneurs getting sucked into the mindset of building for investors and not necessarily building for customers. Entrepreneurs and their teams are too focused on valuation and not enough on business fundamentals.

cookiecaper 10y ago

This is a very investor-centric article. It assumes that successful founders will one day want to "hit it out of the park" by the investor's definition (moreso than they have with a $100M company), as if founders live to serve the interests of the investors. I'd suggest that founders who have a profitable $100M company get themselves free from the chain of their investors as quickly as possible and go about their lives running a successful company, never worrying about what investors think or want again. Remember which party is actually engaged in creating something valuable here. You might need their money to start, but if you do things right, you don't need it to live. The other caveat here is that sama says many founders are surprised when potential acquirers don't consider them "legitimately valuable". That's because founders typically think of value in technical terms. AFAIK, acquisitions happen only because you have something that the company can't just rip off: either you already have a large/significant installed base in a segment the company wants, a recognizable brand, or you have some intellectual property that the acquiring company couldn't recreate by stuffing 3-4 engineers in a closet for a year (which costs ~$1M, much cheaper than any type of exit you're hoping for) (this basically means patents that they want to own for themselves, not really patents on interesting technology, because such patents can normally be circumvented).

squidlogic 10y ago

This seems to be a much more apt analogy for most startups: Rather than being pushed off a cliff and asked to build a rocket, they are being strapped to the rocket (of VC funding) and asked to make it to the moon. Not to diminish the hard work that goes into building a successful startup. Not all rockets make it to the moon, as the difficulty of a moon shot isn't really in generating thrust, but thrust is a necessary but not necessarily sufficient condition.

ajamesm 10y ago

> When you start a startup, you get pushed off the side of a cliff with a bag of aerospace parts. Here's a pain point for someone to solve: why the fuck does the VC process necessitate pushing unequipped people off cliffs?

jeremymims 10y ago
There are actually a number of VCs showing up right now to address this pain point. They're tending to fund profitable B2B companies with $5-40m in annual revenue and explicitly state that they're content with the option of 3-5X returns (while still hoping for more).
- nikanj 10y ago
  Could you drop a few names here?
  - jeremymims 10y ago
    My e-mail is in my profile and I'd be happy to help you get in touch with them if you meet their parameters. Most of them are looking to do just a few deals a year.
  - pquerna 10y ago
    one example i know of: http://scaleworks.com/ http://scaleworks.com/ they bought Filestack (formerly Fileppicker), Chargify and a few more Lew wrote about basically the same thing as sama earlier this month: https://medium.com/@lewmoorman/not-venture-scale-get-over-it-282e93c4f873#.z06m9ejoo https://medium.com/@lewmoorman/not-venture-scale-get-over-it...

rmason 10y ago

It's like a kid playing basketball. He beats the odds and make his high school team. He beats the odds and is a starter. He beats more odds and is the star. He beats even more odds and wins an athletic scholarship to college. He not only makes the team but becomes a starter and eventually the star of the team. He further beats the odds and is drafted by an NBA team. He not only makes the team but becomes a starter. Imagine telling that guy he's a failure because he's no LeBron James. Apparently if you're not a unicorn founder you've achieved nothing.

dgfgfdagasdfgfa 10y ago
Not to mention "unicorn" is meaningless in the long term.
- zedero 10y ago
  I think I like this statement but could you elaborate on what you mean?
  - dgfgfdagasdfgfa 10y ago
    Meaning, it doesn't matter if you grow very fast if you can't make the business sustainable.
corry 10y ago
Good analogy, but without taking into account the financing side of things it's only a partial picture. Imagine if that player was borrowing and spending Other People's Money since High School, based on the EXPECTATION that one day he'll be the next LeBron James and pay it all back with sufficient return or forced into bankruptcy. He had natural talent, but needed money for better shoes, trainers, better nutrition, etc in order to achieve the top level as quickly as possible. So he found some people to loan him the money. In that scenario, it's not so much a question of whether playing in the NBA is a desirable outcome -- it's certainly better than if he hadn't made it that far -- but one would have to also consider the financial outcome for his investors and him personally. There are lots of bankrupt NBA players (for different reasons, but still). This is the article's point: if you're not LeBron, don't choose a trajectory that requires that level of outsized outcome in order to be successful.

CPLX 10y ago

"A company that has profitability within reach and is on track to be worth $100 million with several more years of hard work. This is nothing to be ashamed of" I wonder if there's some vague sense of how disconnected one has to be from normal conceptions of reality to consider building a $100MM company something to be ashamed of.

nikanj 10y ago
I was reading this, and nodding along, until I saw that number. Is SV really that inflated? Your average entrepreneur, say Bob from Bob's Plumbing, would be really happy to have his company build to $10MM over a decade or two.
- derefr 10y ago
  I've always interpreted this sort of valuation as more about "potential best-case acquisition price" than about real market cap. Instagram was "worth" a billion dollars, because Facebook said so; that doesn't mean it had a $1bn market cap. But when VCs talk about you having a "$100MM company", that's what they mostly mean: that there might be a Facebook or two around who would pay that. I'm actually curious, since we've seen a few (not many, but a few) tech IPOs of these SV darlings in the last five years: how well does their publicly-traded market cap today align with the projected valuations VCs invested at?

aetherson 10y ago

This advice is valuable to more than just "airplanes," because the truth is that there aren't just two classes of companies -- "airplanes" and "spaceships" -- there are infinitely many. And it's just as important to realize that your $2B company is not a $20B company as it is to realize that your $200M company is not a $2B company. If your company can plausibly be $50M, and you realize that, you can get wealthy and your investors can have positive outcomes (not "wildest dream" outcomes of course). But if your company is plausibly $2B, but you try to make it a $20B company, you and your investors will end up less happy than $50M guy, even though his company was worth 1/40th of what yours is. I think that the story of a lot of companies during the Great Recession is of over-funding themselves to their eventual detriment -- even companies that are objectively very valuable.

achou 10y ago

I'm a founder of a company that had "mid-success" (a few times over). I mostly agree with this article and when I see companies in my former market raising $100M+ rounds I always cringe. > But as a general rule, the longer you delude your investors here, the worse shape you’ll be in. This is true, but the real problem is not deluding your investors but deluding yourself. It's often necessary to have unreasonable optimism to overcome every hurdles along the way. Knowing when that optimism crosses the line can be difficult especially in the bubble of fundraising. > Very often I’ve seen cases where founders know in their hearts they have an airplane but are able to convince good investors it might still be a spaceship. This really causes a lot of heartache, and often precludes your opportunity for a good acquisition later. The point about over-raising limiting future options really resonates. It's one of the saddest things that can happen: all of the hard work has been done to build a viable business, but in the rush to get there too much money was raised, so the the cap table has gotten to the point where any reasonable exit will yield the founders and employees almost nothing. So frustrating. > Let’s define a “really good airplane” as a company that has profitability within reach and is on track to be worth $100 million with several more years of hard work. Here's the thing. Airplanes can get much bigger than $100M, they just take longer to get there. They have to fight their way there and rarely get the spotlight. That's just the way some markets are, no matter how great the product, no matter how smart the team. It's a shame when founders build a real company but destroy the value of its equity by trying to make it something that it's not.

benjamincburns 10y ago

Anybody have any advice for those who are actually aiming to build a perfectly serviceable airplane, preferably with a reliable-enough autopilot? Articles containing such advice are also welcome.

civilian 10y ago
Don't take money from VCs who are expecting a 10-20x return?
- throwaway91111 10y ago
  Hell, avoid VCs entirely if you can avoid it.
the_watcher 10y ago
You're probably best off avoiding investors looking for venture level returns. Private equity and debt funding are an option, but you'll need to show traction first.
ahartman00 10y ago
@patio11 's blog is pretty good. he tells the story of building a micro isv, then another. at the end of this page is a link to his first post. http://www.kalzumeus.com/start-here-if-youre-new/ http://www.kalzumeus.com/start-here-if-youre-new/

blizkreeg 10y ago

Fuck building a $100M. Can you build a $10M or just a $1M company? Just do that (first). I read somewhere - first get comfortable, then get rich (or change the world). This insane focus on the wrong metric (valuation/size of your company) is going to hurt nearly every first-time founder, which I presume most of you will be. Once in a while, you do hit the jackpot, but let it happen to you, let it come to you as you make progress and hit bigger and better milestones. Pretty sure even Zuck, Gates, Jobs, or you-name-it-unicorn-founder had no fucking clue that theirs would be the unicorn company.

the_watcher 10y ago
This article isn't about building a $1M or a $10M company. It's about companies who have done that already.
- blizkreeg 10y ago
  Thank you for the nitpick. I wasn't talking about the article either.

tptacek 10y ago

The subtext to this piece is the mathematics of venture capital investing. 1. Most companies fail. Not "turn into airplanes"; plow into the ground at terrific speed leaving an unrecognizable smoking crater. 2. VC investors survive this by investing in a portfolio of companies, not just one or two. 3. For the math of a portfolio to work out, the winners have to pay for the losers. 4. The majority of the portfolio is losers. Because they invest so little in such a large portfolio of companies, YC can afford to cultivate startups that are aiming for 8-digit outcomes. But VC firms, as a general rule, can't: for your startup's success to make their math work, you need an outstanding return. They'd rather you return something than nothing --- but they wouldn't rather by much. There's a lot not to like about this model, but it's not really a moral question. There isn't a model where just a couple of investors plow millions of dollars into your startup all at once where simple mathematics aren't determining everyone's positions. So when we talk about the difference between shoot-the-moon companies and "airplanes" or "lifestyle businesses" or whatever dumb term we're using for them this week, we'd do well to keep in mind that the people pushing you away from these kinds of outcomes really don't have a choice.