I say build a company. Go where it takes you. If it takes you to a billion dollars, fine. If it takes you to a million, fine. If you aim to achieve a given number, I suggest you question why your ego, as opposed to your business, needs you to achieve that number. Are you aiming to become number one or two in your business because you have substantive reasons, or is it becaused you once read about Jack Welch saying GE businesses had to be number one or two, and you took that message to heart for no other reason except Jack Welch said it? Are you aiming for the low millions coz you have a substantive reason for it, or are you doing it simply coz you admire Paul Graham who exited at those low millions and you want to be like Paul Graham when you grow up? Life is fluid, people and businesses change, goal posts get shifted all the time, businesses that shunned evil start being evil. These are just the places where businesses take people. Go where yours takes you. And if you don't like where it takes you, then by all means come back, shift your goal posts. Change your sport, even, if that's where your business takes you.
No one accidentally builds a Billion dollar business - so it's not the case that it just leads you there by default, you need to choose to be that size.
At the same time though, you are right in the market leading nature of it. That is, while building your business the opportunity might arise that you can shift what you are doing and that shift would open up your market to a larger opportunity. Alternatively you could choose not to shift and go for a smaller win.
Why I take issue with the original post is because it is basically saying, if it looks like there is a market opportunity to make a billion dollar company, don't take it.
>> No one accidentally builds a Billion dollar business
Actually some do. The classic example is Google's founders - they tried to exit to Yahoo! for a million or so, but were turned down.
Perhaps "accidentally" is not the word. Of course, it's not accidental - tons of hard work is involved. But many people never dream of building a billion dollar business, and a few of them still get there.
More importantly, focusing on building a billion dollar business might not be productive. It might actually distract you from doing what customers would like you to do.
This gets the point backward. Again, it's not that they set out to create a billion dollar business. Certainly at one point they were trying for a smaller exit.
The key point though is that, somewhere between their Yahoo pitch and today Sergei and Larry made the decision to grow to the $B scale. I think it was when Eric came on actually was when that shift happened.
The creation of AdWords must have been a key moment in that, surely? If Auletta's book is to be believed, there were long periods where any kind of revenue at all out of Google would have been cause for celebration.
Nope. Mojang CEO Carl Manneh made a conscious decision to push Markus to sell to MSFT after Markus was starting to get burned out. Mojang could have stayed small, reorganized and kept moving forward but they decided to go for a big win and sell to MSFT.
So it wasn't an accident, as it happens it lined up so that interests aligned for the buyout.
The decision to sell to Microsoft may have been conscious, but what about all of the other decisions that got them to the point where they could get a big sale? I'm talking about the years prior of building and selling Minecraft. I don't think those decisions were made with a billion dollar exit in mind -- and really those are the ones that count the most.
The point is not that they decided "we are going to be a billion dollar company" and then chased it to get the MSFT acquisition. It's that when given options about which way to take it they took the Billion dollar route consciously instead of choosing to not sell and stay small - which again is how I read the article to promote.
When talking about startups "a billion dollar company" usually means valuation. Considering Mojangs profitability they were probably a billion dollar company in early 2012.
While I wouldn't say Larry Page and Sergey Brin have built google into a multi-billion dollar company by accident, I'd imagine they weren't thinking billions when they tried to sell their prototype to yahoo (they did try to sell what they'd built to yahoo or alta vista, did they not?). They set out to make webpages easy to find. Now they are onto a much bigger mission. At any rate that's what they say. That's the sense in which I mean being led somewhere by your company.
Yeah, agreed. There was a wonderful website called "Guru ratings" where this guy read a whole bunch of self-helf literature and rated them and posted a short review. Can't find the site now, seems to be down.
edit: https://web.archive.org/web/20110820085531/http://lukeprog.c...
>Thus, in rough numbers, the chance that a funded company goes on to become a billion-dollar business is 0.005 percent to 0.016 percent. Rounding to any significant digits, that’s basically zero.
I'm really getting tired of these calculations of "the chance" of a startup doing X. You are not a lottery ticket. It's not random. The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time. Business isn't exactly chess, but it's a lot closer to hold'em than it is to a lottery.
It's not entirely random, but most of the forces involved are out of your control. So, thinking in terms of chance is helpful.
The 20 year old Mark Zuckerberg could likely beat both of us combined in say, business. And would probably be successful no matter what. But would probably not be a billion dollar business, were circumstances even slightly different.
Lots of companies and individuals fail all the time, despite their skills.
You are unlikely to be a special snowflake. Even in the case that you are, it might be summer.
Yes. I'd say that every success is due to a combination of determination, skill, timing, privilege, and luck. (You could say that most of these are really variations on "luck".)
Naturally, people tend to emphasize only some of these factors, depending on their own experiences, current agenda, and what kind of story they need or want to tell at the time. Each of these stories is the truth, but not the whole truth.
[Is this fatalistic? I don't think so. Just because most factors aren't under your direct control, doesn't mean you can't be determined and keep trying. Also you could insert here some aphorism like, "it's the journey not the destination". If you're having any fun and even a modest amount of success, you're quite fortunate. You could do worse. Some billions of people probably are doing worse. You may as well be appreciative and thankful, while you keep pushing forward.]
This is an uneducated man who could barely write but managed to make a fortune through, luck, tenacity, delusions of grandeur, and a series of truly idiotic or brilliant decisions depending on how you look at it.
I like to think of business success in light of one of my favorite quotes:
"Luck is what happens when preparation meets opportunity." - Seneca
Scott Adams' book "How to Fail at Almost Everything and Still Win Big" also touches on this, suggesting that skill + hard work don't automatically result in success (there certainly are factors beyond our control), but it's a lottery that you can keep playing over and over with no real inherent cost other than time. Especially in software, you can test a lot of ideas with very little financial risk/investment, and persistence often allows preparation and opportunity to meet. There are no guarantees of course, except the guarantee of failure without trying.
A lot also comes down to your definition of success. I'd say aim high, but expect very little. Expect the kind of return you'd get from a hypothetical full-spectrum new venture ETF. A handful of unicorn successes averaged with a huge tail of losses = returns that are probably really depressing. Be happy with anything above that.
I don't recall the American Dream involving a billion-dollar company. Affording a nice house and raising kids on a single income though - that's definitely dead.
Hm. Maybe if you live in the right place? I have 80 acres in Iowa, a house free and clear, 2 in college and one working in Silicon Valley. All on one income.
Exactly. Try anywhere not directly in the highest rent-inflated area in the US, or in any moderately rural suburb. Not that difficult to afford a house. Could get a decent 3 bedroom, 2.5 bath starter home where I'm at right now for about $750 a month in mortgage.
If that's your definition of the "American Dream" it never existed.
You think folks back in the 1920s could live in the most expensive cities in the US, own a home, send their kids to college, all on one income. I don't think so.
There's nothing special about it. I'm a software developer, like a lot of people on HN. My dad did the same thing, and he was a salesman. I know a lot of people who are able to make it work.
Yes, it's expensive, and it's getting harder as prices begin to reflect the dual-income status of a lot of middle class families, but it's not that difficult if you're willing to make some basic compromises. Consider that it's all relative. I think my life is pretty nice as-is, and that's what matters.
I would say that it's a lot easier if you don't live in SF or another city with an atrocious cost of living, but really in SF and NY you need a sextuple income to afford a liveable place, so the point is kind of moot anyway.
That's mystical BS thinking, from too many self-help books.
Most succeses had been a combination of being born at the right place and time, to the right parents, going to the right school and meeting the right people. Most of those are heavily determined by the past beyond one's control -- and others are semi-random.
Then there's talent for business and determination -- but it's only survivorship bias that doesn't let us see that lots of people who didn't get to have FB also had equal talent for business and determination, or even more than Mark.
Even a "perfect" Mark could have been hit by a bus before the success, or had a dehabilitating illness, etc -- and then your "magical unicorn" admiration would go to whoever else got to be succesful at the time, while Mark still be the same person (only unsuccesful).
Especially to reach the level of success of Zuckerberg or Gates you need a ton of luck. The more luck you have the easier things will be for you. If you're born into the middle class you'll have a much easier time getting further in life than if you're born into a poor, crime-ridden neighborhood with bad schools. We have to acknowledge that.
We also have to acknowledge that you can still take two people who started in roughly the same circumstances and get dramatically different outcomes due to different drives to succeed. To say "most successes had been a combination of being born at the right place and time, etc." leaves out this part of it. I went to a top university and was incredibly privileged to be born both very intelligent and in the middle class to be able to get there. Yet, while all of my classmates are doing just fine in life, there's a huge difference between those that were passionate and hard working and those who weren't. There are tons of people I know who are very smart and came from privileged backgrounds, but who you knew would never do something big because they didn't have the fire inside to work 60-100 hrs/wk for 10 years straight or who valued the prestige and reduced risk of a big company more. Honestly, I don't entirely blame them as it's not always the most fun way to live. But some people are just driven as hell and while it's not enough to be that way without the luck of natural abilities and familial resources, you shouldn't leave it out of your list of factors for things that contribute to success because it makes a really big difference even if not necessarily sufficient by itself.
>If you're born into the middle class you'll have a much easier time getting further in life than if you're born into a poor, crime-ridden neighborhood with bad schools.
That's a caricature of the problem. You don't need to live in a bad neighborhood. You only need to live in a community where people don't talk about starting businesses, don't know how to start businesses, or never made friends with anybody who owned a successful business. No connections = low chance of success.
You sound like some bitter guy who's tinkered around with some self help stuff and gave up after a bit. Or maybe you haven't even tried. For one Bill Gates who worked hard to become who he is, there are tons of other people who were in similar or even better situations than him who didn't.
>You sound like some bitter guy who's tinkered around with some self help stuff and gave up after a bit. Or maybe you haven't even tried.
And you sound like a guy who likes ad-hominens (and still believes in self-help books).
>For one Bill Gates who worked hard to become who he is, there are tons of other people who were in similar or even better situations than him who didn't.
You forgot the tons of other people who worked as hard or more hard than Bill Gates, but didn't get anywhere. Which is the whole point of this thread.
Nobody said that Bill Gates didn't work hard. Just that working hard doesn't mean much as a means to be a billionaire for three reasons:
1) You can work the same or even 2x as hard, in the same business, and get nowhere. Or do you think that failed Microsoft competitors didn't work just as hard, or weren't smart enough?
2) It's many times easier for someone with the backhistory of Bill Gates (the family, the education given to him, being white etc) to be able to even try to do what he did, that for people with less fortunate back histories. And that has nothing to do with smarts or hard work. There are tons of hardworking smart blacks, latinos, LGBT, Nigerians, Sudanese, Venezuelans, etc. Just being white and middle class (or upper middle class even better) means you play life in "easy mode".
3) And obviously you can work 2x or 10x as hard and/or smart in another business, as a scientist, coal-miner, surgeon etc and never get nowhere near making millions, much less billions.
Of course you also overestimated how hard Bill Gates actually worked to get where he got -- because you thought backwards to support your belief: "oh, he is a billionaire therefore he must have worked much harder than people that aren't billionaires to get there".
Instead of making an empirical observation: lots of company owners, in startups etc, bleed sweat for their company, often working 16 hours a day, toiling for years etc, and then fail. And that others are often made millionaires for being in the right place at the right time (Google's first cook, for one).
Gates was smart and worked hard indeed, but there were lots of CS pioneers who worked harded and were much smarter, without billions to show for it.
In fact if Digital Research's boss haven't blown IBM lucrative DOS contract for totally BS reasons, Microsoft would probably have gotten nowhere fast.
And since it's all about the determined individual, I also guess women, blacks, latinos, LGBT et al are just lazy or not competent enough as Mark, Gates et co to not have such many billion dollar success stories -- heck even way less million dollar success stories per percentage of the population. Right?
He was born with his star in ascendence, destined to rule over the unruly private lives of every human alive, destined to surround himself with empty mansions so no others may peek upon his divine unicornhood.
He is the first coming of social media ceo-frat-bro-jesus.
praise be unto the billionaires, for they know not what they do; they only do what they are destined to accomplish regardless of their parents sending them to $60,000 per year teenage boarding schools. do not believe you can know them, for they are not fellow humans, they are Greater while we shall always remain Lesser to their unicorn brilliance. Bow, and praise be.
If we're going to accuse people of using their idea of reality as an excuse, then the alternative is no better. If it is in someone's nature to be adaptable; and by that virtue to be a success; and if others do not have like nature, then those who do not succeed are excused from ever trying or from having tried. They need feel no guilt for failure, for they could not have been anything other than failures. Nothing need ever be their fault.
So, the alternative hypothesis is no better if you want to go throwing around that sort of blame.
I think the point he's trying to make is that if it wasn't Facebook, Zuckerberg would have been successful with something else. Perhaps not as wildly successful, but he certainly wouldn't have regressed to the average, run of the mill consumer getting by on the 9-5.
He wasn't some genius programmer. He created a glorified forum (and in PHP).
He wasn't some genius businessman (evident from his early interviews). He created something at the right time, that got momentum because of that, and that attracted the right people to help make it a success business wise.
Would he have gotten somewhere else if it wasn't for that? Maybe, maybe not.
I don't see anything particularly convincing that he wouldn't have regressed to the mean.
Some traits shared by Mark, Bill, Steve, Jeff, and even PG apart from being born white, not poor, male, lucky, etc:
1) self driven
2) loves to build
3) doesn't let things get in their way
4) goals based on their version of the future
5) deep thinkers / intellects
6) holds their own values and priorities
7) evidence driven / scientific
8) conqueror's mindset
9) idea person, doer, dreamer, student, teacher all in one
10) never was about the money, and more about passion
I don't claim this list to be 100% accurate or exhaustive, but the point is there is more than just luck and DNA, and many of these traits are acquirable. The demographic to me says that the chances of becoming that person are higher under those circumstances, but the demographic itself does not directly enable or cause any such success. Just as all presidents were white until Obama, maybe we just need someone to shatter the stereotype.
Personally, what I respect most is their capacity to generate their own philosophies and to then apply them to their products, to their companies, and to their lives. I find people that can do this are successful at any level.
A lot of those features we just ascribe to them post-factum because of their success. And a lot of those features are also shared by people without much success.
I mean is Mark "deep thinkers / intellects" etc in general? Or it's just a (average) smart college boy who wrote a service that hit the right spots and got viral?
I also know many millionaires (and billionaires) for whom it was always "about the money", and that was their passion.
That isn't a list of accolades. They are character traits heavily utilized on the way to what was accomplished. When comparing Mark to a kid who wrote a program that went viral, just see how instrumental he was. Facebook is far more than just a viral web site, and it didn't fall into place with Mark sitting back and seeing where all the pieces would land.
Yes, many of the traits are shared with average people, as is the trait of being human. This to me only attests to how similar and ordinary and close we really are to those we love to put on high pedestals. How do ordinary people accomplish extra-ordinary feats? To this I suspect combination is key. You could be perfectly capable but not have a dream. You could be a dreamer but lack self motivation... and so on and so forth. And sure, maybe you had it all except for the money to fund yourself. But either way, if we are admitting there is a combination, we're already past the luck hypothesis.
What's so special about those people? Their success is probably due to their connections, and mostly luck in timing. I'm sure there are people that are better than Larry or Sergei and are much less successful.
It's not all luck, a lot of it is who they are. They are mostly aspie nerds. They all went to private montessori "we just do whatever we want" schools. Those schools teach them they don't have to compromise, they don't have to be average, they don't have to work within the system. They just do whatever they want. If someone tries to stop you, you destroy them for standing in the way of you doing whatever you wanted to do.
The same people generally lack overt, crippling hardships in their lives. They get to associate with other successful people from an early age and often have built-in family or community connections.
Musk was studying supercapacitors obsessively as a kid, as a teenager, as a 20-something, and now he puts them in his cars. It's not all luck.
We're at the first age of humanity where aspie hyper-focused weirdness can be funneled into taking over the world. We're just getting started.
The point the poster you responded to was making the point that Zuckerberg may be satisfied with just Facebook, whereas Larry and Sergey choose to pursue other ventures in addition to Google. The poster wasn't making a point about talent or luck.
Even with that, Zuckerberg isn't 100% focusing on the Facebook core product; look at the Connectivity Lab, for example.
EDIT - This comment is at -4. And it's 100% factually and clearly observably true and devoid of emotional content. Which says a lot about how voting works on this site.
This is delusional survivorship bias. Its like saying Churchill would have gone around starting world wars, to prove he could rise to the occasion. Had hitler not done it for him. etc.
VCs consider the entire context around their would-be unicorns. They don't invest solely on the founder's determination. They also consider the plausibility of the idea, the market conditions around the proposed business, the estimated amount of resources needed to compete, etc. It is NOT solely based on one's determination to be "a unicorn", though it's nice to have a determined founder.
People who believe that will is everything are generally pretty naive. Successful people know that if external conditions were even slightly different, their path wouldn't have turned out the way it did, and no one can guarantee it would've been as prosperous.
For example, I make an OK living as a software developer. My interest in computers started when my dad brought home a Packard-Bell in the early 90s. He bought it through a discount program that his workplace offered to increase computer ownership amongst their employees. If he had worked for a different company, or if his company had not made it affordable for him to buy a computer when they were still relatively uncommon in homes, it's very possible that I would be out there bagging groceries somewhere.
If MySpace had been a little wiser, there would've been no room for Facebook. Did the people at MySpace feel the sheer force of Zuckerberg's unicorn-desire and decide to just back off? I don't think so. He was in the right place (at least half-random) at the right time (80%-ish random) and had the right skillset (probably 10% random). There are many thousands of kids like him that didn't have "the stars align" when they had their shot. It doesn't mean Z. wanted it harder and it doesn't mean that these no-names didn't do a good job. The world is not a meritocracy.
95% of YC-backed startups fail. A few go on to have decent success, and maybe 2 or 3 YC ventures actually went on to billion-dollar valuations (Dropbox and Airbnb). And that's considered a really good success rate.
Since we're talking here about what you call 'unicorns' (I hate that word), then we're talking about the odds of building a billion-dollar company. YC is made up of hundreds of incredibly talented entrepreneurs, and even then, it's pretty evident that building a billion dollar company is as much about luck and circumstance as it is about talent and determination.
EDIT: Correction - I was very wrong about YC stats, as it turns out [1]. My mistake. I stand by the original point, though. 8 billion-dollar companies out of ~940 YC companies demonstrate clearly that building a billion dollar company isn't easy, and takes a whole lot of luck.
95% could be accurate. I'd consider every "acqi-hire" an overt failure. Your business failed, but you personally got to fail upwards. acqui-hires are generally VC-engineere soft landings (everybody has friends they can ask for $50 million in a pinch, right?).
Just because money changes hands in the end doesn't make it a success. You fail upwards until you become a creature of pure thought leadership (i.e. a VC whose only job is to 'have an opinion' on stuff and can never be proven wrong because, hey, it's all an opinion or luck or the market or some unforeseeable outside force you failed to consider when failures continually happen).
The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time.
That's not the right question. It's whether the 20 yr old Mark Zuckerberg beats himself every time? What are his chances of doing it again.
In my life I've met a lot of people that made it, but few that made it multiple times. The ones that made it all had a lot going for them and many were brilliant. A lot of them were in the right place at the right time, and had a lot of luck along the way. Very few of them (1 that I know for sure) was a serially successful. Henry Burkhardt III. Problem is, he was not an ethical person and was sued by the SEC for fraud[1].
Let's also be honest: on the path to being insanely wealthy there are a lot of forks in the road. One fork is treating people "right" (think golden rule here) and the other is being completely selfish and screwing people over. In my career, I've been at that road many times. I always chose the sleep-at-night path. There are some serially successful people that always take the "get mine" path. I've known a few of those people, too.
So, luck and the willingness to screw people over. Those are two ingredients for success.
>So, luck and the willingness to screw people over. Those are two ingredients for success.
The older I get and the more I witness people doing business, the more I have come to the same conclusion.
I would possibly broaden "willingness to screw people over" to something like "the capacity to be able to overlook or be oblivious to any negative effects of one's path to success on the other people on the planet."
I know it's a little weak to reference a fictional TV show, but the Silicon Valley investor who made it big with radio on the internet then spends the rest of his career flailing around with no idea what he's doing is more real than the mystical Great Man Unicorn.
Elon Musk has succeeded at everything he has touched, and some of those things were deemed impossible before he did them. As a society, we should be throwing money and projects at Elon until he fails for the first time in his life.
>The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time.
No, he doesn't. FB's success due to 20+ random meetings, connections etc he had. And of course that there wasn't already a capable competitor in that space.
And the non-random facts of his rise, you can't control anyway (being born to rich parents, going to an Ivy League school, etc).
The idea that we as individuals are somehow "special" and odds don't matter is a fallacy.
> The theory was popularized in the 1840s by Scottish writer Thomas Carlyle.
> But in 1860 Herbert Spencer formulated a counter-argument that has remained
> influential throughout the 20th century to the present; Spencer said that
> such great men are the products of their societies, and that their actions
> would be impossible without the social conditions built before their
> lifetimes.
He just left that exercize for the reader. We are all adults here, capable of reading a link and determining if the information in it refutes a prior comment or not.
(And if we don't care enough to do the work, then we can always not do it and just skip the comment with the link).
Depends how you interpret "meetings". I suspect you are imagining 20+ people sat in a board room with Powerpoint, while the OP is imagining "meeting" someone with power/knowledge who will help your business be successful.
Meetings absolutely will create a billion dollar company.
Unless you've built a billion dollar company yourself then you have no more experience that he has -- and no need to be condescending.
And EVEN if you HAD built a billion dollar company yourself, that wouldn't say much.
First, because the way you did it wouldn't necessarily be representative of how it generally happens.
Second, because you could be attributing all your success in doing it to your self, hard work etc, overlooking all the random and lucky elements (not to mention other people's work) that helped you to achieve that. That's a very common psychological fallacy ("no winner believes in luck"), and one can have it even for minor achievemnets.
So let's stick to observation on how many of those companies were made (as non-billion dollar company creators ), and arguments that appeal to logic, law, how society works, etc.
>Unless you've built a billion dollar company yourself then you have no more experience that he has -
This is what the person said.
>>Meetings absolutely will create a billion dollar company.
I questioned this absurd statement.
>Second, because you could be attributing all your success in doing it to your self, hard work etc, overlooking all the random and lucky elements (not to mention other people's work) that helped you to achieve that. That's a very common psychological fallacy ("no winner believes in luck"), and one can have it even for minor achievemnets.
That is your own projection, and actually shows flaws in your own thinking. I have never claimed this to be true. Also, since you're so interested in fallacies, you should be able to spot your own.
>So let's stick to observation on how many of those companies were made (as non-billion dollar company creators ), and arguments that appeal to logic, law, how society works, etc.
You are a severely confused person. Some humans, in some domains, some of the time, apply logical thought, and that sometimes produces results. You want a logical argument? Humans are not robots and they do not interact with the world simply using logic and no law describes how society works. Logic means nothing in the domain we're discussing. How a billion dollar company is made, is not some provable hypothesis.
>“Meetings absolutely will create a billion dollar company”.
I questioned this absurd statement.
What “absurd statement”?
Famously Bill Gates got lucky because Digital Research blew a meeting with IBM to licence their DOS.
Or consider YC Combinator: a successful meeting with PG/YC staff can mean further investor interest in your company and play a pivotal role in its success.
That doesn’t OBVIOUSLY mean that you don’t have to deliver anything or that you don’t need to work.
Just that a company who works as hard as you and has a product just as compelling but blew their meeting (because the founder had a flu, or is not a good talker, or got nervous, or something died during the demo etc) might go nowhere.
Meetings (not brainstorming meetings or discussions between your developers), meetings with people, partners, businesses, VCs are crucial to the success of a company.
>That is your own projection, and actually shows flaws in your own thinking. I have never claimed this to be true. Also, since you’re so interested in fallacies, you should be able to spot your own.
It’s a generic argument on a well known human behaviour — people attributing their success to “hard work” and forgetting things in their favour that others lack and/or their lucky breaks.
What “flaws in [my] own thinking” does that observation show, and what is the BS about "projection", as if we were in kindergarten ("back at you").
>I have never claimed this to be true.
And I never claimed that YOU claimed this to be true.
I didn’t write “you believe blah and blah”, but “it wouldn’t matter if you had made a billion dollar company, because even if you would, you could e.g. be an outlier in regards to how these companies are made, or you could misattribute your success to hard work as many do”.
It was a generic argument about why whether one has started a billion dollar company or not is not really important in this discussion.
Why? To repeat my argument: first because it’s a very limited experience of one personal story (so there’s no guarantee it’s representative for other billion dollar company makers) and second because it’s about them, so its highly probable that they won’t be objective (and it’s actually a common human trait not to be in cases of success, one studied by psychology).
>You are a severely confused person.
Again with the ad-hominens.
>You want a logical argument? Humans are not robots and they do not interact with the world simply using logic and no law describes how society works. Logic means nothing in the domain we’re discussing. How a billion dollar company is made, is not some provable hypothesis.
You say that, but you seem unable to take clues from context about what we’re discussing. I’m OBVIOUSLY not talking about using logic like robots or computers (or scholastic philosophers).
It was another counter-argument aimed at your sneering remarks that the other guy who commented haven’t built a “billion dollar company”, so what does he know...
And I meant, obviously, that we should discuss with logical arguments (avoid logical fallacies), looking at the role of the legal system (law), at how how society works, and observe how those companies were created, to understand their success.
Didn’t reading “let’s stick to observation on how many of those companies were made” [and] “how society works” make you see that I wasn’t referring to logic in the robotic sense (or Principia Mathematica) but in the sense of “let’s not have BS illogical arguments”?
>That doesn’t OBVIOUSLY mean that you don’t have to deliver anything or that you don’t need to work.
YOU said that all their success was due to some random meetings. If you don't mean what you say, then stop saying those things. Creating any successful business requires immense mental and physical resources. MZ is a genius (even though I personally dislike his personality-type) and FB is a result of him being awesome at what he does. You're trying to paint this picture that people have the raw ingredients within them to be a success, and all you need is to be in this right situation to take advantage of them. That kind of model is incongruent with reality.
> first because it’s a very limited experience of one personal story (so there’s no guarantee it’s representative for other billion dollar company makers) and second because it’s about them, so its highly probable that they won’t be objective (and it’s actually a common human trait not to be in cases of success, one studied by psychology).
'representative' doesn't mean anything because there are countless factors involved in being successful, and it is impossible to isolate them all. So let me ask you, why do you focus on success guarantees and objective success models? These things do not exist in the real world. There is simply no point in trying to establish ANY kind of logical reasoning behind success because it doesn't work that way. People look at what successful people do and they think "Hey it worked for X let me try and see if it might work for me". That is a perfectly normal way to approach these things - Which is the point the parent poster was making - "Business isn't exactly chess, but it's a lot closer to hold'em than it is to a lottery."
Before you comment next time, maybe consider whether you're actually interested in engaging in conversation or whether you're just going to stomp off in a hissy fit.
It's understandable to want to object to a commenter who is
being rude, but please don't do so in a way that makes the thread worse.
A gentle reminder of the rules is ok. It's also good to flag egregious comments. (To do that, click on a comment's timestamp to go to its page, then click 'flag'.) We monitor those flags.
Since we're handing out advice here's one for you - Before YOU comment next time, maybe consider whether you yourself are actually interested in engaging in conversation, or just passing off your own assumptions as fact.
Most of us slip up from time to time and we all read things on HN that unduly provoke us, but it's critical not to channel that into rudeness on the site.
Please don't be sneaky in phrasing it. Instead, edit it out. Sneaky rudeness is a worse problem on HN than outright rudeness is, because it's more insidious. Outright rudeness at least tends to get flagged.
> I was responding to rudeness in kind.
Maybe so. But most everyone feels that way, so it's not an ok reason to break the rules.
If you come to that conclusion I think you're more far out there than me -- in not taking clues from context.
It's obviously not saying that he had random meetings in their content and in who was present and that these somehow created his billion dollar company.
Just that the meetings he did have (the "right" meetings with the "right" people) were made possible due to lots of chances and random stuff happening first.
First random factor: if he was born in Alabama from a poor family instead of upper middle class NY family, his chances of having those meetings would be less than half. I'll let you calculate the changes for that happening if he was born black in Nigeria.
Never mind poor black families in Alabama. What was Zuckerberg's chances of breakout success if he was born into an upper middle class NY family just as before but opted to go to a less prestigious university which already had a decent photo-sharing service or message board? Higher than the average person certainly, but higher than the average HN-reading startup-enthusiast developer?
>Just that the meetings he did have (the "right" meetings with the "right" people) were made possible due to lots of chances and random stuff happening first.
Okay then, lets get to specifics. Which meetings are those? Whom did he meet with? What makes you think they were with the "right" people? Who are the "wrong" people to meet with? Also, What makes you think that the meetings were only possible due to chance and would not have happened otherwise?
>if he was born in Alabama from a poor family instead of upper middle class NY family, his chances of having those meetings would be less than half.
How have you calculated the chances? Could you elaborate?
>I'll let you calculate the changes for that happening if he was born black in Nigeria.
I'll gladly do the work if you show me how YOU calculated it in the previous case.
Listen, I'm OK with general arguments and using rhetoric to drive a point. But understand that, your argument consists entirely of your own personal opinion, and people do not have to agree with you on anything. In fact, you then cannot tell someone that their opinion is wrong, if they disagree with you.
>How have you calculated the chances? Could you elaborate?
Just divide all billionaires or multi-millionaires you know by region and family background.
>I'll gladly do the work if you show me how YOU calculated it in the previous case.
I checked the top 100 richest people, and saw that people born in western countries are overrepresented -- especially US who is mere 4% of the global population but has almost all spots in the Top 20 (and further down).
Either those billions Asians and Africans are lazy sods, or external reality plays greater role that the "great determined unicorn" man...
And even in the US, those blacks, latinos, LBGT must be really lazy and incompetent, because they hardly make a dent in the top 100 most richer, despite the demographics (which show they are a huge percentage of the US population).
The part I think most people miss is that how "good" Zuckerberg is/was matters less than the resources he had access to. Luck/privilege account for SO much and that's true of all most all the billion $ startups.
Agreed. It's often underplayed how helpful it was that Zuckerberg was at Harvard when he created Facebook. It created a sense of wanting to be a part of a network that once was exclusive as it expanded. I doubt he would have had the same type of advantage even if he was at another Ivy, like say Dartmouth.
The Winklevoss twins hired Zuckerberg to help build their social network. Instead Zuckerberg delayed their project while secretly building his own. He stole their market opportunity. It's well documented.
This is something that should be noted. Zuckerberg had access not only to university resources, but also a wealthy friend with deep pockets. I don't think that means success for everyone, but there are a lot more companies that would get off of the ground if cash flow wasn't a problem from day one.
What resources did he have access to besides being a Harvard student? That's a huge one, but it's not like he had access to (or needed) lots of resources to make The Facebook a success at Harvard. And after that it was all downhill.
A. being at Harvard, is a huge advantage in of itself. B. having a roommate with enough money to invest in it was a huge advantage. C. Being rich enough to attend a full time and not work a job to support him self.
D. He had parents who indulged his interest in programming early on and hired a software engineer to privately tutor him E. Happened to have a group of friends (including Adam D'Angelo, later Facebook employee) at his VERY expensive private high school that were also great programmers by that point, likely helping each other become better.
I'm not saying the first versions of Facebook were ingenious feats of engineering, but Mark easily may have never learned to build things. Considering everything else mentioned in this thread, we can reasonably conclude that a lot of went very right for him at many points along the way.
He had the resource of being in the right place at the right time (i.e., market opportunity). Facebook did not exist at the time, and the social media market, which a college student could disrupt, wasn't saturated. What would he have started today? We can look at Airbnb or Uber as this decade's runaway success, but neither of those could have been started by a solo college student. Don't underestimate the power of luck in determining startup winners and losers.
Meanwhile, Dropbox could have been started by a solo college student. There only gets to be one Dropbox and it takes luck to be Drew Houston, but it takes an ungodly amount of work and sacrifice as well. We shouldn't lack acknowledgement of skill and drive anymore than we should underestimate luck.
You are not wrong, but Zuckerberg was competing against thousands of people with just as much privilege as himself (and some with a lot more). All of that same privilege didn't guarantee the Winklevoss twins success.
The only one of those that has anything remotely approaching reality is being born in the US, or another first world country. Had he been born somewhere in undeveloped 3rd world, or somewhere torn apart by war, we likely would not be talking about him.
> The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time.
If that's your attitude, then yes he would.
But Facebook being the success it is was not due some genius insight on his part that was destined for greatness, it was mostly luck. If MySpace hadn't driven itself into the ground, Facebook would have never taken off.
If Google hadn't been so slow to realize the importance of social media, if Google+ hadn't been so bad, etc. There are any number of factors that are 100% outside of Mark Zuckerberg's ability to influence that could have stymied Facebook.
A good idea, hard work, good decision making, etc. all are necessary, but they are not enough. People who are hugely successful, and people who think they will one day be that successful like to believe that it's merit that got them there. But it's not. There's just as many talented people who don't make it. The filter is largely luck.
Survivorship-bias assumes that the dead stay dead. But the ability to attract more capital is not necessarily affected by failure. Survivorship bias does not apply here. We can account for the broke / dead in the normal way.
I'm not sure Zuckerberg is such a great example to use (as he's admitted himself). Bill Gates, Jobs, Page, Brin, maybe.
25 year old Page beats you because he invents PageRank while studying the graph structure of the web as a PhD student at Stanford. That's a much better example of intellectual horsepower/execution rather than luck playing a pivotal role in making a successful business.
They were all dependent on luck and outside circumstances. Without Bill's mother's connections that got him in the door at IBM, Microsoft may've never been anything more than a blip. Without the gross indifference to search pre-Google (Y! focused on being a "web portal", not search results), Page/Brin may've just been starving grad students that eventually found a semi-OK job in academia. Most blatantly, if Jobs didn't have a passive engineer like Woz to co-opt, he would've been just another self-centered burnout.
> The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time.
Why are you so sure about that? Has anybody ever observed all the Mark Zuckerbergs that didn't make it? This situation is a classic hindsight bias problem.
You are wrong. It is mostly random. Even pg admits it because the only two metrics he can come up with that are somewhat meaningful signals of success is pedigree of its founders and having co-founders. They even eschewed having a good idea to present, at least a couple of years ago.
Even with having the same metrics for the YC entrants, they still get more than a 50% failure rate.
> The 20 year-old version of Mark Zuckerberg beats the 20 year-old version of me every time.
What basis do you have for saying this? If Mark missed out on the social media boom, what are the odds that he would find another industry waiting for a multibillion dollar company to come along?
Focused more on building a small (5ish people) business with $1mil in revenue a year as the path to enlightenment.
Key insight: building a $1mil/yr business ($7/mo * 12 mo/yr * 12,000 subscribers) that focuses on delivering pure awesome is an excellent way to build a $10mil/yr business is an excellent way to....
> building a $1mil/yr business ($7/mo * 12 mo/yr * 12,000 subscribers) ...
Much easier to do if you sell to businesses. At $100/mo instead of $7/mo you only need 833 customers. I'm nearly there just by adding 1-2 customers a day, which is eminently doable without a team.
Not to derail the original discussion, but I'm curious too - what methods are you using to gain 1-2 users (paying $100/mo) per day? I'm building out a product that I'm marketing to businesses, but am struggling to find ways to actually get the name / brand in front of enough people.
One man writes a novel. One man writes a symphony. One man can write a $1MM ARR SaaS.
One man million dollar software business is very doable if your focus has commercial intent. What marketplace services do people crave, but don’t have ?
and yet business customers might expect more individual attention, where as a consumer product has less of such expectation. you might end up with a lot of support overhead with such a small number of customers. They can start to be demanding, as they know you are beholden to them for revenue....
I haven't found that to be the case. I used to run some retail and consumer services as well. People that spent $2 expected unending support. None of my B2B SaaS subscribers have needed much hand-holding. I get maybe half a dozen support e-mails a day, which often take just a minute or two to type out a reply to with some guidance. Mostly it's new users who just need some help with getting started, after which there is no support burden at all.
If you have 833 customers paying $100/mo, any one of them is just 0.1% of your revenue; you're not beholden to them individually. If they expect unreasonable things of you, then you might not be a good fit for them and can part ways. Sometimes firing a customer is the right thing to do. https://www.groovehq.com/support/how-to-fire-a-bad-customer
Yev from Backblaze here -> Definitely! We charge $5/month and have a support team that's inundated with folks expecting $100/month worth of support. There is something weirdly psychological about it, for example, if you're having a problem with Google, you don't really expect to call them up and complain, same with Facebook. But as soon as you're paying $2/month or $5/month you start expecting a lot of care, whereas if you're an "enterprise" customer, you most likely know the level of care that $100 buys you, so you're more reasonable. It's fascinating!
And, more important, don’t focus on growing to become a $10mil/yr business – if there is no need to expand, just don’t expand.
If your business is only profitable by constantly expanding, it will crash soon. If you have a smaller, but sustainable business, your company might be around in a few centuries still.
This is how a lot of small businesses in Europe work, and how they continued to exist for a millenium.
What's missing from this argument is that opportunities to make ongoing profit without considerable ongoing investments tend to be VERY short lived in the tech field. Assuming that steady revenue will last, will lead you to ending up crashing as hard as Atari.
You grew a steady, low-stress $1MM/year lifestyle business? Great. Now thousands of people are going to see what you're doing, and dozens are going to try to clone you, many of them far better connected than you are. Software is rarely like the e.g. restaurant business, where you can own a scarce piece of property in a good location and don't have to compete with the whole world, or other defendable advantages. Tech startups tend to have far fewer defendable advantages.
Once you realize this, it becomes obvious that "grow or die" is the nature of the business. Not some silly scheme that only exists due to VCs forcing it upon entrepreneurs.
Long-term opportunities that are easily defendable with minimal effort are extremely rare in the tech startups field.
On top of that, guess which type of businesses are, by far, the most attractive to cloners and other competition? - those "ideal" lifestyle businesses that make profits from early on and require minimal upfront investment.
Edit: Or instead of Atari, insert here all the other profitable businesses that you've never heard of, who got crushed after a couple years because they slowed their investments into innovating, assuming that their very steady profits would continue instead of dropping off a cliff. Happened to me twice.
>> Long-term opportunities that are easily defendable with minimal effort are extremely rare in the tech startups field.
I used to buy that. Then I started looking around:
1) What's McAfee today that it wasn't 30 years ago?
2) Windows 10 is a slightly newer look with small WinRT runtime (which may have come from WinCE I don't know) but most of the software underneath is the same code running for over 2 decades as it looks to my eyes.
3) SereneScreen fish screensaver, has it changed much?
4) How many years has Skype been around?
Put some lipstick on the pig and if it ever sold at all, software is renewable.
Also your restaurant analogy isn't really fair, it takes a lot of work every day to keep a popular restaurant popular regardless of location.
>> Now thousands of people are going to see what you're doing, and dozens are going to try to clone you, many of them far better connected than you are.
Linux is better than Windows yet what runs on most desktops?
OS/2 was far, far better than Windows yet Windows is still on desktops because IBM stopped selling OS/2 (and PC's for that matter); not because people would not still be buying it but because they are more interested in selling mainframes (which were supposed to be dead by now).
This is exactly the thing. Focus on one thing, do it better than anyone, constantly make the best product, and you’ll keep your market for a long time.
(Well, you don’t need to be the best, just very good).
>Long-term opportunities that are easily defendable with minimal effort are extremely rare in the tech startups field.
But that's the idea that not everything is a startup. If the addressable market is $10M and you get a good chunk of it already, there's a lot less motivation from anyone to compete with you. And they probably have no clue your market even exists.
And yes, most SMB require more than "minimal efforts", but normal efforts. Much less than building a unicorn. And in many cases a great flexibility and quality of life.
I think the Atari argument reinforces the point of the article.
Atari went from nothing to a household name, something a lot of people had and loved, was sold to Warner Comms for millions of dollars making the founders rich, and became 30% of Warner Communications' income within 10 years of being founded. That sounds much like the meteoric rise of a hot-new-thing 'successful' startup (e.g. Myspace) that lost out to a competitor (e.g. Facebook/Nintendo) than a niche 'lifestyle' company that didn't innovate.
Had they been working on, I don't know, restaurant POS machines maybe they would have been much less known but made that same amount of money over 20 years before some competitor bested them. And what the article is saying is that's also not bad.
Not necessarily grow or die; you can try to build a number of $10M/y businesses instead of growing one to $1B/y one. I won't hazard to guess which approach is harder.
A billion dollar company (~$100 million per year in revenue with 10x valuation multiplier) requires $274,000 per day in revenue (which is $8.33 million per month, or $3.20 per second, every second of the year).
To actually receive a billion in revenue requires $2,740,000 per day (which is $83.33 million per month. Broken down further it reaches $32.00 per second, which doesn't sound impossible).
To become Apple, you would need about $329,000,000 in revenue every day (which is $10 billion per month, averaging out to $3,800 per second).
The thing is, building a billion dollar business doesn't require 1000x the work or entail 1000x the stress of building a million dollar one...even if it is more than 1000x less likely. It's also the case that only getting 5% of the way to a billion dollar business after six years is probably going to feel better than 20% of a million dollar business after two years...one comes with a reasonable paycheck, the other doesn't. Finally, the investors in your million dollar idea aren't going to be any less assholes, and probably moreso; your credit card and local bank are less ok with failure than angels and VC.
To put it another way, building a lifestyle business already requires a huge amount of luck and time on top of the hard work and stress. There are only so many trips to the plate and swinging for the fence may be the rationale option.
The thing is, building a billion dollar business doesn't require 1000x the work or entail 1000x the stress of building a million dollar one
The key thing is, a billion dollars is nothing like 1000x better than a million. In fact, I suspect it's barely 1.1x better (and there's even some weak evidence from subjective wellbeing studies that it could be worse).
The St Petersburg Paradox[1] is a fun application of this fact — the fact that when you already have a LOT of money, even a LOT more money is pretty well useless to you.
Do you really mean 1 million or, say, 10 million? I think there's a huge difference between these two. I haven't done the math, but I figure with the latter you could retire without thinking (much) about what you spend money on. From that point, yes a billion isn't much different.
Hmm. I agree there could be a difference between 1 million and 10 million. To an approximation, 1 million is not having to worry about housing, while 10 million is not having to worry about work.
But I'm not sure not having to worry about work would be good for everybody — me included. It could be good ... but I worry it could also leave one purposeless and adrift (I have some anecdotal evidence on this point).
Apologies for not looking up the literature to corroborate this (or not), but I should get back to the day job.
I read frequently that what was considered a "millionaire" the last century, inflation and cost of living adjusted would mean "someone with 7 millions or more in net worth"
Edit: they're the famous HNWI ("High Net Worth Individuals")
I live in Cambridge, MA and I can't see any way that $10MM isn't enough to never worry about work again. At a first approximation, that's $300-350K in income without much risk of principal drawdown. It's surely enough for $250K in income (plus an inflation "raise" each year) forever.
If that's not enough to not worry about work, you might have lifestyle issues.
$1MM won't buy you a "really nice house" here, though, so I agree with you on that point, but it is still enough to not worry about housing if you choose "sufficient, not luxurious" level of housing.
As a counterpoint from the "flyover country" viewpoint, I live in rural Minnesota about 40 miles outside Minneapolis.
$1MM will buy you a very nice new construction 6,000+ sq ft house on about 20 or more acres of land with an outdoor pool most likely. And you're within commuting distance of major job markets. $10MM and you're living quite comfortably (probably spending weekends at your cabin on the lake) and certainly not needing to work, so maybe you spend your free time tending to your horses or alpacas.
I live in London, and ~$1.5m would be possible for me to retire with my current living costs that includes taking care of my son and the mortgage. $2m would be comfortable.
To just not have to worry about housing, even if I were to buy a house again today, would only take about $600k for a pretty standard 3 bedroom house w/garden even in London...
After buying a nice power boat for week long cruises, a nice turbo prop for quick private travel, and that summer cabin in Colorado, 10,000,000 doesn't go as far as you might think. Especially if you like to travel well.
Then don't buy things with such poor value propositions? 4% interest on $10,000,000 is $400k per year. If you can't live off that I feel sorry for you.
The paradox shows that capping the pot at eight bucks and limiting the tosses to three won't make the payoff better for the player. The no limits game has more positive outcomes.
That's a problem for small businesses, the individual owner usually has to keep playing because the smallness makes them integral to operations. Cashing out and walking away is rare, maybe they can negotiate some reasonable buy out over a few years...but targets insure that's not really a walking away right away. On the other hand, business makes it likely that the owner is replaceable and makes the opportunity to step into their operational roles attractive.
"But why would I ever want to walk away from my business? It is my life's work."
You don't build a billion dollar business to cash out and retire. You would likely end up investing in new businesses and continue from there.
In that perspective, a billion is exactly a thousand times better than a million. Even more so, perhaps, because it enables you to never have to worry about losing your money and going broke, which you could easily do with a million or even ten.
If you try to make a billion dollar business, you're more likely to fail completely and end up with nothing. If you go in with more reasonable expectations and a more sustainable approach, you're more likely to be successful, whether the end result is a million dollar business or a billion dollar one.
Starting off with the attitude of "a billion or nothing" makes you more likely to fail to accomplish anything.
I didn't miss the point. I just happen not to agree with it 100%, by which I mean that building any sort of business that just survives tends to be incredibly hard work and high risk, and even then most don't build long term value or throw off six figure salaries year in and out. 37 Signals is still a unicorn, just not in the VC sense. That's why another 36 similar companies don't immediately leap to mind.
The quantum step in risk is from wage worker to self-employee, and two year's toil with no net income for a little thing makes less sense than for a big thing. The article pretends that little things are sure things. They aren't.
There are many, many, many businesses that do several millions or tens of millions in revenue and are happy doing that. The reason they're hard to name is because they aren't nearly as famous at the the billion dollar business.
You're also still ignoring the point the article makes about the chances of success. Going for a billion dollar business often forces you to make decisions that sacrifice your ability to succeed with a smaller business. Even if the work and stress were the same, I'd take a 1-in-10 chance at $10M over a 1-in-10000 chance at $1B any day.
The odds of a $10,000,000 business are also approximately zero, not 1:10 or even 1:1000. That's what the article ignores. The important choice is starting something or not. The bigger the business the more numerous the possible beneficial outcomes. A billion dollar business can 1.2% fail at $12,000,000.
Every VC I've ever talked to --- middle double digits over 3 different startups --- has told me this story about how they're not looking for "10-baggers" or "unicorns" or whatever it is they're calling them these days. They want to invest in founders, trust that a good team will come up with ways to make money if they just stay out of the way, &c &c zzz.
The fact is that the economics of venture capital pretty much depend on most/all of a portfolio's investments having some shot at becoming outlandishly successful. The winners have to pay for the losers.
If you're an early-stage investor you don't look for unicorns not because you don't want them (you obviously do) but because you can't spot them based on business model, traction, etc.
As an early stage investor you focus on team/founders because that's the best early predictor that a company will become a unicorn in the longer term.
I readily, happily accept that dedicated seed-stage investors, "angels", whatever we call them today, have different incentives and selection processes than "venture capitalists" in the Greylock sense.
I'm a little unclear on how the economics of seed-stage investors interlock with those of venture capitalists, and what level of influence VC decisions have over the whole ecosystem. But from the vantage point of a founder, modern seed stage investors seem like an unalloyed improvement.
Nobody is saying luck is sufficient, just that it's necessary. As is talent, hard work, &c.
The role of luck ("fortune", "fate") in the success of great people is a deep and ancient question, and you should not dismiss it. Machiavelli's Prince is at least 50% about the subject, and Sun Tzu is infatuated with it. Acknowledging luck does not mean dismissing the successful - it's just intellectual honesty.
I can understand how a very logic/scientific mind could have difficulty with the concept of luck. Citing literature may not help.
Let's say there's some stochastic mechanics at work, randomness more than 'luck'. Luck is the attribute of someone, when randomness is an attribute of events, which makes a big difference.
Of course I can understand people citing 'luck' as necessary... but it's more superstition than science.
All in all, it means you can't really know for sure...
Is lower goals really more founder-friendly? I'm not so sure.
A bit perplexing, but in my experience, VCs who aim lower will often put far more stress and pressure on founders to meet short-term milestones and ramp up revenues immediately. Since the distant billion dollar goal is gone, it becomes all about the short-term.
Aiming for a billion is a great filter too. At the early stages, you desperately need to be associated at least a few investors / founders / employees who absolutely believe you're on the path to something huge. Low goals allows more people to get involved who have extremely misaligned interests, who are often looking for something medium sized to milk, instead of something huge to help grow.
> You don't build a business by setting out to be Facebook.
> You build a business by setting out to create thefacebook for universities.
Paul Graham is the only person in the world who can get away with spreading this, please don't repeat after him.
In practice, the difference between building a billion dollar company and building a 10 million dollar company is marginal. You still need to constantly raise money, you will ruin your culture and so on; everything that OP describes as awful downsides of SV mentality is just as present. The author seems to hint towards bootsrapping ("figure out how to earn your first dollar", etc), but examples that he gives, with the exception of 37Signals are just smaller and less successful versions of Facebook with all downsides included.
> the difference between building a billion dollar company
> and building a 10 million dollar company is marginal. You
> still need to constantly raise money...
Disclaimer: I work at Backblaze. The biggest difference I see is the expectations and control of investors. Most of our Backblaze team was involved with a startup called MailFrontier which raised $22.5 million over four years selling almost 90 percent of the company to the VCs. The VCs removed the founder CEO (my partner), installed a puppet CEO that did whatever they asked, and the VCs eventually forced us to sell in a way that basically returned them their original investment.
So Backblaze was a visceral reaction to that experience of losing that control. It's the same team, but we all agreed to go a year without salary to jump start it without selling control. To this day, the only people who sit and vote on the board of directors are Backblaze employees and founders.
The lack of cash meant slower growth, there is no doubt about it. But it is a profoundly different company, and a profoundly different experience. We make decisions that are good for our business and good for our employees, not to massage the egos of a bunch of spoiled VCs. And along the way, the Backblaze founders and employees own the vast majority of the company. Most importantly, nobody can force us to sell. I like my job and I like my coworkers, and I make a fine salary here. Why does everything have to be about the winning top score no matter how unpleasant and then ending the experience? I want to enjoy the ride and keep it going.
>the difference between building a billion dollar company and building a 10 million dollar company is marginal.
That's not even remotely true. Building a billion dollar business is a much different experience than trying to build a $10 million dollar business. It's not a simple difference of scale, it's a difference of kind. What you're saying is kind of like saying that playing high school football and playing in the NFL (or Premier League for our European friends) are only 'marginally different'.
I get this from two working experience: one with my family business (valued in the 8 figure range) and one with a start-up shooting for a billion dollar valuation (which is our actual stated goal). The difference is palpable, but the biggest difference has to be with the opportunities we choose to pursue. The family business tends to have a pretty solid understanding of the market we're in. We know who we are, who our competitors are and we choose our targets carefully. This has led us to profitable, sustained growth. At the start-up, we were going for crazy opportunities and saying yes to very challenge projects, something the family business would have said no to. Why? Because the start-up has to get 'lucky' and find an unexpected opportunity that propels us forward. We need this because there is no other way to get to $1 Billion valuation than through crazy growth, which if you're a start-up means working crazy hard and getting lucky.
There are plenty of other bootstrapped companies out there; I know a few of them and they are doing very well.
Not sure what you mean with downsides. These bootstrapped companies have freedom to do whatever they want and they are mostly built on actual problems that others have not kept artificially alive by the funding game.. That in itself is worth quite a lot, at least to some.
* The value/importance of a 1% increase in efficiency can make or break team performance. 1% of an 8 figure company isn't enough to fund a multi discpline, multi-person team looking to improve efficiency for a year. The parent company literally employs a team whose sole purpose is internal efficiency/performance improvements where "single digit percentage" improvements are enough productivity to justify a multi-million dollar budget. Sure it "exists" in theory in a smaller company but it no one is paid to perform the job because the cost/benefit isn't there.
* The mindset change in regards to accounting, legal risks, etc.
* The amount of red tape & interaction with state/federal governments. No one cared what we were doing when we were just an 8 figure company.
* We actually care about PR when it, frankly, didn't matter before.
Sure, you "care" about these things as a smaller business but you don't have dedicated teams of people solely to manage them. Building dedicated teams solely to perform function X vs. having teams that are more general purpose is a huuuuuuuuge practical difference imo.
Generally I agree, but when it comes to VC this isn't so true.
VC's looking for billion dollar exits are less patient which often times can prevent middle outcomes. Good businesses swing for the fences and end up outright failing instead of taking it a bit slower and really nailing their product/market.
Great innovators are shooting for something they're pretty sure they can get to. They know what it takes, and know their market. It's by limiting your scope and achieving quality innovation that you get black swans.
The success will typically be a surprise, not a plan.
If you're not aiming for a billion dollars (or even hundreds of millions) in a software business chances are you don't have to raise VC money so none of the above matters. I think that's the main point of the article.
What missed here is that if you're operating in a market which you can build a billion dollar business, you can miss badly and still have a hugely successful company.
If you're operating in a market where your turnover is going to max out at a few million then you have a much smaller margin for error, you have to execute close to perfectly to win that market.
Building a large business doesn't have to involve raising huge amounts of money, taking undue risks, etc.
It's important to note that the numbers discussed by the New York Times were only of VC-funded tech companies founded this century. There are at least a few thousand private companies in the US worth 1 billion or more. Forbes keeps track of a few hundred here http://www.forbes.com/largest-private-companies/list/ with the lowest on the list having over 2 billion in revenue.
It's nearly impossible to start a company and have it worth a billion dollars within a decade. But if you drop the get rich quick thinking of Silicon Valley, it's much more possible if you grow slow and steady over a few decades or generations even. My family has a business started 30 years ago that's now worth in the hundreds of millions for example, and we are ecstatic if it grows 15% per year. In the next 20 years, if we don't fail, we should have a billion dollar business. We don't take excessive risk, so there's a fairly good shot. It's a bank in the South FWIW.
Here is the best and the most honest comment on this thread. Just do it boys n girls. N see where it takes you. Nature, nurture, luck? One can't change these things, so just do it n see where it takes you.
Ps: the most interesting question is if it is the creator who shapes the creation or is it vice versa.
Let's not forget that most, if not all of these unicorns are not really billion dollar businesses.
Just because a16z buys shares at year two at a $100MM valuation, and more shares at year 3 at $400MM valuation, and even more shares at year 4 at $1B valuation does not make you a billion dollar biz.
In fact, it says more about a16z bubble inflation methods than anything else.
"What I do take issue with is the fact that Silicon Valley derides almost any other kind of business."
Why care what 'Silicon Valley' thinks about that? The author is making a mental mistake there. If you want to build a million dollar business, you don't need to care what the big money in SV thinks at all. So, stop. It is that simple.
I agree with this. I get both sides, I mean, who wouldn't want to have a billion dollar business? But building one is insanely lucky and there are a ton of super talented businessmen and engineers that haven't done it.
The problem with aiming so high, like the article points out, is that you often fail and are left with almost nothing if it fails. You took a low salary with a lot of equity, but if you work for 3-5 years on a project and then it turns out the company fails (which is highly likely), then you just worked for 3-5 years for a cheap discount.
Sure, you might have learned a lot in that time, but if you worked at a better salary for a more stable opportunity, you would have learned stuff as well (different, but maybe not less important stuff).
I get the allure, but as I get older, I don't really see the value. You don't have forever in your career to make below average wages on the lotteries chance you will make millions.
Instead of having a billion dollar plan have an exit plan first, that's more impressive because you acknowledge failure head on. The chances of you failing are much greater than you even surviving 5 years. As a founder, you need to have an exit strategy that will be the least impactful to your team. Statistics Canada shows a huge failure rate folks. Everyone wants billions but everyone needs steady employement. http://www.ic.gc.ca/eic/site/061.nsf/eng/02807.html
I believe it's trying to point out the currently flawed mindset of the valley. The same mindset that would fail to build any of the businesses that you listed above ;)
It's quite clear that there's a general perception that bigger is better. The fact that some VCs are investing in smaller businesses doesn't negate that.
Maybe you can't just decide to make a billion dollar business, but certain choices may decide whether that's what you're trying to do. The main thing is VC funding and hiring. If you are in a situation where you could get a big cash injection from a VC, at the cost of a reduction of control, you are considering whether to buy rocket fuel - if you do, you either hit the moon or explode while trying. And even before such a situation, the metrics that you choose to focus on will also reflect which strategy you are employing, e.g. are you focusing on total number of active users (think Twitter), or number of paying users (think Slack). Are you thinking growth, monetization or both? Are you spending money on advertising or do you wait to let word of mouth spread your product at whatever pace it can? And if you do spend money on advertising, do you pay more or less for acquiring a new user than that user's LTV is likely to be (hint: if you pay more, you're running a "get big fast" business).
But you can fall into the same trap trying to build a 50 mln business? This is merely a difference between going on a natural growth vs speeding up with investor money, it's irrelevant to the company size unless you're tiny?
The article doesn't hint how to decide when not to fuse capital in, other than discriminating by the projected growth.
If you want to change the world significantly, you will need significant numbers of customers, and associated revenue. Nothing wrong with wanting to change the world.
One of the author's arguments is that you will dilute your ownership by taking on the "required" investment needed to have a chance at reaching the magic 1B. Is this true? Of the 40 mentioned private >1B firms, what fraction raised lots of VC money and experienced significant founder dilution? My guess is not that many of them; the author simply assumes it is the case.
I agree with Gleb's point that there's no shame in trying to achieve a small, profitable business instead of a shoot-for-the-moon billion dollar business, however, I don't understand the "if your VC-funded startup fails there is only downside for you" attitude.
Some benefits of taking funding:
* you move financial risk off of yourself onto others
in exchange for a paycheck
* you can get the cash to start the business today
* you gain work experience, and probably get more
responsibility than you'd get at an "entry level" job
I agree with the article when it poses that a product should be built because you enjoy doing so and when it becomes a company you should do it to generate revenue and not an exit.
However, it's incoherent that an article that is against the "Go big or go home" philosophy discusses how much your company valuation needs to multiply given you sell X% of shares in T amount of time.
At least in today's macroeconomic context, a company is the best platform to scale something valuable, and investors are there to help with that scaling process.
If you have a product that has a huge potential market then go for it. You will probably only have one chance. The problem I see at YC is that, despite supposedly looking for unicorns, so many of the companies that go through the accelerator only have limited markets. I think it's dangerous to impose unicorn-style thinking on young founders whose products or psychology may actually not be up to it.
The United States used to be planted thick with $40M/year companies. These sustained families and made modest opportunities to innovate. They could be anywhere.
I used to work at one. It doesn't exist any more.
At some point this went out of style.
Because of observer bias, this is what I see when people talk about inequality. And I see that it was quite deliberately chosen.
Aiming for orbit and running out of fuel means you will probably fall back and burn up in the atmosphere.
Aiming for the moon and running out of fuel means you can still get to orbit (which is still very cool) but you have to plan ahead.
Mishandling rocket fuel and blowing up is always possibility.
I don't think people choses to build a business of a certain size. It's more like people try to build a successful business, and it settles into it's natural size. Planning your company size is not what I did as entrepreneur, making sure your company survive is.
Buffer has raised a 3.5M Series A. GitHub has a quarter billion dollar in funding. Bootstrapping doesn't have to be an eternal culture, it might just be what makes sense in the early days of a company, and it might no longer make sense further down the line.
The underlying message here is that you may be overlooking a very good lifestyle business opportunity (which is totally under your control) while looking at a startup framework that is at best casual and at worst not depending on you at all.
> If you sell 80 percent of your shares before an exit, your company needs to be worth 500 percent more for you and your employees to make the same amount.
It needs to be worth 400% more for a same founder/employee value share.
My most interesting "great idea" actually wants to be a non-profit. OTOH a friend thinks it's also potentially a billion dollar idea because of the total lack of anything in the space. But that would require finding a way to reap the rewards without driving away the users - they can not be the product in this case.
P(my business becoming a billion dollar business) (~0.0005%) * (1-P(me saying "no" to letting my business become a billion dollar business) (~0.0005%)) is still 0.00000499997. Nothing to worry about, Budman.
OR
Has Budman just written this article as psychological warfare against any soft targets who might be competing against his future billion dollar business? The plot thickens.
What is this constant thread of "Don't shoot for the stars?" Why are people trying to reign in expectations and goals for what are essentially crazy and highly talented people?
I don't want to run a $10M company, I want to run a $10BN company. It's the difference between tee ball and Major League.
The author is basically saying that everyone should just shoot to stay in tee ball, which is equally as arbitrary as choosing to shoot for the majors. What the hell is the point of all of this if we aren't going for the big win?
For one, because the chances of shooting for the stars and failing is very high. You have to take on a lot of funding, spend a lot on user acquisition, etc. etc. etc.
Do you want a highly talented person to work on something for two years that ends up being utterly destroyed, or do you want them to work for 20 years on a business that keeps improving?
What the hell is the point of all of this if we aren't going for the big win?
Life? What you're saying sounds like the result of an absolutely off-whack work/life balance. There is, and will always be, more to life than work.
>There is, and will always be, more to life than work.
This is where I am in constant disagreement with people. My work based on what I want to be doing with my life. I want my life to be my work - that's what life is about imo, dedicating your efforts to something that grows and sustains a community. A lot of people don't want that for some reason, but if you look at basically every person who has ever done something great and massive no matter what it is, ghandi, gates etc... their life WAS their work.
If you're including Ghandi in here then you have a pretty broad definition of "work".
In any case: if you're so intent on building a billion dollar company, what will you do when, as probably states will be the case, that company does not reach a billion dollars and in fact fails entirely?
That's right I do have a broad definition. "Work" to me is the thing that you are putting most of your effort to. Maybe you are a stay at home mom, and your work is raising children - you have to be all in for that. Same goes for anything.
If one venture fails completely, then you take what you learned and start again when you can.
If you are in a position that you can start your own company and raise money for it, the worst that can happen is that you have to go find a job. Lets even assume that you lose your house in the process. Ok, well downsize, keep your head down till the next opportunity arises and keep moving forward. I don't see any other way to live.
People have these marginal goals of working 9-5 going to the beach on the weekend, having a couple kids, then retiring at 65/70 and traveling or whatever till they die at 85. That sounds terrible to me - and my guess is that would sound terrible to anyone who worked on something that people gain value from (Salk, Scorsese, Musk etc...).
People have these marginal goals of working 9-5 going to the beach on the weekend, having a couple kids, then retiring at 65/70 and traveling or whatever till they die at 85.
You're drawing lines where there are none. Why, exactly, is striving for but not necessarily achieving a billion dollar company a more worthwhile pursuit than raising children and traveling the world?
If you are in a position that you can start your own company and raise money for it, the worst that can happen is that you have to go find a job.
No, the worst that can happen is that you waste years of your life, and look back as an old man and only see a series of failed ventures to your name.
I think we're too hung up on the number. It has nothing to do, really, with the dollar amount of the company - that's just a proxy for impact/scale. I could as easily say "Be President" or any other things that are at that scale.
It's a more worthwhile pursuit because your individual impact can be much wider.
And your work is "trying to run a $10B company?" Just write yourself a $10B check and consider it accomplished.
If you're going to conflate living your life with working hard, then you've got no reason to separate spending your money from making your money, and at that point it doesn't matter how much you're making.
People also have goals like "achieve something with lasting value" and running a company with a big budget is not intrinsically that. Especially when you're so prone to fail at it.
I think we're too hung up on the number. It has nothing to do, really, with the dollar amount of the company - that's just a proxy for impact/scale. I could as easily say "Be President" or any other things that are at that scale.
Doesn't scale as an individual. So your impact is basically limited by how much time you put in for each. On the other hand if you are trying to build Khan Academy or Udacity with that purpose, that would match my point of doing great things at scale.
It's more along the lines of 'you don't have to run a $1bn+ business to be successful' – that is, by chasing after the very unlikely dream of becoming one of the vanishingly small number of $1bn+ companies, you are ignoring the possibility of becoming a thoroughly successful $n-million sized company, and focusing on the wrong metrics.
There's no shame in building what would by any means be a large, successful company just because it doesn't break the $1bn barrier – but making that the goal is a weird choice. Like the article says:
'The better goal? Keep your head down, make a great product, and build a successful business.'
If you have an idea and execution that is worth $1bn+ then great! Hopefully it will pay off. But it shouldn't be the goal; develop a good product and sell it well. Take the opportunities you can to build a market. Maybe you'll make it to $1bn+! But maybe you won't – and that's ok.
> I don't want to run a $10M company, I want to run a $10BN company. It's the difference between tee ball and Major League.
Why stop at $10BN? That doesn't get you into the Global 500.
For that matter, if you want to "run a $10BN" company, what makes you think the best path to that is by doing a startup? Of the Global 500 how many of the CEOs come from startup backgrounds? None of the top 10.
If you really want to run a giant company, your best shot might be to work at a giant company for a really long time and become the boss.
Yea I mean I chose 10B as a magnitude of 10MM ... but 500B+ would be even better. To your second question though it's not about doing it as a "startup" it's about creating the business that I want on my terms.
This is a deeply insightful post on the Dollar-Auction-style tournament nature of the startup ecosystem, with interesting parallels to Sudhir Venkatesh’s research on why drug dealers are willing to work for less than minimum wage.
Because it was a comment that added no valuable content about a statement that while not literally accurate, had a rhetorical intent that was plainly obvious.
This is the same company who came to the conclusion it was cheaper to send people to costco to buy hard drives and manually remove them from enclosures than just negotiate with a vendor[1].
They reckoned they bought 5.5 petabytes of data at retail prices. I've always taken what they say with a grain of salt.
Yev from Backblaze here -> Unfortunately we aren't large enough to negotiate with hard drive manufacturers. We've tried, believe me, but since we're not putting in order of 10,000 drives at a time, they refuse to speak with us. The closest we get is an introduction to their preferred vendor channels, but we have to go through them like anyone else. At the time we did the "farming" it was because those channels had dried up and risen in price by almost 3x, and we were faced with going out of business or getting creative. I assure you, we would RATHER work with manufacturers directly, but it's not as easy as calling up Seagate and asking for a bunch of drives on the cheap (especially when computer companies like Dell and Apple need those drives to make THEIR product lines works). They can raise prices of their computers by a few dollars and not really feel an impact, we can't!
Did you happen to miss the part that says that all vendors had tripled their prices because of the Thailand flood?
> Over the next few days prices spiked in all of our traditional purchasing channels,
They were grabbing existing stock from stores which had not raised their prices yet, even if they were limiting the amount of drives per customer.
> In addition to the price of the drive there were now extra costs to shuck the drives, extra costs to recycle the shucked parts, and once shucked we couldn’t return a bad drive, but it was still less expensive than buying internal drives even if we could find them
They did factor costs into account. This was an emergency situation, they never said that's how they do business normally.
