Sometimes having nothing to lose can be a real advantage for a startup | Hacker News Reader

Sometimes having nothing to lose can be a real advantage for a startup

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73 pointsjkopelman16 comments

I'd go further and say that having nothing to lose is one of the biggest advantages for a start-up.

I remembering hearing a founder of an IPO biotech company say how he only started his company because he could not find a job. There was no other option. Doing something of his own was his last ditch effort to make a living.

If you have nothing to lose, that means you have "nothing". Having "nothing" probably doesn't give you enough resources to do anything at all, right? There are always opportunity costs anyway.

And... the article says paypal lost ~170 millions while "willing to invest millions of dollars to acquire new customers"

I wouldn't call it "nothing" ;)

Just because they recorded a loss of $170 million doesn't mean they consumed that much cash. Every account that they credited $5 to they had to record as a "loss." But how many people cashed out that money? Not many I bet, I bought something on Ebay with mine. Paypal essentially created a new currency that they pegged to the dollar. It didn't cost them any cash to "print" new money in people's accounts

I don't think it's a "loss". Every new account is an asset for them, and they paid 5 dollars to "buy" accounts without actually giving cash to account owners (as you mentioned). However, unless they have assets to cover this "deferred liability", that would be a fraud. And they had access to money to cover it. So it's not a case of desperate startup with no resources, I am afraid :)

Sure, every account is an asset but the assets in accounts have to be recorded as liabilities - that is why they had losses way in excess of the cash they raised. The point of the article is PayPal ran risks (violating banking laws, risking a run on their cash) an established company never could have.

Who was the founder? Maybe I just don't understand the industry, but I always figured starting a biotech company was only really an option for the well-connected and well-funded. It seems really expensive.

It was a speaker at a panel at TieCON 2007.

I have no idea how he pulled it off. You are right, thinking biotech and startup makes it seem like it would require a lot of investment. At the same time, there are plenty of folks in desperate situations able to raise money and build a company. How they raise money etc. simply becomes a part of the detail when you are that desperate.

He may have had a well-connected cofounder. Or professor. I don't know.

It is certainly not impossible; I did it. It requires very specific circumstances to be able to bootstrap a biotech company. What's more common is probably what I call an East Coast style business: you write a business plan, then you go raise money to execute it.

Very good article, to add the list of advantages a small startup has against an established vendor.

Anyone who worked for a large company knows how long it takes for any significant decision to happen, and how much hedging and precaution is built in each. Large corporations move slower.

The counterpoint to this is that if a large company ever decides to really go after you, it will be really tough because they have resources that you cannot possibly match.

Think an army of thousands of sales people badmouthing you to your potential customers, for instance. Or offering a free product to kill your only source of revenue.

It can play both ways.

I often think a startup should act like it's waging a guerrilla war - move faster than your opponent, do things your opponent is unwilling or unable to do, be hard to kill, win the grass-roots support of the people.

So what are the entrenched companies or products that people think are right to go after? Funny that the article is about Paypal, because that's one I wish was still innovating.

Then go after paypal. I would absolutely love if you did.

interesting point, and something most people probably don't think about

Govt must regulate market capitalization of all listed companies to TWICE their quarterly revenue. This will

    1. Prevent Ponzi scams in Corporate Management and Stock Markets
    2. Will create more opportunities for start-ups resulting in millions of jobs creation.

You know what market capitalization is?

If it moves, tax it. If it keeps moving, REGULATE it. And if it stops moving, subsidize it. --Reagon

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