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Your startup idea probably isn’t venture-scale
- moomoo11 3y agoDoes it need to be? Not everyone wants to sell their soul lol.
- paulddraper 3y agoIf you're raising venture capital, then yes. If you're not, then of course not.
- moomoo11 3y agoYeah ofc that’s what I meant. A venture backed business is really hard to execute properly with tons of expectations. Lots of people have really basic ideas that they should just self fund or start small.
- morkalork 3y agoI'd settle for early retirement and lake house scale.
- Swizec 3y ago> I'd settle for early retirement and lake house scale. You can get that as a tech employee with much less risk. Get into tech in your 20’s, do good enough work, invest the money you aren’t using, and you can retire by 45 or so with a very low degree of variance. Lake houses are pretty cheap too. Plenty of cute lakes in unpopular hard to reach areas.
- zht 3y agohow can you claim this with a straight face (in terms of low variance)?
- Swizec 3y ago> how can you claim this with a straight face (in terms of low variance)? Because I’ve been following tech salaries for 10+ years. If you can’t retire early (before 65) after making 150k+/year for 20+ years, you’re rather living way beyond your means or have very high expectations for what a normal person retirement looks like. edit: or I guess in America it means you had a medical scare or two that burned all your money. But that’s not a problem anywhere else and has little to do with the maths behind savings. Tech incomes come with decent insurance at least
- icedchai 3y agoThough what you say is technically true, most people I know don't have the mindset to save and invest for the long term. Many people making six figures live paycheck to paycheck. They spend every dollar they make, and then some. If we had better financial education in America, early retirement would be much more common.
- zht 3y agoisn't thi assuming sustained, averaged growth of some portfolio over decades will continue? isn't this literally past results guarantee future returns?
- paulddraper 3y ago> Lake houses are pretty cheap too. Anything that you'd colloquially call a "lake house" is going to be $1m+, even in frigid remote areas. But, IDK with inflation maybe in 2023 a $1,000,000 purchase does count as "cheap."
- Swizec 3y agoI live in SF so a 1mil lake house feels pretty cheap compared to a 1mil 1.5-bedroom apartMent. Also there are many countries outside USA with way cheaper lake houses. Prettier lakes too.
- carom 3y ago850k Montana - https://redf.in/tica6H https://redf.in/tica6H 865k Texas - https://redf.in/ubeUye https://redf.in/ubeUye 590k California - https://redf.in/bYUSU3 https://redf.in/bYUSU3 I could do this all day, I enjoy it.
- paulddraper 3y agoFirst one is explicitly listed as a fixer-upper. Last one is <1500 sq ft. I gotta hand it to you, the second one is fantastic deal, I wonder why. Maybe bad schools or something. But still.
- carom 3y agoInitially my search had an acre as the minimum lot size. There are probably much better deals in Montana than what I saw. Same for Texas. The issue in Texas is it takes forever to get anywhere from those river front and lake communities. Not a problem if you're remote, bit of a drag if you work in Austin.
- willio58 3y agoI mean this can be achieved with a high salary job and good savings (in a lower COL area of course).
- toomanydoubts 3y agoAnd a lifetime(thus not really an early retirement).
- sealeck 3y agoDepends really on how high the salary is. I think you have to work out what is important to you, and what in one's life is just gratuitious consumption and can thus be eliminated.
- Retric 3y agoRetiring by 35 is very possible on programmer salaries assuming you start young with minimal debt, and avoid major financial disasters. It comes down to questions like, am I willing to forgo ever eating out, buying expensive toys, down to AC etc. The issue for most people is extremely early retirement isn’t actually worth major sacrifices when another X years can raise your standard of living significantly. Unfortunately, retirement isn’t that great when you don’t have money or friends to enjoy it with. The trick IMO isn’t about early retirement it’s avoiding the traps that force you into working a job you dislike.
- willio58 3y agoDepends on how much you save. I'm aiming for the option of retirement at 50. For most of the world, that's a very early retirement age. Anything before 65 can essentially be considered early retirement. You don't need to be 35 to call it early retirement.
- brailsafe 3y agoI'd settle for being able to live in my community long-term scale
- ttul 3y agoI'd settle for being able to live not in a tent or van short-term.
- dehrmann 3y agoPeople's whose goals are retirement and a lake house rarely have the drive or passion to run a small business.
- xedrac 3y agoWho do you think owns most of the lake houses?
- pclmulqdq 3y agoLawyers, doctors, engineers, and professional MBAs. They far outnumber entrepreneurs, even in the ~$10 million net worth stratum.
- dehrmann 3y agoThey might own them, but it doesn't mean they use them. I fault Elon Musk for many things, but it's never drive or passion. I assure you he isn't spending the weekend relaxing at his lake house.
- dasil003 3y agoAnd people whose goals are to become rich rarely have the intrinsic motivation to ever create anything worthy of market success. Money isn't everything; it's a pretty weak motivator in the grand scheme of things. Yes, the uber-wealthy use money to keep score, but make no mistake, all self-made billionaires have deeper motivations that drove them to success.
- willio58 3y agoTotally agree. I've known startup owners who were all-in on their companies. All-in to a degree that they sacrificed time with their family and friends regularly just to grow the business. I always wonder what the end goal is there. Okay, you have a successful business, woohoo! But your kids hate you, your wife divorced you, and the "friends" you have left are trying to get to your money. Money beyond a certain amount simply does not buy happiness. Of course, that's not all startup founders, but so many of them (especially the ones that are obsessed with money for the sake of money) do end up that way.
- aabhay 3y agoThe analysis paralysis that comes with wondering whether your idea is “venture scale” is a really common mental pitfall for many friends that have considered starting a company. Do what you’re passionate about, solve problems for people, and constantly question whether you are doing enough to solve this problem for everyone possible. If you’re asking yourself that question in the most intellectually honest way, you will naturally realize that the necessary tools to do things for many people involves software, AI, and all those common tropes of “venture scale” business. You’ll end up realizing that things like consulting are doomed to not solve the problem for a broad swath of people.
- paulddraper 3y agoI have friend still searching for his "billion dollar" idea. Whereas if he had done some of his "million dollar" ideas, he'd be much better off, both financially and in a position to create a unicorn.
- theGnuMe 3y agoTell your friend that a billion dollar idea is always at first a stupid idea that will never work. See: 1. Dropbox 2. AirBnB 3. Uber
- wizzwizz4 3y agoAll of those were things that already existed, in some capacity. Dropbox did it better, AirBnB had better advertising (which, by the network effect, meant their offering was better). and Uber must be some kind of money laundering scheme: a multinational taxi service that underpays its drivers (often to the point of abusiveness[0]) that is still haemorrhaging billions of dollars a year. [0]: https://www.uberpeople.net/threads/what-happens-to-uber-rates-when-the-price-of-fuel-increases.37648/ https://www.uberpeople.net/threads/what-happens-to-uber-rate...
- tcgv 3y agoAt the same time most stupid ideas will in reality never work.
- pedalpete 3y agoEven if it is venture-scale, does that mean it needs to be funded by VCs? That is maybe the more important question to ask. As many people have suggested, it is as hard to build a small business as it is to build a large one, so don't aim too small.
- ghiculescu 3y ago> A simple rule of thumb for what makes an idea venture-scale is having a path to $100 million a year in revenue I don’t think this is a good rule of thumb. After all… > What do Product Hunt, Trello, Balsamiq, Basecamp, Things, DuckDuckGo, Brain.fm, and many of your favorite products have in common? I don’t think any of them had 100M revenue within 10 years. Edit: turns out I can't read...
- paxys 3y ago> I don’t think any of them had 100M revenue within 10 years. So, you agree with the article then.. Or did you not bother reading beyond the first line?
- Mizoguchi 3y agoI think that was the point of the author. There are great products and services that are not necessarily unicorns and that's fin. Product Hunt I believed had a US$ 20M exit, which in the VC world is a rounding error.
- dinobones 3y agoWould you consider DocuSign or Dropbox venture scale?
- gizmo 3y agoIt's not obvious, except in hindsight, which startups are venture-scale. How big is the audience going to be for a new product? How much can you charge? Who knows? Some products start out in a small niche, get fanatical users, and then become mainstream. eBay, pinterest and etsy are big today, but who could have predicted that? Does pinterest solve a Large, Urgent, and Valuable problem? I don't think it does. Pinterest is basically another photo sharing app. Exactly the kind of thing that this author argues isn't venture scale, and yet it was valued at $50bn last year. Anything that has a few hundred million users is worth a lot. It's trivial to tell whether a startup is venture-scale in hindsight, and impossible to predict in advance. A startup is venture-scale if the founders have growth as their #1 priority. Otherwise, not so much.
- luckyt 3y agoYeah, it's not clear how to estimate the market size or TAM of an idea even if there already is a market, like take random examples of a dog walking or podcasting app. You can easily find sources that claim the dog walking or podcast business are $1 billion dollar markets. But how does that translate to evaluating growth in a startup in this business, and how big can it realistically grow?
- jschveibinz 3y agoThere is an answer to this question, so I’ll give it a try in this context. Let’s assume “dog walking” as the example. Assume the sales price of a dog walk is in the $25/session range, +/- $5 depending on location. That walk has an underlying cost of labor and overhead. Assume 50-50 for each. That means the walker receives about $12.50 for the walk. The overhead pays for the transit time, the admin time (phone calls, scheduling, bookkeeping, insurance, etc.). It also includes marketing and sales. For a local dog walker, the cost of marketing and sales is very low. It’s mostly done by word-of-mouth and referrals from good customers. So the salary is acceptable if they can get 2-3 walks in per hour. Now, to scale this business from local to regional, some things have to change. More people are required. Training is required. And brand recognition is required. The marketing costs must go up, the admin costs must go up, and ultimately the value to the customer must go up (to beat out the local provider), etc. More customer value probably means a lower sales price (to compete). And all of these extra costs doesn’t leave much of the pie left over for labor. So there is a lower labor salary-maybe only $5 per walk-which doesn’t attract very good talent. In the end, you can see that it makes it extremely difficult to “scale up” a business like dog walking. It’s too labor intensive, the bar is too low for competitors, and it’s tough to create additional value for the customer. You can do a similar analysis with other startup business ideas to test if there is really an opportunity for scale.
- troft 3y ago[dead]
- ttul 3y agoVenture investors want the prospect of a high return on their capital. Whether it's by investing in "the next AirBnB" - a business that can on its own scale to billions in revenue - or by investing in a company whose technology innovation can be sold to Apple or Google one day doesn't matter. What matters is the price you paid vs. the price you sell at. The direct revenue potential of the startup's product vision is not the only determinant of value. That being said, the article is right to point out that not all companies are a good candidate for VC. You have to show the investor that your shares can be worth dramatically more in a few years than they are today. Why should they believe you? It's not wrong to say "because Apple will buy us for 50x," if you can articulate that outcome convincingly.
- bmitc 3y agoI am pretty exhausted by the startup world and their market ideas. Nearly ever single one is just taking some mundane part of life and throwing software at it. Also, venture capital generates very short term thinking. Their thinking is almost wholly based on timescales of 1-5 years, maybe out to 10 years, for when they can exit and move on, letting the company either crumble post IPO or sale or end up gobbled up by some megacorp.
- arcticbull 3y ago> Their thinking is almost wholly based on timescales of 1-5 years, maybe out to 10 years, for when they can exit and move on, letting the company either crumble post IPO or sale or end up gobbled up by some megacorp. Average time to exit is now about 9-11 years. [1] Maybe I'm just too millennial, but that doesn't sound like too short a timeframe in an industry that moves and changes as quickly as the tech world does. For instance, 11 years ago smartphone penetration was a tiny fraction of what it is today. I wouldn't consider a 10 year time horizon to be 'short term thinking' - especially when that's an average, in a distribution with a much higher median - but that's just me. [1] https://eqvista.com/exit-timing-startups-by-industry/ https://eqvista.com/exit-timing-startups-by-industry/
- jmholla 3y ago> Maybe I'm just too millennial, but that doesn't sound like too short a timeframe in an industry that moves and changes as quickly as the tech world does. It is a problem when the industries that depend on your work operate on much longer timescales. Not to mention, the degradation of service in the search for increased profits happens during that 9-11 years.
- bmitc 3y agoA ten-year horizon is extremely short-term. It doesn't have anything to do with generations. > 11 years smartphone penetration was a tiny fraction of what it is today. Right, and I'd say we were better off then than now, and I believe science backs that up. Education, intelligence (literally brain and cognitive development), mental health, emotional health, community, time, and more have all suffered at the hands of smartphones. And that's what I'm getting at. Chasing capital value at the expense of everything else is short-term and short-sighted thinking.
- cosmiccatnap 3y agoI turns out none of them were
- armatav 3y ago“Venture scale” scales with the percentage VC makes up of its LPs portfolios, and scales with the amount of money in circulation.
- ericd 3y agoAnd that's ok! It's much easier to build a business worth $10-100M and get it to liquidity than it is to do the same for one worth >$1B. But if you don't take venture funding, your personal stake will likely still be worth life-changing money.
- unusualmonkey 3y agoThe flip side of this is that if your idea is not able to scale... it might not be worth doing. Let's say the market of your idea is $100M/year, and in a best case scenario you can get $10M/year... that might not be a lot, especially if you consider all the costs and risks of business. Worse, is that the smaller the market, likely the harder the business to run. You end up spending more resources, to gain less customers. There's a lot of value in trying to understand market size, before in eating time and effort into a venture - regardless of venture capital.
- sealeck 3y agoA cynical person might argue that whether your startup has the serious potential to become "venture-scale" is unimportant in attracting funding - it's all about psychology and perception. See for example https://www.bloomberg.com/opinion/articles/2023-06-27/silicon-valley-is-on-drugs https://www.bloomberg.com/opinion/articles/2023-06-27/silico...