5 ms·

Oof, just one of our customers pays about the same as their full revenue, and we're a cockroach team. The real thing here is they're not that surprising. A lot

Oof, just one of our customers pays about the same as their full revenue, and we're a cockroach team. The real thing here is they're not that surprising. A lot of companies with their kind of funding use enterprise sales to force say $5-10M ARR, but there's only so much VC money can force for a leaky funnel, broken product, and overall incorrect market + fit. I didn't appreciate this until maybe a year or two ago. Valuation multiples in 50-100X range are super common (and even wackier numbers in seed/a). Think make believe stories like "well with another 12-18mo of growth this really just a bit over a 30X on some future forward revenue multiple...". The cash almost always leads to overspending, and it's highly unlikely the next 2-3 raises won't blow up and everyone goes home. I'm actually super impressed by the Docker team because they've been one of those rare cases of crawling out of that trap, even if with a lot less of the team. We get job candidates with high competing offers for companies I know to be rotten inside, yet there's only so much I can say. "Our new hires are getting paid from customer revenue and with equity that doesn't have $50M-$500M of investor thumbs on the scales already cutting you out in 95% of the likely scenarios" generally doesn't punch through the kool aid.

mwcampbell 5y ago
I'm not familiar with the phrase "cockroach team" in this context, and the obvious web search didn't help. Can you please elaborate?
- jollybean 5y ago
  small, surviving on crumbs.
- diehunde 5y ago
  Maybe they work at Cockroach Labs
- alex_c 5y ago
  I'm not the op and this is the first time I've seen someone else use the term, but I've used it too. Aspirationally - small and impossible to kill. While a unicorn's goal might be growth at all costs (with associated high chance of failure), our goal is to survive anything that might get thrown our way.
- lmeyerov 5y ago
  Hard to kill because they're financially independent. We believe enough in the technology we're building (gpu-powered graph ai & visualization) and the missions we're powering (security, fraud, anti-misinfo, healthcare, etc.) that we turned down large initial funding as it would have broken us. So awhile back, being cockroaches meant running as cost-effectively as we could (and still do, in fact, just not as extreme) as we figured it out, and now that things are working, it means prioritizing sustainable growth vs financial games likely to fail. In contrast, popular models prone to failure and largely fueled by market phenomena like low inflation rates include ad-based social media ("we'll turn on revenue in 5 years, no, really!"), blitzscaling ("we'll eventually figure it out!"), sales-driven growth ("our federal team will make our $ back in 3-5 years, no really!"), acquihires ("with enough AI talent we'll just sell our staff!"). I like venture capital, such as for deep tech and true growth, but the reality is most tech VC funding is more about financial engineering that assumes most of the portfolio fails. They push for commercial scaling too early and wipe out, which is fine for the rich VC who just needs 1-3 bets to win. Fine for them, but sucks for most founders & employees unless they job hop every 2 years. If we take VC $ again, it'd be on our terms and with a clear payback/growth return. A great way to kill an otherwise great idea & company is putting VC $ in, which puts a company on overdrive and financially implodes before it has a chance to figure things out. They're addicted and likely can't stop relying on VC without layoffs (or less likely, succeeding), at which point many of the A players leave as well and hard to recover. Instead, if a cockroach raises > $2M (so commercialization phase), that should generate enough sales revenue that they can keep organically growing in 18-24mo later even if a follow-on round doesn't happen. You'll hear such cockroach founders saying they don't even touch the money for months. Numbers-wise, most Series A companies fizzle out, which is because of this unicorn-or-bust structure.. and especially whenever the market is not on a bull tear. With a bit more time, they probably could have figured it out... but they blew it. Some articles: - Paul Graham's article on this: http://www.paulgraham.com/badeconomy.html http://www.paulgraham.com/badeconomy.html . - https://medium.com/swlh/how-to-build-a-cockroach-startup-instead-of-a-unicorn-4f776f068583 https://medium.com/swlh/how-to-build-a-cockroach-startup-ins... - https://medium.com/the-mission/be-a-cockroach-not-a-unicorn-e13ed9aadea5 https://medium.com/the-mission/be-a-cockroach-not-a-unicorn-...
- altdataseller 5y ago
  Cockroaches just care about survival first and foremost. Unlike unicorns that care about growing huge and taking over the world
- hyperpallium2 5y ago
  Look into the early history of Airbnb. They did anything to survive - even selling politician-themed breakfast cereal. Yes. pg exclaimed, you guys are like cockroaches, you just won't die. Don't know if that's the origin, but hey it could be. Without the story, calling someone "cockroach" has unclear sentiments.
Jemaclus 5y ago
> we're a cockroach team I think I know what you mean by this, but I'm not sure. Could you elaborate on what this means? Thanks in advance. :)
- munificent 5y ago
  I infer that it means "small and hard to kill".
PragmaticPulp 5y ago
> We get job candidates with high competing offers for companies I know to be rotten inside, I fell for this trick once when I was younger, but never again. As it turns out, when companies are bleeding talent and struggling to hire they suddenly find ways to pay well above market rate. You can have a fancy title, too! We had a competitor do something similar at a prior company. I would tell candidates that we can't match their compensation numbers but to come back if things don't work out at the other company. I'd often get a message about 3-4 months later asking if the job was still available
- meetups323 5y ago
  May help explain some Meta offers I've seen... 2 years out of college? Sure, come as a Senior! That's not enough? Principal it is!
  - naiwenwt 5y ago
    The problem is sometimes this is done for legitimate reasons and genuinely does lead to stronger outcomes for both employers and employees. It's hard to tell the difference between "stop the bleeding" title/pay inflation and "aggressively competing for talent" inflation.
    - meetups323 5y ago
      Differentiator is what other companies will pay. If GAM all offer X, F offers 3X, and GAM refuse to budge on their X... either F knows some deep dark secrets about your capabilities which no one else can appreciate, or they're bleeding talent.
      - frankchn 5y ago
        It is usually not quite that drastic. More often it is like GAM offer X, F offers 1.2X.
    - lmeyerov 5y ago
      Sort of. A good question is what is the revenue per employee Meta is ~$2M/employee. Probably more like $1M once contractors are accounted for? But for a good person, even if the rest of the company has random issues, they can carve out a win. Fast was like $1K/employee Consider what that's like for some hypothetical B2B startup BlitzScaler Inc. They're betting on 3x+ growth year-over-year for next 2+ years, 2-3 year sales payback periods, etc, and is probably closer to Fast levels of revenue per employee than Meta's. But hitting $500K is hard, $2M is hard again in different ways, then again to $10M, and again to $20M+ (and increasing range depending if many sales people inflating it). That matters because many aren't there, even unicorns (!). That means, like Uber, they're burning increasing piles of money, except unlike Uber, the revenue is unlikely to be keeping pace. Fundraising buys team, and an artificial sense of fit+growth (kool-aid-drinking team + forced sales that tap out + churn.) A cockroach team is closer to Amazon style: reinvest ~100% in growth, but don't gamble your employee's stock options.
pelagicAustral 5y ago
I should be a part of a cockroach team, in my estimation.
asadlionpk 5y ago
> we're a cockroach team is this a reference to http://paulgraham.com/guidetoinvestors.html#:~:text=nuclear%20war%20are-,cockroaches,-%2C%20because%20they%27re%20so http://paulgraham.com/guidetoinvestors.html#:~:text=nuclear%...
woah 5y ago
> Our new hires are getting paid from customer revenue Money is fungible
- Danieru 5y ago
  Cash flows aren't.
- umeshunni 5y ago
  Customer revenue is recurring
aidaman 5y ago
i feel like even the possibility of a company like docker failing would be among the greatest failures in the history of software

mwcampbell 5y ago

I'm not familiar with the phrase "cockroach team" in this context, and the obvious web search didn't help. Can you please elaborate?

jollybean 5y ago
small, surviving on crumbs.
diehunde 5y ago
Maybe they work at Cockroach Labs
alex_c 5y ago
I'm not the op and this is the first time I've seen someone else use the term, but I've used it too. Aspirationally - small and impossible to kill. While a unicorn's goal might be growth at all costs (with associated high chance of failure), our goal is to survive anything that might get thrown our way.
lmeyerov 5y ago
Hard to kill because they're financially independent. We believe enough in the technology we're building (gpu-powered graph ai & visualization) and the missions we're powering (security, fraud, anti-misinfo, healthcare, etc.) that we turned down large initial funding as it would have broken us. So awhile back, being cockroaches meant running as cost-effectively as we could (and still do, in fact, just not as extreme) as we figured it out, and now that things are working, it means prioritizing sustainable growth vs financial games likely to fail. In contrast, popular models prone to failure and largely fueled by market phenomena like low inflation rates include ad-based social media ("we'll turn on revenue in 5 years, no, really!"), blitzscaling ("we'll eventually figure it out!"), sales-driven growth ("our federal team will make our $ back in 3-5 years, no really!"), acquihires ("with enough AI talent we'll just sell our staff!"). I like venture capital, such as for deep tech and true growth, but the reality is most tech VC funding is more about financial engineering that assumes most of the portfolio fails. They push for commercial scaling too early and wipe out, which is fine for the rich VC who just needs 1-3 bets to win. Fine for them, but sucks for most founders & employees unless they job hop every 2 years. If we take VC $ again, it'd be on our terms and with a clear payback/growth return. A great way to kill an otherwise great idea & company is putting VC $ in, which puts a company on overdrive and financially implodes before it has a chance to figure things out. They're addicted and likely can't stop relying on VC without layoffs (or less likely, succeeding), at which point many of the A players leave as well and hard to recover. Instead, if a cockroach raises > $2M (so commercialization phase), that should generate enough sales revenue that they can keep organically growing in 18-24mo later even if a follow-on round doesn't happen. You'll hear such cockroach founders saying they don't even touch the money for months. Numbers-wise, most Series A companies fizzle out, which is because of this unicorn-or-bust structure.. and especially whenever the market is not on a bull tear. With a bit more time, they probably could have figured it out... but they blew it. Some articles: - Paul Graham's article on this: http://www.paulgraham.com/badeconomy.html http://www.paulgraham.com/badeconomy.html . - https://medium.com/swlh/how-to-build-a-cockroach-startup-instead-of-a-unicorn-4f776f068583 https://medium.com/swlh/how-to-build-a-cockroach-startup-ins... - https://medium.com/the-mission/be-a-cockroach-not-a-unicorn-e13ed9aadea5 https://medium.com/the-mission/be-a-cockroach-not-a-unicorn-...
altdataseller 5y ago
Cockroaches just care about survival first and foremost. Unlike unicorns that care about growing huge and taking over the world
hyperpallium2 5y ago
Look into the early history of Airbnb. They did anything to survive - even selling politician-themed breakfast cereal. Yes. pg exclaimed, you guys are like cockroaches, you just won't die. Don't know if that's the origin, but hey it could be. Without the story, calling someone "cockroach" has unclear sentiments.

Jemaclus 5y ago

> we're a cockroach team I think I know what you mean by this, but I'm not sure. Could you elaborate on what this means? Thanks in advance. :)

munificent 5y ago
I infer that it means "small and hard to kill".

PragmaticPulp 5y ago

> We get job candidates with high competing offers for companies I know to be rotten inside, I fell for this trick once when I was younger, but never again. As it turns out, when companies are bleeding talent and struggling to hire they suddenly find ways to pay well above market rate. You can have a fancy title, too! We had a competitor do something similar at a prior company. I would tell candidates that we can't match their compensation numbers but to come back if things don't work out at the other company. I'd often get a message about 3-4 months later asking if the job was still available

meetups323 5y ago
May help explain some Meta offers I've seen... 2 years out of college? Sure, come as a Senior! That's not enough? Principal it is!
- naiwenwt 5y ago
  The problem is sometimes this is done for legitimate reasons and genuinely does lead to stronger outcomes for both employers and employees. It's hard to tell the difference between "stop the bleeding" title/pay inflation and "aggressively competing for talent" inflation.
  - meetups323 5y ago
    Differentiator is what other companies will pay. If GAM all offer X, F offers 3X, and GAM refuse to budge on their X... either F knows some deep dark secrets about your capabilities which no one else can appreciate, or they're bleeding talent.
    - frankchn 5y ago
      It is usually not quite that drastic. More often it is like GAM offer X, F offers 1.2X.
  - lmeyerov 5y ago
    Sort of. A good question is what is the revenue per employee Meta is ~$2M/employee. Probably more like $1M once contractors are accounted for? But for a good person, even if the rest of the company has random issues, they can carve out a win. Fast was like $1K/employee Consider what that's like for some hypothetical B2B startup BlitzScaler Inc. They're betting on 3x+ growth year-over-year for next 2+ years, 2-3 year sales payback periods, etc, and is probably closer to Fast levels of revenue per employee than Meta's. But hitting $500K is hard, $2M is hard again in different ways, then again to $10M, and again to $20M+ (and increasing range depending if many sales people inflating it). That matters because many aren't there, even unicorns (!). That means, like Uber, they're burning increasing piles of money, except unlike Uber, the revenue is unlikely to be keeping pace. Fundraising buys team, and an artificial sense of fit+growth (kool-aid-drinking team + forced sales that tap out + churn.) A cockroach team is closer to Amazon style: reinvest ~100% in growth, but don't gamble your employee's stock options.

pelagicAustral 5y ago

I should be a part of a cockroach team, in my estimation.

asadlionpk 5y ago

> we're a cockroach team is this a reference to http://paulgraham.com/guidetoinvestors.html#:~:text=nuclear%20war%20are-,cockroaches,-%2C%20because%20they%27re%20so http://paulgraham.com/guidetoinvestors.html#:~:text=nuclear%...

woah 5y ago

> Our new hires are getting paid from customer revenue Money is fungible

Danieru 5y ago
Cash flows aren't.
umeshunni 5y ago
Customer revenue is recurring

aidaman 5y ago

i feel like even the possibility of a company like docker failing would be among the greatest failures in the history of software