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Don’t Build a Startup, Build a Business

41 points by jarederondu 14y ago

jhartmann 14y ago
Just my two cents, I don't know if I agree with the concept that there is a bubble that is just waiting to burst, but I think focusing on the core of how you will make money is totally key to any startup's success. In my mind, you need to figure out first how your startup will not die (revenues), and once you have established this runway for yourself figure out how to go up and to the right. I know that is a horrible oversimplification and like any recipe needs to be adjusted for 'altitude'. I do think to not tackle these issues early on is just a prescription to give away more of your company then you probably needed too, and set a dangerous precedent for how your company views money. All that being said I don't think that all companies fit into this mold, and some really need the time to figure things out instead of rushing into a market and trying to figure out the money side of the equation. I guess the point of my rambling is that you should sweat about where your money is coming from as early as possible. To not do so is risky, and your chance of failure will be high. If you choose to focus on traction first, you really should have lots of experiments in the pike to figure out how to make money from those users. Startup's are all about discovery and growth, but in my opinion revenue and costs should always be near the top of the focuses of any search for that sustainable business model.
andrew_wc_brown 14y ago
I've heard this 20 times (Don't Build a Startup, Build a Business), I agree, but this article is like nodding your head at what you should do, but doesn't give you any indication to how to actually do it. I agree, lets build businesses, but how? Exactly how? These articles should start like this to be of value: "If you have a startup and you want to turn your business profitable this year than this is the most important article you will ever read." "I am going to show you a "special measure of success system" that you can implement right now to start turning profits this month." Then you go on to show them - how to setup kissmetrics to make cohorts and funnels. - A formula to calculate your cost per user. - How to make a projections spreadsheet. - Give them a madlib script to use and cold call until they get 10 people who they think would pay for them service to to prepay before building anything. Then you have a summary sheet with a rubic where you ask them questions where they fill simple answers based on cohorts, cost per user, projections and the success of the cold calling. That score of the rubic should make it night and day whether or not there startup will be profitable or not this year. Thats of use. Make that the article.
- marcedwards 14y ago
  I guess acknowledging the issue is the first step to solving it. “Build a business” seems like a good message to repeat every now and then, just to make sure it sticks. I don't like the VC culture of planning for exit, rather than aiming for success. I liked the article.
  - andrew_wc_brown 14y ago
    There's enough articles that keep repeating the contemplation step. I liked this kind of article the first time I read it. Don't you agree you want to read articles that go past the contemplation step and into implementing a plan to solution?
    - saraid216 14y ago
      There are a good number of solid, simple books and 30/60 minute videos on it. I have no doubt that more are being written as I type this. I can't pull a list of them out at the moment (I stopped actively working on startups a while ago, for various reasons, so I no longer keep tabs), but they really can't be that hard to find. I remember Art of the Start positively, and I believe Kawasaki says that the (free and online) talk of the same title has all the same information. http://www.youtube.com/watch?v=jSlwuafyUUo http://www.youtube.com/watch?v=jSlwuafyUUo
- freshhawk 14y ago
  There are a lot of resources out there about how to build a business, I don't think another short blog post is necessary. You will probably have to leave the startup culture filter bubble to find them I'd guess. Some links to the authors favourite resources for the basics would have been a good addition surely.
lumberjack 14y ago
But wouldn't it be precipitous to decide whether you are doing a Startup or a Business before you even start? Wouldn't a Startup that managed to find an optimal recurring revenue model become a business? If you were the CEO of said Startup wouldn't you implement such revenue model? So given a choice, wouldn't every Startup become a business?
- freshhawk 14y ago
  You make a lot of core business decisions based on whether you are swinging for the fences or building a business from the beginning, you can pretend not to decide but nearly every decision you make at the beginning of a startup is based on this choice. You can pivot of course, if you stumble on a great revenue source that's small in scale but growing steadily and you aren't getting crazy traction then a startup probably would become a business. But there are legitimate reasons to not become a business and keep chasing the big payout. In real life you don't find the optimal recurring revenue model, you find options with tradeoffs.

41 points by jarederondu 14y ago

Just my two cents, I don't know if I agree with the concept that there is a bubble that is just waiting to burst, but I think focusing on the core of how you will make money is totally key to any startup's success. In my mind, you need to figure out first how your startup will not die (revenues), and once you have established this runway for yourself figure out how to go up and to the right. I know that is a horrible oversimplification and like any recipe needs to be adjusted for 'altitude'. I do think to not tackle these issues early on is just a prescription to give away more of your company then you probably needed too, and set a dangerous precedent for how your company views money. All that being said I don't think that all companies fit into this mold, and some really need the time to figure things out instead of rushing into a market and trying to figure out the money side of the equation. I guess the point of my rambling is that you should sweat about where your money is coming from as early as possible. To not do so is risky, and your chance of failure will be high. If you choose to focus on traction first, you really should have lots of experiments in the pike to figure out how to make money from those users. Startup's are all about discovery and growth, but in my opinion revenue and costs should always be near the top of the focuses of any search for that sustainable business model.

andrew_wc_brown 14y ago

I've heard this 20 times (Don't Build a Startup, Build a Business), I agree, but this article is like nodding your head at what you should do, but doesn't give you any indication to how to actually do it. I agree, lets build businesses, but how? Exactly how? These articles should start like this to be of value: "If you have a startup and you want to turn your business profitable this year than this is the most important article you will ever read." "I am going to show you a "special measure of success system" that you can implement right now to start turning profits this month." Then you go on to show them - how to setup kissmetrics to make cohorts and funnels. - A formula to calculate your cost per user. - How to make a projections spreadsheet. - Give them a madlib script to use and cold call until they get 10 people who they think would pay for them service to to prepay before building anything. Then you have a summary sheet with a rubic where you ask them questions where they fill simple answers based on cohorts, cost per user, projections and the success of the cold calling. That score of the rubic should make it night and day whether or not there startup will be profitable or not this year. Thats of use. Make that the article.

marcedwards 14y ago
I guess acknowledging the issue is the first step to solving it. “Build a business” seems like a good message to repeat every now and then, just to make sure it sticks. I don't like the VC culture of planning for exit, rather than aiming for success. I liked the article.
- andrew_wc_brown 14y ago
  There's enough articles that keep repeating the contemplation step. I liked this kind of article the first time I read it. Don't you agree you want to read articles that go past the contemplation step and into implementing a plan to solution?
  - saraid216 14y ago
    There are a good number of solid, simple books and 30/60 minute videos on it. I have no doubt that more are being written as I type this. I can't pull a list of them out at the moment (I stopped actively working on startups a while ago, for various reasons, so I no longer keep tabs), but they really can't be that hard to find. I remember Art of the Start positively, and I believe Kawasaki says that the (free and online) talk of the same title has all the same information. http://www.youtube.com/watch?v=jSlwuafyUUo http://www.youtube.com/watch?v=jSlwuafyUUo
freshhawk 14y ago
There are a lot of resources out there about how to build a business, I don't think another short blog post is necessary. You will probably have to leave the startup culture filter bubble to find them I'd guess. Some links to the authors favourite resources for the basics would have been a good addition surely.

lumberjack 14y ago

But wouldn't it be precipitous to decide whether you are doing a Startup or a Business before you even start? Wouldn't a Startup that managed to find an optimal recurring revenue model become a business? If you were the CEO of said Startup wouldn't you implement such revenue model? So given a choice, wouldn't every Startup become a business?

freshhawk 14y ago
You make a lot of core business decisions based on whether you are swinging for the fences or building a business from the beginning, you can pretend not to decide but nearly every decision you make at the beginning of a startup is based on this choice. You can pivot of course, if you stumble on a great revenue source that's small in scale but growing steadily and you aren't getting crazy traction then a startup probably would become a business. But there are legitimate reasons to not become a business and keep chasing the big payout. In real life you don't find the optimal recurring revenue model, you find options with tradeoffs.