6 ms·

Ideas

213 points by ct 14y ago

dm8 14y ago
This one page succinctly conveys what any entrepreneur should think when building a startup be at starting phase or fundraising phase. Btw, Sequoia has one of the best "about us" page (http://www.sequoiacap.com/about http://www.sequoiacap.com/about). It's focused on their customers (showing entrepreneur's pictures in early days and how they serve entrepreneurs) rather than glorifying their ninja investing skills.
- 6ren 14y ago
  We could not find the page you requested. That's what I'm getting from clicking that link. (They have "China" left of the search bar at the top - maybe because I'm in Australia, they think I'm in China, and so don't show the /about.) Also, their "Meebo Bar" almost completely obscures their links at the bottom of the page. Most of the ideas advice is obvious-but-good-to-be-reminded-of, apart from "Rich Customers". That is one legitimate approach (and fair enough if that's what Sequoia wants) - but it's not appropriate for all startups. Another approach is to target (1) a niche market (2) with no money (3) to do something that doesn't matter. pg argues that's how Facebook, Microsoft and Apple began http://paulgraham.com/swan.html http://paulgraham.com/swan.html It seems likely that most revolutionary startups began this way (especially when the customer doesn't feel pain); whereas incremental startups address rich people's problems.
hcarvalhoalves 14y ago
LARGE MARKETS Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop. RICH CUSTOMERS Target customers who will move fast and pay a premium for a unique offering. Sure, I too would love to invest only on huge markets composed only by the world's 1%.
- waterlesscloud 14y ago
  INFERNO Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower. So why does it require large vc firms?
  - dm8 14y ago
    Majority of Sequoia companies become billion dollar businesses and sequoia invests few million in them. In fact for companies like Yahoo it started with few hundred thousands. So what they are saying is not wrong.
  - uams 14y ago
    If you can do a lot with a little, imagine what you can do when given a lot.
jpk 14y ago
The left-hand side: Pretty good, and most would do well to follow this advice. Remember, however, this was written by a VC firm. This isn't a list of things good companies do, it's a list of things that Sequoia portfolio companies do when they make Sequoia money. To be fair, the overlap is notable. Just remember where the incentives are for a piece like this. The right-hand side: Steve Blank aptly defines a startup as "an organization formed to search for a repeatable and scalable business model." So a business plan written by a startup is, by definition, all lies. They're a fine exercise as long as you're grounded by the fact that you'll end up with 20 slides of pure bullshit. (Read: Don't put real effort into writing business plans, build a company instead.)
- lucisferre 14y ago
  This "no business plan" crap everyone parrots is getting tired for me. Situations change, good companies learn and of course plans change. Just because a bunch of hipsters decided business plans aren't cool doesn't change the reality that, in general, failing to plan == planning to fail. I wouldn't bet on anyone who couldn't answer those questions on the right. We are not talking some 100 page MBA bullshit, we are talking understanding what it is you are setting out to do. This is very, very basic stuff right here.
- wheels 14y ago
  You can't validate a business idea on paper, but you can invalidate one. If you can't make the numbers add up in your best case, then you can save yourself a lot of time building a product that's destined to flop. What a business plan shows is that you know how to invalidate structurally flawed ideas and that you've found a starting point that appears to at least be numerically plausible. For example, if you work out that your best theory for acquiring customers costs you $20, but their best-case total lifetime value is $15, you have a business model that you can throw out.
  - johnrob 14y ago
    The only way to invalidate an idea is to prove that people don't want the product. While I wouldn't always bet on a business that has a proven demand, I definitely would not bet against one. A great example is Instagram: I wouldn't have bet on that product because it seemed destined to make no money, but since so many people liked it they somehow found an exit.
bcantrill 14y ago
Nice list and all, but I find myself wondering just how many of these elements of sustainable companies were exhibited by (Sequoia-funded) Color Labs...
- jpk 14y ago
  Every investor picks duds. What's your point?
  - heretohelp 14y ago
    The situation with Color was uniquely transparent that it was ridiculous. This wasn't some "oh the business idea seemed good, but the team just couldn't get their act together", or, "turned out they attacked the market opportunity from the wrong angle and didn't pivot in time"... No, this was: "GEOLOCATION MOBILE SOCIAL INSTAGRAM PICTURES CONCERTS!" Don't even try to worm out of this and pretend there was any reason to take Color seriously. $40mm? My ass.
    - jpk 14y ago
      I mean, I'm not defending Color. It was a terrible app and an even more terrible business. Sequoia invested in the team because they liked them. They gave a bag of money to people they thought could make good use of it, and it didn't pan out.
  - bcantrill 14y ago
    My point is that Color Labs was obviously a dud when it was funded by Sequoia[1] -- and that it almost certainly satisfied none or nearly none of Sequoia's own putative criteria. They are certainly entitled to their duds -- but when they are of Color's magnitude, it makes it a little hard to endure their sanctimoniousness around building sustainable businesses. [1] http://news.ycombinator.com/item?id=2364463 http://news.ycombinator.com/item?id=2364463
    - jpk 14y ago
      Color was pictures plus location, that's true. Instagram is also just pictures and filters, which is equally dumb but turned out pretty well from an investor's point of view. However, you make a good point. Neither Color nor Instagram were/are "sustainable businesses". Sequoia just wants a return. Google is a sustainable business, and if you build one, Sequoia will get their return. You can also just get a bunch of users and flip it to Facebook. They'll get their return then too. And I'd bet Sequoia doesn't really give a crap which way you do it.
adrianwaj 14y ago
Here's an idea: avoid funding 1 company per year and blanket fund with minimal due diligence a whole batch for <$30,000 each so long as they have a business plan (as seen in article) meeting those objectives (as seen in article.)
brandoncapecci 14y ago
Sequoia should take out or redesign the leaf in their mark. It looks like cannabis and conflicts with their image.
- melvinmt 14y ago
  Uhm, they're named after a tree.
chubot 14y ago
Playing devil's advocate: "Pick the one thing that is of burning importance to the customer then delight them with a compelling solution." "Customers will only buy a simple product with a singular value proposition." What about iPhone, probably the most profitable product of the last 5 years? Is it really that focused? I don't think that many people in 2006 would have said: my phone is not enough like a computer. I would have said that cell phone call quality and battery life sucks, so give me something that will hold charge for a week, has the quality of a land line, is ultra light, small, can be dropped, etc. That would have been focused. Steve Jobs said it was 3 products I think... it's a phone, an ipod, and a computer in your pocket. It's this thing where you can play music, surf the web, call your friends, text them, take notes, download apps, and the interface is better than predecessors because you can use your finger. Not to say their advice is wrong... it's just that thing kind of advice is applicable in limited ways. It sounds like conventional wisdom, and isn't one of their points to challenge conventional wisdom? :)
- oconnor0 14y ago
  Some of us would still like that kind of phone. :-)
  - bambax 14y ago
    Yes!!! > give me something that will hold charge for a week, has the quality of a land line, is ultra light, small, can be dropped I would pay dearly for such a phone. I don't need "apps" when I'm on the road; I need something small and durable that can survive anything (including being put in water). I don't carry a purse and find it hard to make room for a smart phone, esp. newer ones which are only getting bigger and bigger. I had hoped Nokia would make that phone, but they too seem to be only interested in the smart phone business. Too bad.
    - Julianhearn 14y ago
      You can get a waterproof phone. My friend has the one below and he lost it at the beach, we called the phone a few hours later after he realised that it was missing and the person who answered said he found it in the sea and couldn't believe it was still working. http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2100-black-red.html http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2...
wtvanhest 14y ago
"Your browser appears to be out of date. We highly recommend you upgrade to avoid problems while you use our site." Then it won't go to the page. I know I'm one of the few stuck with a browser version at work I have no control over, but come on.
- bronson 14y ago
  IE8 support will probably arrive, it's just a matter of developer hours and setting up ugly VMs. If you're on IE7 or below, won't happen ever. :)
  - wtvanhest 14y ago
    IE8. Sounds good. The funny thing is that we just upgraded to Windows 7 about 5 months ago.

213 points by ct 14y ago

dm8 14y ago

This one page succinctly conveys what any entrepreneur should think when building a startup be at starting phase or fundraising phase. Btw, Sequoia has one of the best "about us" page (http://www.sequoiacap.com/about http://www.sequoiacap.com/about). It's focused on their customers (showing entrepreneur's pictures in early days and how they serve entrepreneurs) rather than glorifying their ninja investing skills.

6ren 14y ago
We could not find the page you requested. That's what I'm getting from clicking that link. (They have "China" left of the search bar at the top - maybe because I'm in Australia, they think I'm in China, and so don't show the /about.) Also, their "Meebo Bar" almost completely obscures their links at the bottom of the page. Most of the ideas advice is obvious-but-good-to-be-reminded-of, apart from "Rich Customers". That is one legitimate approach (and fair enough if that's what Sequoia wants) - but it's not appropriate for all startups. Another approach is to target (1) a niche market (2) with no money (3) to do something that doesn't matter. pg argues that's how Facebook, Microsoft and Apple began http://paulgraham.com/swan.html http://paulgraham.com/swan.html It seems likely that most revolutionary startups began this way (especially when the customer doesn't feel pain); whereas incremental startups address rich people's problems.

hcarvalhoalves 14y ago

LARGE MARKETS Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop. RICH CUSTOMERS Target customers who will move fast and pay a premium for a unique offering. Sure, I too would love to invest only on huge markets composed only by the world's 1%.

waterlesscloud 14y ago
INFERNO Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower. So why does it require large vc firms?
- dm8 14y ago
  Majority of Sequoia companies become billion dollar businesses and sequoia invests few million in them. In fact for companies like Yahoo it started with few hundred thousands. So what they are saying is not wrong.
- uams 14y ago
  If you can do a lot with a little, imagine what you can do when given a lot.

jpk 14y ago

The left-hand side: Pretty good, and most would do well to follow this advice. Remember, however, this was written by a VC firm. This isn't a list of things good companies do, it's a list of things that Sequoia portfolio companies do when they make Sequoia money. To be fair, the overlap is notable. Just remember where the incentives are for a piece like this. The right-hand side: Steve Blank aptly defines a startup as "an organization formed to search for a repeatable and scalable business model." So a business plan written by a startup is, by definition, all lies. They're a fine exercise as long as you're grounded by the fact that you'll end up with 20 slides of pure bullshit. (Read: Don't put real effort into writing business plans, build a company instead.)

lucisferre 14y ago
This "no business plan" crap everyone parrots is getting tired for me. Situations change, good companies learn and of course plans change. Just because a bunch of hipsters decided business plans aren't cool doesn't change the reality that, in general, failing to plan == planning to fail. I wouldn't bet on anyone who couldn't answer those questions on the right. We are not talking some 100 page MBA bullshit, we are talking understanding what it is you are setting out to do. This is very, very basic stuff right here.
wheels 14y ago
You can't validate a business idea on paper, but you can invalidate one. If you can't make the numbers add up in your best case, then you can save yourself a lot of time building a product that's destined to flop. What a business plan shows is that you know how to invalidate structurally flawed ideas and that you've found a starting point that appears to at least be numerically plausible. For example, if you work out that your best theory for acquiring customers costs you $20, but their best-case total lifetime value is $15, you have a business model that you can throw out.
- johnrob 14y ago
  The only way to invalidate an idea is to prove that people don't want the product. While I wouldn't always bet on a business that has a proven demand, I definitely would not bet against one. A great example is Instagram: I wouldn't have bet on that product because it seemed destined to make no money, but since so many people liked it they somehow found an exit.

bcantrill 14y ago

Nice list and all, but I find myself wondering just how many of these elements of sustainable companies were exhibited by (Sequoia-funded) Color Labs...

jpk 14y ago
Every investor picks duds. What's your point?
- heretohelp 14y ago
  The situation with Color was uniquely transparent that it was ridiculous. This wasn't some "oh the business idea seemed good, but the team just couldn't get their act together", or, "turned out they attacked the market opportunity from the wrong angle and didn't pivot in time"... No, this was: "GEOLOCATION MOBILE SOCIAL INSTAGRAM PICTURES CONCERTS!" Don't even try to worm out of this and pretend there was any reason to take Color seriously. $40mm? My ass.
  - jpk 14y ago
    I mean, I'm not defending Color. It was a terrible app and an even more terrible business. Sequoia invested in the team because they liked them. They gave a bag of money to people they thought could make good use of it, and it didn't pan out.
- bcantrill 14y ago
  My point is that Color Labs was obviously a dud when it was funded by Sequoia[1] -- and that it almost certainly satisfied none or nearly none of Sequoia's own putative criteria. They are certainly entitled to their duds -- but when they are of Color's magnitude, it makes it a little hard to endure their sanctimoniousness around building sustainable businesses. [1] http://news.ycombinator.com/item?id=2364463 http://news.ycombinator.com/item?id=2364463
  - jpk 14y ago
    Color was pictures plus location, that's true. Instagram is also just pictures and filters, which is equally dumb but turned out pretty well from an investor's point of view. However, you make a good point. Neither Color nor Instagram were/are "sustainable businesses". Sequoia just wants a return. Google is a sustainable business, and if you build one, Sequoia will get their return. You can also just get a bunch of users and flip it to Facebook. They'll get their return then too. And I'd bet Sequoia doesn't really give a crap which way you do it.

adrianwaj 14y ago

Here's an idea: avoid funding 1 company per year and blanket fund with minimal due diligence a whole batch for <$30,000 each so long as they have a business plan (as seen in article) meeting those objectives (as seen in article.)

brandoncapecci 14y ago

Sequoia should take out or redesign the leaf in their mark. It looks like cannabis and conflicts with their image.

melvinmt 14y ago
Uhm, they're named after a tree.

chubot 14y ago

Playing devil's advocate: "Pick the one thing that is of burning importance to the customer then delight them with a compelling solution." "Customers will only buy a simple product with a singular value proposition." What about iPhone, probably the most profitable product of the last 5 years? Is it really that focused? I don't think that many people in 2006 would have said: my phone is not enough like a computer. I would have said that cell phone call quality and battery life sucks, so give me something that will hold charge for a week, has the quality of a land line, is ultra light, small, can be dropped, etc. That would have been focused. Steve Jobs said it was 3 products I think... it's a phone, an ipod, and a computer in your pocket. It's this thing where you can play music, surf the web, call your friends, text them, take notes, download apps, and the interface is better than predecessors because you can use your finger. Not to say their advice is wrong... it's just that thing kind of advice is applicable in limited ways. It sounds like conventional wisdom, and isn't one of their points to challenge conventional wisdom? :)

oconnor0 14y ago
Some of us would still like that kind of phone. :-)
- bambax 14y ago
  Yes!!! > give me something that will hold charge for a week, has the quality of a land line, is ultra light, small, can be dropped I would pay dearly for such a phone. I don't need "apps" when I'm on the road; I need something small and durable that can survive anything (including being put in water). I don't carry a purse and find it hard to make room for a smart phone, esp. newer ones which are only getting bigger and bigger. I had hoped Nokia would make that phone, but they too seem to be only interested in the smart phone business. Too bad.
  - Julianhearn 14y ago
    You can get a waterproof phone. My friend has the one below and he lost it at the beach, we called the phone a few hours later after he realised that it was missing and the person who answered said he found it in the sea and couldn't believe it was still working. http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2100-black-red.html http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2...

wtvanhest 14y ago

"Your browser appears to be out of date. We highly recommend you upgrade to avoid problems while you use our site." Then it won't go to the page. I know I'm one of the few stuck with a browser version at work I have no control over, but come on.

bronson 14y ago
IE8 support will probably arrive, it's just a matter of developer hours and setting up ugly VMs. If you're on IE7 or below, won't happen ever. :)
- wtvanhest 14y ago
  IE8. Sounds good. The funny thing is that we just upgraded to Windows 7 about 5 months ago.