10 ms·

> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business. >"We then decided to pivot into a vertical B2B

by gortok 2y ago

> While we gained some traction with some startups, we ultimately weren't able to build a hyper-growth business. >"We then decided to pivot into a vertical B2B SaaS AI product because we felt we could use the breakthroughs in Gen AI to solve previously unsolvable problems, but after going through user interviews and the sales cycle for many different ideas, we haven't been able to find enough traction to make us believe that we were on the right track to build a huge business." How many wonderful niche products would be around if their owners had tried for a small business instead of a 'huge business' with 'hyper growth'?

ed 2y ago
There seems to be a subtext here of “see? I told you it was hard!” Nothing wrong with setting out to build a Google instead of a Basecamp. They’re different kinds of company. If anything it’s easy to underestimate the risk of building a low-risk business. They’re all hard. Kudos to Konfig!
- bachmeier 2y ago
  > Nothing wrong with setting out to build a Google Sure there is. The probability of success is as good as zero. In all seriousness, a better business model is buying $1000 a month in lottery tickets. You have the same chance of success, you can do it on the side while working your job, and if you do hit the jackpot you don't have to do any additional work. This particular business has no path to being a Google but it might have a shot at being a Basecamp.
  - liontwist 2y ago
    Your mental model of startups is a lottery? Even the Marxist analysis would say it’s about privilege, access, and exploitation. Not “probability”. Considering well connected people with startup know-how and experience in the Bay Area, I would say they do pretty well with serious startup projects.
    - yakshaving_jgt 2y ago
      There is rather a lot of probability involved, and the odds change dramatically depending on the kind of business you’re trying to launch.
      - liontwist 2y ago
        When you start making a product and trying to sell it when do the dice rolls come in?
        lazide 2y ago
        Every step of the way. - right product? - right market segment? - right marketing? - right execution? - right scalability post basic execution? - right sales approach? - right post sales approach? All of these have 10 different paths (in reality), any of which if you take the wrong one could end up in some kind of expensive dead end or spectacular failure.
        BartjeD 2y ago
        You are zooming out, and when you look at an abstraction from a distance it's easy to miss the details and just boil it down to probablities. The reality is that you measure and get information on all of these things to determine more accurately what odds you have. The act of measurement changes the probabilities, because if you do it right you will know more than you did before.
        johannes1234321 2y ago
        However the measurement has to be done right or it will mislead and will take time, which your competitor uses to overtake or at least counter you.
        lazide 2y ago
        And sometimes you start in a place (or take directions into a place) which put you at such a disadvantage with competitors that you can’t ‘win’. It’s rare you can know that while it’s happening though. In theory all these things are controllable and no problem is unsolvable. Sometimes it’s even true (post-facto however, more often than not). That view is often the best for succeeding (or more precisely, NOT having that view often puts one at a disadvantage when it comes to succeeding). But the probabilities are often the more accurate model. That is often the best model for deciding if you want to take a bet, or for comforting yourself later if it doesn’t actually work out perfectly. It really doesn’t help though (most of the time) with actually doing successfully.
tptacek 2y ago
If you need funding to cover your monthly nut, you need a plausible path to hyper-growth; the portfolio math doesn't work for investors otherwise. If you set out to build a small-scale sustainable business, and you succeed, you can avoid funding. But if you're pivoting to something entirely new mid-to-late-ways through your company, you've probably burned down most of your reserves.
- NetOpWibby 2y ago
  > If you need funding to cover your monthly nut You can get funding for that?!
  - entropyneur 2y ago
    Before 2022, that would have been series B material.
  - x0x0 2y ago
    Yes. Most of what early vc practically pays for is salaries (and a lot of that is really just a passthrough to landlords because California is an incompetent state run by incompetent people.)
    - CoastalCoder 2y ago
      I believe you just had a "whoosh" moment.
      - x0x0 2y ago
        That's what I get for reading literally. sigh.
        VagabundoP 2y ago
        You can take solace from the fact that you've made quite a few people sensibly chuckle in cafes around the world.
Sytten 2y ago
People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business. You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.
- mediaman 2y ago
  I don't understand why people even think about selling $10/mo licenses. Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people. Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
  - NetOpWibby 2y ago
    This is a solid plan, thanks.
  - TechDebtDevin 2y ago
    Cool, says everyone... Have you done it?
    - x0x0 2y ago
      Done that with $25k saas. The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
    - mediaman 2y ago
      Yes. But it's not for everyone, especially not for a lot of engineers. Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling. Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about. The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available. But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.
spullara 2y ago
It just doesn't make any sense when you can go to work for a big company and get that kind of outcome without all the risk.
- Jarwain 2y ago
  Maybe my understanding of "big company" salaries are skewed but I imagine there's a profitable middle ground between big company salary and hypergrowth? As long as one isn't taking VC money at least On the flip side, I can't say I'm super sure what "hypergrowth" means, it's a rate of growth but I guess what really Matters is some expected valuation/market cap kinda thing
  - spullara 2y ago
    pretty hard beating riskless 500k+ TC without having equity in a hypergrowth company.
    - Jarwain 2y ago
      Isn't 500k+ TC on the upper upper end of the salary distribution though? Vs equity in a rapid growth 20% CAGR or somethin? Or hypergrowth that caps out around 2M ARR? I guess I'm just trying to gain some career perspective on this heavily bootstrapped startup I'm at thats targeting the alt-thread-mentioned "medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people." and whether it's really worth it for me
    - JofArnold 2y ago
      I wonder how the probability of securing such a job - with huge layoffs lately and increased competition - compares to the probability of business success. There's unemployed engineers grinding at system design and algorithms 10 hours a day for at least half a year to get an interview. If I'm going to spend hundreds of person hours on something, I think I'd rather start a company to be honest. Additionally, internationally those levels of pay are incredibly rare.
- tonyedgecombe 2y ago
notforviewingit 2y ago
Yeah I have been wondering this myself as well. I'm one of 3 co-founders in a bootstrapped company doing consultancy for a few years in a LCOL area. We have been paying founders 50k/year salaries for the life of the company. We haven't been especially lucky and we haven't been super brilliant in our business decisions. Yet we are doing fairly well. This year we made 400k revenue, 150k profit and 40% growth. Our sales prospect are a lot better than at the start of the year. So I'm expecting to have another strong year of growth next year. Also we are nowhere near saturating the market and can have strong growth for many years to come. Salary + 1/3 of profits is equal to 100k for this year. 40% growth doubles the company every 2 years, If everything goes well just salary + profits will grow very nicely. Then on top of this come the exit opportunities where founders will make millions.
- Sytten 2y ago
  Product and service businesses are very very very different things. Service you get immediate cashflow but the thing doesn't scale past the humans. Software scales infinitely in theory, but it takes a lot of time to build before you even get 1$ out of it.
  - tonyedgecombe 2y ago
    I've know quite a few businesses that started with services then transitioned into product. Once you have enough domain knowledge it is the obvious next step.
  - notforviewingit 2y ago
    You can hire people into consultancy business and grow it like any other business. Sure it won't become the next magnificent seven, but you can grow it enough that you can make a lot of money. For example, there exist plenty of consultancy companies that have 10million revenue. That would be 20x growth for us. In practice that would mean 500k - 1m yearly income for founders in our case. On top of that the company probably could be sold for 30m - 100m. With typical vc dilution founders need to grow a very successful product company to earn similar amounts of money. There are plenty of examples of unicorn exits where the founder team has made less.

by gortok 2y ago

ed 2y ago

There seems to be a subtext here of “see? I told you it was hard!” Nothing wrong with setting out to build a Google instead of a Basecamp. They’re different kinds of company. If anything it’s easy to underestimate the risk of building a low-risk business. They’re all hard. Kudos to Konfig!

bachmeier 2y ago
> Nothing wrong with setting out to build a Google Sure there is. The probability of success is as good as zero. In all seriousness, a better business model is buying $1000 a month in lottery tickets. You have the same chance of success, you can do it on the side while working your job, and if you do hit the jackpot you don't have to do any additional work. This particular business has no path to being a Google but it might have a shot at being a Basecamp.
- liontwist 2y ago
  Your mental model of startups is a lottery? Even the Marxist analysis would say it’s about privilege, access, and exploitation. Not “probability”. Considering well connected people with startup know-how and experience in the Bay Area, I would say they do pretty well with serious startup projects.
  - yakshaving_jgt 2y ago
    There is rather a lot of probability involved, and the odds change dramatically depending on the kind of business you’re trying to launch.
    - liontwist 2y ago
      When you start making a product and trying to sell it when do the dice rolls come in?
      - lazide 2y ago
        Every step of the way. - right product? - right market segment? - right marketing? - right execution? - right scalability post basic execution? - right sales approach? - right post sales approach? All of these have 10 different paths (in reality), any of which if you take the wrong one could end up in some kind of expensive dead end or spectacular failure.
        BartjeD 2y ago
        You are zooming out, and when you look at an abstraction from a distance it's easy to miss the details and just boil it down to probablities. The reality is that you measure and get information on all of these things to determine more accurately what odds you have. The act of measurement changes the probabilities, because if you do it right you will know more than you did before.
        johannes1234321 2y ago
        However the measurement has to be done right or it will mislead and will take time, which your competitor uses to overtake or at least counter you.
        lazide 2y ago
        And sometimes you start in a place (or take directions into a place) which put you at such a disadvantage with competitors that you can’t ‘win’. It’s rare you can know that while it’s happening though. In theory all these things are controllable and no problem is unsolvable. Sometimes it’s even true (post-facto however, more often than not). That view is often the best for succeeding (or more precisely, NOT having that view often puts one at a disadvantage when it comes to succeeding). But the probabilities are often the more accurate model. That is often the best model for deciding if you want to take a bet, or for comforting yourself later if it doesn’t actually work out perfectly. It really doesn’t help though (most of the time) with actually doing successfully.

tptacek 2y ago

If you need funding to cover your monthly nut, you need a plausible path to hyper-growth; the portfolio math doesn't work for investors otherwise. If you set out to build a small-scale sustainable business, and you succeed, you can avoid funding. But if you're pivoting to something entirely new mid-to-late-ways through your company, you've probably burned down most of your reserves.

NetOpWibby 2y ago
> If you need funding to cover your monthly nut You can get funding for that?!
- entropyneur 2y ago
  Before 2022, that would have been series B material.
- x0x0 2y ago
  Yes. Most of what early vc practically pays for is salaries (and a lot of that is really just a passthrough to landlords because California is an incompetent state run by incompetent people.)
  - CoastalCoder 2y ago
    I believe you just had a "whoosh" moment.
    - x0x0 2y ago
      That's what I get for reading literally. sigh.
      - VagabundoP 2y ago
        You can take solace from the fact that you've made quite a few people sensibly chuckle in cafes around the world.

Sytten 2y ago

People say that but as someone trying to actually do that, it is freaking hard to commit to 3-5 years of virtually no salary to maybe get to the same outcome you would have had with a funded business. You need to sell a lot of 10$/month licenses for it to even viable to a 2-3 people startup in a developed country. There is also the cost of opportunity to consider in that.

mediaman 2y ago
I don't understand why people even think about selling $10/mo licenses. Just go sell $2-4k/mo SaaS to a medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people. Customer problem discovery is easier, you get reputation network effects within the vertical, you gain trust because you learn the industry lingo, you can actually solve peoples' problems because you're not balancing needs against unrelated industries, they're willing to pay, and once you get 20 customers you're doing pretty OK.
- NetOpWibby 2y ago
  This is a solid plan, thanks.
- TechDebtDevin 2y ago
  Cool, says everyone... Have you done it?
  - x0x0 2y ago
    Done that with $25k saas. The one point where gp is wrong is you really can't sell $4k things; $10k min and $25k is better. eg a good to great salesperson closes 25% of deals, so you have the cost of 4 mqls per one close, and then the salesperson gets 20%ish of the deal.
  - mediaman 2y ago
    Yes. But it's not for everyone, especially not for a lot of engineers. Many of these buyers feel more comfortable meeting you in-person, so going to trade shows, writing articles for niche trade publications, and sometimes doing site visits are all very helpful. So is cold calling. Sales cycles are often slow. You have to get used to customers taking months to decide, having lots of meetings with different stakeholders, and to get good at telling the difference between those who need a lot of meetings but will likely close versus those who will never do anything. It's a very different game than selling subs online, which I know little about. The product does need to be decent but I disagree with others that it has to be amazing. Most enterprise software is horrible. They will be delighted if you actually solve their problems (rather than the problems horizontally-oriented software vendors want their customers to have), even if it has some rough edges, as long as you're very customer-focused, responsive, and available. But it also tends to be durable revenue, because you get tightly integrated into their operations if you do it right.

spullara 2y ago

It just doesn't make any sense when you can go to work for a big company and get that kind of outcome without all the risk.

Jarwain 2y ago
Maybe my understanding of "big company" salaries are skewed but I imagine there's a profitable middle ground between big company salary and hypergrowth? As long as one isn't taking VC money at least On the flip side, I can't say I'm super sure what "hypergrowth" means, it's a rate of growth but I guess what really Matters is some expected valuation/market cap kinda thing
- spullara 2y ago
  pretty hard beating riskless 500k+ TC without having equity in a hypergrowth company.
  - Jarwain 2y ago
    Isn't 500k+ TC on the upper upper end of the salary distribution though? Vs equity in a rapid growth 20% CAGR or somethin? Or hypergrowth that caps out around 2M ARR? I guess I'm just trying to gain some career perspective on this heavily bootstrapped startup I'm at thats targeting the alt-thread-mentioned "medium sized traditional industry that has ancient, crummy software with a target customer employee size of 50 - 1,000 people." and whether it's really worth it for me
  - JofArnold 2y ago
    I wonder how the probability of securing such a job - with huge layoffs lately and increased competition - compares to the probability of business success. There's unemployed engineers grinding at system design and algorithms 10 hours a day for at least half a year to get an interview. If I'm going to spend hundreds of person hours on something, I think I'd rather start a company to be honest. Additionally, internationally those levels of pay are incredibly rare.
tonyedgecombe 2y ago

notforviewingit 2y ago

Yeah I have been wondering this myself as well. I'm one of 3 co-founders in a bootstrapped company doing consultancy for a few years in a LCOL area. We have been paying founders 50k/year salaries for the life of the company. We haven't been especially lucky and we haven't been super brilliant in our business decisions. Yet we are doing fairly well. This year we made 400k revenue, 150k profit and 40% growth. Our sales prospect are a lot better than at the start of the year. So I'm expecting to have another strong year of growth next year. Also we are nowhere near saturating the market and can have strong growth for many years to come. Salary + 1/3 of profits is equal to 100k for this year. 40% growth doubles the company every 2 years, If everything goes well just salary + profits will grow very nicely. Then on top of this come the exit opportunities where founders will make millions.

Sytten 2y ago
Product and service businesses are very very very different things. Service you get immediate cashflow but the thing doesn't scale past the humans. Software scales infinitely in theory, but it takes a lot of time to build before you even get 1$ out of it.
- tonyedgecombe 2y ago
  I've know quite a few businesses that started with services then transitioned into product. Once you have enough domain knowledge it is the obvious next step.
- notforviewingit 2y ago
  You can hire people into consultancy business and grow it like any other business. Sure it won't become the next magnificent seven, but you can grow it enough that you can make a lot of money. For example, there exist plenty of consultancy companies that have 10million revenue. That would be 20x growth for us. In practice that would mean 500k - 1m yearly income for founders in our case. On top of that the company probably could be sold for 30m - 100m. With typical vc dilution founders need to grow a very successful product company to earn similar amounts of money. There are plenty of examples of unicorn exits where the founder team has made less.