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- Venture Capital pouring millions into untried businesses. - The crazy valuations. - The recent complains of VCs that "Entrepreneurs aren't working on enough

- Venture Capital pouring millions into untried businesses. - The crazy valuations. - The recent complains of VCs that "Entrepreneurs aren't working on enough big ideas". It all actually makes sense now. It's all in the name of Big Risk = Big Reward style ventures. Especially after defining a "startup" as a company meant to grow rapidly and to massive proportions. Not necessarily a tech business. Not an online store for your company. But instead an extreme-expantion-potential style company. I wish Startups were defined like this from the beginning. It also further pushes me away from the whole Startup / Silicon Valley thing. Growing that fast means a lot can go wrong and there's very little time to learn from mistakes. I'm a slower thinker, I like to analyze and enjoy, learn and understand, build and live, not sacrifice my life and grow my company like a lunatic. Thank you Paul. You've actually freed me from a dream that I now realize will never make me happy. I can finally let go of my plan to abandon my family, move to the bay area, drain my life savings, live in a shoebox, stumble from one conference and event to the next hoping to network and find my messiah & co-founder, try to get funded, grow my business to someone else's expectations, all for a tiny fraction of a chance to succeed and be either a slave to my own company or lose control of my baby and walk away with diluted equity. I think I'll stay here in St. Louis with my aging family and build my businesses slowly and calmly. You freed me Paul. You gave me back my life, my real one.

deleted 14y ago
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ozataman 14y ago
Yeah, there is something about this startup model I don't quite like. To be upfront, I am not arguing what the word startup means - the society is free to assign to it any meaning it wants and what Paul describes here is a clear, specific meaning that's as good as any. What makes me uneasy is the model itself and what it implies for the entrepreneur. To me, it makes the most sense for the VCs and other investors who manage a portfolio and can accept to fail in 90%+ of their decisions while still getting massive returns from the remaining 10% that succeed (Maybe I'm even understating the split here). But it's awful for the entrepreneur. They manage portfolios of one and surely, nobody sets out to fail! It's an awful feeling and no matter how much you say "I've learned a ton!", you still waste a big part of your life while also surviving under intense stress. There is no one model, no clear right/wrong here and clearly Paul's model does work over large numbers of cases, judging from the Googles, Apples, Dropboxes of the world. I personally favor a more grounded approach where you start with a strong industry background/knowledge or at least a set of skills that make you and your team special. The more diverse your team, the better, as you'll make connections between possible/untapped solutions and your domain's problems. Then you set out to solve a problem you've noticed (with a clear business model and path to initial traction based on your industry intuition and upfront customer discussions) and seek customer interaction as early as possible. If you're in IT, you're in luck as you can often get to your MVP early and you should try to get customers FAST. Doing this with limited exposure to the VC game, in my mind, teaches your company to live within constraints and minimize your burn rate while making the most out of every member of your team. You can also take a little more time evolving your product, devoting your energy to the science (as opposed to fund-raising, etc.) and discovering unique value propositions. You also have the freedom to pivot as you need and perhaps even spend lots of time with your initial clients (and maybe be a consulting firm for a while) to learn. There may then be a point where you are much better informed about your business and want to go the VC route to transition to Paul's growth mindset. Apple started in a garage with family loans (if memory serves right) and got funded after it was already selling its prototypes and had traction. This formula, of course, would never work for a crappy team, but then no formula does. Now if you happen to be working on the next Google, then it really is moot trying to achieve a disciplined organization upfront or taking it slow or spending time with initial clients or [fill in the blanks here]. You've found a gold mine and you're essentially pillaging it - who cares if you're inefficient. But less than 1% of smart entrepreneurs out there will end up finding that gold mine and somehow I would hate to be in the 99%. I would prefer a strategy that increases my chances of initial traction, possibly slows me down a litte, but gives me the mental leeway to discover a true niche and possibly a scalable product later on. The book "Nail It then Scale It" comes to mind. Maybe this is what Paul means all along, but I can't help thinking that the "weekly growth targets" would paralyze many of the newcomer entrepreneurs out there with its singular mindset and make them blind to the intricacies of the problem they are actually trying to solve.
- caf 14y ago
  It's not so much "who cares if you're inefficient" - if you really have found that goldmine then you have to tear into it quickly, because if you slow down to get that extra efficiency then a faster, less efficient competitor will dig it out from under you.
  - ozataman 14y ago
    Right, that's a better wat to put what I intended to convey implicitly.
mark_l_watson 14y ago
+1 I had the same thought. A small business that grows slowly with a high probability for sustainability in shifting economic times is a very good thing.
hasenj 14y ago
Exactly my thoughts! I don't want anything to do with this life style. I posted this in another reply but I'll post it again because I think it's so relevant. DHH talking about startups http://vimeo.com/3899696#t=1290 http://vimeo.com/3899696#t=1290
michaelkscott 14y ago
This is an article that was written in 2000 by Joel Spolsky (as another commenter also noted): http://www.joelonsoftware.com/articles/fog0000000056.html http://www.joelonsoftware.com/articles/fog0000000056.html It pretty much describes with different terms what pg here described as a "startup". I think startups have always had that definition (at least since the late 90s) but folks came along and started calling every little thing they own (i.e. their blog, non-profit, life-style business) a startup. Obviously, a lot of that had to do with how the tech media also entertained that liberal definition of a startup -- and everyone and their mom started jumping on that wagon because it was considered cool. I think articles like this should be a must-read for anyone wanting to get in the game, seriously.
apinstein 14y ago
We need a "slow startup" movement. pg's definition of a startup is just one kind of startup. I like to call it the VC startup. It's an organization whose goal is to succeed big or fail, and fast. This "charter" is driven by the needs of investors, and I get that. It makes perfect sense, and from where pg's sitting, it's the attitude he needs to have to successfully manage his portfolio. But it's not the only way to grow a startup, and I think it unfairly marginalizes non-VC startups as non-startups. pg probably wouldn't consider my company a startup, but I think he'd be wrong. We're 4 years old, have 4 employees, profitable, and grow at a pokey 100% YoY. The pace of work is enjoyable. We build things for the long-term. We have time to help our customers. We get to see our friends and family. A lot. The principals own 100% of the equity. But in our minds we aren't building just a tech business, we are building a startup. A slow startup. We picked a huge market (photography). We started by marketing to a small niche where we could be profitable while building the infrastructure required to scale to a larger horizontal market. If we'd been VC funded, we might be in the same position for growth; finally finding traction after years and several expensive, painful pivots. In this alternate startup universe we'd own practically none of the company at that point, and we'd have wasted a lot more money. I "grew up" in the 90s dot-com era reading Geoffrey Moore. We feel like we're executing that strategy and doing it well. We're poised for overnight success in a larger market, and on our own terms. I don't feel like any less of a startup than the multiple VC-backed startups I have worked for previously. I do feel a lot less stress. So, if you want to enjoy life, build great things, and potentially make a ton of money, don't think it's not possible. Find or found a slow startup and change the world!
- DASD 14y ago
  Perhaps even applaud "slow" in the sense of longterm as a movement. It applies to not only "startups." Joel Spolsky wrote a great article about this in 2009 that also had an active discussion here. http://news.ycombinator.com/item?id=920668 http://news.ycombinator.com/item?id=920668 http://www.inc.com/magazine/20091101/does-slow-growth-equal-slow-death.html http://www.inc.com/magazine/20091101/does-slow-growth-equal-...
  - apinstein 14y ago
tlogan 14y ago
I think there is a middle ground. I see that startups have 3 phases: 1. The first phase is figuring our scalable business model. That includes product, customer acquisition, etc. For this phase the best is that you are bootstrapped or having just small investment. At the end of this phase, you should be profitable or your natural/viral growth should be like Facebook in early days. 2. The second phase is growth. For this phase, you might need VC money since during growth profit might not be enough. Or you might decide that this is "lifestyle" business. 3. The third phase is optimization. Now, the problem with some startups is that they jump onto phase 2 too early. And I have feeling that some SV startups (not all - but one pumped via techrunch and similar) jump to second phase too early. I think it is ok if phase one is extended by 6 months or even one year - that is just a rounding error if you are going to be big. No need to rush.
lifeisstillgood 14y ago
I second that one - I have been feeling, well, second class for not making the leap family and all. Well I am - just not the growth startup, just the get rich, slowly startup. Fingers crossed for you
deleted 14y ago
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deleted 14y ago

[deleted]

ozataman 14y ago

Yeah, there is something about this startup model I don't quite like. To be upfront, I am not arguing what the word startup means - the society is free to assign to it any meaning it wants and what Paul describes here is a clear, specific meaning that's as good as any. What makes me uneasy is the model itself and what it implies for the entrepreneur. To me, it makes the most sense for the VCs and other investors who manage a portfolio and can accept to fail in 90%+ of their decisions while still getting massive returns from the remaining 10% that succeed (Maybe I'm even understating the split here). But it's awful for the entrepreneur. They manage portfolios of one and surely, nobody sets out to fail! It's an awful feeling and no matter how much you say "I've learned a ton!", you still waste a big part of your life while also surviving under intense stress. There is no one model, no clear right/wrong here and clearly Paul's model does work over large numbers of cases, judging from the Googles, Apples, Dropboxes of the world. I personally favor a more grounded approach where you start with a strong industry background/knowledge or at least a set of skills that make you and your team special. The more diverse your team, the better, as you'll make connections between possible/untapped solutions and your domain's problems. Then you set out to solve a problem you've noticed (with a clear business model and path to initial traction based on your industry intuition and upfront customer discussions) and seek customer interaction as early as possible. If you're in IT, you're in luck as you can often get to your MVP early and you should try to get customers FAST. Doing this with limited exposure to the VC game, in my mind, teaches your company to live within constraints and minimize your burn rate while making the most out of every member of your team. You can also take a little more time evolving your product, devoting your energy to the science (as opposed to fund-raising, etc.) and discovering unique value propositions. You also have the freedom to pivot as you need and perhaps even spend lots of time with your initial clients (and maybe be a consulting firm for a while) to learn. There may then be a point where you are much better informed about your business and want to go the VC route to transition to Paul's growth mindset. Apple started in a garage with family loans (if memory serves right) and got funded after it was already selling its prototypes and had traction. This formula, of course, would never work for a crappy team, but then no formula does. Now if you happen to be working on the next Google, then it really is moot trying to achieve a disciplined organization upfront or taking it slow or spending time with initial clients or [fill in the blanks here]. You've found a gold mine and you're essentially pillaging it - who cares if you're inefficient. But less than 1% of smart entrepreneurs out there will end up finding that gold mine and somehow I would hate to be in the 99%. I would prefer a strategy that increases my chances of initial traction, possibly slows me down a litte, but gives me the mental leeway to discover a true niche and possibly a scalable product later on. The book "Nail It then Scale It" comes to mind. Maybe this is what Paul means all along, but I can't help thinking that the "weekly growth targets" would paralyze many of the newcomer entrepreneurs out there with its singular mindset and make them blind to the intricacies of the problem they are actually trying to solve.

caf 14y ago
It's not so much "who cares if you're inefficient" - if you really have found that goldmine then you have to tear into it quickly, because if you slow down to get that extra efficiency then a faster, less efficient competitor will dig it out from under you.
- ozataman 14y ago
  Right, that's a better wat to put what I intended to convey implicitly.

mark_l_watson 14y ago

+1 I had the same thought. A small business that grows slowly with a high probability for sustainability in shifting economic times is a very good thing.

hasenj 14y ago

Exactly my thoughts! I don't want anything to do with this life style. I posted this in another reply but I'll post it again because I think it's so relevant. DHH talking about startups http://vimeo.com/3899696#t=1290 http://vimeo.com/3899696#t=1290

michaelkscott 14y ago

This is an article that was written in 2000 by Joel Spolsky (as another commenter also noted): http://www.joelonsoftware.com/articles/fog0000000056.html http://www.joelonsoftware.com/articles/fog0000000056.html It pretty much describes with different terms what pg here described as a "startup". I think startups have always had that definition (at least since the late 90s) but folks came along and started calling every little thing they own (i.e. their blog, non-profit, life-style business) a startup. Obviously, a lot of that had to do with how the tech media also entertained that liberal definition of a startup -- and everyone and their mom started jumping on that wagon because it was considered cool. I think articles like this should be a must-read for anyone wanting to get in the game, seriously.

apinstein 14y ago

We need a "slow startup" movement. pg's definition of a startup is just one kind of startup. I like to call it the VC startup. It's an organization whose goal is to succeed big or fail, and fast. This "charter" is driven by the needs of investors, and I get that. It makes perfect sense, and from where pg's sitting, it's the attitude he needs to have to successfully manage his portfolio. But it's not the only way to grow a startup, and I think it unfairly marginalizes non-VC startups as non-startups. pg probably wouldn't consider my company a startup, but I think he'd be wrong. We're 4 years old, have 4 employees, profitable, and grow at a pokey 100% YoY. The pace of work is enjoyable. We build things for the long-term. We have time to help our customers. We get to see our friends and family. A lot. The principals own 100% of the equity. But in our minds we aren't building just a tech business, we are building a startup. A slow startup. We picked a huge market (photography). We started by marketing to a small niche where we could be profitable while building the infrastructure required to scale to a larger horizontal market. If we'd been VC funded, we might be in the same position for growth; finally finding traction after years and several expensive, painful pivots. In this alternate startup universe we'd own practically none of the company at that point, and we'd have wasted a lot more money. I "grew up" in the 90s dot-com era reading Geoffrey Moore. We feel like we're executing that strategy and doing it well. We're poised for overnight success in a larger market, and on our own terms. I don't feel like any less of a startup than the multiple VC-backed startups I have worked for previously. I do feel a lot less stress. So, if you want to enjoy life, build great things, and potentially make a ton of money, don't think it's not possible. Find or found a slow startup and change the world!

DASD 14y ago
Perhaps even applaud "slow" in the sense of longterm as a movement. It applies to not only "startups." Joel Spolsky wrote a great article about this in 2009 that also had an active discussion here. http://news.ycombinator.com/item?id=920668 http://news.ycombinator.com/item?id=920668 http://www.inc.com/magazine/20091101/does-slow-growth-equal-slow-death.html http://www.inc.com/magazine/20091101/does-slow-growth-equal-...
- apinstein 14y ago

tlogan 14y ago

I think there is a middle ground. I see that startups have 3 phases: 1. The first phase is figuring our scalable business model. That includes product, customer acquisition, etc. For this phase the best is that you are bootstrapped or having just small investment. At the end of this phase, you should be profitable or your natural/viral growth should be like Facebook in early days. 2. The second phase is growth. For this phase, you might need VC money since during growth profit might not be enough. Or you might decide that this is "lifestyle" business. 3. The third phase is optimization. Now, the problem with some startups is that they jump onto phase 2 too early. And I have feeling that some SV startups (not all - but one pumped via techrunch and similar) jump to second phase too early. I think it is ok if phase one is extended by 6 months or even one year - that is just a rounding error if you are going to be big. No need to rush.

lifeisstillgood 14y ago

I second that one - I have been feeling, well, second class for not making the leap family and all. Well I am - just not the growth startup, just the get rich, slowly startup. Fingers crossed for you

deleted 14y ago

[deleted]