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I’ve been in and around startups since 2008. I feel that pretty much all of wisdom around startups has become outdated, especially the entire narrative around t

by spaceman_2020 4y ago

I’ve been in and around startups since 2008. I feel that pretty much all of wisdom around startups has become outdated, especially the entire narrative around them. The biggest change I’ve seen is how startups are being seen as “risk free”. At my first startup, I was one of the early employees and I had to convince and cajole new grads to join a startup. Everyone wanted to join big tech co. for the job security. That’s changed now. New grads I’ve hired don’t see a startup as a risk event anymore, but rather, a normal career move. It also used to be that founders would forego a salary and early employees would assume they would get paid much less than a regular job. Founders were also driven to protect their equity share and would dread dilution. Of late, I’ve seen founders very eager to secure fat salaries and to get to liquidity events as fast as possible. The earliest startups I worked with, the founders would fret for days about bringing a VC onboard since that meant diluting their holding. Now, founders are driven to raise funding and sell some of their holdings to safeguard their future. I say all of this without judgment or bias - I truly believe your first priority should be to secure your family’s financial future. I just feel that the startup world is awash in so much funding (at least before 2022) that the riskiness and “courage” associated with startups - something most early startup essays would talk about endlessly - have been largely negated.

aerhardt 4y ago
Very interesting insights. I hadn't thought about it, but looking back, I've observed exactly the same phenomena regarding junior hires and founders.
version_five 4y ago
It's gentrified or become mainstream or whatever you want to call it. Like instead of living in a loft built in an abandoned factory in an obscure part of town, buying a new-build condo with exposed vents and some brick on one of the walls. A lot of startups are just outsourced corporate innovation, or a VC bet on the founders, more like the investors hiring someone for a role than an organic "invention in the garage". Not always true of course, but a shift overall
- phkahler 4y ago
  YC in the beginning was all about giving the people who make things a shot at using their ability and ideas to start a company. Now it's founders, funding, and hiring the first engineer. Maybe half of what PG said is out of date, but a lot of that is because he wrote about a fundamentally different kind of startup. I think those stillexist, just not at YC any more.
  - version_five 4y ago
    There was a list of Thiel fellows published the other day* and it struck me that the companies listed are mostly all pretty mainstream sounding startups and founders that wouldn't stand out on a list from YC or another VC. Maybe it's always been that way, I had in my mind that a program like that was trying to be a little more outside the box, but it feels pretty mainstream. I dont know what "next" looks like but the whole scene feels a bit like a copy of a copy of a copy now. (I'm not criticizing any individuals, just the relative uniformity of a scene that presents itself as high risk bets on genuinely new stuff) * https://finance.yahoo.com/news/thiel-foundation-announces-next-thiel-150500767.html https://finance.yahoo.com/news/thiel-foundation-announces-ne...
  - intelVISA 4y ago
    Always funny to see the "modern YC startup" of two corp-types looking to offer the privilege of a crappy salary and tiny equity to a 'founding engineer' to build their product for them. I would say I'm saddened but ultimately VC money far outpaced the small minority of people who can build things.
    - tough 4y ago
      Every time I see some of these, I'm reminded I should apply and get the equity myself. But oh well, I'm not a US grad coming out of MIT or whatever those kids seem to have
- k__ 4y ago
  I guess, bootstrapping and grants are the "new" way.
svengrunner2049 4y ago
There is a lot of truth to all these observations. Would have just seemed anecdotal points even just 1-2yrs ago, but I feel what GP is listing has become the normalized expectation now. On founder salaries, the days of ramen garage bootstrapping seem behind us. To be able to even live in these high cost Startup hubs cities/countries, needs higher salaries that is used to in the 90s and early 2000s. I'm not talking about crazy founder salary asks, which I have seen (pre-seed co-founders asking for $130k from their investors!), but even taking a "cut" still puts you in 80-100k range. If folks have families, it's a tough ask to go lower. Founders not cutting their personal finances to the bone, I think is fine, and I think it's a good thing the expectation is mostly gone that you have to somehow prove your commitment to investors or whoever by how broke you can go. It is quite sadistic. I think the bigger issue is startups being seen as "risk free" and that is totally a problem. Not because we want everyone to fear for their life each day the come to work, or because we want to scare people off from joining. It's because it messes up the incentive structure and misalignes people. Startups need people who have, taken all the info in, are aware of the risks, and dive in head first anyway. Because they are committed to the mission/idea, want to just do something they find cool, or even because they want to roll the dice and strike it rich...whatever the reason. This is not to exclude people with lower risk tolerance, or who _need_ to make higher cash comp to meet their commitments...that's fine, just join later on at a point where the risk meets your tolerance. It just does not work if the latter type of person joins early. To give a recent example. I was reading through one of those layoff lists that come out of folks who are looking for new roles post a company layoff event. I recognised a name. Turns out it was my former account manager at a very big (and safe) enterprise tech company we buy from. This person had moved to, at the time, a decacorn startup, had been there 7mo and was now out the door. This startup was a rocketship, and no one was really expecting anything to go wrong. But like you said, they are never "risk free", and this macro economic shock hit their trajectory and cuts were made. Unfortunately they hit this person. I don't know if they made the move to a startup with the risks in mind, or if they just saw it as a move to (probably) higher pay and a better "lifestyle".
- spaceman_2020 4y ago
  2020-21 was particularly bizarre. I had friends working happily in good jobs ask me if they should start a startup. Not because they wanted to, but because their friends in VC firms were literally calling them up to “start something - we’ll give you money”. There was just way too much money and VCs didn’t know what to do with it. Prime example, of course, would be the entire crypto/web3 industry.
shanebellone 4y ago
"Of late, I’ve seen founders very eager to secure fat salaries and to get to liquidity events as fast as possible." This summarizes my disdain for tech. Most startups seem focused on addressable audience size rather than any form of utility. That is symptomatic of VC funding.
- spaceman_2020 4y ago
  I don’t begrudge the tech, but I have increasing disdain for VCs. If they’re not clueless and greedy (FTX backers are a prime example), they’re elitist and snobbish. There is very little room for founders who don’t have the right pedigree (ex-FAANG, Ivy school). Ironically, of all the startups I’ve worked in/consulted, the most profitable ones (actual profits, not paper profits) were started by non-obvious founders without significant funding or credentials. Tech funding is becoming a little like the old boys club where ex-FAANG/Ivy VCs fund other ex-FAANG/Ivy founders.
  - jacooper 4y ago
    I think true profits are starting to matter again for VCs.
- ethanbond 4y ago
  Not that it characterizes all startups or fully negates this critique, but scale is an important component of utility. Solving a small problem for a billion people will produce more utility (and therefore value) than solving a big problem for 10 people (obviously there are specific tens of people for whom this would be false). FWIW though pretty much all startup advice, and YC’s in particular, is to solve the big thing for 10 people before scaling up.
  - shanebellone 4y ago
    As admittedly pedantic as it is... any product that scales to billions of users is really a commodity in disguise. Take social media as an example: It's essentially "attention arbitrage." The raw material is our attention, and the output is their profit. They've built an economic engine by piping excess attention directly to the highest bidder. Also, can you really compare utility in terms of scale? Is it better to improve 1,000,000 lives 50% or 1,000,000,000 lives 1%?
ravagat 4y ago
Well written comment

aerhardt 4y ago

Very interesting insights. I hadn't thought about it, but looking back, I've observed exactly the same phenomena regarding junior hires and founders.

version_five 4y ago

It's gentrified or become mainstream or whatever you want to call it. Like instead of living in a loft built in an abandoned factory in an obscure part of town, buying a new-build condo with exposed vents and some brick on one of the walls. A lot of startups are just outsourced corporate innovation, or a VC bet on the founders, more like the investors hiring someone for a role than an organic "invention in the garage". Not always true of course, but a shift overall

phkahler 4y ago
YC in the beginning was all about giving the people who make things a shot at using their ability and ideas to start a company. Now it's founders, funding, and hiring the first engineer. Maybe half of what PG said is out of date, but a lot of that is because he wrote about a fundamentally different kind of startup. I think those stillexist, just not at YC any more.
- version_five 4y ago
  There was a list of Thiel fellows published the other day* and it struck me that the companies listed are mostly all pretty mainstream sounding startups and founders that wouldn't stand out on a list from YC or another VC. Maybe it's always been that way, I had in my mind that a program like that was trying to be a little more outside the box, but it feels pretty mainstream. I dont know what "next" looks like but the whole scene feels a bit like a copy of a copy of a copy now. (I'm not criticizing any individuals, just the relative uniformity of a scene that presents itself as high risk bets on genuinely new stuff) * https://finance.yahoo.com/news/thiel-foundation-announces-next-thiel-150500767.html https://finance.yahoo.com/news/thiel-foundation-announces-ne...
- intelVISA 4y ago
  Always funny to see the "modern YC startup" of two corp-types looking to offer the privilege of a crappy salary and tiny equity to a 'founding engineer' to build their product for them. I would say I'm saddened but ultimately VC money far outpaced the small minority of people who can build things.
  - tough 4y ago
    Every time I see some of these, I'm reminded I should apply and get the equity myself. But oh well, I'm not a US grad coming out of MIT or whatever those kids seem to have
k__ 4y ago
I guess, bootstrapping and grants are the "new" way.

svengrunner2049 4y ago

There is a lot of truth to all these observations. Would have just seemed anecdotal points even just 1-2yrs ago, but I feel what GP is listing has become the normalized expectation now. On founder salaries, the days of ramen garage bootstrapping seem behind us. To be able to even live in these high cost Startup hubs cities/countries, needs higher salaries that is used to in the 90s and early 2000s. I'm not talking about crazy founder salary asks, which I have seen (pre-seed co-founders asking for $130k from their investors!), but even taking a "cut" still puts you in 80-100k range. If folks have families, it's a tough ask to go lower. Founders not cutting their personal finances to the bone, I think is fine, and I think it's a good thing the expectation is mostly gone that you have to somehow prove your commitment to investors or whoever by how broke you can go. It is quite sadistic. I think the bigger issue is startups being seen as "risk free" and that is totally a problem. Not because we want everyone to fear for their life each day the come to work, or because we want to scare people off from joining. It's because it messes up the incentive structure and misalignes people. Startups need people who have, taken all the info in, are aware of the risks, and dive in head first anyway. Because they are committed to the mission/idea, want to just do something they find cool, or even because they want to roll the dice and strike it rich...whatever the reason. This is not to exclude people with lower risk tolerance, or who _need_ to make higher cash comp to meet their commitments...that's fine, just join later on at a point where the risk meets your tolerance. It just does not work if the latter type of person joins early. To give a recent example. I was reading through one of those layoff lists that come out of folks who are looking for new roles post a company layoff event. I recognised a name. Turns out it was my former account manager at a very big (and safe) enterprise tech company we buy from. This person had moved to, at the time, a decacorn startup, had been there 7mo and was now out the door. This startup was a rocketship, and no one was really expecting anything to go wrong. But like you said, they are never "risk free", and this macro economic shock hit their trajectory and cuts were made. Unfortunately they hit this person. I don't know if they made the move to a startup with the risks in mind, or if they just saw it as a move to (probably) higher pay and a better "lifestyle".

spaceman_2020 4y ago
2020-21 was particularly bizarre. I had friends working happily in good jobs ask me if they should start a startup. Not because they wanted to, but because their friends in VC firms were literally calling them up to “start something - we’ll give you money”. There was just way too much money and VCs didn’t know what to do with it. Prime example, of course, would be the entire crypto/web3 industry.

shanebellone 4y ago

"Of late, I’ve seen founders very eager to secure fat salaries and to get to liquidity events as fast as possible." This summarizes my disdain for tech. Most startups seem focused on addressable audience size rather than any form of utility. That is symptomatic of VC funding.

spaceman_2020 4y ago
I don’t begrudge the tech, but I have increasing disdain for VCs. If they’re not clueless and greedy (FTX backers are a prime example), they’re elitist and snobbish. There is very little room for founders who don’t have the right pedigree (ex-FAANG, Ivy school). Ironically, of all the startups I’ve worked in/consulted, the most profitable ones (actual profits, not paper profits) were started by non-obvious founders without significant funding or credentials. Tech funding is becoming a little like the old boys club where ex-FAANG/Ivy VCs fund other ex-FAANG/Ivy founders.
- jacooper 4y ago
  I think true profits are starting to matter again for VCs.
ethanbond 4y ago
Not that it characterizes all startups or fully negates this critique, but scale is an important component of utility. Solving a small problem for a billion people will produce more utility (and therefore value) than solving a big problem for 10 people (obviously there are specific tens of people for whom this would be false). FWIW though pretty much all startup advice, and YC’s in particular, is to solve the big thing for 10 people before scaling up.
- shanebellone 4y ago
  As admittedly pedantic as it is... any product that scales to billions of users is really a commodity in disguise. Take social media as an example: It's essentially "attention arbitrage." The raw material is our attention, and the output is their profit. They've built an economic engine by piping excess attention directly to the highest bidder. Also, can you really compare utility in terms of scale? Is it better to improve 1,000,000 lives 50% or 1,000,000,000 lives 1%?

ravagat 4y ago

Well written comment