Is Going for Rapid Growth Always Good? Aren’t Startups So Much More?

Posted on Sep 22, 2012 | 93 comments


I think I’ve read Paul Graham’s post on “Startup = Growth” three or four times now. And of course on Twitter I’ve seen the Tweets, ReTweets and superlatives on what a great post it is.

Viewing the article through the lens of a venture capitalist there’s much to agree with under the mantra of “growth!” And when you read the article carefully it allows for a period of discovery in your business. For example

“The growth of a successful startup usually has three phases:

  1. There’s an initial period of slow or no growth while the startup tries to figure out what it’s doing.
  2. As the startup figures out how to make something lots of people want and how to reach those people, there’s a period of rapid growth.
  3. Eventually a successful startup will grow into a big company. Growth will slow, partly due to internal limits and partly because the company is starting to bump up against the limits of the markets it serves.”

There’s an allowance for a period of time where there’s “slow or no growth” while you’re figuring things out.

He also talks about the rate of growth and the need to pick targets, measure and question assumptions when you aren’t achieving your objectives. I spend a lot of time encouraging startups with whom I work to take measurement more seriously. I talked about some of that here. So I like that bit, too.

He talks about making things that people want & going after a big enough market. Check.

He also nails the reason why venture capital is still necessary to grow large businesses quickly in a world where the costs of running startups have fallen dramatically

“Why do founders want to take the VCs’ money? Growth, again.

The constraint between good ideas and growth operates in both directions. It’s not merely that you need a scalable idea to grow. If you have such an idea and don’t grow fast enough, competitors will.

Growing too slowly is particularly dangerous in a business with network effects, which the best startups usually have to some degree.”

This is a frequent theme of mine when asked to speak to audience about the VC industry. “Lean” is great in the early days but if you discover an attractive market opportunity you need to get “fat” really quickly or somebody else will.

As a person who spends much time thinking about the venture capital & startup community and who has seen good times & bad times across many economic cycles the article is well written.

Still.

I worry that many people will read this post and get the wrong message. And the wrong message is frankly strewn all over Silicon Valley.

Founders will continue to take the “growth at all options” path that leads to privacy & trust creep at places like Quora. Startups will continue to be aggressive in spamming us in our Facebook timeline. Fooling us into downloading an app to watch a video and afterward feeling duped.

After all, growth equals high valuations and loads of venture capital! And headlines. And approbation.

But for every breakout that works are probably 10,000 that don’t. And many of these companies burn through cash too quickly trying. Or pivot too quickly. Or only go after markets for which network effects are possible.

And this is fueled by the VC culture in Silicon Valley.

I was recently talking to a VC about a business I was looking at and I was asking whether he found the business interesting, too. He said, “I’m not really convinced. The company hasn’t really reached ‘escape velocity‘ which means it must not be working.” Escape velocity. The speed needed to “break free” from a gravitational field without further propulsion.

Reach it quickly or investors will look elsewhere. I know that some of the best businesses have seen this rapid acceleration quickly: Google, Facebook, Instagram, AirBnB and the like.

I think that our industry is too quick to believe that it’s “up and to the right” quickly or it’s time to move on to the next thing. Investors seem to think this way these days. And so do entrepreneurs who are quick to pivot to new businesses or to sell in an acquihire.

And you can follow the craze for instant growth right up the value chain. LPs (the people who invest in VC funds) want to know what “hot” deals you’re in. “What exits have you had?” “What, since ’09? If I exited those wouldn’t it sort have been a …. failure? I’m shooting for 7-to-10-year exits.” Most LPs are not. They want to know that you’re in Twitter, Facebook, Square, Fab and the like.

Instant growth = huge valuation from follow-on investors = big VC mark-up on our quarterly reports = LP interest. Grow or die.

I don’t really think the incentives work well in this scenario. It encourages a bit too much FOMO (fear of missing out) and over-valuation in companies and a desire to do huge financing rounds to be perceived as the “knock-out winner.” How’d that turn out in the late 90′s? It’s been high tide since 2009 so an entire batch of entrepreneurs don’t know what low tide even looks like.

To be clear, growth is really important when I’m an investor. But I do wonder about a couple of things:

1. Some businesses take a bit longer to percolate. There’s a saying in startups that “being too early is the same as being wrong” and that’s true. There are times where your solution should work but it just doesn’t. It might be for technical reasons or it might be for customer adoption reasons. I’ve seen this happen before where companies seems to be struggling with traction and one technology change at an industry level suddenly propelled them more rapidly. If you tried to build Instagram before the iPhone, for example, there was almost no way you could have seen their growth rate.

And the “stay lean” argument isn’t only good for entrepreneurs, it can be good for VCs, too. In a pool of 25-30 investments in a VC fund the goal is to have 2-3 huge outliers, each of which return the total fund size. It is VC math, like it or not. Our partners have invested in more than dozen companies that became worth more than a billion dollars and that has disproportionately driven returns.

But 98% of VC exits in our industry are sub $100 million. So investing $3-5 million in a company and taking a year to 18 months to see how it develops before adding more fuel can often be the right course of action. Pile on huge VC money behind you and you have the same problem entrepreneurs have when they raise too much money.

As I’ve looked through our own returns I see many 5-8x returns that contributed greatly to our financial results. Fred Wilson talked about this too, in his spot-on post about “the fallacy of bi-modal returns” which is worth reading for anybody interested in VC math.

2. Some entrepreneurs can make a dent in a smaller world. I think the one thing that niggles me that most is reserving the word “startup” for only super-growth, Silicon Valley style businesses. I think we should encourage an entire generation to think about building startups. But  my definition of the word is much broader. Business that are innovative. That leverage technology or drive change. Businesses that are probably on a rapid growth scale by historic levels but would prove very bad investments for venture capitalists.

Has Silicon Valley really become so elitist that it wants to reserve the word “startup” for companies only with the ambition of hyper growth?

I started talking about this 3 years ago to audiences where I encouraged (and still do) most people NOT to raise VC. And I’ve talked openly about why many services businesses should not feel product envy and chase the commensurate growth rates.

3. Are we not subtly convincing too many people to “go big or go home?” I don’t love that culture. I love it in a subset of people & businesses. I love it in the companies in which I invest. Still, I think many entrepreneurs are done a disservice by buying into this mantra.

Why? Many entrepreneurs would have / could have built successful businesses that changed their lives, enriched their careers, provided value to customers and made money for those involved. Perhaps I feel this way because it’s my story.

I built two companies. Neither achieved the kind of growth rates associated with Silicon Valley but both grew significantly faster than traditional industries and both were innovative.

My first company was used to manage workflow & share CAD drawings and plans on the $16 billion refurbishment of the London Underground. It was also used as a project management tool & document storage system for the largest private bank in Europe who even stored images of their bank vaults on our servers. We worked with police departments, the ministry of defense, many of the largest utility companies in Europe and a ton of contractors, engineers, architects, developers and suppliers.

In revenue terms our first two years of sales were $2.1 million and then $5.9 million.

We sold the company when we hit $36 million in bookings and $16 million in SaaS GAAP revenue. Not Google. But a tremendous experience for everybody involved.

Many people made money. Not Eff You money but money that changed  lives forever.

And many people’s careers were launched.

David Lapter our CFO & the best one I ever worked with. Now he’s CFO of Fab.com
Stuart Lander, who was the President & COO is now helping run Internships.com
Ryan Lissack is the CTO of Maker Studios
Tim Barker is the CPO of DataSift (and prior to that headed European marketing for Salesforce.com)

I’m pretty sure all of these guys feel that they worked at a “startup.”

And many more employees parlayed their experience working with us into careers at Google, Microsoft, Oracle, Salesforce.com and elsewhere.

And it launched this author’s career and taught me everything I know about sales, marketing, hiring, firing, fund raising and so on.

I don’t know how you can call that experience anything but a startup.

Our second company was bought by Salesforce.com. It’s now the foundation for Salesforce Content. Used by millions of users.

No tiny islands were bought with the proceeds but every member of our team earned more money than we had seen in our lives.

I could look back and say we should have tried to be Box or Dropbox. But we didn’t. And I don’t believe any of the team members have regrets about the outcomes of their lives or the experiences they have had since.

So before we rush to define startups as a Silicon Valley, go big or go home, grow at all costs, succeed quickly or move on culture I think we should reflect on the encouragement we want all future entrepreneurs in this country to have.

I know that Paul Graham never said you had to be high-growth startup. I read his post carefully enough to know that he really just described the phenomenon that we uniquely see in Silicon Valley and that drives many VC businesses and some of the fastest growing companies in our industry.

But I believe that without presenting the other case to my definition of startup entrepreneurs who want a different path and who are young & impressionable they might read into Paul’s post a certain religion of going for instant, rapid growth. Just the same way that “pivoting” in lean startup terminology initially talked about launching features and pivoting your product as customers gave you feedback and morphed into “it’s ok to start by doing subscription commerce and if it doesn’t work relaunch as a mobile payment platform business.”

I want the definition of startup back. To be used by anybody who is willing to take the risk to quit their corporate job and go out and try and build an innovative, disruptive, tech-enabled business that tries to change the way things work in the world.

It’s ok to build a company that stays small, has a few million dollars in revenue and builds careers, bank accounts and enriches client experiences.

It’s also ok to raise venture capital and try to build a monster business. But know that if you don’t go “up and to the right” you might find yourself abandoned (unable to raise more VC) or even ousted (to bring in a CEO who can show rapid growth or die trying) in the name of growth & returns. It happens more than is reported.

It’s also ok not to raise venture capital. To aim at changing a small corner of your world or industry. Or your life.

And I applaud all of you who try.

  • http://bothsidesofthetable.com msuster

    I didn’t disagree with Paul’s post – to be clear. But I think too narrowly focusing the definition of “startup” would be a shame for what we want to achieve in our country – encouraging more innovation and risk-taking.

    I see many businesses here in LA that raise $500k-$1m and will never be “truly scalable startups” but may just make a small dent in their corner of the market. Should I pull them aside and say, “I’m sorry. Please don’t call yourself a startup. You’re really just a new business like any other. TRUE startups have the ambition to be massive businesses and scale quickly.”

    I don’t see how that makes sense?

  • http://bothsidesofthetable.com msuster

    Yes, but we define “integrity” differently. I believe that when you sign up a system in which users expect to be able to read articles privately you should expect it to stay that way unless somebody asks your permission otherwise.

    Imagine what kind of Internet we’d have if Google decided to publish what each individual person was reading.

  • http://bothsidesofthetable.com msuster

    re: YC or PG envy – I have neither. My muted tones were for two reason.
    1. I fundamentally agree with the premise of his article even though I don’t find it inclusive enough
    2. In the past I have written some posts in which I was very direct in critiquing somebody’s point of view. It always ended up irritating the other person rather than them seeing it as a debate. So now when I write I try hard to be less offensive.

    By the way, I have never gone to a YC demo day and may never do so. I don’t seek out YC companies and they don’t impact my business much other than driving up the costs of which I must invest in startups (which is fine, it’s a free market).

    By the way, I 100% agree with your comment about not envying those with more. There will ALWAYS be somebody with more and if you chase that you’ll never truly be happy.

  • http://bothsidesofthetable.com msuster

    hear, hear. agree completely kiril.

  • http://www.facebook.com/mikesu Mike Su

    Amen. While the googles of the world are sexy, we’ve finally come into the age where the tech smb market is viable. I mean tech businesses that are smb’s, not tech cos targeting smb’s. I believe these companies that can be launched all across the country will in aggregate create far more jobs and create far more value than the top 100 VC backed start ups. The way Silicon Valley turns their nose down at these companies would be like McDonald’s turning their nose down at urasawa cause it doesn’t scale.

  • http://www.linkedin.com/profile/view?id=18847600&trk=tab_pro BillMcNeely
  • http://whoat.net/ Lee Blaylock

    I don’t get caught up in the term startup, b/c any business that starts and grows is one. Yet there are many kinds and the ones LPs want GPs like Mark to find and nurture are the ones that will deliver much higher returns than found in more mature companies trading in the public markets. However, disciplined institutional LPs won’t allocate more than 1-3% (a few higher) of their AUM to such a risky asset class as Venture.
    Growth is the fountain by which Wall Street thirsts, so therein lies where markets are driven. Lots of good conversation on growth with Wilson, Suster, Graham and others recently, but what happens where there’s lower growth than public markets look for and the portfolio company sits in a venture portfolio with no love, thus an orphan, albeit a cash flowing one at that. To support Fred Wilson’s bi-modal VC return fallacy, there is still real value here to be had.

    I could make a long insightful post that no one will read but the wonkish PE investor, but to summarize… if you have a solid cash flowing business,but low growth and esp with a market cap of < $1b, it should not be a public company b/c Wall Street doesn't care about you – and NEVER will as it just just too expensive to cover you given the new world order. Yet, too many public small cap boards take on too much risk in search of that brass ring and get Wall Street's attention. The same happens in more private boards than it should b/c the VC investor is looking to achieve as high a risk/reward return as possible.

    If that business, that, say did $100mm of revenue and 12% EDBITA but only growing at 5% to 12%, private boards would run the company differently than the way most public boards are oriented. They'd invest in the core business to remain relevant and competitive, but not chase growth with too much risk. They'd buy out other share holders and then look to dividends once the inflection point hit.

    I'm not saying this is the focus of the VC model, but more often than VCs want to experience, they find portfolio companies that miss their mark in terms of getting into geosynchronous orbit, but still have solid, cash flowing businesses, but low growth so options are limited, esp as a fund comes to EOL.

    See this chart for a good explainer on how companies move from the left, VC funded that don't yet return the cost of capital (Stage A) to Wall Street darlings growing rapidly (Stage B) to cash flowing machines, albeit low growth (Stage C – think MSFT) to dying winners in Stage D (think Dell) to distressed companies in jeopardy of going out of business in Stage E (e.g. Blockbuster). Very few companies move from Stage D to Stage B (Like Jobs took Apple in a rare feat of mgmt excellence).

    All product companies go through stages and the ones with the ability to constantly turn out new products in attractive growing markets and stay in Stage B and maintain growth, will be the ones most rewarding their customers and employees, thus shareholders as well.

    This chart below will tell 1,000s of words. It is from a firm I'm an advisor to.

  • http://blog.ideatransplant.com Jan Schultink

    Maybe

  • http://bottomlinelawgroup.com/ Antone Johnson

    Seems to me that PG’s view makes some sense for startups that have already achieved product-market fit, but for those in earlier stages, if they follow Lean Startup methodology — doing customer development, “getting out of the building,” developing a minimum viable product — it makes no sense to use consistent rapid growth as any kind of litmus test of legitimacy. In fact, to turn things around, rapid growth, when it occurs, is an *indicator* that product-market fit has been achieved. Does that mean the startup wasn’t really a startup in the earlier stage? Hardly. To quote Steve Blank, “a startup is an organization formed to search for a repeatable and scalable business model.” I think that fairly covers the period of “incubation” before hyper-growth kicks in.

  • dwaggle

    Hi Mark, you’ve already had quite a reaction to your post but I’d like to give you my views. I’ve been working on a new venture for quite sometime already and as I got closer to finalizing a model and strategy, I started engaging with a number of investors (VC firms, angels) in Europe and in the US. Many have been kind enough to advise me and explain why they wouldn’t invest; this has been very useful for my focus. However, I found myself in a place where eventually I felt uncomfortable: it seemed I was more worried about my (future) business pleasing a potential investor than building a solid business. As it became clear to me that the VC world worries more about maths and probabilities and appears to be relatively incestuous (which I can understand: reduce risks so invest in people you know or were referred), I decided to change my line of conduct: I worked on a strategy without investment. I have lost confidence in finding any VC providing seed; so I’ve been doing what part of your post talks about. I’ll still be looking for investment at a later stage to fund growth, but I’m not looking for funds to start me up anymore (unless an investor turns up on my doorstep by magic!). I’m working on getting proof of concept and a bit of traction with my own means. I’m hoping I won’t ever have to need investment to grow though. Anyway, I have found it discouraging that investors would invest in 10 ventures knowing only 1 or 2 will make it big enough for the 8-9 failures to have no effect. This is a speculation game, not investment.

  • kcorazo

    Speaking of Steve Blank, his definition of “startup” is more useful: “a temporary organization built to search for a scalable and repeatable business model.”

    This definition is great for keeping startups focused on their mission: to search rather than execute. And the skillset, the body of knowledge, the discipline of doing this is applicable to startups with different kinds of scalability DNA. The thousands of readers of your book surely are not limited to people doing high-growth startups.

    People have been using “high-growth startups” and “scalable startups” for years, like “high-growth fish” and “scalable fish.” This implies there are other kinds of fishes. Why straightjacket words when you have adjectives?

    Why don’t we just let Silicon Valley folks use startup the Paul Graham way and let the rest of the world use it to say “I don’t know if this is going to be a real business, but what the heck, I’m making the leap.”

  • http://giffconstable.com giffc

    Thank you for writing this counterpoint. You put your finger on a lot of things bothering me about Paul’s post, especially an attempted redefinition of the word startup. I am much more inclusive,

  • http://www.converser.io/ Barry Nolan

    Well said Mark. This is what growth looks like for the 99%.

  • http://bothsidesofthetable.com msuster

    Agreed. I think the need for YC rapid growth is related to demo day

  • http://bothsidesofthetable.com msuster

    Thanks for the input, Lee. And for summarizing your argument. I like the chart, too. Only question is … it’s hard to know who’s in B a priori. Salesforce.com has seen spectacular success, it was certainly not a guarantee 5 years ago. I should know! ;-)

  • https://plus.google.com/u/0/b/114718778524214371963/114718778524214371963/posts kidmercury

    suster vs graham? suster delivers the knockout punch with this blow.

    also, i’ll take growth of revenue over growth of users. they are not the same and i think we are entering a phase where they may be inversely correlated beyond a certain point. niche, qualitative networks will offer greater monetization potential than widescale networks, in my opinion, as i believe the latter will increasingly compete with incumbents like google and amazon without bringing a sufficiently disruptive technology. the more one scales the more it becomes a big data game, and so the more one runs right into google/amazon.

  • http://www.larry.com/ LE

    “In the past I have written some posts in which I was very direct in critiquing somebody’s point of view.”

    My wife (who is great by the way) got upset this morning because I asked her when she was at the market if she could get the large tomatoes instead of the small ones.

    I was raised on criticism and hate useless pats on the back. When I tell someone an idea I want to know what they don’t like about it I don’t want to hear “wow that’s great!”.

    “It always ended up irritating”

    I think that is probably why teleology-wise most people (not online but IRL) are lame and never open their mouths to offer critique. In general, our ancestors realized that it caused more harm than good to give someone advice or opinion, even if done in a nice tone.

    I like the detailed nature of your posts by the way as they are filled from the perspective of real world experience. I’m not a fan of people who write things (bloggers, professors, VC’s) who have never had to actually manage a real working business and I think you offer much value to anyone who is funded by GRP. We could call your angle on startups, “sustartups.com” by the way.

  • http://petegrif.tumblr.com/ Pete Griffiths

    I agree. Taxonomy is important and Steve Blank’s taxonomy is helpful.

    I think the problem arises because the word ‘startup’ doesn’t feel like a term of art. To one not schooled in lean startup theory or steeped in the lore of the valley it seems to have an obvious meaning – a company that is starting up.
    Paul wants to use the word to describe a small subset of such companies and Mark thinks he takes it too far. Paul is clearly correct that the companies he is describing have very different DNA from many companies that are ‘starting up.’ And Mark is correct that you don’t have to be Google to make a real contribution and I totally agree with him that people who worked with him in the companies he was involved in felt they were in a startup. I started such a company and it sure felt like a startup to me.
    I think Mark makes an incredibly important point about the speed of takeoff of a company. This is doubly important because it is well known that companies that are disruptive, that create new markets, are frequently slower to take off and yet these companies can create outsize returns. Hence the irony that the very VCs who depend on such returns are likely to dismiss the very companies that could earn them.
    A danger of the unfettered growth thesis is that it leads to pumping up numbers and doesn’t pay enough attention of engagement. This was excellently discussed by Fred Wilson and various commentators on AVC. “One thing that Paul did not touch on is the difference between organic and sustainable growth and temporary stimulated growth. “http://www.avc.com/a_vc/2012/09/growth.html

    Good piece – thanks Mark & Patrick

  • http://petegrif.tumblr.com/ Pete Griffiths

    Hi Antone – I don’t think Paul is saying that a startup (as he defines one) is one that has achieved the kind of hyper growth that he discusses but rather that it is an organization which explicitly intends to attain it. As such it has certain characteristics e.g. an idea that if realized can support such growth. Hence his discussion of the kinds of products and markets that might support what he calls a startup. Hence a company which has a startup idea can still be a startup whilst searching for product market fit and without having yet found it or having realized said growth.
    A company that believes its DNA to be that of a startup, ie it has the idea, but which never finds product market fit or growth despite best efforts is a ‘failed startup.’ And in fairness to Paul, this is different from a failed corner store.

  • http://petegrif.tumblr.com/ Pete Griffiths

    In fairness I think Paul’s article makes it plain why he believes it to be more than that. :) He discusses how the day to day attention to growth metrics sharpens focus and generates surprising insights.

  • http://petegrif.tumblr.com/ Pete Griffiths

    It would be extremely interesting for a week – politicians would cry and divorce rates would soar.

  • laurayecies

    Regarding the lack of inclusiveness – the key point I agree with here – I wonder how many companies in Silicon Valley meet his criteria. It feels like very few and the same ones we always here about. Those companies are great but do not on their own make a thriving startup ecosystem, a venture capital industry not to mention create the jobs and economic growth we need.

  • Rhatta

    Mark, we had several SHR meetings 2 weeks ago and many (if not most) VCs are speaking the same language. Gross user growth is not what they wanted to see, but rather, predictable and compelling organic growth metrics.

  • Peter Lalonde œ

    This is a great post. I am the founder of a startup that has potential to see huge growth (and allow us to keep the title startup I guess). I have seen first hand the lust for hyper growth in the early stages and pressure to pivot if you don’t see it right away. I don’t agree. Strong CEO’s have to have some conviction that what they are building will add long term value. It’s not bad to resist getting users for the sake of getting any users and focus on getting the right users to propel the business.

  • PaleolithicDiet

    Mark,

    It is not so much a matter of ambition, as it is economics. As you well know, a services-based consultancy is much harder to scale than a software company that delivers value at zero-ish marginal cost.

    Not that there is anything wrong with the former and not that it cannot be scaled, but it is certainly a different beast than the companies you would invest in.

    My point is only that we define and talk about the different types of “startups” accurately — because they are fundamentally different creatures with different challenges and opportunities, different risk profiles etc etc

    If we use precise language to do that, all stakeholders in the ecosystem benefit.

    If we don’t, if we use a term that is hyper-inclusive just because it feels good, it becomes worse than useless – and we all suffer.

    BTW Your point about “small dent” startups is one about innovation — I suspect you are referring to startups that are more towards the sustaining side of the Innovation Spectrum (for visual, see here: http://vlskvts.co/Ne04U1)

    These are what Steve would call “Buyable Startups” — again, the problem comes when the founder of a “Buyable Startup” would happily exit at $30m (let’s call that a double) but has investors and employees who demand the founder go for an all or nothing grand slam (+$500m).

    Either way is fine — but the expectations and language should be clear on all sides.

  • PaleolithicDiet

    Scalable is, like all things, a matter of degree. People can and do scale orgs like consultancies, but those are less scalable than things that look like, say, Instragram. Last thing, scalable is not synonymous with value.

  • PaleolithicDiet

    “A temporary organization built to search for a scalable and repeatable business model.” = innovating in uncertainity and built to scale. This is not referring to, say, a new pizza restaurant in a market with many existing analogs and competition.

  • http://twitter.com/Rob_DLG Rob DLG

    “I want the definition of startup back. To be used by anybody who is willing to take the risk to quit their corporate job and go out and try and build an innovative, disruptive, tech-enabled business that tries to change the way things work in the world.” This is a spot-on statement that should be recognized more within the industry. A lot of people can talk and preach but until you risk your own skin and get in the trenches you will NEVER be able to fully understand or respect others that do. You don’t need to be a child prodigy or tech genius to launch a start-up and be successful. Too many people in the community on both sides subscribe to that ideology.

  • http://elamadej.com/ Ela Madej

    Thank you Mark for that post, totally agree.

  • Scott

    The best fertilizer is the farmer’s shadow?

  • http://www.ibla.us/ Meganlisa

    Mark
    Your best post ever. I get so sick of the same old same old…
    Just read in Start Something That Matters about the busts…Pets.com, Toys.com, etc who scaled into nothing…Walmart took time. Zappos had a hard time raising money for a while. Fidelity took no VC capital. Etc.
    You have it perfectly…create something of value and don’t just build to scale.
    And you know that I’m totally about scaling, profitability and size (built my past career on it). But the best companies I’ve known ignored the outside pressure and made the right decisions for the business at the time not just to get VC funding.
    You made my day (and yes, I’m mostly working too…just it’s never fast enough).
    Hope you’re well.
    Megan

  • http://hirethoughts.blogspot.com/ Donna Brewington White

    Ela — so nice to see you pop up in this thread! You still in SF?

  • http://petegrif.tumblr.com/ Pete Griffiths

    What a wonderful expression. I’ve not heard it before – thank you!

  • http://twitter.com/jeroenjeremy Jeroen Fransen

    A grand post. Thinking like this you also give more room to those startups that deep down have technical and business scalability potential but that might not initially grow like crazy as they solve complex ‘real’ problems in the world. Yes I’m looking at you, ed tech startups!

  • http://elamadej.com/ Ela Madej

    ;-) temporarily back in Europe with the dev team here, getting my O1 visa and back there as soon as I can.

  • http://bothsidesofthetable.com msuster

    thanks, @kidmercury:disqus

  • http://twitter.com/blindman2k blindman2k

    By qualifying the term “startup” as “Buyable startup” for example, you are actually agreeing with Mark. The word “startup” on its own should be inclusive but the narrower definition of “Scalable startup” should be reserved for hyper-growth startups.

  • http://twitter.com/andyidsinga andyidsinga

    “I want the definition of startup back. To be used by anybody who is willing to take the risk to quit their corporate job and go out and try and build an innovative, disruptive, tech-enabled business that tries to change the way things work in the world.”

    ..that paragraoh really nailed it – thanks!

  • http://about.me/brandonmarker Brandon Marker

    “Fooling us into downloading an app to watch a video and afterward feeling duped.”

    I am still in utter shock that Social Cam, and similar “startups”, got the attention they did.

  • Siobhan Bulfin

    thanks so much for responding! wow. Yeah I put in the airplane miles :)

  • FamiliesGo

    It’s important to remember that VCs are looking for viable businesses that are also good VC investments and the two things are not synonomouse. Not every viable growth business is the right fit for VCs (just look at the Inc. 500) and not being attractive to VCs doesn’t mean your business doesn’t have potential. Too many VCs project the message that their mode of building companies is the only way and I’m not sure whether that’s tunnel vision or ego but founders owe it to themselves to look at all avenues of growth.

  • http://twitter.com/Connectionary Sean Wilson

    Great post! There’s so much arguing over semantics and analogy anymore–mostly for needy egos in search of yet more pointless, self-aggrandizing sense of elitism to add to whatever pigeon-hole or niche one has felt the need to crawl into.

    It’s sure not because any of it makes for smarter investments or acquisitions.

    We can make any sort of analogy we want to fit whatever mindset we bring to the table of entrepreneurship. Some folks like broad, panoramic vistas when feasting on analogies while others like their spicy business myopia. It takes all of a few moments to sprout more completely formed analogies and startup ideas than what we often run into in the world around us. It can take longer to type a brief example that shatters taxonomies and preconceptions others have dedicated years to forming than it does to create a better fleshed out business model than failed startups share in common. Or it can take weeks and be perfected, and still they’ll argue whey their take on it is more appropriate, ignoring perspective and applicability.

    Startups are like onions. Yeah. There are little onions, there are big onions. There are sweet onions and plain onions; some will make you cry more than others. The onions, like all tech companies (or even bricks and mortars companies), all are comprised of layers: ideas, business processes, participants, products, market relationships, finances, and so on. Every onion of any given size all shares the same basic layers.

    Big onions have more layers. Sometimes. A small startup may have have a team of developers thrashing keyboards 14 hours a day to turn out the big idea. A large one may have several teams, each with a different responsibility.

    Occasionally, the onions are bigger because the layers are simply thicker–a function perhaps of how long they incubated, were watered, were exposed to growth inducing sunlight or due to the quality of the soil (business environment/climate) around them. Perhaps the larger startup has several development teams not only doing different tasks, but has layers through which the code is processed and evaluated…specific security audit teams that integrate with the systems support crew (that were missing in the smaller startups because they’re using managed hosting for their SaaS product instead of trying to build their own data center) or some such.

    The onions all cook and eat the same. The only difference is that the more people I have to feed (marketplaces, investors…insert desired analogy component here), the more onions I need to serve to satisfy them (and their lifestyle which demands a certain kind of feast).

    Now I can say that Google was never an onion…it’s so much more massive, in fact, it’s the beef, the industry/market meat, the main course. Your startup that grew in a few months and sold for millions is just another onion. Google is a cow, a prime Angus beef steer. The world doesn’t live on onions, it lives on steak and burgers…so your taxonomies are just…what? Self-aggrandizing, elitism for onions that at best made us cry and in the end were only there to garnish the steak. We forget about the onions, even though we have them with our steak regularly.

    In the end, it’s how the onions were grown and how they were cooked (or not) that made them the perfect garnish or side for the economy’s daily dinner, or made someone cringe and say, “Take that away–I’ll try something else.”

    Or, maybe it’s those fish, really.

    Just not the way you think the fish matter. Perhaps startups are like fisherman chumming the water, dumping different baits overboard, hoping to attract the fish. Sometimes it’s the minnows that come feeding. Sometimes it’s a psychotic shark that hunts you and your boat’s crew down and chews you and your sinking boat for breakfast.

    You either hook the fish (investors, marketplace….insert favorite analogy component here) or you don’t. You either get it in the boat and back to shore to sell or have for dinner (sell, profit…insert favorite analogy component here)

    In any case, if someone were a hotstuff programmer, one could launch a startup and own a market over the course of a long weekend. I mean, create an app for trappers to run their trapline, geolocate and mark the location of each trap, allows them to speak and record the set details, bait used. I can cross-reference location data with past sets/performance and bait details on my smartphone now which I can later and extract a bazillion charts and data sets from. It allows me to manage my trap inventory and even sends me alerts reminding me I need to blacken all my #7 1/2′s before I run the next line. Version 2.0 will integrate weather data and fur market prices on demand…make sure we tweet that before we do anything else.

    Sure, trappers constitute a small market. But I can own it quickly. I don’t need China sized markets if I can take over 20 something smaller European markets…where they have more disposable income and a better history of trapping anyway. Eff that…I’ve got the only trapping app in the world worth a darn.

    If I want growth, I can export that same model for other purposes…coon hunters, houndsmen, deer guides who want to get paying hunters on a buck quickly. For them, I’ll include a module that allows them to add photos of tracks and/or bucks snapped with their phones to a track/deer identification feature so that anytime they come across a track on that 10,000 acre lease, they can scroll through tracks and see if it’s “Old Mossy” or “Muy Grande” that left those tracks in that dry, sandy creekbed near stand #8. This hunter coming tomorrow wants a 12 pointer and I know “Old Mossy” broke a couple tines fighting a young buck and so if it isn’t “Muy Grande” that’s passing through, I think I’ll stick him on another stand where my app data tells me that I’ve seen him at least as many times, but there have been so many other fighting bucks around to make such a wiley oldster shy away.

    Little ideas can turn into big ideas. Little ideas are extended in ways not everyone thinks, not even startup veterans. It will take me 200 times longer to type all of this than it does to come up with the idea for the comment, and I manage 35-65 wpm depending on how much coffee I’ve had and how inspired I am.

    It’ll take longer to convince some self-aggrandizing seeking VC that these ideas are good and worth pursuing than it will to probably create the products, roll them out, dominate those blue water markets that have fanatical segmentations and earn a profit…if I’m a hotstuff coder with a drop of business savvy. So, if I do it myself, because I can, does that mean my company isn’t a startup just because I didn’t let some VC with a lack of vision get in on the groundfloor of the company?

    Falconers. Holy birds of prey, they’re a tiny market, but I can own it too with a raptor management take on my line of outdoor integrated apps I’m now calling the Go Wild Apps family. I’ll check to see if it’s taken after I snag the domain names because they’re not….and I can make money off that whether or not I change the name down the road, I’m sure of it.

    And I would totally fire my COO and marketing department if they didn’t already have an app for hog hunters cooking by the time I had secured funding from some VC who doesn’t understand why most startup analogies and pigeon-holing is as useless as teats on a boar hog….or what a boar hog is.

    Scale is scale. The description of the scale is not the measurement of the thing being measured, it is a representation so you can wrap your mind around a thing.

    By the time you finish reading this post, Elk Hunter 1.0rc 2 will be available in our new app store.

    Turkey hunters and those wanting to to make use of our upcoming Grand Slam apps will be excited to hear those are on the burner now too.

    In 2013, as soon as we release our Outdoor Activism module, those of you who like to pay thousands of dollars to visit other countries and work hard studying mountain goats or tree frogs will join the Go Wild Apps community, bringing balance and (insert latest politically correct youth/outdoors marketing spiel here) to the family. We’re glad to have your dollars too. Just think of how you’re going to be able to submit data in realtime to the Go Wild Global Critter Watch database and make a difference in so many ways. Government agencies will gain increased knowledge about species densities, migration patterns, sportsmen and outdoors enthusiasts will benefit as well.

    You’ll be pleased to know we’re adding one-click “Donate to (insert any one of 1000 species here) preservation” integration across the entire app family.

    Lay off with the terminology fixations. You can call whatever you want…whatever you want. How fast a startup grows and what one has to put into it is irrelevant if we’re talking investment returns. I recall how an awful lot of folks made good money (and still do) off domain names. Spent $15 on 10 domain names and made 184,396% return on average on each of their investments.

    Didn’t exactly need a VC to get that one-man startup in gear, make a more than relative fortune and get out. Sure, everyone’s got a few domains they’re holding onto these days….but there are all kinds of startups in the search field just like there’s still Google sitting there wondering how to move localized ads and search into the bedroom. A Tablet-of-drawers…integrated largescreen touch tablet w/mirror and drawers so you can lie in bed and stream movies?

    What do you mean those folks weren’t working the startup model? They were startups before startups were startups.

    VC’s just seem hung up on looking for some cool lingo, charts, formulas to jazz up a job description that’s in reality an awful lot like “throws mud at the wall, hoping some of it sticks and forms an intriguing pattern I can call art and make money off of.” I don’t care how many charts and formulas you create to explain the interaction between the mud and the wall, you’re not going to make the mud look any different no matter whether or not you perfect the mud. There’s still throwing involved…how much, with what force. Is the market the wall, or is gravity? Why do we need another freaking analogy?

    Maybe I’m just biased in favor of doing things that work because you find a way to make them work and reap what you can, when you can, where you can, how you can, to the extent you wish, doing what you think is good, in a manner you think best, reflecting your personality, to achieve the ends you desire. The appropriate term in the lexicon for that is “being” and all attempts to redefine it will fall short.

    Because business is about relationships. All of the relationships–people, money, processes, ideas, assessments, strategies, personalities and on and on. And despite the underlying common business frameworks, no two businesses are alike–because no two businesses have the exact same set of relationships, and never will.

    Next year there will some new lingo to describe the same things that business has been about and carried on for thousands of years. But someone will want new lingo to help showcase their take on it, their technology, their application or approach or…need for self-aggrandizing recognition. Hey, it’s OK. We all want to be remembered. Some folks have plaques under trees, some like marble, some like corporations, and some heal. Whatever you like.

    The new lingo, of course, is important because sharing and liking really never existed 10,000 years ago. And 10,000 years from now everyone will think startups are what happens when you think about a business idea–and a complete business model will appear as a hologram data storm that changes in response to thought impulses, which will run 10,000 simulations and tell you the scientific results of your business idea will only net you a 58% ROI over the next 10 years….about 10,000 nano-seconds after you had the thought and subsequently thought, “Analyze.”

    Or something.

    Can we get past the lingo and allow that no one owns the language of business, and that perhaps such limited thinking and taxonomies in current use are unsuitable for defining relationships in every case the exact same way?

    Damn, now my coffee’s cold… Suddenly, I no longer care about a startup manifesto. Just your VC cash for my apps. Why are VCs always so slow?

    You can almost hear the shrinking returns while they worry about blog posts.

  • http://www.buildtracks.com/ Gregor – buildtracks.com

    “It’s ok to build a company that stays small, has a few million dollars in revenue and builds careers, bank accounts and enriches client experiences” – I think “It’s ok” is playing this down somewhat…

    It’s hugely difficult to do this and even harder to maintain over a longer period. It takes a lot of will power. I’d like to see more people who start a company with this as their goal. Perhaps if we all started more modest companies then collectively we might be able to solve some of the world’s biggest problems. The world doesn’t need another Instagram that is for sure!

    Great post – thanks.