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Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all. Recently re-reading pg's How To Make Wealth [1] ma
by dood 19y ago
Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all.
Recently re-reading pg's How To Make Wealth [1] made me wonder if this will soon become an outdated view of startups. The factors leading to the current and predicted rise in the number of startups (free software, cheap hardware, less personnel) should also lead to a large broading of the spectrum of failure <-> success.
The startup world has until recently been determined by its capital-intensive, high-risk nature - big money chasing big rewards. But the new dynamics may leave room for a lot of diversity in between, and consequently a lot more working on some kind of startup. 37 signals can be seen as exemplary of the other extreme to a go-big-or-die startup: founders and employees accept less risk, less pressure and more life for a higher chance of reward, though a lower expected reward. I think there will be a lot of middle ground: a lot of investors willing to accept less risk for lower return, and a whole lot more people will choose lower rewards for a more comfortable life, and better chance of success.
[1] [http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html] "The all-or-nothing aspect of startups was not something we wanted. Viaweb's hackers were all extremely risk-averse. If there had been some way just to work super hard and get paid for it, without having a lottery mixed in, we would have been delighted. We would have much preferred a 100% chance of $1 million to a 20% chance of $10 million, even though theoretically the second is worth twice as much. Unfortunately, there is not currently any space in the business world where you can get the first deal."
- mattmaroon 19y agoI think this is already happening somewhat thanks to Google's penchant for making a lot of small acquisitions, and other companies following their lead. The problem still largely remains though. A venture backed company still has a lot more money than a bootstrapped one, and that still translates into a big advantage, even though database software is now free rather than $100k.
- dood 19y agoI suspect there is a massive, unexploited gap in the current venture model (with YC and Google leading the way in exploiting it), which will soon start to rapidly close as the opportunities become clear, and a new set of investment skills is developed. The current economic turmoil may even help speed the process up somewhat, as investors seek to minimize risk.
- kingkongrevenge 19y agoI'm a little confused why there's so much focus specifically on startups, where "startup" means a liquidity event focused venture. I thought the goal was just to make a lot of money, not do it in a specific way. I think the highest EV is from founding a private going concern and pocketing profits over the course of ten years. Statistically the majority of millionaires are entrepreneurial sole proprietorships or partnerships. We're talking about people who bought or built a few car washes and ran a tight ship, or built a reputable private accounting practice. I don't know this for a fact, but I bet a lot more people have got wealthy (by my standards) from software contracting and ISV work than from startups.
- suboptimal 19y agoThat was my impression, too--the article seemed to focus more on the VC path to success, which is like making it big as a professional athlete or entertainer. For contractors and ISVs, I suppose you have to find a profitable niche.
- juanpablo 19y ago"Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all." Like a lot of thing in life: The most popular movie/book sells 10 times more than the #2. MS Word vs WordPerfect. Harrison Ford vs Mark Hamill... People like stars.
- pchristensen 19y agoPeople like choices they don't have to think about.