Everything I need to know about startups, I learned from a crime boss
gigaom.com
gigaom.com
His point about risk is very unclear and/or misleading. He suggests we should think big vs small. It's almost insulting to read an article this vague. What do you even mean by small and big? As far as I know, businesses that aim to make 2M/yr rev have a better shot than ones that must make 100M.
For my money, organized crime has more in common with big box retailers than startups, because the amount of cash on hand you require (not to mention the infrastructure) is a pretty nasty barrier to entry. The market is dominated by a few key players and focus is on sustainable growth. Startups are about rapid growth and disrupting established industries by artificially lowering the barriers to entry.
Walmart started as one store, don't believe you can't compete with them, I see mom and pop shops sell products in the same categories as Walmart and win.
Bootstrap so you don't have the pressure to 100x for an investor, and so you can pull out some of that $2mm once it starts flowing.
If you know of a business where even a bad run nets you $2mm, I'm sure everyone here would love to know.
This kind of vague general math is silly. It assumes that the chance of success stays more or less the same while the potential pay-off obviously grows for larger ventures. If it were that simple. You simply can't make an intelligent generalization along those lines. Any comparison should be made on a case by case basis.
It's easy to point out how $2mil a year might be only 1% or even 0.001% of the total size of some particular market, but that's irrelevant. No amount of business is guaranteed. $2mil is still $2mil, it's still x number of people each ponying up y number of dollars, for pretty significant values of both. Without a compelling product and a solid brand you have no guarantee of that. There's no such thing as a business venture that makes $2mil in a worst case scenario. The worst case is always losing money.
The opposite is true though: there are a lot of companies that will have trouble doing more than $2 million. I think the author is suggesting you don't pick one of those.
In the end, the real cost is time. Do you want to spend your time building something small, or something big? That depends on why you're working, I suppose, but if you really don't care what the business is, might as well build something big.
The counter argument is that the latter kind of business models (e.g. social) have much higher potential payouts due to scale. But I believe one doesn't have to look too hard in the first category (e.g. SAAS) to find billion dollar opportunities that collapse into million dollar ones if the winds change.
WHAT WAS CLEAR:
- Pick things that make money first and scale. I agree with this but you might as well be speaking Klingon to those interested in funding but not figuring out if it makes money first..
- If you learn how to make money you can decide more of what you do and where you go.
- If you can find a cash cow (instead of a cash calf), grow it.
NOT SO CLEAR:
- Crime boss started small and scaled out in size and into side products, but we should do as he does now and pick big markets instead of picking small things like he did when he started out? Maybe I misread.
- I don't know what small, or large business the writer has successfully started where he can state which is harder.
- The clear takeaway
Crime Boss. Crime Boss.
How many people has he killed, either personally or by order. Did those murders, leg breakings or threats help scale his business in the early days. Is this an approach patio11 should use?
#justaskin
IE: If you run an illegal drug-dealing business, you still need to worry about supply, demand, and marketing (although the marketing is a little different).
Drug dealers don’t sell drugs. Drugs sell themselves... You will never hear a drug dealer say: How am i gonna get rid of all this Crack? ~Chris Rock
i understand they have enough physical risk so they avoid spreading money in hope that some unclear possibility will succeed.
i wouldn't like non-criminal investors be that (financial) risk averse, otherwise we won't get many new interesting businesses. let 9 of 10 startups fail, but the 10th would be google. (and the 9 wouldn't wear cement shoes)
Learned that one from my puppy.
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