Here in Seattle, there's a great community of small software businesses with meaningful profits and impact. We have ties to the broader Seattle startup and technology community, without being a proper subset.
I don't see it as an either-or proposition. Right funding for the right business, as it were.
DHH's "Reconsider": "Our definition of winning didn’t even include establishing that hallowed sanctity of the natural monopoly!"
Sam's "Playbook": "We also ask how the company will one day be a monopoly."
VC businesses like Twitter and Uber create centralized points of stagnation that seem great at first, but can't innovate the way open systems can. If Twitter was open we wouldn't be wondering if they'll improve their product or who will be CEO, because there'd be a dozen people innovating on it. Instead, because the network is owned by one group of people, that basically doesn't happen.
We still get that sort of amazing, eco-system creating innovation when a rare innovator declines VC (wikipedia, bitcoin). But when a VC steps in, the only innovations that flourish are those that benefit the capitalist.
Venture capital is, ironically, the enemy of innovation. It doesn't support it; it captures it and restrains it, tying it down with the bonds of capital.
What I find funny is that if you make an analogy to music you find exactly where these platitudes lead to. "Great team" like One Direction or Britney Spears. "Make something that people want," such as Hit Me Baby One More Time.
Innovation is more like this: "The Velvet Underground's first album only sold a few thousand copies, but everyone who bought one formed a band." [Brian Eno]
When I see VC's like Peter Thiel who openly (and correctly) complain about the lack of innovation, I have to scratch my head and think, "Well, then, get out of the way."
Perhaps, but how successful would TBL's creation be without the Kleiner-Perkins investment in Netscape. The paid web browser probably wouldn't have taken off and the VC funding allowed Netscape to invest in building a quality browser while not charging end users to download.
VC has it's place and we shouldn't write it off entirely. But we should also realize that there are other ways for important changes to develop and VC isn't the panacea as it's often presented as here.
> Joy was prompted to state this observation through his dislike of Bill Gates’ view of “Microsoft as an IQ monopolist.” He argued that, instead, “It’s better to create an ecology that gets all the world’s smartest people toiling in your garden for your goals. If you rely solely on your own employees, you’ll never solve all your customers’ needs.”
Maybe it's not VCs, but you can't bootstrap everything. Or maybe you can, but it will probably take a lot longer.
To name 4: Google, Docker, Tesla, Apple. I'm happy that they were able to raise enough VC that they've innovated and created stuff that I happily use. (Well, I don't own a Tesla. But I've driven one.)
"If Twitter was open... a dozen people innovating on it..."
Though not 100% independent of their funding model (loss-aversion bias might lead us to conclude that big companies take less risk), presumably Twitter has at least a dozen people trying to innovate on it?
They may not be doing what [parts of] the community wants, but that's not quite the same thing as not innovating.
Things like GPS are society-level upgrades. Uber is just one application of GPS.
Twitter is flowing in the sea of red and as far as I know never had a dime of profit. Who gives money to twitter by this point? Twitter has a lot of users, but it does not monetise the platform well. Also IMHO, Twitter has waaaay too many employees and I imagine that it's internal processes are very inefficient.
Uber is great example of unicorn startup. Though we'll see how it will turn out.
This is outrageous, I was so naive of HN community, that things like this are not happening here.
Personally I found this article more interesting than "Reconsider". I mean c'mon, it's trivially true that the humbler road doesn't get the press but is more spiritually satisfying &c &c. Whereas this article brings together valuable knowledge from different domains.
For those who want a unicorn valuation, I'm sure Sam's piece is great. Or maybe it's not, I don't know.
But what I do know is he kept mentioning how competition never kills startups. It's failure to execute. Why balance burnout and cashflow and hiring and funding in some kind of race to become a unicorn if competitors won't actually kill you?
Why not grow at a reasonable pace, running a reasonable business, that makes reasonable money?
But on the macro scale there are always windows of opening and closing opportunity on what makes for a viable business before (new technology takes over/bigger companies start paying attention/governments try to regulate you out of existence), and it is that more general climate of whether it's possible to execute at all that pressures the potential unicorns into a do-or-die mode. Monopolistic competition like e.g. Uber vs. Lyft is an exceptional case for technology; the expectation is that if you succeed at all you will probably be in complete control until the technology ecosystem itself shifts.
There is a second half to this, of course, which is that the type of people who found a fast-moving VC-backed startup are so deeply enmeshed in their plans for the company that they will put themselves into an unsustainable overdrive and expect everyone around them to do the same. Their enthusiasm can be entirely real and still be basically toxic and lacking in conservative sensibility. There are a lot of commonalities among founder personalities, IME.
Try reading it through the eyes of an investor putting capital to work rather than the person doing the work.
Angels? Really? You’ve plucked your self-serving moniker from the parables of a religion that specifically and explicitly had its head honcho throw the money men out of the temple and proclaim a rich man less likely to make it into heaven than a camel through a needle’s eye. Okay then!
Most of our hires were introduced through people I know. In a small business this is often the only logical way to hire because you already have some level of trust with the referrer and thus they've acted as the first gateway for a candidate to get through (and they usually can vouch for the candidate's work).
Also, many small businesses are concerned largely with staying alive and making a profit, so that may mean they will be focused on "non-interesting" problems of making the business operate well. Factor this into your decision as to who you want to work for as well.
The general consensus I'm hearing is that the way you get hired at a smaller company is just through networking, but if there's no network near me to speak of am I just simply out of luck?
And yes, I'm aware that I will have to work on some "non-interesting" problems, but I'm okay with that as long as I feel like my work is being valued by my coworkers and that I'm not just another drone.
Also, chatting with random people at coworking spaces could be fruitful.
He has an unfortunate tendency to see the way that he was successful as the only way to be successful, and seems to lack the ability to benefits in other ways of doing things. We used to see this in PG's writings too: back before he started YC he appeared to be utterly convinced that it was Lisp that made his company successful. After he started YC and he saw a lot more his writing became a lot stronger IMO.
Regarding DHH, I'll just point at [1], with the comment that Facebook made $891 profit last quarter. It's also currently valued at ~$300B.
[1] https://signalvnoise.com/posts/2585-facebook-is-not-worth-33...
To be fair that blog post was written in 2010 when Facebook was still a private company and had nowhere near the level of advertising, reach, etc. that it has today. In particular they had barely scratched the surface of mobile and were only making money off Farmville and other ephemeral apps.
The trajectory was clear enough that all those investors DHH called "star struck" put money in.
To quote him: Irrational investor exuberance indeed. I think it would be more sensible to class them as "investors who had more foresight than DHH".
He berated them for being dumb. Since we can now see that they weren't dumb at all we should consider DHH's insights questionable.
They were desperately buying anything they could on the secondary markets. That isn't luck, it's seeing an opportunity.
It's like Pinterest 2 or 3 years ago (say around the time of the 27M A16Z B round). Putting as much money into that as you could isn't being lucky, it's seeing an opportunity. Their 2014 and 2015 rounds are basically just ways to print money.
That's the whole crux of why people don't respect VC.
Um. Some people don't respect some VCs. I don't agree with everything Marc Andreessen says, but I'd be pretty silly if I didn't respect his opinion on technology.
> We found 39 companies belong to what we call the “Unicorn Club” (by our definition, U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors). That’s about .07 percent of venture-backed consumer and enterprise software startups.
That being said, the term is now almost a pejorative moniker for overpriced vaporware or at least "proof of the bubble". or something. Still though, a fusion company would be the rare breakthrough on a big idea that would warrant such a moniker. Unicorns missed the ark during the great flood, so at IPO time we'll see if tgey go extinct or evolve into narwhals.
0 http://techcrunch.com/2013/11/02/welcome-to-the-unicorn-club...
Aileen is a woman.
> and pursuits beyond Hacker News
What foreign language is this?
I am long time thinking and saying, that modern startups have rather poisonous culture around them. It's very refreshing to read who thinks (and writes) about it.
The difference, I think, is that a lifestyle business is a startup where you take your foot off the gas once your income meets your personal needs. It doesn't need to be a monopoly - in fact, it's better if it isn't, because if it is some other company will likely monopolize it. And you don't need to deal with the fundraising and hiring parts of the handbook, since you never get that big. Everything else seems to apply, though.
If you're less growth focused, have your pricing nailed down, and are well positioned in your niche - then you should have enough new users from simple population turnover and you don't need that graph to keep angling so sharply upward to avoid ulcers.
i know you're curious so instead of teasing i'll just say: all of these kinds businesses are basically the same: think of something people or businesses pay money for, then do that. generally the business morphs as you get better / identify new opportunities. and you can grow it very large given enough time.
If you have a 6 man company with titles like "President and Founder" and "CEO", you're buying into the SV groupthink a little.
Outside of SV, in the world of small/medium business (for which I've consulted), I don't think I've ever heard the title "CEO". Meanwhile, I've gone to tech conferences and have seen sole-proprietors refer to themselves as the CEO.
I do not make 95% of executive leadership decisions. The CEO does. Which again, is the definition of the term.
So no, I am not buying into the SV groupthink. Just because other startups use VP/SVP/"manager" doesn't make it non-SV. They're just... correct terms.
By that, I mean product-based businesses with at most a few million in revenue, a 5ish person team, a solid sustainable market position, and no desire to revolutionize any unicorns.
Building a lifestyle business mostly rules out services as most desired lifestyle business model is some sort of passive income scheme. Content oriented monetization models are being slowly, but surely killed by ad blockers. An innovative product tailored to the needs of a small, well defined audience seems to be a best bet for a lifestyle business and that's very different from a classical SME.
I don't think passive income is needed at all, I think "lifestyle business" is a useful definition for making tradeoffs in your business decisions in favor of your lifestyle.
e.g. setting up a consulting business in a small coastal town because you like to surf every morning, even though it costs you potential business. To my mind, that's certainly a "lifestyle business".
Doing this with a product business is harder but not impossible.
I don't know about you, but personally I get annoyed when people create a false dichotomy between a startup and a "lifestyle business". Not everyone who declines to play the VC game is a "lifestyle business". It should also not be a dirty word, which is the way it comes across to me sometimes.
Each local area is a separate market. Those types of businesses have limited geographical range, and a given range can only support a handful in a specific segment. For a technology business, the market is usually not limited by geography. Fundamentally, it is the same principal: a given market can only support a limited number of players.
Now, the size of the market may preclude traditional small business growth models. It depends on how tied to locality a particular business idea is. I could see, for instance, something like Homejoy working on the scale of a single metro area. In fact, having dozens of metro-area-sized Homejoys might actually work better than a single, national incarnation.
1. http://www.tillett.info/2014/11/24/lets-kill-the-term-lifest...
"Small Giants: Companies That Choose to Be Great Instead of Big"
[1]: http://www.amazon.com/Small-Giants-Companies-Choose-Instead/...
But I'm also not convinced that it's the best way to be happy as a technologist. The system produces two things - incredible wealth and power for the few winners and a large amount of (a certain kind of) technological innovation. And it produces a lot of bodies, empty hype, churn and overpriced housing in the process. You can enjoy the innovation without joining up, and if you do join up then statistically speaking you're way more likely to be a body than a winner. I marvel at this machine but I'm aware that my happiness (or that of my loved ones) is not something it's likely to produce.
To his credit, Sama's post hints at this when he says that starting a startup actually "sucks." We should listen to him.
And I would be a card-carrying member of the "slow tech" movement, where do I sign?
The goal would be to balance out some of the other posts here about getting 10000 users in a week or "bringing in $500k of revenue in 3 months.
http://www.amazon.com/Start-Small-Stay-Developers-Launching/...
I really hate this term. It makes it seem like anything that's not a high growth unicorn startup is somehow a failure. It's like a way to give it a label and somehow look down on it.
(don't mean to aim this at you - just a general remark)
I wouldn't call it a "small business" either because, to me at least, that brings to mind a small consultancy and does nothing to communicate the "sell widely but stay small and focused" approach of the intentionally-small digital B2C business. (Mouthful there, huh?)
You might like this article if you haven't already seen it. It's been doing the rounds lately. https://medium.com/@dhh/reconsider-41adf356857f
As for a term... I can't think of one apart from "business". :P Heh.
edit: Just noticed someone else already commented with a link to that article! Ha!
Some people ask how it makes money (advertising) or if I have raised any money (no) or if I have employees (not yet), but I've never once needed to use the term "lifestyle business" or "small business".
In truth, you gotta bust your ass at a small shop to get your work out there and make $$ from it.
I never went to one, I just follow patio11 tweetstorms whenever he is on it and it is full of gems (the tweets, I can only imagine the conference itself).
They have lots of videos on the website, but a "playbook" format would by an awesome resource!
BTW, I work at "trying-to-be-big-with-outside-investment" startup applying to YC, but I see A LOT of value on the advice of these people when I'm daily executing stuff and not daydreaming how to big a "YC startup"
To the extent bootstrapped SaaS has a playbook, it is Start Small, Stay Small. I'd probably write one eventually but Starfighter is cutting into my writing bandwidth at present.
But I highly recommend anything DHH says (as mentioned before) and also the 4 hour workweek book.
The key thing that people don't understand is that investors only make money if you're trying to "revolutionize unicorns." In other words, so many company fails, that in order for your fund to have positive returns, you need to have an investment return 10,000x. Otherwise, you're losing money.
Companies that don't intend to become massive business are fine; but they are not candidates for venture funding. It's not about being un-sexy, it's that the economics just don't work for venture funding. It's not enough to return the investment. It's not enough to 10x. It's not even enough to 100x.
There's no rules in business but the laws of the land. Pretending that there's one definition of success is very limiting to both focus and opportunity for all of us.
Do not try to do everything: like have a "great idea", "great team", "great product", "great execution", etc. Think as company as product: if you try to make everything "great" then everything will be actually "half-ass".
If you are great at two or more things: you are unicorn.
For example, if you are great at customer acquisition / SEO then you can just make something very very simple and ask people for money. No need to have "great product" at all.
I know a lot of people attempting this and they mostly seem to be flying under the radar, or at least have nowhere near the cachet of a startup. They are often bootstrapped, frequently for lack of other options.
For those of us who don't want to be in the pressure cooker or are turned off by the hype machine, these businesses are a viable alternative route toward independence and possibly achieving a significant impact. The fact that they have become as attainable as they are is I think also something quite remarkable.