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Of course everyone is free to choose what they want to do with their own business. And I have personally also chosen non-standard paths of smaller growth (e.g.,

by edanm 9y ago

Of course everyone is free to choose what they want to do with their own business. And I have personally also chosen non-standard paths of smaller growth (e.g., I started a software consultancy instead of a VC-backed company). However, there are a few concrete reasons why companies, especially software companies (as opposed to e.g. restaurants), tend towards growth: 1. Some companies will require some amount of growth to be profitable. Not necessarily VC style growth, but you really might need a 100-employee company. 2. If you're not growing, you're not facing new challenges. This might or might not bother you as the founder of the company, but people tend to like dealing with new challenges in their work, whether it be technical challenges or business challenges. 3. Relatedly, if you want to work with smart, ambitious people, you need to have growth to provide them with interesting challenges. A McDonald's can afford to rehire employees every year, but it's harder for software companies. 4. Even if your employees don't care about technical challenges, they probably still care about compensation and their career ladder. It's all well and good that you as the owner are making lots of money, but your employees need a realistic path to making more and having a better job title too, otherwise you can't retain the best employees. 5. Of course, the simplest reason is named in the article - because of zero marginal distribution costs and network effects in software, large players eventually tend to dominate many fields. Even if you build a CRM perfectly fit for a niche industry, there's a good chance many customers will eventually jump to something like salesforce, both because of marketing, and because of features/network effects (more integrations, etc). Again, not saying DHH is wrong, just that these are structural reasons why software companies (and similar) tend towards growth.

notahacker 9y ago
Not sure how true (2) and (3) are: you can face new challenges every day in the tiniest consultancy ever, and have all sorts of fun learning about new niches to organically expand into that would make no sense for a VC backed company to waste their time dominating. Sure, it's not going to mollify the CTO who's not satisfied if he's not scaling a service to a million concurrent users or the VP Sales who feels underemployed if he's not running an army of junior salespeople, but if your goal was an organically-grown medium-sized business you probably didn't need their skillset anyway. And some of the roles that scaling up creates requirements for are repetitive drudge work...
dgudkov 9y ago
>If you're not growing, you're not facing new challenges. While growth typically introduces new challenges it doesn't assume the opposite -- no growth, no challenges. Changing markets, customer preferences, and competitors' actions -- all that can bring enough challenge even when there is no growth. Even more than that -- if you're growing it most probably means that you don't have major problems with product/market fit. In case of no growth it might mean that you're losing the product/market fit and you still don't know how to fix it, which makes it very challenging.
- noway421 9y ago
  Challenge is not about challenge itself, but about the combination of challenge-reward. If you are fighting for something with a marginal return there's less incentive for that.
bdcravens 9y ago
> If you're not growing, you're not facing new challenges > you need to have growth to provide them with interesting challenges I think challenges are more the product of autonomy than growth. A response to growth is often to just increase the headcount and the infrastructure.
SonOfLilit 9y ago
Tesla has to grow fast or go home (as do Amazon, Uber, etc'). But as you said, you can choose which company to start, you don't have to start Tesla or Amazon. I think your employees will face bigger and more interesting challenges, and learn more from smarter coworkers, and will be retained better, if you keep it a 10 person team for years and years and years. As 37signals proved more than maybe any other company. Of course, they also proved (5)... (Hi Edan!)
- edanm 9y ago
  From experience, a 10 person team will keep some employees happy, sure, but the best probably not. Their pay will be too low, and even if not, most good employees eventually want to do more - manage people, work on new technologies, work on bigger scale, etc. Of course, nowadays I think the average retention at tech companies is like 2 years isn't it? So this is an industry-wide problem. The bigger problem if you're founding a 10 person company is that, assuming you don't want to run this for the rest of your life, you'll eventually want people to replace you, and they will also want bigger challenges, etc. I once saw a great talk at MicroConf, by the guy who started Balsamiq, which he started with the purpose of being a 1-person company. He soon found he had to grow. The bottom line of his talk is that most companies have a "natural" range of sizes they can be, and you can choose where you want to be in the range, but it's gotta be in there. Very good and interesting talk. (Hi back! Didn't know you HN'ed)

by edanm 9y ago

notahacker 9y ago

Not sure how true (2) and (3) are: you can face new challenges every day in the tiniest consultancy ever, and have all sorts of fun learning about new niches to organically expand into that would make no sense for a VC backed company to waste their time dominating. Sure, it's not going to mollify the CTO who's not satisfied if he's not scaling a service to a million concurrent users or the VP Sales who feels underemployed if he's not running an army of junior salespeople, but if your goal was an organically-grown medium-sized business you probably didn't need their skillset anyway. And some of the roles that scaling up creates requirements for are repetitive drudge work...

dgudkov 9y ago

>If you're not growing, you're not facing new challenges. While growth typically introduces new challenges it doesn't assume the opposite -- no growth, no challenges. Changing markets, customer preferences, and competitors' actions -- all that can bring enough challenge even when there is no growth. Even more than that -- if you're growing it most probably means that you don't have major problems with product/market fit. In case of no growth it might mean that you're losing the product/market fit and you still don't know how to fix it, which makes it very challenging.

noway421 9y ago
Challenge is not about challenge itself, but about the combination of challenge-reward. If you are fighting for something with a marginal return there's less incentive for that.

bdcravens 9y ago

> If you're not growing, you're not facing new challenges > you need to have growth to provide them with interesting challenges I think challenges are more the product of autonomy than growth. A response to growth is often to just increase the headcount and the infrastructure.

SonOfLilit 9y ago

Tesla has to grow fast or go home (as do Amazon, Uber, etc'). But as you said, you can choose which company to start, you don't have to start Tesla or Amazon. I think your employees will face bigger and more interesting challenges, and learn more from smarter coworkers, and will be retained better, if you keep it a 10 person team for years and years and years. As 37signals proved more than maybe any other company. Of course, they also proved (5)... (Hi Edan!)

edanm 9y ago
From experience, a 10 person team will keep some employees happy, sure, but the best probably not. Their pay will be too low, and even if not, most good employees eventually want to do more - manage people, work on new technologies, work on bigger scale, etc. Of course, nowadays I think the average retention at tech companies is like 2 years isn't it? So this is an industry-wide problem. The bigger problem if you're founding a 10 person company is that, assuming you don't want to run this for the rest of your life, you'll eventually want people to replace you, and they will also want bigger challenges, etc. I once saw a great talk at MicroConf, by the guy who started Balsamiq, which he started with the purpose of being a 1-person company. He soon found he had to grow. The bottom line of his talk is that most companies have a "natural" range of sizes they can be, and you can choose where you want to be in the range, but it's gotta be in there. Very good and interesting talk. (Hi back! Didn't know you HN'ed)