American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2–3 years after pivoting three times.
American startup culture is so weird. Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2–3 years after pivoting three times.
On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.
If you told most European startup founders that in 5 years you'll have plateaued at 15-20 employees, a steady income flow, and you'll be paying yourself $200-250k a year, they'd think of that has a big success. In the US they may very well think of that as failure, especially if they are VC funded. I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.
If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.
There are exception: we need big companies to make GPUs, probably. But it’s not clear to me that this logic applies universally. Some inefficiency is probably going to be good for public wellbeing.
But they're not? Adjusted for inflation, median US household income is 18% higher than fifteen years ago and 32% higher than it was thirty years ago: https://fred.stlouisfed.org/series/MEHOINUSA672N
You could say it was stagnant from 1999 to 2015, though.
You can compute exactly how much by dividing https://fred.stlouisfed.org/series/MEHOINUSA646N by https://fred.stlouisfed.org/series/MSPUS Here's a sheet where I've done this: https://docs.google.com/spreadsheets/d/14NVqsKXnswG27TiwENpi...
But note that some of the change here is people building and buying larger houses as we get richer, which inflation calculations account for and this division does not.
[1] https://ipropertymanagement.com/research/average-rent-by-yea...
If food prices go up, it hurts psychologically but it's not the end of the world. I can buy cheaper food, I can buy less food, I can eat out less. Most people in the developed world are very far from food price-induced famine. I can buy a year's worth of sustenance for a thousand dollars, it might not be healthy but I'm not going to die.
Housing is qualitatively different. Many renters are only a few steps away from homelessness, and more people rent nowadays because they cannot afford to buy. It's hard to adjust for increases in housing costs by buying cheaper housing, your housing is linked to your income.
I complain about but don't ever worry about food prices, yet the roof over my head is a real cause for concern.
For my parents' generation it was the opposite, being overweight was more uncommon, housing was dirt cheap, people worried about getting enough calories rather than too many. Indexing wages to inflation is an anachronism that we have taken into this new world.
I think this is mostly not true? You can adjust for housing becoming more expensive by changing your consumption patterns, just as you describe with food. It's still rough, but unless your family is living in single room in a shared unit (or, if you're single, sharing a room) there are choices between "consume housing at your current level" and "be homeless".
The CPI-U table has housing as 37% of the overall basket: https://www.bls.gov/news.release/cpi.t01.htm What do you think it should be?
[0]: According to this calculator - https://www.usinflationcalculator.com/
Here's the equivalent chart without inflation adjustment, which gives the (incorrect) impression of sharply rising incomes: https://fred.stlouisfed.org/series/MEHOINUSA646N
You think it's better in Europe? Here in germany everything is going downhill fast
we definitely don't need trillion dollar companies selling ads.
Correction: it's not bad for the economy, it's bad for the investors (the only people who matter in the whole world).
I'm sure a tremendous amount of actual value in the economy has been destroyed by VCs demanding a binary result of either total failure or exponential growth.
You don't win the big price either by taking the big swings. I mean, some people do, but they are so few that they can be considered a rounding error.
Maybe the economy wins when one-in-a-million business unicorn appears, but I don't make any of my other life choices by considering the global economy either, so why would consider it here?
I don't agree. I think this is specious reasoning fueled by a mix of cargo cult mentality and survivorship bias. Just because a hand full of startups made it all the way through to a unicorn status, and some where bought out for undisclosed reasons,that means nothing on whether an idea is or can be hiper-scalable. To make matters worse, this reeks of short-term mentality that serves no purpose whatsoever other than find yet another angle to put together a kind of pump and dump scam.
This is a mental model of how things actually work that is fundamentally wrong and out of touch with reality. In any free market economy you have multiple competing businesses operating in the same market. The world is not a 100m race. Second place can still turn an fantastic profit and make everyone rich.
I agree with you that profitable businesses add value to everyone's lives, but there's a maximalist limit to the relationship where they start extracting value and opportunity overall.
Frankly, not all of the VC sphere is focused on value creation. Much of it seems focused on buzzwords and vaporware. Success in the VC world might mean keeping the hype and promises of hyperscale performance rolling long enough to successfully dump on retail. Sure, VCs and founders profit, but is it genuine value creation?
It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.
1000% agree, thanks for the thoughtful reply
Your comment contradicts the "hyperscale or bust" mentality. Hyperscale is not a necessary condition to be competitive. You can put out a better product/service even before economies of scale are reachable. In the meantime, this hyperscale nonsense is nothing more than cargo cult mentality where the need for a sustainable business model is replaced with hand-waving and mindlessly repeating "hyperscale" as a mantra, which has been the death of countless startups.
To me, it seems exactly like the point of view that someone who wins the 100m would have.
> Nor to the US, whose system has if anything produced far too much food for its citizens.
Where people still starve, where people are still homeless, where people still live in poverty. What's your point here?
That's just your own assumption. Who cares what any of us imagines anyone else thinks? It's not really relevant.
Since you're responding and we're having a conversation about each other's opinions, I'd say it actually is relevant.
If you do, you still won't win the big prize. The people who do win the big prize are so few, even in the US, that it's an almost certainty you won't do it. Perhaps you're right that there must be thousands of losers for even a single winner to come up, but that seems so inefficient I doubt that's really true.
I agree, but from a different point of view. Companies put out products and services aligned with their strategies. In large companies, you build up strategies that spread across multiple domains. This means that product managers need to enforce constraints that will go well beyond the concerns of the use base of their specific product. That is a net loss for the customer as the product/service they once loved is now a way to force-feed them things they do not want or care about.
[1] https://asteriskmag.com/issues/07/want-growth-kill-small-bus...
[2] Steve Jobs quote: "It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.
So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. [...]"
Or are you suggesting, that every single cent that every single company earns, comes from something that actually provides value to someone (excluding shareholders)?
Citation seriously needed. There is no argument here, merely a demonstrably false statement. A large company is literally the only kind of entity that is capable of creating entire categories of value which make up a huge percentage of the global economy. Furthermore, a lot of what many, many small businesses are doing, especially very profitable ones, is directly enabled by and entirely dependent on the existence of large businesses.
I can't think of any companies that were more product-focused than Steve Jobs' Apple. They created so much value across so many industries. They created so many transformational products.
Their machines in the 1980s revolutionized personal computing (eg they brought GUIs and the mouse to the world). The iPod let us carry thousands of songs, audiobooks, or podcasts in our pocket. iTunes changed the music industry, giving us an easy way to get the music we wanted without piracy. The iPhone put the Internet in every pocket. Honorable tangential mention: Pixar transformed kids movies and dethroned Disney.
Apple made a ton of money making products that were delightful to use that users happily pay a massive premium for. They made things that were so much more than the sum of their parts.
This makes sense from a VC perspective, but not from a founder perspective (for most).
> it's bad for the Economy
Economy != VCs' pockets
Man, if anything, this is the part that’s weird.
There’s this very weird undercurrent of keeping track of who is “winning” in the US.
Is it not possible that someone who shepherds a hypergrowth startup to IPO, is just as of much a winner as the bootstrapped founder who has a profitable, sustainable business with a handful of employees?
I get it - everyone wants to win. But in hyper focusing on winning, you may lose sight of the fact that there’s lots of ways to win.
The last part of this comment is the last part of Jerry Maguire, because I think Jerry’s mentor Dicky Fox has the right idea about this:
”Hey, I don't have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.”
In most cases in fact its just broken childhood mostly via broken father figure, source of eternal income for most psychologists since those issues are not actually fully fixable, at best they can be tamed a bit and folks brought into acceptance. Add some lower intensity mental issues and voila.
Of course neither money nor power work for such issue, but if one surrounds themselves with enough people repeating such mantras, it may eventually feel like they are right. At least for some time.
Nothing for regular folks here, unless one specifically says and feels that pursuit of happiness is not really on their agenda.
Also, would be nice if somebody compared mental issues drug consumptions US vs Europe say split by jobs. I literally know 0 people, peers, IT colleagues nor friends who take anything on mental health, we are just bunch of relatively happy balanced folks here who are not in frequent dread over some bigger protracted health issue that can wipe one out, don't have to worry about saving up a million or two for out kids universities, have enough time to relax on vacations, fully paid sick days etc. Once one is not desperately poor, this is how proper quality of life looks like, not some numbers on accounts.
I say this as someone who has personally experienced the kind of struggles you talk about in such unflattering terms. (I lost my dad to heart failure at age 7, and have struggled with major depression for most of my adult life.)
Put another way, there is an endless supply of noise (read: competition for attention). If you're not swinging big enough to cut through that clutter odds are good you're just adding to the clutter. That's going to be an endless struggle.
Less risk is actually more risk.
Taking VC money is a poison pill.
Is there someone out there focused on selling ten $50m companies at the same rate that this guy is focused on being part of, I assume one $.5bn company?
... an while it's bad for the economy, it may be good for the country. Notice how Europe doesn't have regular school shootings, rampant crime or 100k people a year killing themselves with Fentanyl. It may have something to do with culture that prioritizes other things besides the economy.
was it? Or the inability of other countries to block US startups (because the US government will never let them) makes it impossible for local startups to compete leading to monopolies? If every country went US way of blocking TikTok, the hyper-scale growth would cease to exist fast.
That's not the right question. The correct question is:
Why DOES the presence of US tech companies mean local tech companies can't compete?
And that's the beginning of the discussion. If there is no money to be made, no market will be developed. Block US companies and in a few years you have a booming ecosystem.
Some greasy words. Using VC money to offer subsidized services while capturing the market and killing competition has no relation with being "so good" at providing value, much the opposite.
Then having got there, a VC-funded competitor will just roll over you as they'll have better connections and funding.
Sales cycles for B2B for big players are insane - price points to offer our stuff to small/medium businesses are not enough.
Even if we provide value and save time for customers it still is hard work all the times to explain the value.
Well the grass is greener on the other side - but I can see how having B2B business where for years you have the same struggles just to keep the lights on and every month is the same and you have the same conversations but with different customers explaining 10x a year exactly the same thing - why you provide the value —— is just something people don’t want to get stuck into and can lead to burnout rather quickly.
So I can see how someone would like to land business idea where the value is obvious and people scream „take my money”.
Sure I want to win the big prize, that's why I'm playing the lottery from time to time. But in my $dayjob, it is and it will stay hard work.
If it actually would be easy, everyone would do it.
The first is looking for a return on investment. If you're going to attract other peoples' money, those "other people" are obviously looking for companies that are going to provide a return. And since a wise investor diversifies their portfolios, they know that a lot of their investments are going to fail, so one way to hedge that is by encouraging all of their investments to grow as much as possible. That way a small number of hyper-performers will make up for the losses.
But we also see vertical growth happen with major corporations as well. Not just startups. And I suspect this has a lot of to do with red tape, over-regulation and bureaucracy. When you need to jump through tons of hoops including getting licensing and permits, setting up tax and payroll accounts... not to mention if you want your company to be publicly traded and the hoops you need to jump through for that ... it can be way cheaper and lower-risk to expand the activities of an existing, already established company than to spin off a new one.
Small projects asking interesting questions will be laughed out of the room, labelled as lack of "ambition". The fact that not all interesting questions require 4-5 years and millions of dollars to be answered seems to not bother people paying the bills.
An important part of running a business is taking a risk.
Furthermore, plenty of businesses fail for reasons that have little to do with the economic value / needed functionality of the product. In some cases, it takes a similar company with subtle differences (or even timing) to really understand why one business failed and a different succeeded.
(One very bad example could be the difference between Sega and Nintendo in the 1980s and 1990s. Compare the NES to the Master System, the SNES to the genisis, and the Game Boy to the Game Gear.)
(Another example can come from comparing Tesla to the dozens of other electric car startups.)
But it works for the USA. Most, if not all the start ups that matter, originate in the US and a lot of them are the unicorns we all use daily like TSLA, GOOG, NFLX, MSFT, META, etc.
And the founders are natives and immigrants, so it is not a demographics issue. It is more of a process issue for the rest of the world.
> Not everything needs to be a hyper-scaler, not everything needs to be huge. Businesses should focus more on sustainability, and not shut down after 2–3 years after pivoting three times.
How do you get the moon, if you don't aim for the moon? Risk == Reward. When you don't risk, you end up with startups like in DE e.g. Auctionata, Moped, etc.
This is just the culture in unreasonable VC scenarios. Most new companies are not VC backed and have realistic expectations on the new business.
It does if you want to take a few $m of someone else’s cash, pre-revenue, which is what these startup founders want.
American VC-backed startup culture, you mean. And yeah, that makes sense. If you put money into something you expect to get paid back in 5 years. You need growth to do that.
If you want to go slow, then you bootstrap your startup.