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Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? Or, could someone create a lifestyl

by rotten 7y ago

Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? Or, could someone create a lifestyle business and call that a startup? Where the goals might be simply to make a living doing what you love without working for some big company somewhere? Or maybe could someone create a startup that makes the world a better place without concern for getting oneself crazy rich? I am not a fan of the idea that the only driving motivation for establishing a small tech company is to make the VC's happy.

dean177 7y ago
Whenever you see “startup” on hacker news, people are almost always referring to the aim for massive VC funding, exponential growth, get big or die trying types of companies. Paul Graham wrote an essay which differentiated startups from other new businesses based solely on growth: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html
- rorykoehler 7y ago
  That essay is incredibly self serving. I think it should be taken with a pinch of salt. At very least any counter point to it shouldn't be immediately shut down with a link back to the essay. It's text book circular logic.
  - JasonFruit 7y ago
    They're not really making an argument here, just pointing out how people who use the word "startup" intend it to be interpreted.
    - jacquesm 7y ago
      > people Some people.
  - dean177 7y ago
    I wasn’t endorsing the essay or advocating for these hyper growth vc fuelled businesses, just pointing out that this checklist doesn’t apply to the kinds of businesses you were talking about if you accept this (common?) distinction between ‘startups’ and other kinds of new businesses.
  - ryanSrich 7y ago
    By most accounts, PG's definition is the accepted definition within SV, so it's important to understand that most (99%?) VCs are looking at companies growing at breakneck speed. Lifestyle businesses, or companies not looking to grow very fast don't need VC money, so I really don't understand everyone's obsession with making "VC sustainable". If you want to start a business and require initial capital then take out a bank loan. It's relatively simple. But...that's not a startup, again, by most accounts. If you want to use some random definition found on the internet go for it, but that's not status quo.
    - rorykoehler 7y ago
      If you start a company that competes head to head with a vc steroid company using the same technologies but do it without vc is that a startup?
xwdv 7y ago
The only reason to work in a startup is for money, and the only reason to start one is for fast money. If a startup isn’t getting you money, well, then there’s not much else it’s giving you. People might say otherwise, but that’s because they’ve been largely conditioned to react that way. Startup is a word reserved specifically for exponential growth businesses usually juiced up with VC cash. If that’s not what you want to do, then just call yourself a plain ol’ business. Or if you are on some world changing mission and don’t care about money then be a non-profit. And if you have no real business and just want to work on your own stuff and maybe make money later then that’s just a side project. Of course, that’s not as sexy as calling yourself a startup and not as likely to get you on the cover of entrepreneur magazines with your arms crossed and a smirk on your face.
- gopher2 7y ago
  > People might say otherwise, but that’s because they’ve been largely conditioned to react that way. Perhaps you are the one that's been conditioned?
  - xwdv 7y ago
    Conditioned to what? By embracing the fact that startups are purely about money I keep things simple and true. When the motivation is all about numbers there’s less potential for confusion and wasted time.
    - macspoofing 7y ago
      It isn't purely about money, but money is a very big motivator.
      - xwdv 7y ago
        Then what else is it about?
        gorbachev 7y ago
edanm 7y ago
> I am not a fan of the idea that the only driving motivation for establishing a small tech company is to make the VC's happy. I'm not either. But arguing over words is a pointless waste of energy. Around here (and in most places in tech), startups are understood to be a form of entrepreneurship which aims to create innovative companies with the aim of being large tech companies, almost always fueled by VC money. It's not by any means the only kind of company one can start (mine isn't that!), and I think it's a bad thing that many people don't realize there are other forms of entrepreneurship (in most contexts, an entrepreneur can be someone who decided to franchise a McDonald's!). But it doesn't really matter that the word startup is used to mean something different. It's just a word.
- achillesheels 7y ago
  I’d elaborate further that only tech companies have the potency to radically disrupt millions of people’s lives in 0<t<10 years and need “dry powder” to activate that potential, which VCs are positioned to allocate for various reasons.
macspoofing 7y ago
>Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? No. But it is a huge motivator for almost every founder - and all who say otherwise are lying. It isn't hypocritical to be motivated by wealth AND by doing good. When you start getting investment, then ... yes. The expectation is that your investors will make a 10x on their cash. You don't have to be VC-funded, and bootstrapping is certainly reasonable. >Or maybe could someone create a startup that makes the world a better place without concern for getting oneself crazy rich? Usually people with that attitude end up doing non-profits. Having said that, there is nothing quite like the burnout and disillusionment you experience after working for a nonprofit for a few years. I actively discourage working for or starting nonprofits because I've talked to enough people. Competition for funding (government or otherwise) is horrendous amongsts nonprofits, and pay is almost universally lower than market rate or downright abysmal. Typically the social good you're doing is not scalable and a band-aid over an existing social problem. I live in a university town with a big startup culture and over the last few years I've seen many more recent grads enamoured with nonprofits than with traditional startups.
BjoernKW 7y ago
My personal definition of the term startup is "A relatively new business in search of a business model." In many cases, this search requires venture capital but in some it doesn't. A startup can very well be a lifestyle business. For example, I'd consider many of the companies listed on Indie Hackers to be startups. Only a minority of those has taken venture capital.
- _frkl 7y ago
  Has any? I thought that was the point of the 'indie-' part...
  - BjoernKW 7y ago
    There are some that have done so: https://www.indiehackers.com/products?funding=vc https://www.indiehackers.com/products?funding=vc
- em-bee 7y ago
  steve blank defined a startup as "an organization in search of a business model". so yes, i'd say you are spot on.
karmakaze 7y ago
This is very much my line of thought. I have come to use different terms for these: - Startup is what I now call VC funded companies. A startup can and often does 'make the world better' for some definition of better - A profitable side-business that could grow into a large stable company starts as a side-project/side-business. This short Sam Altman "How to Succeed with a Startup" video[0] plainly covers why this is so. [0] https://www.youtube.com/watch?v=0lJKucu6HJc https://www.youtube.com/watch?v=0lJKucu6HJc
- perennate 7y ago
  But what do you call a new business that a founder is fully committed to (so, not a side business) but without an aim to grow to a huge valuation (just enough profit to live)? I think that's what the parent comment is suggesting, not a side business. I'd just call it a small business though, rather than a "startup".
  - karmakaze 7y ago
    That is an underserved area, terminology-wise. Perhaps 'small startup' captures it best where it can also have other startup qualities of leveraging tech or disrupting a market.
  - vram22 7y ago
    >But what do you call a new business that a founder is fully committed to (so, not a side business) but without an aim to grow to a huge valuation (just enough profit to live)? You call it "a little Italian restaurant on the web". At least, @DHH (Rails and Basecamp founder) does: Short compilation of his original talk, by Werner Vogels, Amazon CTO: https://www.youtube.com/watch?v=fHHXddS0m14 https://www.youtube.com/watch?v=fHHXddS0m14 Full DHH talk at Startup School 2008: https://www.youtube.com/watch?v=0CDXJ6bMkMY https://www.youtube.com/watch?v=0CDXJ6bMkMY And it can give more than just enough profit to live. A lot more.
anovikov 7y ago
Lifestyle business is nice except the niches in which they can sustainably exist are really really scarce. Most of the time you either get big yourself, or pushed out of the market by someone who does.
pascalxus 7y ago
Almost all the low hanging fruit has been done, at least in software. It's time to do hard stuff now
tachyonbeam 7y ago
It's the silicon valley mantra. Grow for multiple years at a loss so you can be the first and biggest player in your business segment and instigate a monopoly, giving nobody else a chance to establish themselves. They all want to be the next Google, Amazon or Facebook. I remember seeing a silicon valley VC, in an interview, saying that he wouldn't invest in a startup if he couldn't see a path to a billion dollar valuation. Of course, this guy has the right to his own investment strategy, but it also seems kind of idiotic to suggest that every business that can't have a billion dollar valuation is worthless. There are plenty of niche business out theres that occupy smaller market segments that the tech giants will likely never come into. Personally, I wouldn't say no to owning a significant share of a 600 million dollar business.
- ericd 7y ago
  The VC is not saying that businesses that don’t reach $1B are worthless, they simply don’t work for their business model, which relies on finding companies that “return the fund”.
- flunhat 7y ago
  The economics of venture capital don't work out if you invest in companies that you think will be worth less than a billion dollars. There's a really enlightening blog post that goes through all the numbers (maybe someone can find it again for me), but it basically comes down to this: 90% of all companies funded by this VC will fail. Of the remaining 10%, some will be middling successes. One or two companies will be really great. But the VC has a problem: his LPs expect a return over 10 years (or whatever the lifetime is) that is as good as the market (simplifying, but this is basically true). If the one or two companies that succeed only become worth a few hundred million, he's actually delivered a sub-par return for his LPs. So the one or two companies that succeed must _really_ succeed, or else the VC is going to have trouble with their next fund. Someone did the math and showed that a 10x return on those successful investments is the minimum for the fund as a whole to provide a good return for its LPs. All this means that when a VC looks for deals, he can't waste time on lifestyle businesses and the like. Billion dollar companies or bust. Keep in mind that this is not true for people who write smaller checks (like angels).
sah2ed 7y ago
> Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? The answer is yes, if your working definition of entrepreneurship agrees with the one used by Lori Greiner: ‘Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week [like everyone else]’. People who believe in putting in twice the effort to reap exponential growth rather than (the less exciting) organic growth do so under the assumption that they can compress time. For tasks that are amenable to time compression like running a startup, the only reliable way to compress time is to increase the number of man hours spent tackling the (perceived) opportunity, which of course means hiring people as fast as your war chest permits. And because the size of your war chest determines the number of people you can hire per week or per month to allow you attain exponential growth, it is no surprise that a lot of founders seek out VC funding.
- perennate 7y ago
  She says regarding her quote, "And it is true, because we like to be our own bosses. And so if you're one of those people, you want to quit your day job, you don't want to punch a clock, you want to have freedom and also be freedom of your own destiny." [1] It seems that your interpretation of her quote doesn't match Greiner's own interpretation. I think the point she's making is simply that entrepreneurs are willing to work more hours on their own business to avoid working for someone else. Whether the business grows exponentially or organically doesn't matter. I also didn't quite follow your interpretation, why does avoiding working 40 hours a week lead to spending more man hours to pursue an opportunity? (edit: thanks for explaining) [1] https://www.businessinsider.com/lori-greiner-shark-tank-entrepreneurs-2016-7 https://www.businessinsider.com/lori-greiner-shark-tank-entr...
  - sah2ed 7y ago
    > I also didn't quite follow your interpretation, why does avoiding working 40 hours a week lead to spending more man hours to pursue an opportunity? Disclaimer: my interpretation is in the context of the SV mantra under discussion, I have no horse in this race. Working 80hours/week involves making a lot of sacrifices with respect to family, friends and (often overlooked) one’s health, so the people who do so think of the (outsized) reward at the end to drive their work ethic that is unsustainable for most people over the long term. Also, there is only so much code one founder can write, ditto for sales, which is why hiring more people is a sensible strategy.
Zealotux 7y ago
I was just reading another excellent piece from Joel Spolsky on the subject: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-... Almost 20 years old, but still relevant.
weaksauce 7y ago
Those really aren’t startups... those are lifestyle businesses or just businesses.
quadcore 7y ago
Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? Nope, the main driver is the feeling of being on a mission.

by rotten 7y ago

dean177 7y ago

Whenever you see “startup” on hacker news, people are almost always referring to the aim for massive VC funding, exponential growth, get big or die trying types of companies. Paul Graham wrote an essay which differentiated startups from other new businesses based solely on growth: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

rorykoehler 7y ago
That essay is incredibly self serving. I think it should be taken with a pinch of salt. At very least any counter point to it shouldn't be immediately shut down with a link back to the essay. It's text book circular logic.
- JasonFruit 7y ago
  They're not really making an argument here, just pointing out how people who use the word "startup" intend it to be interpreted.
  - jacquesm 7y ago
    > people Some people.
- dean177 7y ago
  I wasn’t endorsing the essay or advocating for these hyper growth vc fuelled businesses, just pointing out that this checklist doesn’t apply to the kinds of businesses you were talking about if you accept this (common?) distinction between ‘startups’ and other kinds of new businesses.
- ryanSrich 7y ago
  By most accounts, PG's definition is the accepted definition within SV, so it's important to understand that most (99%?) VCs are looking at companies growing at breakneck speed. Lifestyle businesses, or companies not looking to grow very fast don't need VC money, so I really don't understand everyone's obsession with making "VC sustainable". If you want to start a business and require initial capital then take out a bank loan. It's relatively simple. But...that's not a startup, again, by most accounts. If you want to use some random definition found on the internet go for it, but that's not status quo.
  - rorykoehler 7y ago
    If you start a company that competes head to head with a vc steroid company using the same technologies but do it without vc is that a startup?

xwdv 7y ago

The only reason to work in a startup is for money, and the only reason to start one is for fast money. If a startup isn’t getting you money, well, then there’s not much else it’s giving you. People might say otherwise, but that’s because they’ve been largely conditioned to react that way. Startup is a word reserved specifically for exponential growth businesses usually juiced up with VC cash. If that’s not what you want to do, then just call yourself a plain ol’ business. Or if you are on some world changing mission and don’t care about money then be a non-profit. And if you have no real business and just want to work on your own stuff and maybe make money later then that’s just a side project. Of course, that’s not as sexy as calling yourself a startup and not as likely to get you on the cover of entrepreneur magazines with your arms crossed and a smirk on your face.

gopher2 7y ago
> People might say otherwise, but that’s because they’ve been largely conditioned to react that way. Perhaps you are the one that's been conditioned?
- xwdv 7y ago
  Conditioned to what? By embracing the fact that startups are purely about money I keep things simple and true. When the motivation is all about numbers there’s less potential for confusion and wasted time.
  - macspoofing 7y ago
    It isn't purely about money, but money is a very big motivator.
    - xwdv 7y ago
      Then what else is it about?
      - gorbachev 7y ago

edanm 7y ago

> I am not a fan of the idea that the only driving motivation for establishing a small tech company is to make the VC's happy. I'm not either. But arguing over words is a pointless waste of energy. Around here (and in most places in tech), startups are understood to be a form of entrepreneurship which aims to create innovative companies with the aim of being large tech companies, almost always fueled by VC money. It's not by any means the only kind of company one can start (mine isn't that!), and I think it's a bad thing that many people don't realize there are other forms of entrepreneurship (in most contexts, an entrepreneur can be someone who decided to franchise a McDonald's!). But it doesn't really matter that the word startup is used to mean something different. It's just a word.

achillesheels 7y ago
I’d elaborate further that only tech companies have the potency to radically disrupt millions of people’s lives in 0<t<10 years and need “dry powder” to activate that potential, which VCs are positioned to allocate for various reasons.

macspoofing 7y ago

>Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? No. But it is a huge motivator for almost every founder - and all who say otherwise are lying. It isn't hypocritical to be motivated by wealth AND by doing good. When you start getting investment, then ... yes. The expectation is that your investors will make a 10x on their cash. You don't have to be VC-funded, and bootstrapping is certainly reasonable. >Or maybe could someone create a startup that makes the world a better place without concern for getting oneself crazy rich? Usually people with that attitude end up doing non-profits. Having said that, there is nothing quite like the burnout and disillusionment you experience after working for a nonprofit for a few years. I actively discourage working for or starting nonprofits because I've talked to enough people. Competition for funding (government or otherwise) is horrendous amongsts nonprofits, and pay is almost universally lower than market rate or downright abysmal. Typically the social good you're doing is not scalable and a band-aid over an existing social problem. I live in a university town with a big startup culture and over the last few years I've seen many more recent grads enamoured with nonprofits than with traditional startups.

BjoernKW 7y ago

My personal definition of the term startup is "A relatively new business in search of a business model." In many cases, this search requires venture capital but in some it doesn't. A startup can very well be a lifestyle business. For example, I'd consider many of the companies listed on Indie Hackers to be startups. Only a minority of those has taken venture capital.

_frkl 7y ago
Has any? I thought that was the point of the 'indie-' part...
- BjoernKW 7y ago
  There are some that have done so: https://www.indiehackers.com/products?funding=vc https://www.indiehackers.com/products?funding=vc
em-bee 7y ago
steve blank defined a startup as "an organization in search of a business model". so yes, i'd say you are spot on.

karmakaze 7y ago

This is very much my line of thought. I have come to use different terms for these: - Startup is what I now call VC funded companies. A startup can and often does 'make the world better' for some definition of better - A profitable side-business that could grow into a large stable company starts as a side-project/side-business. This short Sam Altman "How to Succeed with a Startup" video[0] plainly covers why this is so. [0] https://www.youtube.com/watch?v=0lJKucu6HJc https://www.youtube.com/watch?v=0lJKucu6HJc

perennate 7y ago
But what do you call a new business that a founder is fully committed to (so, not a side business) but without an aim to grow to a huge valuation (just enough profit to live)? I think that's what the parent comment is suggesting, not a side business. I'd just call it a small business though, rather than a "startup".
- karmakaze 7y ago
  That is an underserved area, terminology-wise. Perhaps 'small startup' captures it best where it can also have other startup qualities of leveraging tech or disrupting a market.
- vram22 7y ago
  >But what do you call a new business that a founder is fully committed to (so, not a side business) but without an aim to grow to a huge valuation (just enough profit to live)? You call it "a little Italian restaurant on the web". At least, @DHH (Rails and Basecamp founder) does: Short compilation of his original talk, by Werner Vogels, Amazon CTO: https://www.youtube.com/watch?v=fHHXddS0m14 https://www.youtube.com/watch?v=fHHXddS0m14 Full DHH talk at Startup School 2008: https://www.youtube.com/watch?v=0CDXJ6bMkMY https://www.youtube.com/watch?v=0CDXJ6bMkMY And it can give more than just enough profit to live. A lot more.

anovikov 7y ago

Lifestyle business is nice except the niches in which they can sustainably exist are really really scarce. Most of the time you either get big yourself, or pushed out of the market by someone who does.

pascalxus 7y ago

Almost all the low hanging fruit has been done, at least in software. It's time to do hard stuff now

tachyonbeam 7y ago

It's the silicon valley mantra. Grow for multiple years at a loss so you can be the first and biggest player in your business segment and instigate a monopoly, giving nobody else a chance to establish themselves. They all want to be the next Google, Amazon or Facebook. I remember seeing a silicon valley VC, in an interview, saying that he wouldn't invest in a startup if he couldn't see a path to a billion dollar valuation. Of course, this guy has the right to his own investment strategy, but it also seems kind of idiotic to suggest that every business that can't have a billion dollar valuation is worthless. There are plenty of niche business out theres that occupy smaller market segments that the tech giants will likely never come into. Personally, I wouldn't say no to owning a significant share of a 600 million dollar business.

ericd 7y ago
The VC is not saying that businesses that don’t reach $1B are worthless, they simply don’t work for their business model, which relies on finding companies that “return the fund”.
flunhat 7y ago
The economics of venture capital don't work out if you invest in companies that you think will be worth less than a billion dollars. There's a really enlightening blog post that goes through all the numbers (maybe someone can find it again for me), but it basically comes down to this: 90% of all companies funded by this VC will fail. Of the remaining 10%, some will be middling successes. One or two companies will be really great. But the VC has a problem: his LPs expect a return over 10 years (or whatever the lifetime is) that is as good as the market (simplifying, but this is basically true). If the one or two companies that succeed only become worth a few hundred million, he's actually delivered a sub-par return for his LPs. So the one or two companies that succeed must _really_ succeed, or else the VC is going to have trouble with their next fund. Someone did the math and showed that a 10x return on those successful investments is the minimum for the fund as a whole to provide a good return for its LPs. All this means that when a VC looks for deals, he can't waste time on lifestyle businesses and the like. Billion dollar companies or bust. Keep in mind that this is not true for people who write smaller checks (like angels).

sah2ed 7y ago

> Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? The answer is yes, if your working definition of entrepreneurship agrees with the one used by Lori Greiner: ‘Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week [like everyone else]’. People who believe in putting in twice the effort to reap exponential growth rather than (the less exciting) organic growth do so under the assumption that they can compress time. For tasks that are amenable to time compression like running a startup, the only reliable way to compress time is to increase the number of man hours spent tackling the (perceived) opportunity, which of course means hiring people as fast as your war chest permits. And because the size of your war chest determines the number of people you can hire per week or per month to allow you attain exponential growth, it is no surprise that a lot of founders seek out VC funding.

perennate 7y ago
She says regarding her quote, "And it is true, because we like to be our own bosses. And so if you're one of those people, you want to quit your day job, you don't want to punch a clock, you want to have freedom and also be freedom of your own destiny." [1] It seems that your interpretation of her quote doesn't match Greiner's own interpretation. I think the point she's making is simply that entrepreneurs are willing to work more hours on their own business to avoid working for someone else. Whether the business grows exponentially or organically doesn't matter. I also didn't quite follow your interpretation, why does avoiding working 40 hours a week lead to spending more man hours to pursue an opportunity? (edit: thanks for explaining) [1] https://www.businessinsider.com/lori-greiner-shark-tank-entrepreneurs-2016-7 https://www.businessinsider.com/lori-greiner-shark-tank-entr...
- sah2ed 7y ago
  > I also didn't quite follow your interpretation, why does avoiding working 40 hours a week lead to spending more man hours to pursue an opportunity? Disclaimer: my interpretation is in the context of the SV mantra under discussion, I have no horse in this race. Working 80hours/week involves making a lot of sacrifices with respect to family, friends and (often overlooked) one’s health, so the people who do so think of the (outsized) reward at the end to drive their work ethic that is unsustainable for most people over the long term. Also, there is only so much code one founder can write, ditto for sales, which is why hiring more people is a sensible strategy.

Zealotux 7y ago

I was just reading another excellent piece from Joel Spolsky on the subject: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-... Almost 20 years old, but still relevant.

weaksauce 7y ago

Those really aren’t startups... those are lifestyle businesses or just businesses.

quadcore 7y ago

Is the only reason to create a startup to experience exponential growth and get really rich and have your own stock symbol? Nope, the main driver is the feeling of being on a mission.