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Most businesses should strive to be self-sustaining. And if they make obscene amounts of money, all the power to them. What I dislike is A) the view from start

Most businesses should strive to be self-sustaining. And if they make obscene amounts of money, all the power to them. What I dislike is A) the view from startup land that there are only two types of new businesses, "startups" and everything else ("lifestyle") B) and the "everything else" category is somehow inferior or even some sort of hobby or vanity project. Sahil used the term to describe his own company, and at one point felt shame about it, even though he had a real business with real customers and real revenue. That's how twisted the mindset in startup land has become, where real business owners are supposed to feel shame, and "success" is based on as-yet unfulfilled promises and raising a round?

anongraddebt 8y ago
I agree about the unjustifiable dichotomy much of the tech scene holds between "startups" and everything else (as you describe it). I think it's funny, though, that non-tech industry leaders critiqued Bezos in the past for running a 'lifestyle business' when in fact Amazon was always a technology company and has become dominant and successful to boot.
- umeshunni 8y ago
  Not to mention that Amazon has returned more to investors over the last 10 years than many startups and Unicorns have.
Zanni 8y ago
There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. [0] That doesn't mean they're better, but you have to know the difference or you're going to get yourself in trouble. Is a quarter-horse better than a camel? Yes, if you're trying to win a quarter-mile race; not so much if you're trying to survive in the desert. I think some of the disdain comes from legit growth startups trying to distance themselves from one-man "startups" that could be better categorized as micro-ISVs or side projects. But there's definitely no shame to running a successful lifestyle business. The 37signals guys have been great at shifting that perspective. [0] http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- markdown 8y ago
  > There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. Perhaps in the US, and probably in just a small part of the US. Everywhere else, a startup is just a new business.
  - csa 8y ago
    So I think the point that many folks would make is that maybe we should call a new business a “new business” or a “small business” rather than a “startup”. While I realize people don’t always like to use constraining labels, limiting the word “startup” to businesses that are aggressively seeking a rocket-ship trajectory actually strikes me as a useful convention.
- mindcrime 8y ago
  There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. [0] I respect and admire pg as much as probably anybody on this board, but I still reject the idea that he has any particular standing to declare his subjective definition of "startup" to be "the" definition by fiat. I would argue that "startup" actually refers to "businesses that are designed to grow big", where the speed at which you do so is mostly irrelevant. If one wants to raise VC money and tie themselves to that particular time-boxed constraint, that's great. But you can just as well do it "slow and steady" by focusing on early profitability and continually and incrementally reinvesting profits back into the company for growth. Neither is "better" or "worse" than the other, except in context, just as with the quarter-horse/camel example.
  - marcus_holmes 8y ago
    the definition I've used for years is "a startup is a business creating a new business model or service over the internet". Because there were so many people around me who were/are part of the startup scene, building businesses that were/are definitely "startups" and yet not focused exclusively on growth.
- ilamont 8y ago
inuhj 8y ago
Gumroad took 10.35MM in investment to build a company that does 780k/yr (65k/mo*12mo) in profit. The numbers don't work out to call that a success. If he bootstrapped and reached 780k/mo after 8 years of work that would be a successful lifestyle business and he should be absolutely proud. I'm absolutely not trying to be judgmental as I've succeeded and failed at businesses myself.
- eanzenberg 8y ago
  That's actually not a bad return on investment (7.5% yearly)
  - Aeolun 8y ago
    And it doesn’t stop there. The money certainly isn’t vaporized as with a failed business.
  - inuhj 8y ago
    It's not a good return on investment because the underlying asset hasn't appreciated 7.5%/yr some 8 years later. I am not a valuation expert but as a small business I'd estimate a 3x EBITDA placing the valuation at 2.34MM. The investors presumably owned a fraction of that.
  - jeremyjh 8y ago
    Risk adjusted its a pretty poor return. Also you are completely ignoring the time value of money.
  - nostrademons 8y ago
    There's a time value on that money. If you'd put $10M into an S&P 500 index fund in 2011, it'd be worth about $22M now, which first of all is a fair bit more than 7.5% and secondly is the denominator you're looking for to figure out percentage returns on capital now. The company wasn't making $780K/year in profit in 2011, it took 7 years to get there.
    - eanzenberg 8y ago
TAForObvReasons 8y ago
Keep in mind that HN is a website operated by Y Combinator, a company in the business of developing and launching startups that will raise more money through the VC system. The core business model involves encouraging companies to take more money at better valuations. If you view the startup world from the HN lens, it's all about the VCs and how to maximize their returns at all costs. Those incentives run counter to the values of sustainable profitability and doing right by customers.
- hnnh44 8y ago
  Also, keep in mind that HN is mostly user curated, and represent the views of it's participants more than ycombinator itself.
  - zorga 8y ago
    And is moderated by an asshole who shadowbans anyone who dares disagree with another human being like actual humans disagree. Fuck you dang.

anongraddebt 8y ago

I agree about the unjustifiable dichotomy much of the tech scene holds between "startups" and everything else (as you describe it). I think it's funny, though, that non-tech industry leaders critiqued Bezos in the past for running a 'lifestyle business' when in fact Amazon was always a technology company and has become dominant and successful to boot.

umeshunni 8y ago
Not to mention that Amazon has returned more to investors over the last 10 years than many startups and Unicorns have.

Zanni 8y ago

There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. [0] That doesn't mean they're better, but you have to know the difference or you're going to get yourself in trouble. Is a quarter-horse better than a camel? Yes, if you're trying to win a quarter-mile race; not so much if you're trying to survive in the desert. I think some of the disdain comes from legit growth startups trying to distance themselves from one-man "startups" that could be better categorized as micro-ISVs or side projects. But there's definitely no shame to running a successful lifestyle business. The 37signals guys have been great at shifting that perspective. [0] http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

markdown 8y ago
> There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. Perhaps in the US, and probably in just a small part of the US. Everywhere else, a startup is just a new business.
- csa 8y ago
  So I think the point that many folks would make is that maybe we should call a new business a “new business” or a “small business” rather than a “startup”. While I realize people don’t always like to use constraining labels, limiting the word “startup” to businesses that are aggressively seeking a rocket-ship trajectory actually strikes me as a useful convention.
mindcrime 8y ago
There's a legit distinction, though, between startups and other businesses - startups are designed to grow fast. [0] I respect and admire pg as much as probably anybody on this board, but I still reject the idea that he has any particular standing to declare his subjective definition of "startup" to be "the" definition by fiat. I would argue that "startup" actually refers to "businesses that are designed to grow big", where the speed at which you do so is mostly irrelevant. If one wants to raise VC money and tie themselves to that particular time-boxed constraint, that's great. But you can just as well do it "slow and steady" by focusing on early profitability and continually and incrementally reinvesting profits back into the company for growth. Neither is "better" or "worse" than the other, except in context, just as with the quarter-horse/camel example.
- marcus_holmes 8y ago
  the definition I've used for years is "a startup is a business creating a new business model or service over the internet". Because there were so many people around me who were/are part of the startup scene, building businesses that were/are definitely "startups" and yet not focused exclusively on growth.
ilamont 8y ago

inuhj 8y ago

Gumroad took 10.35MM in investment to build a company that does 780k/yr (65k/mo*12mo) in profit. The numbers don't work out to call that a success. If he bootstrapped and reached 780k/mo after 8 years of work that would be a successful lifestyle business and he should be absolutely proud. I'm absolutely not trying to be judgmental as I've succeeded and failed at businesses myself.

eanzenberg 8y ago
That's actually not a bad return on investment (7.5% yearly)
- Aeolun 8y ago
  And it doesn’t stop there. The money certainly isn’t vaporized as with a failed business.
- inuhj 8y ago
  It's not a good return on investment because the underlying asset hasn't appreciated 7.5%/yr some 8 years later. I am not a valuation expert but as a small business I'd estimate a 3x EBITDA placing the valuation at 2.34MM. The investors presumably owned a fraction of that.
- jeremyjh 8y ago
  Risk adjusted its a pretty poor return. Also you are completely ignoring the time value of money.
- nostrademons 8y ago
  There's a time value on that money. If you'd put $10M into an S&P 500 index fund in 2011, it'd be worth about $22M now, which first of all is a fair bit more than 7.5% and secondly is the denominator you're looking for to figure out percentage returns on capital now. The company wasn't making $780K/year in profit in 2011, it took 7 years to get there.
  - eanzenberg 8y ago

TAForObvReasons 8y ago

Keep in mind that HN is a website operated by Y Combinator, a company in the business of developing and launching startups that will raise more money through the VC system. The core business model involves encouraging companies to take more money at better valuations. If you view the startup world from the HN lens, it's all about the VCs and how to maximize their returns at all costs. Those incentives run counter to the values of sustainable profitability and doing right by customers.

hnnh44 8y ago
Also, keep in mind that HN is mostly user curated, and represent the views of it's participants more than ycombinator itself.
- zorga 8y ago
  And is moderated by an asshole who shadowbans anyone who dares disagree with another human being like actual humans disagree. Fuck you dang.