4 ms·

Founders nowadays think about selling about as much, and in about the same way, as they always have. But it's meaningless talking about startups being "designe

by pg 15y ago

Founders nowadays think about selling about as much, and in about the same way, as they always have. But it's meaningless talking about startups being "designed to flip" because you'd do the same things regardless of whether you wanted to sell early or keep working on the company for the rest of your life: you have to make something great and thereby get rapid user growth. Ironically, the only externally visible sign that a startup's founders are hoping to sell early is when they don't do something she attacks founders for doing: raising a lot of money. Raising series A from a VC fund means ruling out an early, small acquisition, so founders who want to keep that option open try to raise as little money as possible.

redthrowaway 15y ago
Editing your post to say something entirely different after I've written a rebuttal to it but before I've posted it is cheating ;) So there's three main methodologies I see at play in the startup world. There's the go-big-go-home crowd, the facebooks and groupons and squares and so forth. There's the ramen profitable crowd that operate like typical small businesses: the fog creeks and the like. Then there's the flippers. We all know the story of the Go Big or Go Home guys; they've been a part of the SV psyche for decades. Similarly, the ramen profitables/small businesses are pretty standard. My uncle started a small game development house about a decade ago that makes FPS training programs for service rigs in the oil industry.[1] It's a new take on a very old business model, and while they make a very comfortable living they're under no illusions of a $40MM buyout. They expect to be doing roughly the same thing ten years from now that they were ten years ago. Compare the above with flippers. We have founders who come up with an idea for a cool, if maybe gimmicky app. They build it; it's flashy and does something interesting. They iterate, pivot, and find a userbase. Then they sell to Google/Apple/Microsoft/whoever. Now, there's nothing wrong with this per se. The issue that the author and I both have is that this appears to have been the plan all along. There appears to be no desire on the part of the founders to build a business, rather they're spending a couple years on a fancy tech demo in the hopes of landing a sweet job with a fat signing bonus. It's almost like a practicum as opposed to a business, something that you do for a few years after college so you can get a better job. The defining question for me is this: how many of the founders would be happy if in 10 years their company had experienced healthy growth and they had 15-30 employees, taking home $300k/year? Alternatively, how many are shooting for an IPO and a company that will still be around in 50 years? I'm not saying flipping a small startup is a bad idea, just that it feels a bit disingenuous to call these ventures businesses. They feel more like a graduate degree combined with an innovative investment engine. And, while I understand why you took umbrage at the author singling out YC, these ventures are exactly the kinds of startups that YC churns out. [1]Shout out: http://cooleimmersive.com/ http://cooleimmersive.com/
- grandalf 15y ago
  I think you have a misunderstanding of why people invest. There is no correlation between the type of business and the willingness of the founders to sell out quick vs ride it for the long haul, assuming in each case the founders are equally rational. There is however a difference in aptitude for running an early stage startup and building a business that will pay you $300K per year. Many times the founders intend to do this but fail b/c it's not their strength. Let's face it, a lot of success has to do with timing and luck. This is where something like YC is hugely valuable. You're working with seasoned entrepreneurs who can help avoid common pitfalls (which looks like luck) and funding is also more readily available so you're less likely to make a decision out of financial desperation. I think you have a bit of blindness (no offense) in your argument to the way that market forces dictate what the right decision is. Given equally rational and equally risk-hungry decision makers, the decision to be acquired vs sticking it out is not often ambiguous. To argue that it's a matter of the individual psyche is I think fairly silly and overly focused on the personality/pr aspect of startups than on economic reality.
  - redthrowaway 15y ago
    I think you're reading my argument as something it's not. I'm not saying that the current model is in any way bucking market forces, quite the opposite. I'm saying that the current model of entrepreneurship seems to be focussed more on a quick ROI/liquidity event rather than innovation or business-building. That in itself is not bad. My complaint, which I think the author is hinting at as well, is that this model of startup is far more "credit swap" than "mom and pop". It is, as she said, a commoditization of entrepreneurship. YC, while invaluable for founders, is also an investment vessel factory, and the economic model it embodies shares much more in common with the kinds of financial products we see from Wall Street than traditional venture capitalism. Yuri Milner's offer of $100k to each YC graduate embodies this. It's a scattergun approach that, while likely profitable, incentivizes flipping over innovating.
    - garry 15y ago
      This sentiment is an insult to the hard work, blood, sweat, and tears that my YC friends and colleagues put in every single day. YC is made up of brilliant, hard working hackers, designers and hustlers who are trying to change the world through building disruptive software. It's never been about flipping. It has _always_ been about making something people want. Once you make something people want (which IS none other than innovation), only then do you have the optionality of selling or doubling down. This argument is utterly confused. In so many words: You can't flip something that isn't actually innovative. Because nobody will want it.
matclayton 15y ago
when did something great need rapid user growth? Investors often require that to make a return, but does that define that you've made something great? Random example plastic logic, no customer growth, raised ~£1B, will plastic electronics technology change the world more than any Valley based company to date, who knows, but it has a damn good shot at making an entire new industry. They might not succeed as a company, but as an idea they are making something astonishing.
thaumaturgy 15y ago
> ...and thereby get rapid user growth. Only for a small subset of businesses. (Usually, the ones that investors are most interested in, because it's where they're more likely to make more money.)
6ren 15y ago
> Founders nowadays think about selling about as much, and in about the same way, as they always have. Is there evidence for this? I get the impression that HP, IBM, Apple, Microsoft, Adobe, Sony etc didn't think about exiting as much (of course, selection bias). Though Xerox and Google did try to get bought. I don't think that short-term vs. long-term motivations encourage precisely the same behaviour.

by pg 15y ago

redthrowaway 15y ago

Editing your post to say something entirely different after I've written a rebuttal to it but before I've posted it is cheating ;) So there's three main methodologies I see at play in the startup world. There's the go-big-go-home crowd, the facebooks and groupons and squares and so forth. There's the ramen profitable crowd that operate like typical small businesses: the fog creeks and the like. Then there's the flippers. We all know the story of the Go Big or Go Home guys; they've been a part of the SV psyche for decades. Similarly, the ramen profitables/small businesses are pretty standard. My uncle started a small game development house about a decade ago that makes FPS training programs for service rigs in the oil industry.[1] It's a new take on a very old business model, and while they make a very comfortable living they're under no illusions of a $40MM buyout. They expect to be doing roughly the same thing ten years from now that they were ten years ago. Compare the above with flippers. We have founders who come up with an idea for a cool, if maybe gimmicky app. They build it; it's flashy and does something interesting. They iterate, pivot, and find a userbase. Then they sell to Google/Apple/Microsoft/whoever. Now, there's nothing wrong with this per se. The issue that the author and I both have is that this appears to have been the plan all along. There appears to be no desire on the part of the founders to build a business, rather they're spending a couple years on a fancy tech demo in the hopes of landing a sweet job with a fat signing bonus. It's almost like a practicum as opposed to a business, something that you do for a few years after college so you can get a better job. The defining question for me is this: how many of the founders would be happy if in 10 years their company had experienced healthy growth and they had 15-30 employees, taking home $300k/year? Alternatively, how many are shooting for an IPO and a company that will still be around in 50 years? I'm not saying flipping a small startup is a bad idea, just that it feels a bit disingenuous to call these ventures businesses. They feel more like a graduate degree combined with an innovative investment engine. And, while I understand why you took umbrage at the author singling out YC, these ventures are exactly the kinds of startups that YC churns out. [1]Shout out: http://cooleimmersive.com/ http://cooleimmersive.com/

grandalf 15y ago
I think you have a misunderstanding of why people invest. There is no correlation between the type of business and the willingness of the founders to sell out quick vs ride it for the long haul, assuming in each case the founders are equally rational. There is however a difference in aptitude for running an early stage startup and building a business that will pay you $300K per year. Many times the founders intend to do this but fail b/c it's not their strength. Let's face it, a lot of success has to do with timing and luck. This is where something like YC is hugely valuable. You're working with seasoned entrepreneurs who can help avoid common pitfalls (which looks like luck) and funding is also more readily available so you're less likely to make a decision out of financial desperation. I think you have a bit of blindness (no offense) in your argument to the way that market forces dictate what the right decision is. Given equally rational and equally risk-hungry decision makers, the decision to be acquired vs sticking it out is not often ambiguous. To argue that it's a matter of the individual psyche is I think fairly silly and overly focused on the personality/pr aspect of startups than on economic reality.
- redthrowaway 15y ago
  I think you're reading my argument as something it's not. I'm not saying that the current model is in any way bucking market forces, quite the opposite. I'm saying that the current model of entrepreneurship seems to be focussed more on a quick ROI/liquidity event rather than innovation or business-building. That in itself is not bad. My complaint, which I think the author is hinting at as well, is that this model of startup is far more "credit swap" than "mom and pop". It is, as she said, a commoditization of entrepreneurship. YC, while invaluable for founders, is also an investment vessel factory, and the economic model it embodies shares much more in common with the kinds of financial products we see from Wall Street than traditional venture capitalism. Yuri Milner's offer of $100k to each YC graduate embodies this. It's a scattergun approach that, while likely profitable, incentivizes flipping over innovating.
  - garry 15y ago
    This sentiment is an insult to the hard work, blood, sweat, and tears that my YC friends and colleagues put in every single day. YC is made up of brilliant, hard working hackers, designers and hustlers who are trying to change the world through building disruptive software. It's never been about flipping. It has _always_ been about making something people want. Once you make something people want (which IS none other than innovation), only then do you have the optionality of selling or doubling down. This argument is utterly confused. In so many words: You can't flip something that isn't actually innovative. Because nobody will want it.

matclayton 15y ago

when did something great need rapid user growth? Investors often require that to make a return, but does that define that you've made something great? Random example plastic logic, no customer growth, raised ~£1B, will plastic electronics technology change the world more than any Valley based company to date, who knows, but it has a damn good shot at making an entire new industry. They might not succeed as a company, but as an idea they are making something astonishing.

thaumaturgy 15y ago

> ...and thereby get rapid user growth. Only for a small subset of businesses. (Usually, the ones that investors are most interested in, because it's where they're more likely to make more money.)

6ren 15y ago

> Founders nowadays think about selling about as much, and in about the same way, as they always have. Is there evidence for this? I get the impression that HP, IBM, Apple, Microsoft, Adobe, Sony etc didn't think about exiting as much (of course, selection bias). Though Xerox and Google did try to get bought. I don't think that short-term vs. long-term motivations encourage precisely the same behaviour.