[HN Gopher] Why to start a startup in a bad economy (2008)
___________________________________________________________________
Why to start a startup in a bad economy (2008)
Author : dbrereton
Score : 239 points
Date : 2023-01-18 17:32 UTC (5 hours ago)
(HTM) web link (paulgraham.com)
(TXT) w3m dump (paulgraham.com)
| gnicholas wrote:
| > _For years I 've been telling founders that the surest route to
| success is to be the cockroaches of the corporate world._
|
| This has always seemed incompatible with the VC model, which
| involves raising a ton of money, putting the company on an 18
| month clock, spending the money so you can hit key milestones,
| and then raising even more money when the clock runs out.
|
| I have heard of a few companies that were on the VC track, raised
| money, and stayed frugal. But my impression is that investors
| want to see you swing for the fences, which involves spending all
| the money they invested, and fast.
|
| How common is it for startups to buck this trend?
| varelse wrote:
| [dead]
| zachthewf wrote:
| The difference is pre versus post PMF.
|
| When you start your startup, you are by definition pre-PMF.
| There is only a weak relationship between what you spend and
| what comes out the other side. Once you're post-PMF this
| changes and you may need to jack up the spending in order to
| grow as quickly as possible.
|
| Lots of companies screw this up and scale up spending when
| they're pre-PMF. In 2021 those companies could keep raising,
| but now they're probably going to die.
| gnicholas wrote:
| Pre-PMF companies need to experiment and nail down their PMF.
| So what should they be spending on, and what shouldn't they
| be spending on? I assume conference booths fall into the
| latter category. Is there anything other than product dev and
| design that falls into the former? Where does marketing land,
| in order to make sure enough people are in the funnel to be
| able to meaningfully experiment and gather data?
| wefarrell wrote:
| Relationship building is pretty important pre PMF,
| especially for industries with larger contracts and longer
| sales cycles.
| zachthewf wrote:
| IMO sales and marketing expenses should be minimal--
| essentially limited to testing different channels to see if
| they work.
|
| I'm sure this depends on the business but I'd say if you
| need a lot of marketing spend in order to experiment it's a
| sign that you may not be enough of an expert on where to
| find your customers and you either need to find a way to
| gain that expertise or pivot to an area where you already
| have it.
| O__________O wrote:
| VC care about three things: percentage of ownership, growth,
| and a liquidity event.
|
| If a startup doesn't need the capital to grow, they're not
| likely to take on VC funds. If they do, the startup will need
| to sell equity, which based on funding round have norms based
| on equity given for capital received. If the startup is frugal
| with the capital, but still manages to hit growth targets and
| reach an acceptable liquidity event for the VC, then any
| unspent capital would only add to the valuation of the company.
|
| Is that common, no, but it does happen; if it does, generally
| means founders gave up equity unnecessarily. Regardless, VC
| measure ROI on capital invested in the startup not if the
| capital they invested was spent by the startup.
| dheera wrote:
| You can also just not take VC money. There are a couple of ways
| to do this:
|
| (a) Work at a big co, save a boatload of money, quit after a
| few years, and then fund it yourself without the bullshit
| coffee chats* and 18-month clock.
|
| (b) Work somewhere that has good work-life balance, pays you
| enough, is okay with you spending your free time doing
| something that doesn't compete with the company, and then build
| it on the side until it makes enough money to replace your day
| job, and only then quit your day job.
|
| * There are good VCs out there, but 95% of VCs will waste your
| time, and you'll have to wade through them in your search for
| funding. The amount of coffee chats you'll go through will
| literally destroy your company because you won't have time to
| do real work.
| reidjs wrote:
| What is the difference between a startup and a business
| nowadays?
|
| I can start a business without an investment round, but not a
| startup? Is it a startup if it involves tech, a business if
| not? What if they use SOME tech, but not necessarily innovative
| tech? Or is this one of those 'you know it when you see it'
| kind of things? Has the term startup become a buzzword like
| "optimize" or "synergy"?
|
| Seriously asking, not being snarky.
|
| edit: thank you, for the responses that clarifiesthe
| distinction
| NikolaNovak wrote:
| My colloquial understanding is that Startup is meant to grow
| fast, Business is meant to grow slow.
|
| Some of the causes and effects:
|
| 1. New business may have a proven business model, customers,
| product, market. Startup may have to find or create any of
| those
|
| 2. New business may have some capital to build/invest itself
| (I've worked in a restaurant, saved up, now opening my own).
| Startup is based on idea/people/work, but likely has no
| internal capital
|
| 3. Both have risk; but in some ways New business risk is
| known & understood. Startup's risk may be as undefined as
| their product/market.
|
| As frequently used, there's also a
|
| 4. Expectation of profit / failure rate. A new business would
| be happy to succeed with small profits, certainly very much
| over bankruptcy/shutdown. Startup ecosystem/expectations are
| built around fail or succeed wildly.
| rising-sky wrote:
| I think the first point is probably the most
| differentiating characteristic. Startups are typically
| about innovating, doing something differently from what's
| expected or the norm. Typically, but not always, this leads
| to disruption in the domain if the startup is successful.
| But it should always be about innovating or attempting
| something different in its domain, otherwise it's just
| another business.
| unixlikeposting wrote:
| the word "startup" has been a buzz word since ~2012 from my
| perspective. Ever since I saw established companies start to
| describe their approach as becoming more "startup-like".
| fijiaarone wrote:
| Startup means a business that is "starting up". People have
| become so divorced from reality that words don't even have
| meaning anymore.
| wizzwizz4 wrote:
| Computer means a person who "computes". Photo-shop means
| a shop that "develops photos".
| strangattractor wrote:
| The grow fast part is key. If you can out spend your
| competition and out grow them it is much easier to monopolize
| your market. That is how you become a FAANG. Not all
| businesses have that potential however - which is why so many
| fail. Failure in this case does not necessarily mean the
| business is not successful - simply not successful enough.
| munificent wrote:
| I'm not a business person, but I always assumed "startup"
| meant that you take venture capital. That in turn means you
| now have a financial need to grow to a certain size for the
| investors to recoup.
| tiledjinn wrote:
| Scale and speed of scale. Planning for fast growth.
|
| Most small businesses do not plan to grow very quickly.
| praptak wrote:
| Also the dual is true - bigger risk of failure is
| acceptable. Normal business investor typically cares
| between bankruptcy and having merely poor RoI.
|
| Startup incubators would rather have their 999 startups go
| broke and the 1000th become "next Google" than have average
| RoI on all 1000.
| gnicholas wrote:
| According to PG, a startup is a company designed to grow
| fast. [1] Again, this is a bit at odds with the advice to be
| frugal. It's not that you can't do both, it's that you have
| to strike a balance because they are in many ways at the
| opposite ends of a spectrum.
|
| 1: http://www.paulgraham.com/growth.html
| throwaway29812 wrote:
| Right, and most often that growth is tied to a digital
| product that can scale to infinity with little additional
| capital needed.
| personjerry wrote:
| Joel Spolsky explains it well in this article:
| https://www.joelonsoftware.com/2000/05/12/strategy-
| letter-i-...
| gopalv wrote:
| > I can start a business without an investment round, but not
| a startup?
|
| The answer around me seems to be that a startup comes out of
| an idea without the capital worked out. That the equity they
| have to offer is worth nothing, unless they execute the plan
| with money they don't have.
|
| If you have the capital worked out, you can go ahead into the
| business phase of the process right away, where profitability
| is king and there's no plan needed to answer the "how to
| raise more?" question.
|
| A lot of what we associate with startups is the
| justifications towards raising and a lot of what we see from
| a "business" is geared towards margins.
|
| For instance, better margins by extracting more profits on a
| lower revenue is better for one, but looks bad for the other.
| lightbulbish wrote:
| I like a definition from Steve blank (I think).
|
| A startup is an organisation in search of a scalable,
| profitable and repeatable business model.
|
| (Scalable is relative but at minimum exponential. Linear
| growth does not a startup make.)
|
| The above definition has helped me clearly delineate between
| an smb and what one feels is a "startup". Even used it to
| explain to customers who wanted hourly work from us.
| babyshake wrote:
| You might be able to raise seed money from VCs and not swing
| for the fences. If they are good VCs, they aren't depending on
| their seed investments to all necessarily pan out within a few
| years, if there is good reason to be more frugal. Series A+ is
| a different story.
| dahfizz wrote:
| Once you've taken VC money, its growth at all costs. Where
| "growth" is defined by inflating valuation, not necessarily
| "real" growth of the company.
|
| If you want to be frugal and grow responsibly, you have to do
| it without VC money.
| JumpCrisscross wrote:
| > _its growth at all costs_
|
| If you've taken VC, you had a bad VC. Otherwise, this
| misconstrues most VCs' advice in a downturn, which is to
| prioritise staying alive.
| TAForObvReasons wrote:
| The key phrase is "in a downturn". When it is not a
| downturn, VCs encourage startups to grow at all costs. And
| it's extremely difficult to change course. VCs can change
| advice overnight but companies don't have that flexibility
| JumpCrisscross wrote:
| > _When it is not a downturn, VCs encourage startups to
| grow at all costs_
|
| The defining difference between a startup and small
| business is scaling potential. If you can't grow, you
| shouldn't take VC.
| codegeek wrote:
| I think you are missing the bigger point. VC money puts
| pressure to grow at any cost and very quickly. That takes
| away the freedom founders/teams could have to do a few
| things at a different pace and more sustainably which can
| still lead to scaling. VC = fast or die. No middle
| ground. But there are ways to scale even without that
| level of pressure but VC doesn't allow that.
| JumpCrisscross wrote:
| > _VC = fast or die. No middle ground_
|
| VC is expensive capital. The same dilemma exists for
| companies that issue high-yield debt.
|
| > _there are ways to scale even without that level of
| pressure but VC doesn 't allow that_
|
| Genuine question: what is this?
| codegeek wrote:
| "Genuine question: what is this?"
|
| More time. There are examples of bootstrapped businesses
| that may be took a decade to get to first few million
| which will be dead in VC terms. But they continued and
| got to 100s of Millions. VC model would tell them to kill
| it if after a decade, they were doing a lousy couple
| million in revenue even if on the right path with PMF.
| JumpCrisscross wrote:
| > _bootstrapped businesses that may be took a decade to
| get to first few million which will be dead in VC terms_
|
| Isn't the criticism of the last decade of VC that it
| backed many of these?
| pjerem wrote:
| It happened last year to my current employer. It also was
| the 20 years anniversary of the company.
|
| Everything changed and I've seen it change from a small
| agile business with nice people to a baby corporation
| with up or out mentality, useless processes everywhere,
| harassment methods from HR department. In one year, VC
| money created as many millionaires as employee burn-outs.
| TAForObvReasons wrote:
| Bootstrapped small businesses can have the same scaling
| potential as startups. They just value sustainable growth
| over business fragility. It seems foolish during summers
| but that mentality allows bootstrapped businesses to
| survive winters in a way that startups can't.
| JumpCrisscross wrote:
| > _small businesses can have the same scaling potential
| as startups_
|
| Usually not. Most small businesses have geographic limits
| to their scaling potential. That said, yes, there are
| niches where small businesses will beat a start-up
| competitor, at least in the short run.
| gnicholas wrote:
| So is this something PG wrote before YC was so deep in the VC
| ecosystem, and that's why it makes sense for him to have
| said? What would he have advised a startup to do back then,
| after raising a $2M round? Would he have told them to keep
| their burn rate low enough to stay default-alive?
|
| What would he say now?
| waprin wrote:
| If you compare the pg essays from 2000-2010 to 2010-now,
| there's a very noticeable shift in tone on this exact
| topic, even moreso if you zoom out of pg and consider YC
| messaging then and now.
|
| Tons of old pg essays sound straight from something like
| Indie Hackers or Microconf with their "avoid raising VC
| money" angle. He even literally predicts the death of VC in
| web SaaS, saying "investors aren't worth the trouble":
| http://www.paulgraham.com/divergence.html .
|
| His YC cofounder Jessica Livingston wrote a book "Founders
| at Work" and about half the founders in the book are
| bootstrappers (DHH, Joel Spolosky, Craigslist). The other
| half are mostly founders recounting horror stories of
| interacting with VCs.
|
| Compare that to modern YC where there are videos where they
| say _everyone_ should consider applying to YC with the
| _only_ exception being people that want to bootstrap.
| Modern Startup School says: "Without startup funding the
| vast majority of startups will die."
| (https://www.ycombinator.com/library/4A-a-guide-to-seed-
| fundr...).
|
| There's something very important to note which is that YC
| did not change the deal from 125k for 7% to 500k for 7%.
| It's still 125k for 7% plus 375k worth of equity on your
| next raise. Which only makes sense if there is a next
| raise. So obviously they discourage bootstrapping since
| their whole model has been built around you raising at
| least one more round after YC.
|
| Seems a pretty simple case of "follow the incentives." YC
| basically became more of a traditional VC over time. And I
| think pg was still closer to a founder in the early 2000s,
| from a founder perspective, it's more of a set of tradeoffs
| whether you should bootstrap or seek VC. But from a VC's
| perspective, obviously they want you to seek VC since they
| can't get involved if you bootstrap and bootstrapped
| startups won't get the outsized returns they need.
|
| My opinion is, pg is a smart guy, there's still a ton of
| wisdom to learn from in his essays, but as with every other
| person on the planet, consider their motivation and
| incentives for telling you what they're telling you.
| dasil003 wrote:
| Also worth noting the 14 year tech bull run and ever
| increasing amounts of capital looking for a return. In
| 2000-2010 it was in many ways easier to bootstrap as
| everything was smaller, complexity was less with simpler
| browsers and no smart phones, UX expectations were less,
| and salaries for software engineers were more in line
| with average professional salaries.
|
| Not that I disagree with your assessment on pg's
| incentives and YC's change in position over time, but the
| environment for software startups is also materially
| different now that affect you whether you take VC money
| or not.
| waprin wrote:
| I'd argue the exact opposite.
|
| Key costs like hosting are way cheaper, back then you
| probably had to rack server in a data center, now you can
| deploy a free/cheap PaaS with a free/cheap database while
| you find PMF.
|
| Marketing is way cheaper, social media is a grind but
| it's a game you can play to acquire users/customers for
| _free_.
|
| There's more stuff going on online, more people, more
| businesses, more everything. Think about the entire
| "creator economy", other bootstrappers, Shopify sites,
| etc.
|
| Yeah some stuff has gotten harder, more platforms, higher
| UX standards. But on the whole I'd rather bootstrap in
| 2023 then 2010.
|
| Check in with me in a year though.
| logifail wrote:
| > Key costs like hosting are way cheaper, back then you
| probably had to rack server in a data center, now you can
| deploy a free/cheap PaaS with a free/cheap database while
| you find PMF.
|
| Back in the day I have delivered several different cheap
| 1U rackmount servers to data centres. Once took one -
| using public transport - to whatever suitable spot in the
| Docklands in East London. Travelling on the DLR with a
| server under one arm was a a memorable experience.
|
| Long story short: you can do a lot from a $1000 server,
| if you put your mind to it.
|
| Yet these days it seems PaaS is better, (over-)paying
| GCP/AWS/Azure, while you grope around to find a product
| that will sell for $$$ before your cloud credits run out?
| bluedino wrote:
| Back in 2009 I had a dedicated server for $89/month
|
| It wasn't the greatest thing in the world, but it was
| dual-core, 2GB RAM, 160GB HD. I ran a small forum, email
| server, and a couple buddies used it for shells and
| running whatever PHP apps they wanted.
|
| An $80 Linode these days only has 16GB and 320GB.
| FlyingSnake wrote:
| I wish this comment was on the top level comment in this
| thread. The divergence of pg from his original message is
| really sad. The more you gaze into the abyss, the abyss
| gazes back into you.
| dopeboy wrote:
| This is an excellent point. I'm with you - I still trust
| his advice if not for his judgement for the fact that the
| sample population of startups he's worked with is so
| high.
|
| But this bias is there. I'd wager if YC started HN today,
| it wouldn't be called HN. That name is uniquely related
| to the times YC & PG came into.
| efficax wrote:
| sometimes this is true but not always, there are smart and
| patient vcs who trust their founders
| artemonster wrote:
| Sounds like a pyramid with extra steps
| [deleted]
| longcrab wrote:
| A ziggurat?
| artemonster wrote:
| We NEED more of those
| bloodyplonker22 wrote:
| To a cynical curmudgeon, it is a pyramid scheme for 100% of
| startups. To normal people, it is a pyramid scheme when you
| have a company like Theranos, which represents a very small
| percentage of dishonest founders in technology, overall.
| auggierose wrote:
| Maybe that's what the VCs want, but you don't have to do what
| they say. It is your company, after all.
| gnicholas wrote:
| That's an interesting question. If you are dead set on
| being frugal and don't need help from your investors (in
| the form of introductions, etc.), then you could draw a
| line in the sand and refuse to cross it.
|
| If things don't go well, it would probably be hard to raise
| money for a future startup, due to the reputational damage
| of not having followed the VC playbook.
|
| If things go fine, the VCs would probably say you could
| have grown even faster by spending faster. And what's
| considered a 'fine' outcome for you (selling for $15M with
| 1/3 for you) is not considered 'fine' for a VC whose model
| requires bigger wins -- even if they take much longer.
| tempsy wrote:
| Budgeting for 18 months of runway doesn't mean "waste money on
| frivolous things as fast as possible"
| mach1ne wrote:
| Not on all cases, but I personally know one startup where the
| VC told the investors to hire as many people as possible,
| regardless of whether they were actually needed. This
| anecdote seems to ring true with what I hear elsewhere.
| slap_shot wrote:
| I think you might have conflated a few things:
|
| No VC is telling companies to just to wastefully hire
| people they don't need. That wastes money and creates
| friction and bigger problems inside of a company.
|
| They do tell you to hire aggressively, and you often
| present them with a model that shows _how_ you will use the
| money you raise, and sometimes you hire too many people on
| accident. But no VC is pounding their fists on the table
| telling founders to explicitly go hire people that aren't
| needed. That's directly against the interest of both the
| founder and the investor.
| a_c wrote:
| IMO start up or not depends on growth, growth in terms of
| learning the product/industry. Many VC funded companies achieve
| growth by throwing money on to problem, which works. But if you
| manage to out learn your competitors while still staying alive,
| essentially being cockroach, it is still start up.
| jmathai wrote:
| You shouldn't need VC to start (maybe ever) and probably
| shouldn't be thinking about it until you've got some traction
| and customer validation - which can take some time.
| actionfromafar wrote:
| It depends on what you want to do. Some things can take too
| much time without investors, like building new kinds of
| nuclear reactors.
| danpalmer wrote:
| Uncommon. You're right. This advice just doesn't work for most
| startups.
|
| If you're pre-seed stage, in Silicon Valley, and the founders
| have a "good" background (the right companies, knowing the
| right people, etc), then sure you might raise a small round. If
| you're any later than that, or anywhere else in the world, you
| need results, and results don't come as easily in a recession.
| fortuealex wrote:
| Eh, it depends.
|
| Depending on your segment it may be easier to sell products
| in a recession. Tools which cut cost and are below a certain
| monthly spend actually become easier.
|
| Hiring is MUCH MUCH easier.
|
| Raising money is harder.
| kneebonian wrote:
| That was the way in the days of negative interest rates, and
| cheap and easy money. We are headed for the greatest
| contraction of capital since the great depression soon[1], and
| that will no longer occur.
|
| 1. According to Zeihan, who points out that with the retirement
| of the boomers their 401k accounts that have been funding all
| this money are going to get cashed out and withdrawn, reducing
| the amount of money for lending, leading to an overall capital
| contraction.
| im_down_w_otp wrote:
| We've bucked this trend at auxon.io, and for the large part it
| has been stalwartly supported by our investors. Quality pre-
| seed and seed stage investors seem to have a different mantra
| than is being expressed here. Though I've certainly encountered
| investors who typify the criticism here. However, what I heard
| a lot of from our investors is something more akin to, "The
| biggest killer of startups is premature scale."
|
| Somewhat amusingly now that the capital environment has shifted
| dramatically, we have investors coming around who used to give
| us side-eye for being discerning and fastidious (and also our
| investing resources early to acquire government & adjacent
| customers), but now they treat us like secret geniuses or
| something. Because we have a reasonably stable baseline to
| build from. We're aligned with key markets that continue to
| spend money even during down markets and recessions. Not to
| mention we're also not in crisis having to massively disrupt
| progress and morale by laying off a bunch of people (in fact
| we're hiring, though still judiciously of course), which is
| HUGE since team and execution is everything.
| jrvarela56 wrote:
| I've heard more startups taking this route after the new YC
| deal. 500k buys a lot of ramen.
| gnicholas wrote:
| Yeah, I know of some that have pivoted at least once and are
| still alive and kicking. I wonder how YC thought through the
| costs/benefits of increasing the invested amount so much.
| college_physics wrote:
| _Are_ we in a bad economy? Bitcoin market cap is 400bln. OpenAI
| eyes 30bln valuation etc. etc.
|
| Business cycles, timing the downturn and all that, does this
| Warren Buffet type "sound contrarian advice" apply also in Alice
| in Wonderland economies?
| alfalfasprout wrote:
| Just because bitcoin and OpenAI have nontrivial value doesn't
| mean we're not in a bad economy.
|
| Inflation is rampant still, even wealthier folks are cutting
| back, and interest rate hikes are destroying markets. Keep in
| mind markets always lead the broader economy by at least
| several months. They'll crash well before earnings consistently
| start looking bad and recover before you see earnings recover.
| US interest rate hikes are also having an outsized effect on
| other countries vs. the domestic economy.
| college_physics wrote:
| its a very mixed bag. e.g., mortgage delinquency rates near
| historical lows [0]. I picked those valuation examples to
| illustrate that 1) there is a lot of discretionary
| "investment" wealth around and 2) people are still clinging
| to the various "disruption" narratives.
|
| obviously inflation is real and the new rates regime is real
| but it feels that people are pre-emptively trying to cool
| things down, build some buffers etc. rather than an already
| realized economic malaise.
|
| the implication for the "time your startup" narrative of OP
| is that it is even less clearcut of a decision than if it was
| a real (let alone deep) recession.
|
| [0] https://fred.stlouisfed.org/series/DRSFRMACBS
| rgmerk wrote:
| Things might be bad in Silicon Valley right now but the
| broader economy is still chugging along pretty well.
| fortenforge wrote:
| Does PG ever think it's a bad time to start a startup?
| [deleted]
| 082349872349872 wrote:
| > _Another advantage of bad times is that there 's less
| competition._
| slackfan wrote:
| There definitely is. People are running around chicken-
| litteling like the sky is falling. In the meantime, I'm
| bootstrapping a services company because the person that
| provides the megaphones while everybody is screaming at the sky
| is the one who makes the money.
|
| It's not just less competition, it's the extant players in any
| market assuming there is less competition and getting
| blindsided by upstarts.
| josh_carterPDX wrote:
| "But it doesn't matter much either way. It's the people that
| matter. And for a given set of people working on a given
| technology, the time to act is always now."
|
| So agree with this sentiment. It matters less about when you
| start a company. It's how you execute. You might be building
| something very timely, but if you can't scale then it hardly
| matters whether there's a recession or not.
| roflyear wrote:
| And scale doesn't mean technology.
| Patrol8394 wrote:
| VC has unfortunately pushed forward a model that rarely helped
| building sustainable businesses, but rather grow fast, build
| hype, IPO, cash out move on model. It definitely benefitted few
| at the expense of many.
|
| People have accepted to work tireless hours for peanuts and paper
| money with the promise they will become rich: this rarely happen.
| Don't buy the hype. It is more the exception than the rule.
|
| Many multi billion dollar VC funded business are still not
| profitable and often don't have a path to profitability.
| p0pcult wrote:
| >but rather grow fast, build hype, IPO, cash out move on model
|
| you missed the step where you completely destroy the
| established market, and then when you're the only game left in
| town, make for a more expensive and/or worse product/service
| than what existed before.
| josh_carterPDX wrote:
| I think this is the old way of thinking in the VC world. Yes,
| it still happens, but I think enough VCs have been burned by
| garbage deals that they are starting to look under the hood
| more carefully. No VC wants to be funding the next Theranos or
| WeWork. Bad economy doesn't mean going back to 2008 funding
| levels. I think a bad economy today means that the companies
| being created need to have a viable path for growth as well as
| profitability.
| Patrol8394 wrote:
| >No VC wants to be funding the next Theranos or WeWork
|
| I wouldn't bet on it. Wait for $$$ to become cheap again and
| you will see all sorts of garbage with multi million $$$$
| evaluation out of thin air.
| josh_carterPDX wrote:
| It's a good point. It does seem like some VCs have short
| term memory.
| UncleOxidant wrote:
| Both of the companies cited as examples early on the the
| article, Microsoft and Apple were basically started by a couple
| of guys in a garage (or dorm room). VC wasn't involved until
| later stages. Probably most of their early funding came from
| parents. There are plenty of things that don't need VC funding
| to get going - they can either be self-funded or with loans
| from relatives in the early stages. At some point the decision
| can be made as to whether VC is needed to expand or if it's
| just fine to stay small.
|
| In the 90s my wife worked at a software company that makes
| scientific imaging software. They have a nice niche and
| continue to sell their software into academic and research
| labs. They never had more than about 7 employees - now about 5.
| It's a decent business that never needed VC funding and has
| gone for about 30 years now.
| dopeboy wrote:
| > Probably most of their early funding came from parents.
|
| Perhaps VC is an equalizer here. It makes it possible for
| founders (like me) to start the next Microsoft without having
| to rely on privilege.
|
| I understand allocation of VC resources has its own privilege
| issues but I'll take that slightly more accessible world over
| a world where your family determines the outcome.
| UncleOxidant wrote:
| Rich parents helped in the Microsoft case, but I don't
| think that was the case for Apple where the parents of both
| Jobs and Wozniak were middle class.
| zurtri wrote:
| I launched my startup May 1st 2021. And yes COVID was still very
| much in play.
|
| My thinking was if I can survive in the lean times, I can survive
| in the better times.
| emrah wrote:
| A good companion article to read in tandem (also by Paul Graham):
| http://www.paulgraham.com/notnot.html
| jyu wrote:
| It's an open secret that investors get 20% of the upside for 1%
| of the work of founders. Parrot enough plausible nonsense to
| impressionable people to get favorable investment terms and
| you're well on your way to monetizing your position as a newly
| minted thought leader.
|
| Nice work, if you can stomach it.
| jsjdbbd wrote:
| [flagged]
| bloodyplonker22 wrote:
| It's also an "open secret" that investors lose their investment
| when the founder fails. In addition, more than 90% of VCs are
| money losers, overall. Founders are taking the risk with their
| time, investors are taking risk with their money.
| rebelos wrote:
| Investors are taking a risk with _other_ peoples ' money. And
| their management fees usually cover very juicy base
| compensation, so their downside risk is minimal.
| gowld wrote:
| Those fees don't last long if they get bad returns.
| clpm4j wrote:
| Some people seem to be overthinking this by a long shot. If you
| have a company you want to build, then it's always the right time
| to start. The greater economy will always have influence both
| positive and negative. But considering this, it's probably better
| to start in a "bad economy" than a "good economy" assuming it's a
| strong business idea that you can keep alive and grow until the
| economy becomes "good" again, and then you can exit into the good
| environment rather than starting when things are rosy and
| wanting/needing to exit when things inevitably turn south again.
| atlgator wrote:
| We're not in the same market as this article. Typically, in a bad
| economy salary expectations are lower making a startup launch
| more "affordable." Unfortunately, that is not the case currently
| with ongoing inflation. Salary expectations continue to increase
| on average, not decrease.
| roberttod wrote:
| Taking this with a pinch of salt given the nature of our current
| situation vs. 2008.
|
| > Technology progresses more or less independently of the stock
| market.
|
| Progress could be defined in many ways, but sure as hell there is
| less money in the tech sector, and funding is very difficult
| right now as far as I understand.
|
| I do agree with the sentiment that the market shouldn't affect
| your timing if it can be avoided, but I wouldn't expect it to be
| very easy to start something capital intensive with a long road
| to profit right now...
| m0nk3y wrote:
| From Paul's perspective in 2008, this makes sense. And generally,
| this is sound advice.
|
| However, in the 2010s, we saw an explosion in tech business
| opportunities and cheap capital during strong economic times.
| Most of today's unicorns are from this era.
| tempsy wrote:
| Well the biggest difference is that the economy was "bad" then
| but central governments/banks were accommodating.
|
| It's "bad" now because central banks are actively making capital
| more expensive, which makes it harder to raise money for a
| speculative bet.
| UncleOxidant wrote:
| The two examples given early in the article, Apple and
| Microsoft were basically both started by a couple of guys in
| their garage. Not a whole lot of capital was needed initially.
| Sure, in later stages of both companies capital was needed, but
| the initial development stage were mostly self funded (some
| loans from parents likely involved at some point). Capital was
| way more expensive in the 70s when both of these companies were
| founded than it is now.
| sogen wrote:
| Note: Bill Gates' mom was a high rank executive at HP or
| something similar, forgot the details.
| UncleOxidant wrote:
| The Gates' definitely had money. His dad was a lawyer and
| founded a law firm. Definitely helped.
| gnicholas wrote:
| According to Wikipedia, he joined an existing law firm,
| and his name was added to the firm's name. [1] That firm
| later merged with other firms, and continues to bear its
| name even decades after his retirement. I imagine he/they
| made a good deal of money on their client Microsoft,
| especially during their antitrust trial!
|
| 1: https://en.wikipedia.org/wiki/Preston_Gates_%26_Ellis
| gowld wrote:
| It's a beautiful story of nepotism and rent-seeking. Bill
| got the job from a powerful friend of his mother, bought
| someone else's work outright, customized it, and licensed
| it to IBM on incredibly Gates-friendly terms (pay per-unit,
| non-exclusive license).
|
| https://www.nytimes.com/1994/06/11/obituaries/mary-
| gates-64-...
|
| https://www.cnbc.com/2020/08/05/how-bill-gates-mother-
| influe...
|
| > Mary was a respected businesswoman with many
| responsibilities, including her membership on the board of
| nonprofit organization United Way of King County. There,
| she met the late John Opel, then-chairman of IBM, who also
| was a member of the United Way board.
|
| > IBM's talks with Digital Research started to flounder,
| and when assessing options, Opel remembered Microsoft as
| the company "run by Bill Gates, Mary Gates' son," according
| to The Seattle Times.
|
| > When Microsoft won the job, it didn't actually have an
| operating system of its own. So in 1981, the company bought
| QDOS, an operating system created by hardware company
| Seattle Computer Products, and with it developed MS-DOS,
| the Microsoft Disk Operating System. Microsoft licensed its
| MS-DOS to IBM to use as the operating system for its
| personal computer. (In addition to Microsoft, IBM also
| contracted Digital Research and SofTech Microsystems to use
| their operating systems for IBM's personal computer.)
| teeray wrote:
| If there is true intrinsic value in the company's offering, I
| wonder if there's opportunity for fully bootstrapped startups
| to thrive. Maybe the growth isn't explosive, but it might be
| more sustainable.
| tempsy wrote:
| I mean it will be harder to raise capital extensive seed
| rounds but i'm sure small seed rounds will still be fine.
|
| As in I would be really shocked to see a new Uber for X or
| grocery delivery startup raise tens of millions right now,
| but yes small teams building something that isn't very
| capital intensive will likely still be able to raise money.
| Apocryphon wrote:
| There's a theory that I've seen on HN: in the event of a
| civilization-destroying apocalypse, future civilizations will
| find it incredibly harder to industrialize, because our current
| society has used up all of the cheap energy supplies and easy
| to extract mineral resources.
|
| I wonder if that is applicable here as a metaphor.
| 015a wrote:
| I've pondered this from the perspective of the Fermi Paradox;
| that Earth had a really fortuitous series of events where the
| planet went down one line of flora/fauna evolution that,
| despite millions of years of evolution didn't to our
| knowledge amount to intelligent life; experienced a global
| apocalypse which allowed that (plus later/earlier)
| flora/fauna to decay and become an easily available source of
| energy; then had a second line of evolution which did, for
| whatever reason, result in intelligent life; which now has
| access to all that energy from the last iteration.
|
| To me, that's a really convincing explanation for the Fermi
| Paradox. There may be other intelligent species out there,
| but evolution on earth seems to have a history of producing
| killing machines (and crabs. its always crabs). So, the gate
| to get to intelligent life isn't probable; and then you hit
| the gate of "does that intelligent life have enough local
| resources to escape the gravity well of its own planet", a
| gate which for earth practically required a prior chain of
| hundreds of millions of years of evolution, and an opportune
| asteroid impact to clear that chain out and make way for a
| new one to roll the dice again.
|
| The mitigating factor for the second gate is: There could be
| other resources which could provide the power to escape a
| gravity well independent of biological decay (e.g. uranium,
| hydrogen). But at least in human history: think of what it
| _took_ for us to fully understand how to harness oil, let
| alone uranium or hydrogen, create a rocket, and get to space
| safely; we did that with the tremendous benefit of plentiful
| hydrocarbon resources (global shipping, computers, mining
| rigs, plastic, etc). At minimum; a species without this
| advantage would take _a lot_ longer to get to our level; but
| we did it in just a couple hundred years.
|
| Universal timescales help, but they also work against; as the
| earth has showcased, planets get bombarded by civilization-
| ending asteroids often. So, either an element of luck, or: a
| species has to have these structural advantages, and apply
| them for the purposes of asteroid defense before the next one
| hits; or its all over and the clock resets.
|
| Point being if I were a betting man: there are probably
| between 1 to 4 civilizations in our galaxy (including us)
| which have reached a similar or greater level of technology;
| but a great number more that are functionally trapped in a
| steampunk age, unable to escape their own planets.
|
| My other more fringe theory for the Fermi Paradox, which to
| be fair is practically the entire plot of The Last of Us, is:
| that the Apex Predator on every planet that is capable of
| evolving carbon-based life is Fungus. Eventually, Fungus
| always wins; and takes intelligent civilization with it.
| generalizations wrote:
| I've seen that theory here too. A counterargument is that
| we've also brought a lot of valuable resources to the
| surface. Industrialization may simply be 'differently hard'.
| Apocryphon wrote:
| To apply that back to the metaphor, it's also said that one
| salutary side effect of the dotcom bubble is all of the
| infrastructure built during it, such as high-speed fiber,
| which were fundamental for the Web 2.0 wave. So perhaps
| that is the "surfacing" of resources that a later tech
| boom- our boom- profited from.
| gowld wrote:
| In the event of a civilization-destroying apocalypse, energy
| needs will be tiny, so they can use the existing mines and
| fields and whatever.
| paulpauper wrote:
| Inflation is ironic in that it means people get poorer.
| Deflation of assets but inflation of prices.
| paulpauper wrote:
| 2008 was a huge outlier though. This was the start of the hugely
| lucrative cloud, app-payment, SAS, smartphone, 4g, app-store,
| social networking, mobile confluence. Also, low interest rates
| forever. A typical bad economy is not like 2008. But sound advice
| guessbest wrote:
| Not really sure how this advice is still relevant since Facebook
| with its own app store model helped save the tech industry in
| 2007 from the downturn like the one in 2001-3.
|
| The next big thing appears to be AI (not VR), but I don't really
| see how it can really compete with that historic low cost
| startup. What would a MVP AI even look like? Would it only be a
| good AI part of the time? We already have that. Try using Siri.
|
| > That was the task for some Stanford students in the fall of
| 2007, in what became known here as the "Facebook Class."
|
| > The students ended up getting millions of users for free apps
| that they designed to run on Facebook. And, as advertising rolled
| in, some of those students started making far more money than
| their professors.
|
| > "Everything was happening so fast," recalls Joachim De
| Lombaert, now 23. His team's app netted $3,000 a day and morphed
| into a company that later sold for a six-figure sum.
|
| > Early on, the Facebook Class became a microcosm of Silicon
| Valley. Working in teams of three, the 75 students created apps
| that collectively had 16 million users in just 10 weeks.
|
| https://www.nytimes.com/2011/05/08/technology/08class.html
| Apocryphon wrote:
| And it's astounding how much Facebook apps have been forgotten,
| with Meta's neglect and abandonment of their own platform. Not
| that it was a technology with an extended lifespan anyway,
| users were only going to stomach endless notifications from
| FarmVille and Mafia Wars for so long.
| alex_c wrote:
| I wouldn't say Facebook apps were forgotten as much as
| actively suppressed by Facebook after a certain point in
| time.
|
| In the early days of the platform app developers had a huge
| amount of freedom in terms of accessing users' social graphs,
| pushing notifications to timelines, and so on. It made it
| incredibly easy to build a viral loop and push out an app
| that spread like wildfire.
|
| Obvious downsides to that - big privacy issues, and annoying
| users with endless notifications like you said. Facebook had
| to start restricting what app developers could do, and once
| that happened it became much harder for apps to get traction.
| smcl wrote:
| Please remember that PG is a financially very secure person, who
| is in the business of getting people on board with YC and
| committing to throw themselves 100% into tech companies that will
| individually more than likely fail.
|
| If PG says "you should start a startup in a bad economy" it's
| simply a clever sales pitch, a spin on the current circumstances.
| Back in 2008 when this was posted it was presumably in response
| to the Global Financial Crisis (or "Credit Crunch" in the UK),
| I'm guessing it's being posted again due to the recent layoffs.
|
| It _may_ be the right time for you to take the plunge, but you
| should be reading this article with a clear head and remember
| that this is not an old friend giving you some sage advice, but
| someone who is incentivised to get you to take risks on their
| behalf.
| jrockway wrote:
| Yeah. The alternative is to chill out at your current job and
| be able to pay your mortgage, and then start a startup when
| money is raining from the sky like it was in 2021. It's
| cyclical. Tech isn't dead forever, and what's a good idea today
| will still be a good idea in a couple years. You'll also be a
| couple years wiser, which is never bad.
| volkk wrote:
| or, someone will simply start your idea (assuming it's
| original and good) and be first to market. lots more nuances
| around first to market, but PG has a point. there's no right
| answer and it's all personal, but if you do have an awesome
| idea, and it makes sense financially for you, then there's no
| point in waiting X years. you're just throwing those years
| out. worst case, what, you get rejected from funding because
| of a grim financial future? it's still extremely valuable
| spending that time building your project and getting that
| awesome experience of pitching/getting rejected.
|
| there's always an optimistic take to everything and a
| pessimistic one. if you're always taking the wait and see
| approach, chances are you're not going to do anything later,
| either. be somebody who does things and doesn't just sit
| around dreaming and waiting (like me)
| TruthShare wrote:
| And if this happens you switch jobs to the newly funded
| company and rest and vest. No shame in this game either.
| aerosmile wrote:
| Any startup that will hire someone focused on resting and
| vesting hasn't figured out their hiring, which is a 100%
| indication that the vesting is not going to be valuable.
| awill88 wrote:
| Or maybe they wouldn't know if they did? Are we
| pretending we're all mind readers?
| birdyrooster wrote:
| Any startup that has a business model which cannot
| accommodate the incumbent work culture hasn't figured out
| their business model, which is 100% indication that the
| vesting is not going to be valuable.
| mrbgty wrote:
| eh, even original and good ideas aren't that valuable.
| Sometimes an individual can get lucky with a gimmick but a
| sustainable business is usually successful when a team of
| great people are both having and executing on good ideas on
| a daily basis - and still needs luck.
| aerosmile wrote:
| I can't figure out if you're being sarcastic, because if so,
| you're nailing it. If not, literally every single argument
| you brought up is against the consensus in the YC community,
| which doesn't mean you're wrong, but it still stands out as a
| massively contrarian position on this site.
| Apocryphon wrote:
| The current fiscal environment is against the consensus in
| the YC community. The times they are a-changin'.
| jrockway wrote:
| I'm not being sarcastic.
|
| I get that people are concerned about their ideas being
| stolen, but honestly, you can probably come up with another
| idea. I think what most people who have their ideas stolen
| find is that it turned out to not be a good business, and
| someone else invested 2 years of their life on a painful
| slog to discover that. On to the next idea!
| [deleted]
| itake wrote:
| The advice could be for people that were laid off and face
| months of unemployment. Quitting your job now to start a
| startup might make less sense. But also, quitting your job
| now and getting a grant when stocks are undervalued, could be
| a good move too.
| cableshaft wrote:
| Also can also hack up an proof of concept or MVP during that
| time as well, a few hours a week at a time. Even if you don't
| complete it, you'll have that much more progress towards it
| when you decide to take the plunge later.
| _fat_santa wrote:
| How I read it is, during a good economy money will be more
| plentiful and investors will be more willing to invest in your
| startup. If you know it's easy to get investor dollars and
| every subsequent round of funding is almost guaranteed, you
| have the luxury of not being immediately profitable. It's much
| easier to peruse a business plan where you peruse growth and
| larger long term profitability at the expense of short term
| profitability when the economy is good because you are
| constantly getting investor funds and it's easier to sell new
| investors on your idea.
|
| In a bad economy you don't have that luxury. Not only is there
| not as much cash to go around, investors are pickier with the
| cash that they do hand out. This means you can no longer pursue
| a business plan that sacrifices profitability for growth, you
| have to prioritize making money. Assuming your business
| succeeds, it will then be better prepared to get investor cash
| when the economy improves and can theoretically weather future
| financial storms better.
|
| I realize this is a very idyllic way of looking at it and there
| are a million other variables that come into play, but I think
| pg is definitely looking at it in idyllic terms in his piece.
| mrits wrote:
| With so much supply I'm not sure he needs to write articles to
| increase it.
| smcl wrote:
| When the economy turns, people get scared and want to take
| less risks. This is an attempt to nudge you to maybe take
| some risks rather than spend a bit more time upskilling
| and/or searching for a role in an existing company.
|
| It's not technically wrong or anything, it's just business.
| But people sometimes forget that because we do get good,
| honest, selfless advice on here and it's sometimes hard to
| differentiate.
| proser wrote:
| Keep in mind this article is 15 years old. It could get a
| driver's permit in most US states.
| [deleted]
| mbesto wrote:
| Your sentiment is overall very valid, however please also
| remember this was PG who wrote this in 2008 and YC was only 3
| years in.
|
| > I'm guessing it's being posted again due to the recent
| layoffs.
|
| This was _submitted_ again (by someone not affiliated with YC),
| but it 's a repost.
|
| Objectively speaking starting a startup in a recession / bad
| economy is actually a good idea. There are numerous examples of
| why this is the case, but the simplest explanation is that you
| get to follow a regular venture cycle that correlates to the
| highest returns. Since it usually takes about 7~10 years to get
| to $1b+ valuation, this follows a normal market cycle. There is
| a reason an unprecedented amount of software companies IPO'd
| 2020~2021, because valuations were sky high, and not because of
| those individual businesses were strong but simply because the
| market was hot. If you can ride that wave you can create
| incremental wealth for _yourself_ , regardless of whether a VC
| is involved. In other words, timing is everything and starting
| when the market is at the bottom _is_ good timing.
| smcl wrote:
| I didn't intend to imply there's anything untoward going on
| here re posted/submitted, it's the same to me and I
| acknowledge in my post that it was originally posted a long
| time ago.
| dgb23 wrote:
| I agree with your caution. But the other side is that PG was
| right in 2008. Some of the big unicorn startups started around
| that time.
| mambru wrote:
| Survivorship bias?
| throwaway29812 wrote:
| Without data on industry wide startup failures year over
| year, impossible to say. But most likely yes.
| travisjungroth wrote:
| Not necessarily. If you say starting a company is great
| because you asked 10 post-exit founders what they thought
| and they said "lots of work but totally worth it" that's
| survivorship bias. Founders that didn't survive wouldn't
| say the same thing. If you're saying that founding a
| startup in a down economy is a good idea because of a
| higher chance of survival that's not survivorship bias. The
| non-survivors aren't ignored, they're included in the rate
| calculation.
| time_to_smile wrote:
| I think year here is also super important. In 2008, even
| without the benefit of hindsight, investing in tech is not a
| crazy idea. We had a real-estate/banking crisis and there was a
| lot of people looking to figure out where to put their money.
|
| Tech in 2008 looked very healthy, and VC funding only went up
| from there.
|
| We're looking at an actual contraction in the tech sector now.
| We can argue how about whether this is a small "correction" or
| something more major, but I think it is a good idea to not just
| blindly apply good market advice from 2008 to the 2023
| landscape.
|
| It probably is a great time for a startup, just probably not a
| tech startup.
| alfalfasprout wrote:
| > It probably is a great time for a startup, just probably
| not a tech startup
|
| Well, it's not really an issue of tech vs. non tech anymore
| is it? A good chunk of the largest companies are now under
| the "tech company" bucket. It boils down at the end of the
| day in whether they invest heavily in tech or if it's
| incidental.
|
| This mashes together companies as diverse as Tesla,
| Snowflake, and Airbnb together. The former is a car company
| with inventory, etc. The middle one is a SaaS company. The
| latter a travel company platform.
|
| Ultimately, a few things are clear-- even after 5% interest
| rates get slashed (which looks increasingly likely to happen
| in 2024 and not 2023) investors are no longer interested in
| businesses that have no idea how they'll attain
| profitability. I would argue this is a good thing-- it now
| forces companies to be strategic in what they invest in.
| nickdothutton wrote:
| The single best reason I'd give, for why it's a good time to
| start a startup in a downturn, is that it's all signal. There's
| little or no noise. No noise from buyers who are just tyre
| kickers, or who buy a little but dont truly adopt, even from VCs
| who might at other times waste a lot of your time.
| jll29 wrote:
| I would say whether PG is right or not depends on how much
| initial funding the founders have and what they're trying to
| build.
|
| If you have not a lot of savings to live from, and your runway is
| therefore short, you'd be stupid to quid your day job and launch
| your startup: your small savings will quickly be used up and
| that'll be the end, because you won't be able to raise a round.
|
| If, however, you have substantial savings to deploy so that you
| can get far enough to afford to pivot 1-2 times until you find
| product-market fit, then PG is right and taking the plunge is the
| right thing, regardless of business environment.
|
| If your plan relies on customers, then it also depends on whether
| your product or service is aimed at reducing customer cost or has
| value in a different way.
|
| To exemplify the above: I claim "You can/should start something
| like AirBnb in a bad economy, but not Google."
| sircastor wrote:
| > so that you can get far enough to afford to pivot 1-2 times
| until you find product-market fit,
|
| This line of reasoning has always felt so bizarre to me: try to
| start a business doing something you think is important and
| when you find it doesn't work, try some other business until it
| does. I understand it as a response to things not working out
| as expected, but people go into business with this as a
| strategy.
|
| I guess I'm just not that type of person.
| MattGaiser wrote:
| I assume the idea is that the initial impulse was in the
| right area, but the first attempt itself isn't quite correct.
|
| So you learned a bunch and therefore aren't starting from
| scratch with the 2nd try.
|
| I.e. you make some environmental tool and try to sell it to
| the government. You learn that the government is a byzantine
| mess. You then sell the tool as part of a service to the
| corporations causing the mess to prevent future lawsuits. You
| pivoted, but the tool itself still had value.
| hideo wrote:
| I think its a distinction between the type of person that
| says "I want to build a business, I think building product X
| sounds like a good way to do so" and the type that thinks "I
| want to build product X, I think building a business sounds
| like a good way to do so"
| davedx wrote:
| > I would say whether PG is right or not depends on how much
| initial funding the founders have and what they're trying to
| build.
|
| I think PG is fairly criticized for some things, but on this
| topic I trust that he knows what he's talking about.
| randomdata wrote:
| _> I claim "You can/should start something like AirBnb in a
| bad economy, but not Google."_
|
| Yet AirBnB was born into a good economy (that, in fairness, was
| on the cusp of going quite bad), while Google was born into an
| economy that was just starting to recover from being bad. Not
| when you start but when your product is ready to ship may be
| more significant. By the time Google was ready for prime time
| we were in a good economy. When AirBnB was ready for prime
| time, we were in a bad economy.
|
| Skate where the puck is going, as they say.
| boulos wrote:
| > while Google was born into an economy that was just
| starting to recover from being bad.
|
| Huh? Google was started in the mid to late 90s (incorporated
| 1998 but started earlier at Stanford). It was quite literally
| during the peak years of the dot com bubble and the US
| economy was doing fantastically well. The Clinton
| administration was even trying to draw up plans for what to
| do if the national debt was paid off...
|
| Are you thinking about when Google went _public_ in 2004?
| randomdata wrote:
| Work on Google started in 1996. While things weren't bad
| per se, we were still working through recovery from the
| early 90s recession. It wasn't bad but it wasn't good
| either. By 1998, when Google was ready to ship, things were
| quite good.
|
| If, in an alternate universe, work on Google had started in
| 1998 when the economy was strong and didn't ship until
| 2000, things could have been quite different. It was no
| doubt important that they were ready to ship when the
| economy was at its peak. That means starting when things
| aren't so good.
| boulos wrote:
| Using unemployment as a reasonable signal, I don't think
| 1996 is that connected to the 1991 recession.
|
| https://fred.stlouisfed.org/graph/?g=YUZM
|
| Sure, it was still above 5% in 96 nationally. But
| strongly down from the summer of 92 peak.
|
| Additionally, Netscape's IPO was in August 1995. I
| wouldn't call that a bad environment for starting an
| internet company.
| newaccount2021 wrote:
| [dead]
| logifail wrote:
| > If, however, you have substantial savings to deploy so that
| you can get far enough to afford to pivot 1-2 times until you
| find product-market fit, then PG is right and taking the plunge
| is the right thing, regardless of business environment. [snip]
| I claim "You can/should start something like AirBnb in a bad
| economy, but not Google."
|
| Q: How many times did AirBnb and/or Google have to pivot to
| find product-market fit?
| fidgewidge wrote:
| PMF is tricky. Google's first product was a hit, but it
| wasn't a market fit because nobody was paying for it so there
| was no market. They were attempting to sell an enterprise
| version (the search appliance). They pivoted pretty fast to
| AdWords.
|
| Like, is there PMF if no money is changing hands. I saw
| Docker be described as having extreme PMF but they went down
| because they had a product, but giving away cool stuff does
| not create a market.
| mach1ne wrote:
| Some startups do, some don't.
| logifail wrote:
| > Some startups do, some don't
|
| I'm not sold on pivoting, and I'm not the only one. See:
|
| Too Many Pivots, Too Little Passion
| https://hbr.org/2012/09/too-many-pivots-too-little-passion
| Swizec wrote:
| Google pivoted from "ads ruin search engines" to one of the
| world's biggest advertising companies. That's a pretty big
| pivot
| ttul wrote:
| The runway from nothing to something is about ten years on
| average. If you start when times are hot, you're closer to the
| next reset event and more likely to experience the reset before
| you exit. If you start when things are dead, you have the most
| time to figure things out and exit when things are hopefully not
| dead yet.
| karolist wrote:
| Is the economy really bad now? US unemployment rate is lowest it
| has been since 1970, where I live the restaurants are full, roads
| are full of cars, planes are full of people, hotels are booked
| for events well in advance. What exactly is bad besides people
| having less throwaway cash because eggs and bread is more
| expensive? Tech layoffs are, IMHO, more an excuse to cull bloated
| orgs without getting negative press because everyone is doing it,
| not because of necessity. We're past the Ukraine/Russia war shock
| and resource shortage scares, what else?
| soapspudster wrote:
| I'm of the opinion that the right time is always now. However,
| when things are great, large wealthy companies over-hire and
| over-pay everyone. It sedates good employees to stay and be
| comfortable.
|
| When things hit the fan, the larger and fatter a company is, the
| more likely they will throw the baby out with the bathwater. They
| go into ultra-stupid cost-cutting mode and that is a great
| opportunity to hire some of the best dormant employees you'll
| ever meet.
|
| Since the best determinant of a company's success is the makeup
| of the team, I'd say when the economy is bad is the best time to
| start a company. You'll land some of the best talent and that'll
| give you the best chances of success.
___________________________________________________________________
(page generated 2023-01-18 23:00 UTC)