I worked at a startup and the CEO was obsessed with hiring at all cost. We, engineers, were all wondering what the hell these new hires were supposed to do. We did not need them.

Then they explained it to me. They needed to show growth through hiring in order to raise money.

I mean, I couldn’t even blame them, if that’s a criteria for VC to hand you a check, well you gotta do what you gotta do.

Needless to say this startup, eventually had to cut cost and end up firing most North America employees and replacing them with new hires in east Europe.

My experience is that current investors want you to hire tons of people to shorten your runway so they can force you into another round where they can buy more shares and dilute the founders more.

That might be part of it, but also VCs are not interested in $100 mil exits, they rather you go all out and either capture the market or die trying.

I always wonder how much of the faibled 99% start-up failures are up to that attitude. Imagine to settle for 100 million exit, at maybe 2x, more often. Couldn't it be tgat VCs would ve more profitable? Serious question, bevause VCs are professionals in what they do and they definitely have a reason. A reason that totally eludes me.

I always thought Uber could be a nice billion plus business modernizing the taxi business and providing software to run it, but no, they had to grow so much to legally fight whole countries and upset regulations

I always have to adjust for this as an early-career engineer aspiring to start my own startup. It's insanely intimidating looking at companies with multi-million or billion-dollar valuations, but my definition of a "successful" company is probably vastly different than what most hyper-growth VCs are looking for.

I'm always more interested in the low-fixed-cost software businesses like Sublime Text, Pinboard, or Hwaci (SQLite)

the answer is no probably not. VC for tech startup exist because of economy of scale of tech and is ruled by power law. one winner that returns 100x is much more important than a handful that return 2x.

to be clear most VC funds are not actually able to do that.

They would have to adjust their strategy and be more selective in the companies they invest in. And they of course know that they aren't actually very good at picking winners, so that strategy is out.

Have they not heard of the mythical man month?

Interesting and funny documentary from the dot com boom era in a finish company, riot entertainment. Great watch on the insanity of VC funding and growth.

https://m.youtube.com/watch?v=g0lrIi0ce5E

Haha, I have watched that documentary multiple times, it is great and deserves to be turned into a film.

Someone's earlier point about hiring as a growth indicator to VC's reminds me of the point made by the CEO in the documentary about how VCs told him he needed to have 100 employees in order to boost the value of the company, so they ended up hiring people off the street, spouses and family members.

Crazy story.

That's the equivalent of counting the number of lines of code to see how much work you did that day as a developer.

I'm always stoked when my daily contribution is a negative number of LoC

It really shows how "free" capital has been last few years if the VCs can use that broken as heuristics and survive (even thrive).

Yeah Bolt's numbers are just nonsense. We do 1/3 of what you do with a slightly less workforce than you, same hiring strategy.

There have to be tons of businesses like ours. No one cares about small business success though. I'd love to read more books and stories about "small" businesses making $5-40MM and how they go about their day and running the company. Would make for far better reading than all the vaporware and malinvestment in the VC space due to free money over the last 5-10 years.

"Hidden Champions", it is not super recent, but it deals with mostly what you are looking for.

The thesis is (If I remember correctly) that the backbone of Germanys economy are "Hidden Champions", small but highly skilled and specialized companies that can produce a niche (technical) good at an quality that cannot be matched by any other mean, making them practical the entire market for that thing.

- The book on Amazon: https://www.amazon.com/Hidden-Champions-Twenty-First-Century...

- Wikipedia even has an article on the subject: https://en.wikipedia.org/wiki/Hidden_champions

mittelstands!

At its peak during the 1980s and 1990s this is exactly what Inc magazine focused on, businesses making between $10 million and $100 million, the vast middle section of American business, the tens of thousands of medium sized businesses that make up the bulk of the economy. And Inc was very popular, because at that time it was a very popular idea for an entrepreneur to build a business on that scale.

After 2000 that particular ideal faded away, and also the market for what Inc magazine offered faded away. Slowly, but increasingly, the focus shifted to "unicorns." There were a few contributing factors:

1. In the 1950s and 1960s and 1970s it was still possible to start a business and grow it to $20 million, and then remain relatively stable at that level. However, the creation of new businesses has been in decline since the 1970s, a trend partly offset by the explosion of software startups, but still the trend is downwards.

2. Consolidation. In 1999 there were 8,000 businesses listed on all of the USA's stock markets (NYSE, Nasdaq, etc). In 2022, there are only 3,400 businesses listed. These last 20 years have seen the fastest consolidation in the history of the USA.

As such, the middle zone of American business is under pressure. Much more now than before 2000, a business has to get big, or get bought, or go under. So the dream that Inc magazine was selling in the 1980s and 1990s simply isn't realistic any more.

>> As such, the middle zone of American business is under pressure. Much more now than before 2000, a business has to get big, or get bought, or go under. So the dream that Inc magazine was selling in the 1980s and 1990s simply isn't realistic any more.

I guess. Our HQ is in an industrial-commercial zone, and there are no shortage of small businesses making $1-100MM doing stuff I've never heard of, have probably existed for decades, and just do quite well for themselves. I've driven around 5-10 square miles over the last few years around here just to take inventory of said businesses, and so many of them don't have websites or meaningful online presence, yet clearly do decently well.

I think people just don't talk about these businesses, or care very much. Only Mike Rowe really seems to care about small business / blue collar-type work (Dirty Jobs). I guess Guy Fieri does a good job of highlighting restaurants in his work, too.

Kinda sad.

I'd like to see a Gini coefficient type analysis for businesses.

Knowing nothing about nothing, I wonder about the role of financialization and tax policy in driving this transition. Stuff like the preference for growth stocks over value stocks, replacing pensions with individual retirement accounts, and cutting capital gains taxes.

However we got here, my belief (hope) is our economies would be more resilient with more small to mid-size companies. Ditto more fair.

Tax rates on small businesses - especially in my county/state combination - are absolutely brutal and have significantly gone up over time in comparison to larger businesses as a percentage of revenue. There's a lot of reasons for this, none of which I think are deliberately intended to harm small businesses, to be clear, but it's frustrating all the same.

I've seen companies with less revenue and a bigger workforce growing at that rate. They call it blitz-scaling, and I don't know if it's actually ever worked, where I saw it first hand it was basically just setting a pile of money on fire.

Yep, this is what happens when your "growth" metric is employee headcount, under the naïve assumption that more people is a proxy for more work getting done is a proxy for revenue. This may make more sense for a sales-focused organization, less so for marketing or technology driven organization.

Maybe not a proxy per se, but more like a leading indicator, right? Those big enterprise customers might not ask about revenue, but the sales unit can certainly brag about headcount.

The moment that any indicator becomes a goal it instantly becomes completely useless as an indicator or metric for anything.

Absolutely agree. I wrote the comment while thinking, why would a company need a proxy for revenue, when revenue is so easy to count? On reflection I now understand the GP’s point; when revenue is zero, you need something to use instead.

But of course revenue (and, having achieved that, then profit IMO) should be among the concrete goals. It’s so weird that this is missed so often.

In a way it seems like SWE jobs in tech hubs are subsidized by VCs. We can see it as some huge redistribution of wealth.

With an important caveat. The SWEs in the Bay Area are just conduits for obscene sums of money flowing from VCs to real-estate agents, landlords and homeowners. Plus car dealerships, perhaps (every other car is a Tesla or a higher-end BMW/Mercedes model in the Bay Area).

This is the correct interpretation. All those high salaries are high to cover high standards of living and high prices.

The standards of living are high only because of the natural bounty of the Bay Area. Pretty good weather, stunning natural beauty with easy access to plentiful and varied open spaces, some of the best produce in the nation thanks to the most fertile and productive farmland in the world (central valley), multicultural, and generally tolerant and respectful people.

But many of the objective things that count towards a high standard of living are not much better than the rest of the nation, given the eye-watering tax burdens on CA residents. California roads are amongst the worst, housing quality is generally poor and nothing to write home about, failure to promote dense housing has led to encroachment on wooded areas that are huge fire risks, zero investment in burying power lines has exacerbated forest fires even further, and heavy property crime due to the exploding homeless population in core urban areas is continuously threatening public safety. Not to mention the insanely high gas prices (due to CA taxes), consumption taxes and effectively high property taxes which all hit living standards of average people quite hard.

Only a fraction of software engineers work for VC backed companies.

Reminds me of my dotcom boom/bust experience of the late nineties where the dotcom was posting monthly "hiring targets" and celebrating that they met them. They were so screwed and tanked badly right after March 2000.

March 2001

~$20M in revenue from ~50 employees, equating to $400k in revenue/employee is extremely impressive for an early stage company.

What company is that?

My employer was doing those kind of numbers pre-covid, having been profitable from year one.

But we’re not really ‘a tech company’, except in as much as we have a website. We did outlast companies in our sector that expanded like startups, though.

Staying relatively small and focussed with growth driven by making money instead of outside investment might be the antithesis of what a lot of people on here are into, but it can produce better results in many occasions.

We aren't early stage. We have a growing revenue stream but have been at it for about 5 years with some ups and downs along the way. There is a product market fit but the product still needs a lot of work on being more scalable (in terms of process).

What are your primary customer acquisition channels?

Does it matter if that revenue is unprofitable and there is not a real path to profitability?

We have been profitable for the past 18 months or so.

I like the username! I think I first heard it in the show Foundation (on Apple TV).

It’s a Santana álbum too eh?

Also a coffee shop in the Dam!

Also a character in the (largely forgotten) action-RTS game Sacrifice!

https://sacrifice-shiny.fandom.com/wiki/Abraxus

Also Draco Malfoy’s grandfather.

you don't onboard efficiently which makes your new hires inefficient so you have to hire even more to compensate to just get the increase you wanted. This is just one factor in the raise of inefficiencies during a fast company growth.

Wow that is very impressive in this climate may I ask what is the category of the business? I am guessing it is not in any of the fashionable current spaces (blockchain, retail logistics, fintech,…)

No, a much less sexy but profitable and still under-served market - industrial monitoring and process improvement.

How do you even go about going to a factory and convincing people that they need a certain piece of software?

Did you work in this space and already have connections?

I'm butting in here because this struck a chord.

There are lots of people of people out there running highly profitable (and globally well-known) businesses off of Excel sheets. They have identified that they don't want to do this anymore as these sheets have grown so monstrously complex over the years that the employees who have to use them are miserable. Basically there is lots of opportunity to start a tech company whose sole purpose is to get much bigger businesses off of Excel. However, for reasons, this is much harder than it sounds.

As a counterpoint, a few months ago I helped out a small manufacturing company with their Excel overload. Every day, they start with a new document based on a template someone made years ago. Every shift has their own worksheet in the document, every machine and job has its own set of rows, with lots of columns for capturing relevant information.

Everyone there is used to dealing with it and for every use case except this particular one, it does what they need.

All I did was write a little program to consolidate data from many thousands of spreadsheets, do some aggregations, etc. allowing them to get better insight into scrap and downtime rates per machine and per contract.

I charged $500 for about 1.5 hours of work, and they were thrilled.

Anyway, what I wanted to point out was that totally eliminating Excel is, for many businesses, probably not worth the hassle and productivity problems associated with the switch. But you certainly can move complexity out of Excel and into a place where it is much more manageable. Reading/writing Excel files is ridiculously easy and doesn't need to occur on a machine with Office, or even Windows.

I didn't mean to be so absolutist. Excel is often enough. I've worked with companies who are trying to ditch their Excel sheets but, in my experience, it's often a super hard problem to solve, especially if you are trying to generalize to sell it to multiple parties.

It's not easy to find those excel users and ask them what they need.

I think you probably need to be embedded in the industry for a while so you have both a good handle on how the industry works and the connections to get a foot in the door with any new solution.

many of them don’t know what they need. I often think of the Ford(?) quote, “if I asked people what want they wanted they would’ve said faster horses”

Ya, I worded that poorly. I didn't mean to say it's that easy to find them, but there are a bunch of them out there.

Ha, love that. Gotta love the "boring" businesses that have good profit margins and solve problems. We're in a similar industry, with a lot of R&D costs.

Congrats on building a company that is making money sustainably.

Thanks. We definitely want to take it to the next level, beyond a "good lifestyle business" stage but we'll do it on our terms growing the workforce at a rate that makes sense to us despite some pressure from the board to "hire more aggressively".