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Not if you view a lifestyle business as a lilypad for something larger. But even better, once you have the knowledge that comes along with building a succesful

Not if you view a lifestyle business as a lilypad for something larger. But even better, once you have the knowledge that comes along with building a succesful $10k/month business, you also posses the exact same knowledge that it takes to build a $100k/month business.

nupark 16y ago
I run what would likely be classed as a lifestyle business (though I prefer to think of it as a large business in the process of bootstrapping). The more people there are running lifestyle businesses, the bigger the 'lillypad'. With a sufficiently large lifestyle-driven economy, we could move away from the VC model where very few people have the majority of the capital necessary to fund big ideas. We're already moving to a world where industrial costs continue to decrease, small businesses specialize in providing specific services (such as manufacturing), and computers and machines provide enormous leverage. Examples range from Amazon EC2 to affordable, low-scale manufacturing of injection molded plastics and cheap, on-demand PCB manufacturing. On the subject of building "big things", it's worth reading this blog post on how the Glif (http://www.theglif.com/ http://www.theglif.com/) was created by a small team of two, funded by Kickstarter, from design to manufacturing: http://www.therussiansusedapencil.com/post/2794775825/idea-to-market-in-5-months-making-the-glif http://www.therussiansusedapencil.com/post/2794775825/idea-t... In comparison to pg's example of a router, it is a small thing, but it's a great demonstration of how the bar is being lowered, and what was only accessible to large, capital-rich entities is now available to two guys with limited initial capital.
pg 16y ago
If it worked well to self-fund giant companies using the income from small ones, we should see instances of it happening in the wild. There is nothing to prevent that happening now. And yet it doesn't seem to happen. Few if any of the big technology companies grew that way. It seems like if you're good what happens is that your initial lifestyle business just grows bigger. E.g. as has happened to 37signals. But 37signals is not Google or Amazon.
- nupark 16y ago
  If it worked well to self-fund giant companies using the income from small ones, we should see instances of it happening in the wild. We don't have much of a history to work from, and the majority of the enabling tools available to us simple did not exist prior to or during the emergence of the current economic and business environment. I think developments such as Kickstarter provide a glimmer of where things are headed.
- tptacek 16y ago
  One reason why you wouldn't expect to see this so often in the wild is that by the time you get to be as successful as 37signals, the drive to make speculative bets on shoot-the-moon business plans is diminished. Presumably after your second supercar, you don't so much feel like gambling people's jobs on a Google-killer. Successful businesspeople may not be risk-averse; they're happy to start electric car companies for the joy of it. Successful businesses, on the other hand, don't think like that.
  - ScottBurson 16y ago
    Yes, I think this is exactly right. The pattern you'd expect to see wouldn't be a small business spawning a large one; it would be one of the principals of the small business cashing out and leaving to start something that eventually got larger. Ah, but this reminds me. I know three people who have made $500M or more on their earlier businesss who have cashed out and gone on to found new startups. Only one of the three funded the startup entirely out of his own holdings; the other two have other investors involved. I imagine the latter two think that they get more value (advice, connections, etc.) from these other investors (who I think include VC firms) than they give up in equity. FWIW, the business funded entirely by the one founder eventually failed (I worked there for several years). Arguably, this was a failure of marketing, as we had a small number of wildly enthusiastic customers that never became a large number. Also arguably, had experienced VC firms been in on the deal, they would have made sure that the marketing was done competently. So I'm suggesting that if you want to start something that you hope will get large, you may be well advised to involve professional VC even if you don't need the money.

nupark 16y ago

I run what would likely be classed as a lifestyle business (though I prefer to think of it as a large business in the process of bootstrapping). The more people there are running lifestyle businesses, the bigger the 'lillypad'. With a sufficiently large lifestyle-driven economy, we could move away from the VC model where very few people have the majority of the capital necessary to fund big ideas. We're already moving to a world where industrial costs continue to decrease, small businesses specialize in providing specific services (such as manufacturing), and computers and machines provide enormous leverage. Examples range from Amazon EC2 to affordable, low-scale manufacturing of injection molded plastics and cheap, on-demand PCB manufacturing. On the subject of building "big things", it's worth reading this blog post on how the Glif (http://www.theglif.com/ http://www.theglif.com/) was created by a small team of two, funded by Kickstarter, from design to manufacturing: http://www.therussiansusedapencil.com/post/2794775825/idea-to-market-in-5-months-making-the-glif http://www.therussiansusedapencil.com/post/2794775825/idea-t... In comparison to pg's example of a router, it is a small thing, but it's a great demonstration of how the bar is being lowered, and what was only accessible to large, capital-rich entities is now available to two guys with limited initial capital.

pg 16y ago

If it worked well to self-fund giant companies using the income from small ones, we should see instances of it happening in the wild. There is nothing to prevent that happening now. And yet it doesn't seem to happen. Few if any of the big technology companies grew that way. It seems like if you're good what happens is that your initial lifestyle business just grows bigger. E.g. as has happened to 37signals. But 37signals is not Google or Amazon.

nupark 16y ago
If it worked well to self-fund giant companies using the income from small ones, we should see instances of it happening in the wild. We don't have much of a history to work from, and the majority of the enabling tools available to us simple did not exist prior to or during the emergence of the current economic and business environment. I think developments such as Kickstarter provide a glimmer of where things are headed.
tptacek 16y ago
One reason why you wouldn't expect to see this so often in the wild is that by the time you get to be as successful as 37signals, the drive to make speculative bets on shoot-the-moon business plans is diminished. Presumably after your second supercar, you don't so much feel like gambling people's jobs on a Google-killer. Successful businesspeople may not be risk-averse; they're happy to start electric car companies for the joy of it. Successful businesses, on the other hand, don't think like that.
- ScottBurson 16y ago
  Yes, I think this is exactly right. The pattern you'd expect to see wouldn't be a small business spawning a large one; it would be one of the principals of the small business cashing out and leaving to start something that eventually got larger. Ah, but this reminds me. I know three people who have made $500M or more on their earlier businesss who have cashed out and gone on to found new startups. Only one of the three funded the startup entirely out of his own holdings; the other two have other investors involved. I imagine the latter two think that they get more value (advice, connections, etc.) from these other investors (who I think include VC firms) than they give up in equity. FWIW, the business funded entirely by the one founder eventually failed (I worked there for several years). Arguably, this was a failure of marketing, as we had a small number of wildly enthusiastic customers that never became a large number. Also arguably, had experienced VC firms been in on the deal, they would have made sure that the marketing was done competently. So I'm suggesting that if you want to start something that you hope will get large, you may be well advised to involve professional VC even if you don't need the money.