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Comment by sabat | Hacker News Reader

I'd take DHH's opinion more seriously if he had any actual experience with VC or startups. 37 Signals is not a startup -- they crow about that fact themselves. 37 Signals is a small business.

David's points all presume that he fully understands what Joel is planning; he clearly cannot, since Joel hasn't laid out a detailed business plan.

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Your point about DHH having no experience with VC is somewhat valid (they don't think Bezos counts), but your point about "small business" versus "startup" is completely devoid of meaning. You don't need to take VC to be a startup, and you don't need to exit inside of 5 years to be a startup either.

An uncharitable summary of your argument: 37signals has been too successful to know what they're talking about.

>An uncharitable summary of your argument: 37signals has been too successful to know what they're talking about.

That's not a completely unreasonable argument to make. The fact that they were able to achieve success without having to take in investor money, in some ways disqualifies them from giving advice on when its ok to take investments.

Were they successful without taking investors money? I mean, they took investors money, so how do we know? We don't know how much Bezos gave them, it could have been millions. I don't know. Maybe someone knows, but to say they were able to achieve success without having to take investor money isn't entirely accurate, because they did.

DHH explicitly said they didn't receive operational cash from Bezos in his interview with Steve Blank's class. They took the money to get tight with Bezos and to trade some equity for risk mitigation.

I don't find this argument compelling. It doesn't matter why you take the money. It matters that you took the money and keep saying it doesn't matter. If it doesn't matter, why did they take it? For the benefits and they did benefit from it, so they can't keep saying they haven't taken investors money and be credible.

I disagree. Manager-types call the years where you spend more money than you should "investment years", as in, you're investing in the business. If they took the money and are sitting on it, they clearly are't running the standard VC company playbook.

You're making too many assumptions. Who says they are sitting on the money? Who says they didn't spend it on rent and salaries when they didn't have any other money coming in? Maybe they spent it on publishing their book or adwords or off shoring. Who knows?

your point about "small business" versus "startup" is completely devoid of meaning

Small businesses usually aim to stay small businesses; 37signals is not going to grow to 500 employees and become like Salesforce. Startups, whether or not they take funding, aim for larger success and an exit, either a buyout or an IPO (whether it's within 5 years is beside the point). Those differences account for a big difference in management strategy.

An uncharitable summary of your argument: 37signals has been too successful to know what they're talking about.

You've misunderstood me. Since I think that there's a big difference in running a startup vs. running a small business, I don't think it makes sense for DHH to presume to give business advice to startups. Jeff Bezos? Sure, he could give advice; he's had a startup.

Until recently, I hadn't actually heard that definition of startup, at least outside of VCs talking to each other (because obviously VCs only care about the subset of startups that involve VCs and, ideally, large-multiplier exits). But in general I've thought of a "startup" as simply a new business based on technology. Some subset of startups were funded by venture capitalists, and a subset were aiming to grow huge and have quick exits. But others aimed at medium-sized businesses, or even smallish businesses. A large proportion of the people I know who've founded startups actively don't want an "exit", because they built it, and they aren't going to give it up anytime soon.

I'm not even really sure how it became that people assumed that startups ought to aim for large funding and under-5-year exits. Is that just a legacy of the fact that anyone with eyeballs could (and therefore, often did) get funding in the first bubble, so it just became assumed that it was the norm?

37signals has taken an investment from Bezos Expeditions. As Jason Fried explains in the blog post, it was certainly not the standard VC deal though - http://37signals.com/svn/archives2/bezos_expeditions_invests...

Considering that they're successful taking that route, though, they do have some first-hand experience to back up their claim that you can be successful without going the VC/startup route.

> 37 Signals is a small business.

Are they really a small business? I have the impression that they have a large user base - and IMO a better set of products than Stack Overflow.

Small business in the sense of few employees and little in the way of capital assets.

Just because you're making money hand over fist doesn't mean you're implicitly a "big business".

I guess I am trying to find out whats HN's definition of small business. Not sure why I am getting downmodded.

I too am wondering the HM definitions. Big/small business versus startup. What is the definition of startup? I don't understand why businesses that go for VC funds have the monopoly on the term "startup".

The definition I've seen given by PG is anything that scales up. In other words, a business that sells a product that can be used by many users. A small business is usually something that offers a service (a restraunt, a barber shop, or a consulting firm).

Funding has nothing to do with it.

I would say any business with fewer than 50 employees is a small business. According to Wikipedia, 37signals has 16. There are technical definitions in various countries of "small business", based in some cases on number of employees and in some case on revenues or other economic metrics. Any way you slice it, 37signals is a small business.

The point is that 37signals explicitly claims not to be a startup. Their line is that they're a profitable 10 year old company.

I once asked DHH in a Q&A his opinion on working on a startup outside of Silicon Valley. He corrected me.

That's not to say they were not once a startup. Every 'startup' should have the objective of becoming a sustainable business. Eventually the startup tag will go away, but that's not to say they were not once there. Microsoft was once a startup. Apple was once a startup. It makes me laugh here on HN where some guys weekend project can be considered a startup when it really has no potential to ever be a business.

"Better set of products than stack overflow"

This doesn't make any sense. That's like saying the Yankees have a better team than the Saints. Apples and oranges.

I don't use any 37s products, I have email.

However, I find StackOverflow invaluable. I will spend 20 minutes searching the web for answers, and when all hope is lost, I can ask a question on Stack, wake up in the morning and someone will have generously shared their knowledge, providing a perfect solution.

It is simply incredible.

There is a talk by DHH where he shared stories about his jobs prior to 37Signals. These jobs were at VC funded, dot-com companies (something involving games) and he claims to have learned some lessons there. He talks about this in the beginning of the Q&A session here:

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2334

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