6 ms·

Yeah plus the Y-combinators of this world won't want to throw cash at a 10-1 chance of making a few million, when they can do the same on a 100-1 chance of maki

Yeah plus the Y-combinators of this world won't want to throw cash at a 10-1 chance of making a few million, when they can do the same on a 100-1 chance of making a few billion.

toomuchtodo 9y ago
This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]. [1] I'm not referring to YC specifically, but investors and incubators who are comfortable with Uber-esq behavior.
- timewarrior 9y ago
  Not all global mega corps need to salt the earth. To some extent disruption will have side effects. Some like Uber are deliberately evil and others like Apple, Salesforce etc might not. My original point was that people were attempting ideas which were in the realm of potential global mega corps. If you don't grow to be one, you get eaten up!
- ZenoArrow 9y ago
  > "This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]." We already have that. They're called banks.
  - beatpanda 9y ago
    There's a huge gap between investments banks consider too risky and the kinds of things SV investors in particular want to fund.
    - ZenoArrow 9y ago
      Depends on your growth strategy. If you're prepared to start lean and can demonstrate early signs of revenue then I'd imagine you'd find banks willing to cut a business loan.
      - tormeh 9y ago
        You can't build a product company like this. Products require lots of development before any revenue arrives. Underdeveloped capital markets (VCs, stock exchanges etc.) is why Europe's software industry is mostly services. The difference between SV and anywhere else is access to risk-tolerant money. SV is not primarily an IT cluster, it's a VC cluster.
        ZenoArrow 9y ago
        > "You can't build a product company like this." Sure you can, you just bootstrap through monetising the ground work. For example, if you want a product company you can start out as a freelance design agency. The bulk of the initial design work will be for clients, but you can be involved with low volume manufacturing on the side. As the company grows, not only do you have the funds to take on progressively more ambitious product manufacturing projects, you've also built up a team of designers that can help push these projects forward. You're going to need designers right? Why not get them making you money from day one. To give an alternative example, let's say you want to manufacture mobile phones. A good way to start small would be to manufacture accessories for existing phones. This is within the grasp of anyone within the Western world, given enough drive to do it. The revenue and knowledge you can gain doing so allows for increasingly sophisticated accessories to be built until the point where you have your own manufacturing premises (or have access to one at low rates, due to the volume of products you're pushing). The step from this point to manufacturing mobile phones is not that great. Does this require more patience than burning through VC money? Sure, but it's also lower risk. Building a company gradually from the ground up means you get a better sense of what it takes to run a successful business (or in other words, experience is the best teacher).
        tormeh 9y ago
        No, because you're making a service company. Culture eats strategy for breakfast. The org chart you need for product and the one you need for services are different. The necessary mindset of the employees are different. Not only that, but the buyers of product and services are often different as well. Sure, building up a huge services company lets you squirrel off some funds for product development, but how often do you see this in practice? The only example I can think of is IBM, and they're moving in the other direction.
- kjksf 9y ago
  If you're talking about morality, when a VC is funding a company they don't know if it's going to act like Uber or like Lyft. The post you're responding to is about economics, though, and VC math doesn't work for funding modest successes. A VC can fund 10 businesses and have 9 of them fail (high risk) as long as the remaining one provides 100x+ return (high reward). If you don't fund that one blockbuster then you can't fund the failures. If you want to be in low-risk and low-reward business, then you're a bank and you're providing loans, not giving out no-strings-attached cash.

Yeah plus the Y-combinators of this world won't want to throw cash at a 10-1 chance of making a few million, when they can do the same on a 100-1 chance of making a few billion.

toomuchtodo 9y ago

This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]. [1] I'm not referring to YC specifically, but investors and incubators who are comfortable with Uber-esq behavior.

timewarrior 9y ago
Not all global mega corps need to salt the earth. To some extent disruption will have side effects. Some like Uber are deliberately evil and others like Apple, Salesforce etc might not. My original point was that people were attempting ideas which were in the realm of potential global mega corps. If you don't grow to be one, you get eaten up!
ZenoArrow 9y ago
> "This is a great observation: we need better accelerators to incubate startups that are more realistic and not willing to salt the earth to win at all costs [1]." We already have that. They're called banks.
- beatpanda 9y ago
  There's a huge gap between investments banks consider too risky and the kinds of things SV investors in particular want to fund.
  - ZenoArrow 9y ago
    Depends on your growth strategy. If you're prepared to start lean and can demonstrate early signs of revenue then I'd imagine you'd find banks willing to cut a business loan.
    - tormeh 9y ago
      You can't build a product company like this. Products require lots of development before any revenue arrives. Underdeveloped capital markets (VCs, stock exchanges etc.) is why Europe's software industry is mostly services. The difference between SV and anywhere else is access to risk-tolerant money. SV is not primarily an IT cluster, it's a VC cluster.
      - ZenoArrow 9y ago
        > "You can't build a product company like this." Sure you can, you just bootstrap through monetising the ground work. For example, if you want a product company you can start out as a freelance design agency. The bulk of the initial design work will be for clients, but you can be involved with low volume manufacturing on the side. As the company grows, not only do you have the funds to take on progressively more ambitious product manufacturing projects, you've also built up a team of designers that can help push these projects forward. You're going to need designers right? Why not get them making you money from day one. To give an alternative example, let's say you want to manufacture mobile phones. A good way to start small would be to manufacture accessories for existing phones. This is within the grasp of anyone within the Western world, given enough drive to do it. The revenue and knowledge you can gain doing so allows for increasingly sophisticated accessories to be built until the point where you have your own manufacturing premises (or have access to one at low rates, due to the volume of products you're pushing). The step from this point to manufacturing mobile phones is not that great. Does this require more patience than burning through VC money? Sure, but it's also lower risk. Building a company gradually from the ground up means you get a better sense of what it takes to run a successful business (or in other words, experience is the best teacher).
        tormeh 9y ago
        No, because you're making a service company. Culture eats strategy for breakfast. The org chart you need for product and the one you need for services are different. The necessary mindset of the employees are different. Not only that, but the buyers of product and services are often different as well. Sure, building up a huge services company lets you squirrel off some funds for product development, but how often do you see this in practice? The only example I can think of is IBM, and they're moving in the other direction.
kjksf 9y ago
If you're talking about morality, when a VC is funding a company they don't know if it's going to act like Uber or like Lyft. The post you're responding to is about economics, though, and VC math doesn't work for funding modest successes. A VC can fund 10 businesses and have 9 of them fail (high risk) as long as the remaining one provides 100x+ return (high reward). If you don't fund that one blockbuster then you can't fund the failures. If you want to be in low-risk and low-reward business, then you're a bank and you're providing loans, not giving out no-strings-attached cash.