Start a business, not a startup
37signals.com
37signals.com
Different kind of "entrepreneurial enterprises" can be successful in different ways - and most of us would be happy with either kind of success. So let's be specific as to what has the highest probability of success.
PG advocates iterative design throughout the product - he mentions it repeatedly in his essays and talks, that startups should start somewhere which looks good and change their ideas "en route". It seems to me that DHH might call this "trying to give turds wings" - instead, he advocates starting with an idea which will have a strong market to start with, like Basecamp. Then you can work a productive 4-day week working on "objectives [which] are reasonably clear". PG would argue that most of the time, the objectives should never be too clear - in the sense that we should keep an flexible mindset about what we are building.
I guess the unknowns we don't agree on are:
1) How many "obvious" market niches are there, where at least 2,000 users will pay you $40/month? In his SS2008 talk, DHH hypothesizes that there are many, but as far as I can tell, it's just a hunch.
2) What is the probability of hitting one of those niches, and what is the probability of getting acquired/going IPO using "iterative design" to traverse the space of ideas? I don't think there are enough data available to really say.
Since there aren't enough data to make a call statistically, both PG and DHH argue from their experiences - which differ. Both are right to claim that you can be successful either way, so I guess the best way to make a call is based on an individual's personality.
Just kidding. I don't think its fair to say that DHH is pulling markets out of his butt though. They service the fortune 5M, so obviously their own customers are living proof that the market is bigger than you'll ever need it to be. As well, $40 a month is less than most people pay for a cell phone. That's a pretty low bar.
To your second point, given that there exists a "fortune 5M" and there exists a lot fewer "big mammoths", I think there's plenty of data if you care to see it.
For those of you arguing for or against, read Joel's Strategy Letter I: Ben and Jerry's vs. Amazon: http://www.joelonsoftware.com/articles/fog0000000056.html
I am with the 37signals guys on this one. DHH's startup school presentation was refreshing.
And that's my own experience with startup. Everyone has a plan until they get into the mud.
[with apologies to all women, ever, for making a joke at your expense]
I have to believe that many people have done "the same thing" as Paul Graham, 37 Signals, and other successful people, and still gone nowhere.
I'm skeptical that people are really good at recognizing everything that they have done and the influence, good or bad, it had on their success, such that it ports well to other people and situations.
Folks probably cannot do "the same thing" as other people, because these other people cannot themselves accurately tell you what they really did, rather what they ended up deciding in retrospect was important to recall.
I think PB's comment is still the best, "Advice = Limited Life Experience + Overgeneralization".
However, what I learned is that if I accept that there is limitation to other people's advise, I would still like to hear from them in order to help me make my own decision and according to my own circumstances.
My experience with startups is that it always come down to impedance match. Having an academic background in mechanics, what I learned is that condition for perfect impedance match is when system is at resonance. The opposite of resonance is dissonance. In my previous career, I had discovered that dissonance is in fact a resonance, but it is a resonance of a sub-structure when someone has put an artificial constraint on the sensory point (such that there is no signal).
In some way, that's how startups work. Just because you fail doesn't mean that the rest of the world has failed. In fact, they might very well have succeeded but somehow you just weren't part of that success. So our job is make sure that we have as perfect as an impedance match with the rest of the world as possible, so that we are part of the resonance and not part of the dissonance.
This sounds very theoretical. But it is not. It is really about paying attention to others in your eco-system (VC's, customers, co-Founders, channel partners, etc.) and make sure that you are part of their success. Specifically in this conversation thread, we are talking about starting startups with VC money or through bootstrapping. I never felt that it is a religious question. Either way will lead to success and either way can lead to failure.
But as entrepreneurs, our job is to figure what VC's bring to the party and if we take VC money, how we could be part of their success. If we don't take money from VC's, how we could still be successful nevertheless.
I tried to organize my experience and my thoughts in my book-in-progess (http://www.StartupForLess.org).
As a starting point, this analogy seems useful to me, but I believe that when probing further, more complexity often shows up. Various stakeholders might have different impedances; e.g. your investors might resonate with you on a different frequency than your customers do. There can be many mismatches like that, and I don't see how I could possibly foresee them all while I'm building in order to prevent them upfront.
Another aspect: paradigm shifts in Thomas Kuhn's sense seem to <i>require</i> dissonance. After all, how can you make a radically innovative product if you're in perfect resonance with "the rest of the world"?
To some engineers, "Make something people want" might seem like a less precise directive than "Match impedances", but it might actually be more useful when getting up in the morning thinking of what to do today.
http://foundread.com/2008/04/18/why-you-must-embrace-rejecti...
But more importantly, to follow up on your comment. The question really is about "making something people want". We all know that this is a necessary condition but is it also sufficient. In the old days, it would take a lot more than that to succeed (so it was not sufficient). But time has changed. I believe today under certain constraints, it can actually be both. In the following, I talked about "narrowcasting" and "entre-sumers" which are the corner stones for such paradigm shift.
http://foundread.com/2008/04/11/to-yc-or-to-vc-that-is-my-qu...
If you listen to the 37signals guys, they're going to tell you the best way to get rich is to do pretty much what they're doing. If you listen to PG, he's going to tell you the best way to get rich is to do pretty much what he did. Both business models are valid, and they both work. If you're thinking of starting a business, you should keep both models (and several others) in mind and pick the one that best suits your situation, your needs, your ambitions, your available funding and your product.
Of course, that doesn't mean that it's useless to sit around and discuss the upsides and downsides of various business models -- that's actually a very useful discussion. But it is silly to argue that one is better overall.
One can make the argument that if we make money for VC's, then we make money for ourselves. I think there are plenty of examples (especially in the Silicon Valley) where this is true. That's the "a small slice of a large pie" school of thoughts. The other side of the same argument is that if you bootstrap your company, then you are on your own and the world conspires against you. So at best you have "a large slice of a small pie".
I think these are false choices. My own experience (I had two startups, one of each) is that bootstrapping is not a lifestyle but a tactic in wealth creation.
I believe the speakers at Startup School are all in agreement that the world has changed and that it is possible to build a meaningful company with sustainable revenues by bootstrapping. But bootstrapping does not mean that you don't take VC money, just not for R&D.
When you have a working product and a workable business model, then you can go out for VC money, but now as "working" capital. And if you can take it further and actually become profitable, trust me, VC's will be kicking down your doors wanting to buy a piece of the action.
I enjoyed the Startup School presentations very much, especially that of PG, PB & DHH and the following is my takeaway ...
“Make something people want … don’t ignore but try to understand [people’s] advise … listen [mainly] to yourself … don’t worry too much about money … the secret to making money online … is to ask for it.”
I believe they are arguing that the optimal solution might be "a medium slice of a medium pie". As one of the commenter has stated, "getting the bus back in the middle of the road where it belongs".
That's why I make my daughter pay her own way. Sure she's only three years old, but she's already able to work 10 hour days at the factory, which makes her way more profitable than most other three year olds. Best of all, we're not spoiling her, and you can be sure that we won't waste money on frivolous "startup" expenses, such as school.
Starting companies designed to change the world either succeed or die, and they tend to find out which very fast, which leaves a good number of them dead. Those dead ones have no reason to stay subscribed to campfire. 37signals will make more money on "lifestyle" businesses than startup businesses (if startup is defined as high technology, get rich or die trying).
It's the long tail of business types. On the left, taller side, you have a few wildly successful companies (startup or otherwise). Just to the right of that, there are the moderately successful ones. They don't make as much, but there are more of them. To the right of that there extends a massive tail of "lifestyle" or similar businesses that didn't set out to change the world or make the founders billions - millions maybe, but not billions. The farther that long tail extends to the right, the larger the market potential for 37signals products.
The point is that they don't make money on the hight of the graph (the success of the companies) but by the length of the graph (the number of companies).
Bottom line: it's good business for 37signals to encourage more lifestyle companies. I don't blame them for it. In fact, it's actually pretty smart of them.
Regardless of your definition, each is simply a different approach towards business, and as such, they will take different paths (VC funded, angel, self funded) towards their goals. There is no panacea and no single way to succeed, so articles like this that imply otherwise just sound a bit pretentious.
Is there any one on hackernews that believes twitter won't make any money when they finally decide on a revenue model? Anyone who is willing to say publicly that 37signals will be worth more as a business than twitter in 12 months?
Just to be clear: if your product is very popular, finding a way to make money will not be difficult. You might not make a lot of money (but DHH says that's ok right?) and you might have to sustain a huge level of traffic to stay in business, but you won't go broke.
I just spent my first weekend ever in the Silicon Valley and was incredibly impressed with all the smart personable people working on and talking about cool things.
I was also perplexed at how many of them were having trouble making money, and the general lack of customer facing skills that we take for granted in other parts of the U.S.
Sure, it's nice to dream of hitting a grand slam, but it's also nice to eat while you're dreaming. You CAN have it both ways; it's just so easy to get caught up in the hype of the former that we forget about the latter.
Thanks, 37 Signals, for helping put the bus back in the middle of the road where it belongs.
You can also write a great app that people want, get them to pay for it, and scale, scale, scale. With great tech, nice financials, and growth, you may be surprised at the investors who seek you, not the other way around.
Greasemonkey to blacklist sites. http://www.andrewfarmer.name/2008/04/greasemonkey.html
I like their posts so far and would not like to see them gone.
The upvotes and comments mean that some (lots) of HN readers appreciate the discussion and the alternate viewpoint.
Can we please stop using the word "spam" for everything? Spam doesn't constitute anything online that you didn't appreciate. His comment wasn't enlightening nor insightful and as such many may consider it useless. But it's noise, not spam.