Startup childhood – Tiny startups are not Google-in-miniature-form | Hacker News Reader

Startup childhood – Tiny startups are not Google-in-miniature-form

dalton.substack.com

112 pointsmarcoslozada43 comments

TLDR: Pre-product-market fit (childhood) is not equal to post-product-market fit (adulthood) — and trying to clone an adult company without true product-market fit yourself significantly increases odds of never reaching product-market fit.

While there likely endless list of advice on reaching product-market fit, to me, advise given by Richard Wiseman in his book titled “The Luck Factor” feels like the most generalized. TLDR is lucky people: (0) are social and intentionally seek out new connections; (1) maximize chance opportunities, they’re not fixated on a grand plan; (2) nurture and listen to their intuition; (3) expect good fortune; (4) find the good in bad situations.

Here are links to:

- http://richardwiseman.com/resources/The_Luck_Factor.pdf

- https://youtube.com/watch?v=WizT_VdtOYM

On a side note, never been able to live in Bay Area, but really enjoy startups. If anyone has any suggestions beyond HN for startup related online communities that are friendly to anonymous users, please comment below.

Also worth noting that the leadership needed for a startup isn't necessarily the leadership needed at a larger size. Founding a company, and leading an established business, are two very distinct skillsets.

I believe you can hire organizational managers, as COOs, without sacrificing the founders as influencing CEOs though. When founders are forcefully replaced, the business loses its colors, its soul, and the source of its vision over time.

Really depends on a lot of factors, but majority of businesses rarely need a “startup” vibe after reaching scale. Clearly there are exceptions, though all founders die at some point and waiting until they do is rarely best option for the company.

How many startups make it longer than their founders?

Few at scale. Likely most notable example is Apple, especially since Apple brands itself as being innovative.

Definitely. If founders recognize that they’re no longer able to see the company from a unique perspective, or simply aren’t there most of the week, they should arguably move to an advisor/shareholder role where they’re still inspiring but passively so. Although that’s not always an option granted by investors, is it?

Of the founders, those lacking the mature skillset to scale and run a proper business, stay around too long or have too much influence, the results can be pretty ugly as well.

Not just leadership, but many positions. 0->1 is often a very different skillset than 1->N.

I think what people fail to mention is if this charade can be kept long enough, it is enough to make huge amounts of money for the founder and the initial VCs. Just look at Uber, doordash, WeWork etc. SBF would have also made it if he wasn't an absolute muppet.

Survivor bias

Uber has been a publicly traded company for ~3 years and has a market cap of ~50B.

Doordash has been a publicly traded company for ~2 years and has a market cap of ~20B.

You really have a generous definition of "charade," as I think the public market valuations seem to imply there is some incredibly massive true value in these businesses.

What you didn't mention is that Uber and Doordash aren't very profitable. Also, it's in their interest to cut costs... which means paying their worker less.

The thing with Uber is that its unit economy does not seem to work; it cannot be made profitable without some drastic changes.

So the charade is how do they stay afloat, and have this huge valuation.

If you truly believe that the stock isn't worth 50B, you are free to short the stock. In fact, lots of people out there are shorting the stock. However there is no smoke and mirrors here: they release quarterly financials, they've been public for a boom time and a down time. The aggregate of the market disagrees with your view.

The OP also specifically says the point of the charade is to "make huge amounts of money for the founder and the initial VCs". Uber/Doordash didn't just make huge amounts of money for the founders and initial VCs, it made huge amounts of money for early employees, later employees, current employees, the initial VCs, the later VCs. People have had years to exit their positions and unlimited liquidity to do so... some other rational actor was happy to buy the shares they were selling. If you say these companies are charades than so is every publicly traded company.

Most companies have made a ton of money for anyone who bought in April-June 2020 and sold by September-November 2021. I personally made > 2x on certain stocks during these 20-22 months.

UBER currently trades at $27, well below its IPO price of $42 in May 2019, and we had pretty noticeable inflation in the meantime. So how have they made money for early investors and employees is not much of a charade: by selling to a greater fool :(

The standard advice here is that you shouldn’t expect that you can remain solvent longer than the markets can remain irrational. Uber certainly has a questionable potential to ever make a reasonable amount of money but I can’t really see that causing a significant drop in stock price any year soon. Everyone paying attention invested in Uber in its current difficult to profit state and I can’t think of a reason they’ll suddenly have a dramatic change of heart.

They aren't profitable at all and have never been.

Uber and Doordash have pretty solid PMF though. It's just that their economics aren't profitable. This seems to be true, especially for western countries.

In other countries where the city is a lot more dense and min wage is low, these delivery apps are okay-ish.

A few exceptions come to mind after reading this:

Large robotics organizations such as self-driving car startups. They currently operate relatively independently under large multi-national corporations.

They have all the trappings of a post-PMF startup like org charts, titles, performance reviews, comp packages but have not proven their business models.

I agree. Further examples are:

- non trivial hardware

- games

I think it generalizes to a conjunction of: a delayed-value AND a need for narrowly-specialized-execution.

One reservation is that I do think that as startups such organizations are more fit than corporates: to succeed, the abundance of loyalist political hacks should be lower and the abundance of execution veterans is much higher.

Huh? The product they are trying to make is very obviously useful. It's like a new way to make electricity: I don't need to study the market much to know if I can pull it off there will be customers.

Org charts and performance reviews are things basic to any big organization. Even three men and a dog need to know who walks the dog.

Analogies are never perfect but this one was extra bad. Why'd you need a org chart and/or performance reviews to know who of the three should walk the dog?

Accidentally, the "organization bloat" mirrors my experience in big companies, so maybe the analogy isn't that bad after all actually.

That was my first thought too. In some startups they will take turns walking the dog. In some, they will walk it together. In others, the dog will be walked by one specific person.

The company will probably fail if no one walks the dog, or if it is put in charge.

And when you make duties and assign them you have an org chart

Arguably, but I was just agreeing that the analogy was poor.

But to your point, there is no need for an org chart if the tasks and assignments are identified and assigned collectively. Not that you’d know if from this thread, but there do exist non hierarchical systems of governance.

I think this metaphor is excellent.

The key point is the examples of things that seem silly early stage but obviously necessary later, like org charts.

Unfortunately, not everyone will immediately agree that it’s silly to have an org chart when you’re a small team or pre-PMF. And some people might never be convinced! But this metaphor sounds like a good way of trying to explain the fundamental differences between “where we are today” and “where we might end up”.

Exactly!

I recently used an org chart for a 3 year horizon, not because it will be anything like that in reality, but it was a way to communicate:

- the required roles and teams to non-technical leadership that would be required to deliver on the vision

- a rough team size to help define cost bases for future planning, and to align expectations across different parts of the company

A tangent about org charts: Honestly, one of the best exercises for early-stage entrepreneurs, which I think I stole from "The E Myth", is making an org chart a much larger version of the company and then figuring out who's doing what. The first company I started was only me and one other person, but making sure that at least one of our names was in each key box was really helpful.

I've heard this reflected the other way, too, in Conway's Law - https://en.wikipedia.org/wiki/Conway%27s_law

Totally agree with this and one of the biggest problems i’ve dealt with at early stage startups is employees from a big companies that couldn’t deal with bypassing certain things like this.

I would also add that sometimes this is even not intentional. Some founders, employees, VCs dont even know how PMF looks like. Sometimes it can also be tricky - take B2B Co. - “we reached 1M$ ARR in 1yr post launch - we hit PMF” - then you dig dipper and everyone who bought the product are the founder/vc friend.

Interesting metaphor, and I agree with the underlying point that all companies have to be treated differently as they mature. Not as a mini-giant corporation.

As to childhood, I think that's more like speed running evolution as their faculties develop. Still worth protecting from plenty of adult stuff until they're ready.

A 10 person company is different from a 100 person company is different from a 10,000 person company.

Some patterns scale while others break down. Information and understanding and alignment takes longer to propagate the more people are in the org.

In bigger companies lot of support jobs start to appear. By support I mean job to support another persons job. Platform teams for example. PMO functions. Recruiters. In smaller companies non-experts will wing these as 10% person time roles, or they outsource to other services.

Such an interesting take on doordash.

I wonder if the doordashes.

Reply on news.ycombinator.com