This seems to be the narrative that the author wants to promote:
"Startups run on an alchemy of ignorance and amnesia that is incredibly important to experimentation. Most startups fail. The vast, vast majority of startup employees will never exercise their options, let alone become millionaires while doing it. Mathematically, talented individuals are certainly better off financially going into a profession or working at a large tech company, where pay is higher and more secure."
You will hear again and again and again how "Gee only some choice few people get 'rich' in a startup, everyone else gets 'screwed.'" and people will tell you how the whole "Silicon Valley Myth" is just that, smoke and mirrors designed to dupe fools into giving up their valuable youth so that someone else can get rich.
There is a real problem with the narrative though, its the pesky facts that the Bay Area counties actually have lots of people who have a net worth over a million dollars and a if you count the ones that got that way here and then moved to places like Oregon, Washington, etc. Its an even larger number.
That is because while the typical startup may fail, such that 1 in 10 or even 1 in 15 have successful outcomes, it is "easy" as an employee to work in 5 or 6 of them for the first few years of your career. Just like universities there is a cohort of people about the same age as you, they are all moving through the world, getting older, and then dying. If you are in certain parts of the world the overall probability that you will come out richer than the rest of your cohort is much higher. Three areas that seem to consistently produce durable net worth, banking, politics, and technology.
Next lets talk about lying, which is making a statement you know to be false. Now buy a PowerBall lottery ticket, hand it to your special friend and tell them "This Lottery ticket is a winner." are you lying?
The actual state of things is that the lottery ticket is both a winner and a loser, and doesn't actually become a winning ticket until after a future event, the ability to predict accurately is completely unknown. Your statement has a probability of 1 in 179,000,000 of being true, which means it isn't a lie.
So is this just counting angels on a pin? Yes and no. The reality is that as adults we live in a probability filled universe, will you die today on the Freeway driving to work? Yes you will. Unless you don't.
As a founder, the only way to stay sane, is to invest only in outcomes that are positive, regardless of their probability, until they are proven otherwise. So you absolutely believe that you're going to get the next round of funding to take you to the next level, but that other path doesn't really isn't one where you want to be.
That said, having multiple paths to the winning answer is much better than having only one. Just like having ten lottery tickets is better than just having one, in terms of likelyhood of success, plans that include funding and plans that include restructuring but both end up across the goal should be in your mind. When you have a number of difficult things (with unknown outcomes) in your future that is called "stacking risk", you can succeed but the next step failing kills you, Etc. So as a founder you work to figure out all of the paths that meet at the success side of the equation, all of the events and their outcomes that open or close paths to you, and you run like hell for the goal.
Nobody accuses the quarterback of lying when he tells the wide receiver he is going to through the pass to him, only to be sacked behind his own line of scrimmage.
Startups are risky endeavors in an environment that doesn't care a bit about whether they succeed or fail. And there are a lot of things you can't know about how the future is going to go. But it is also not, in general, a game of abuse where some privileged elite are fleecing the chumps out of their lunch money, despite what some disgruntled people feel about it.
"while the typical startup may fail, such that 1 in 10 or even 1 in 15 have successful outcomes, it is "easy" as an employee to work in 5 or 6 of them for the first few years of your career."
I've been here for nearly a decade now. I know a fair number of people who have become genuinely rich (i.e. have fuck-you money in the bank), and people who are theoretically rich on paper.
With only a few exceptions, the genuinely rich people were either founders, long-time insiders at public companies (i.e. Google, Facebook, etc.), or (very rarely) early employees at smaller companies that had an exit (as in, employee numbers lower than 5).
Of the people I know who are currently theoretically rich, most are tied to "unicorns", because they can't sell their insider shares. Maybe these people will end up actually rich, maybe they won't.
But most of the people I know who match the profile you describe (i.e. worked at a few startups as a not-super-early employee, of which some succeeded), are doing okay, but are nowhere near retirement, and certainly nowhere near fuck-you levels of wealth. The expected value of the lottery seems to be something like a few years of market-rate salary at a big company.
What you're seeing in the bay area is the legacy of decades of this kind of wealth accumulation. Millions of people, taking 50+ years worth of chances, over a series of successive economic bubbles. Said another way: you're underestimating the denominator on the probability.
> Next lets talk about lying, which is making a statement you know to be false. Now buy a PowerBall lottery ticket, hand it to your special friend and tell them "This Lottery ticket is a winner." are you lying?
Yes. You can say 'I believe/think this lottery ticket is a winner' or 'This lottery ticket could be a winner' and those are not lies. However the statement you discuss is a statement of a fact that you know is extremely unlikely to be true and is thus a lie.
You can make statements of fact about things that you are reasonably certain are true and will generally not be called a liar. However you will be being more honest if you qualify that statement of fact by as to the amount of certainty you have.
The point of this article is that deliberately expressing a level of certainty that you know doesn't match the actual certainty is lying. There are ways to express confidence without expressing certainty.
> Nobody accuses the quarterback of lying when he tells the wide receiver he is going to through the pass to him, only to be sacked behind his own line of scrimmage.
Due to the context people know that "I will throw the pass to you" is intended to mean "I will try to throw the pass to you.". The same thing does not generally apply to interpreting "This lottery ticket is a winner" (a lie) to mean "This lottery ticket could be a winner" (not a lie).
Yeah, but did those people with a 1mm+ net worth get it startup-ing, by going to oracle/google/fb and banking a bunch of their comp, or by getting lucky in the valley real estate lottery?
Also, I feel like the article directly addressed your, imo, somewhat dated impressions. In the new unicorn world
(1) startups take much longer to go public: there was a recent discussion here about how exits have now become 7-10+ years on average
(2) companies aren't shy about preventing employees from selling: viz examples in the article, or the cto of another startup (I originally wrote slack but my memory was incorrect) on here describing how they effectively prevent even fully vested employees from leaving (while often the cto/ceo/c* are allowed to sell a million or two, if they aren't already wealthy)
(3) unicorns taking huge rounds often give the next round's growth to the current employees and create giant preference overhangs; this is the flip side of raising a huge round if you can
Does the above mean nobody makes $1-2mm? Certainly not, but it does shift the probability distribution.
Lying about your progress and metrics is extremely rampant in the startup world of SV... but IMO SV's biggest lie is that you need to be in SV and you need SV money to build a successful company. This flat out isn't true, especially if you're building a web service where your customers can be anywhere in the world and services / platforms that allow you to scale up incrementally exist. Most of what goes into building a startup is time-consuming trial-and-error grunt-work (e.g. reading documentation, editing boiler-plate code, answering emails / phone) that can be done much more cheaply and less stressful-ly from your mom's basement than hemorrhaging $10k to $100k / month in a downtown SF office while the scaffold of a 4 month deadline looms ominously before you. (There's a case to be made for the value of mentorship, but that value is always multiplicative and never additive - as in, if you don't have a business, your value of 0 is still 0 after multiplying it by the value of your mentor. So for mentors, the later the better.)
SV's second biggest lie is that you need the so-called "hockey-stick" growth curve to be competitive in order to be successful. This lie is clever because you're so caught on hockey-stick that you forget to question the premise of competitive. In the beginning of founding your startup, knowing about your competition might help you build your own product, but worrying about your competition is worthless because the world is more than big enough for the both of you (especially considering you don't exist yet). And if you don't have overhead (i.e. you didn't take SV money and hire a ton of SV's cleverest and most paid engineers), the world will always be biggest enough for you to survive.
SV's third biggest lie is coffee can replace sleep. That's not true, and one of your organs (usually your liver, but I've heard stories of kidneys, lymph nodes, beards, and even ovaries) will let you know after a bit.
1. SV money buys you some access to the market, in publicity and networking effects. Rural startups don't enjoy the same prestige or easy access to other companies.
2. The hockey stick is mainly needed to deal with impatient investors, not in itself. If you had a stable supply of money, you could grow over any number of years, but without showing the right graph its hard to raise money.
3. At least in SF you have a pool of clever engineers or cofounders. Its not like that in all places.
I think it really depends on what kind of company you are building. If its something startup oriented like APIs, or any fad (like IoT), SV is your place. If you're in a capital intensive business, SV is again you place. If you're solving problems for tech companies.. then again. And if its social, you'd be cool if you're in SV and backed by an SV firm. You need the networking and coverage to succeed, and its much easier to come by in SV.
If you're making enterprise software, real hardware products, SMB tools and apps, then you can be anywhere else really.
Besides, SV has that startup vibe going for it. Its not quantifiable but it sure energizes to some degree.
SV's biggest lie is that you need to be in SV and you need SV money to build a successful company.
I don't think anyone in the valley is saying that. I think what they actually do say is that if you want to build a $BN company, the best place to do that is in the valley - which I think is probably true.
Look. Something like 80% of the world's Venture Capital money is in the valley. It has the highest number of exits and the most concentrated group of developers. So if you want to maximize your chances of massive success that's where you go.
Just like if you want to be an actor, you go to LA, or if you want to be an Ibanker you go to NY.
> Most of what goes into building a startup is time-consuming trial-and-error grunt-work (e.g. reading documentation, editing boiler-plate code, answering emails / phone) that can be done much more cheaply and less stressful-ly from your mom's basement than hemorrhaging $10k to $100k / month in a downtown SF office while the scaffold of a 4 month deadline looms ominously before you.
You're right, but it's important to note the distinction between startup and a small business. Category changers generally rely on influx of capital to scale up and gain advantage of economies of scale. Businesses that depend on network effect also require high growth, and it's usually bought with capital.
"Millions of companies are started every year in the US. Only a tiny fraction are startups. Most are service businesses—restaurants, barbershops, plumbers, and so on. These are not startups, except in a few unusual cases. A barbershop isn't designed to grow fast. Whereas a search engine, for example, is."
No one claims you need to be in SV or raise VC to bootstrap your way to make a living (or even be wildly rich). It's a lot harder to create a company with an enormous impact that scales quickly without doing so, however. And this is coming from the founder of a VC-backed company not in the Valley.
It's all about what you're aiming for. I have to make a living, but I want to change the world. To do that my company would have to scale more quickly than revenue would allow, so I must raise VC.
While I agree with you 100%, it appears to me that (without data) wherever you have a high concentration of many people pursuing the same object, there you will find most of the innovation happening. This is just true, even though the biggest innovation may come from a remote place.
When I moved to Palo Alto in 2011, I had this weird sense that their was a hidden secret behind every term used. I've learned since that it's just a BS game built by lawyers & VC's in the name of "protecting the company & investment". In reality, it's a power game won somewhere in the knowledge gap. The more you know and understand the less likely you are to lose the game.
I get why people want to be in a start-up, but I don't get why a lot of these people won't look at starting their own company that doesn't fit into the "start-up" framework.
Why does everyone have to try to be the next Google?
Why isn't it okay to start a company and just want to build it consistently and be profitable from the start?
I get that it's the nature of the types of businesses that get VC money. I just don't get the hype attached to it.
You are setting yourself up for failure, especially by telling everyone that you are "killing it" and your new product is going to "change the world".
That is just asking for failure. You don't have to "Kill it" to be successful and you don't have to change the world to be a good person.
It actually makes you look naive and stupid when your "start-up" fails because you were bragging about it for the year or two that it existed.
Why isn't it okay to start a company and just want to build it consistently and be profitable from the start?
It is "ok" and done all the time, all over the world. It's just not exciting or newsworthy. Just look at dry cleaners - they are everywhere, and usually family owned small businesses that do well enough to put kids through college. In some cases they are even using exciting new technologies to make the process more efficient. It's not exciting though Maybe you don't need that, which is also ok, but there is no sense in vilifying that.
The people doing startups are self selecting as people who want to be involved in something that impacts a lot of people, very quickly. The Valley is full of people who want to do moonshot exciting stuff - even if it doesn't seem exciting to a lot of people outside of it.
I think a startup which claims they're going to change the world should break up the process into bite-sized phases.
Early on, it's simpler to function as a small business; one which caters to a niche sector of the target market. One which thoroughly understands the needs and satisfactions of customers in that niche. One that creates a solid, self-sustaining feedback loop within the company to address those needs before moving forward. Putting the cart before the horse hurts worse than dying from not having any customer's at all.
There's a natural progression to how large companies grew from children to fully-functioning adults. It's akin to using a slow cooker vs. throwing the steak into a microwave and wondering why it doesn't taste good.
The culture around boom and bust and being able to start again has it's roots in California and the gold rush. As placer mining was replaced by hard rock or hydraulic mining, the individual became less relevant and the corportation more so. Mining also saw a backlash as the corporations and banks required more fees placed on the backs of the miners because of the need for water, etc. (Severe compaction of history understood in above example)
With startups, we have seen the individual gain success for themselves and the money backing them What we see here finally happening is that the success of startups depends upon people who are becoming more aware of their own contributions to the process. "Technical cofounder", "non-founding cto", early engineers, etc. are starting to question the asymmetric relationships.
Yes, engineering talent is available, but the execution of a startup in this day and age is nearly on par with the idea itself. Those engineers that can take your idea, run with it, help grow the team, and make it successful are aware of their talents and at a premium. Even worker-bees hired for a particular task are understanding their role and often more important than the management layer hired to shield them from the founders.
For certain narrowly defined aspects of career and business, the people in Silicon Valley demonstrate rationality. Yet, as the essay itself makes clear, in many other respects, the people in Silicon Valley demonstrate remarkably high levels of irrationality.
No we don't. What everyone needs is a higher level of tolerance for the risk. The "Big Lie" was simply a way for people to cope with the risk. The over-analyzing is a current way to deal with a risk. Both ways doesn't solve the basic problem: not all humans are ready to take risk.
No, the lie is a way to actively deceive people about the risk they're taking in order to induce them to work for you or buy something from you.
ps -- valley ethics go like this: my employer just had layoffs; we let an engineer hired 7 weeks previous go. He was an immigrant, and I don't know if he was on an h1b or he'd gotten his green card. It's a giant dick move either way, but a super giant dick move if the former.
The difference, of course, being that employees (even the fractional kind) will not get the preferential stock treatment that VCs have, and many will not have the legal resources or expertise to protect themselves throughout the ongoing life of the company.
Sadly Ronald Coase' theory of the firm gets us here. The idea is that for a given business process, say designing an engine cylinder, painting a widget, there is a complexity that the free market cannot profitably supply and it's simpler to hire someone and change their job description every day to cope.
The advent of software means more complexity can be codified so we will see smaller firms and more outsourcing (socially beneficial) but, if you need to hire someone, it basically means you cannot find a suitable replacement in the market.
If joining a company was just as risky as giving it a couple million dollars and hoping it doesn't (but it probably will, by the way) run itself into the ground, I'm sure that's the way things would be. But as an employee in the tech industry with skills, the worst thing that could possibly happen to me is I'm out of work for a couple weeks. There's no risk at all.
Capital investment is primarily passive. Employees are valued by their activities. What you describe sounds more like consulting and anything other than cash payment is usually a bad idea for at least one party and probably both.
Ignoring the issues of non-competes, ethics, and trade secrets, how do you expect one person to be an effective full time employee for 3, 4+ companies at the same time?
Wouldn't it be easier to just pool the equity with a bunch of employees across the nation and distribute the risk and reward. Though I bet there is some sort of restriction on the stock options.
I disagree with the author's sense that the Big Lie is still necessary. I really doubt that fewer companies will be founded, or fewer people will join them if we were more honest. Maybe early employees will get more equity as a result but that's all I'd expect.
Another lie of SV is that it is not so much about the technology, but about the flow of money and accumulation of users on "freemium" pricing models. Companies get big on funding, crush the competition elsewhere (e.g., in Europe), while still not making any net profit.
Maybe that's the major reason to take that VC money? If you have a good, innovatative product, or lousey product people seem to love; someone with bigger pockets will eventually step in, tweak your idea, and might make it better, and more successful?
The cutthroat business practices of SV seem to be evolving faster than technology itself? I guess it's true with every sector of business these days, including non-profits?
When you are offered options, inquire as to whether the shares you will obtain by exercising will enable you to vote for directors.
The GOOG shares held by Larry Page and Sergey Brin give them control that its publicly traded shares do not. I don't know either way about the shares obtain through employee option exercises.
Stocks are authorized in a sequence of "series": Series A, Series B and so on. What series are your options from? The corporate bylaws sometimes grant different rights to the shareholders from different series.
My Live Picture stock certificate sure looks nice. I dont really know but would be unsurprised were someone to tell me I was the only one to exercise our options.
It's not just startups, most businesses of any sort fail in their first five years. While there are advantages to funding there are disadvantages too. Even if you don't blow your VC on aeron chairs and craft beer you must sell a product or service that, while perhaps not profitable at least conceivably could be, and ship it so that it achieves convincing market penetration by the time you burn rate has burned the round you are presently burning.
Most arguments for self funding focus on the dilution of equity that comes with investment but there are many other arguments. Another is that if you fund your project yourself you don't have to answer to anyone.
Whether that is a good thing depends on your own judgement; don't self fund a product that does no one any good.
Every last one of us has the capacity to create a product that could could earn us a tidy living, maybe pay a few employees. At that point we face a choice: improve that one offering, or use some of the cash to fund something completely unrelated?
There are many good arguments for each of the two choices. Ball Metal Container makes every pop can in America. Nokia at first made rubber boots while the predecessor to IBM made bacon slicing machines.
I grant that there is appeal to working for a startup: it's nice to be noticed. I contributed to some products that were huge hits at trade shows. I would make my Mama proud were I to make front page at the Wall Street Journal.
By contrast self-funders often labor in obscurity, sometimes poverty for years. Even so, many succeed, often spectacularly so, as did the father and son who invented Flow Hive, and improved way to harvest bee honey. Their is some possibility that Flow Hive all by itself will reverse colony collapse disorder, in that it makes beekeeping far more accessible to the nonspecialist.
In my own estimation venture backed startups are no more likely to be in business ten years later than the sole proprietorship.
[+] [-] ChuckMcM|10 years ago|reply
"Startups run on an alchemy of ignorance and amnesia that is incredibly important to experimentation. Most startups fail. The vast, vast majority of startup employees will never exercise their options, let alone become millionaires while doing it. Mathematically, talented individuals are certainly better off financially going into a profession or working at a large tech company, where pay is higher and more secure."
You will hear again and again and again how "Gee only some choice few people get 'rich' in a startup, everyone else gets 'screwed.'" and people will tell you how the whole "Silicon Valley Myth" is just that, smoke and mirrors designed to dupe fools into giving up their valuable youth so that someone else can get rich.
There is a real problem with the narrative though, its the pesky facts that the Bay Area counties actually have lots of people who have a net worth over a million dollars and a if you count the ones that got that way here and then moved to places like Oregon, Washington, etc. Its an even larger number.
That is because while the typical startup may fail, such that 1 in 10 or even 1 in 15 have successful outcomes, it is "easy" as an employee to work in 5 or 6 of them for the first few years of your career. Just like universities there is a cohort of people about the same age as you, they are all moving through the world, getting older, and then dying. If you are in certain parts of the world the overall probability that you will come out richer than the rest of your cohort is much higher. Three areas that seem to consistently produce durable net worth, banking, politics, and technology.
Next lets talk about lying, which is making a statement you know to be false. Now buy a PowerBall lottery ticket, hand it to your special friend and tell them "This Lottery ticket is a winner." are you lying?
The actual state of things is that the lottery ticket is both a winner and a loser, and doesn't actually become a winning ticket until after a future event, the ability to predict accurately is completely unknown. Your statement has a probability of 1 in 179,000,000 of being true, which means it isn't a lie.
So is this just counting angels on a pin? Yes and no. The reality is that as adults we live in a probability filled universe, will you die today on the Freeway driving to work? Yes you will. Unless you don't.
As a founder, the only way to stay sane, is to invest only in outcomes that are positive, regardless of their probability, until they are proven otherwise. So you absolutely believe that you're going to get the next round of funding to take you to the next level, but that other path doesn't really isn't one where you want to be.
That said, having multiple paths to the winning answer is much better than having only one. Just like having ten lottery tickets is better than just having one, in terms of likelyhood of success, plans that include funding and plans that include restructuring but both end up across the goal should be in your mind. When you have a number of difficult things (with unknown outcomes) in your future that is called "stacking risk", you can succeed but the next step failing kills you, Etc. So as a founder you work to figure out all of the paths that meet at the success side of the equation, all of the events and their outcomes that open or close paths to you, and you run like hell for the goal.
Nobody accuses the quarterback of lying when he tells the wide receiver he is going to through the pass to him, only to be sacked behind his own line of scrimmage.
Startups are risky endeavors in an environment that doesn't care a bit about whether they succeed or fail. And there are a lot of things you can't know about how the future is going to go. But it is also not, in general, a game of abuse where some privileged elite are fleecing the chumps out of their lunch money, despite what some disgruntled people feel about it.
[+] [-] timr|10 years ago|reply
I've been here for nearly a decade now. I know a fair number of people who have become genuinely rich (i.e. have fuck-you money in the bank), and people who are theoretically rich on paper.
With only a few exceptions, the genuinely rich people were either founders, long-time insiders at public companies (i.e. Google, Facebook, etc.), or (very rarely) early employees at smaller companies that had an exit (as in, employee numbers lower than 5).
Of the people I know who are currently theoretically rich, most are tied to "unicorns", because they can't sell their insider shares. Maybe these people will end up actually rich, maybe they won't.
But most of the people I know who match the profile you describe (i.e. worked at a few startups as a not-super-early employee, of which some succeeded), are doing okay, but are nowhere near retirement, and certainly nowhere near fuck-you levels of wealth. The expected value of the lottery seems to be something like a few years of market-rate salary at a big company.
What you're seeing in the bay area is the legacy of decades of this kind of wealth accumulation. Millions of people, taking 50+ years worth of chances, over a series of successive economic bubbles. Said another way: you're underestimating the denominator on the probability.
[+] [-] shkkmo|10 years ago|reply
Yes. You can say 'I believe/think this lottery ticket is a winner' or 'This lottery ticket could be a winner' and those are not lies. However the statement you discuss is a statement of a fact that you know is extremely unlikely to be true and is thus a lie.
You can make statements of fact about things that you are reasonably certain are true and will generally not be called a liar. However you will be being more honest if you qualify that statement of fact by as to the amount of certainty you have.
The point of this article is that deliberately expressing a level of certainty that you know doesn't match the actual certainty is lying. There are ways to express confidence without expressing certainty.
> Nobody accuses the quarterback of lying when he tells the wide receiver he is going to through the pass to him, only to be sacked behind his own line of scrimmage.
Due to the context people know that "I will throw the pass to you" is intended to mean "I will try to throw the pass to you.". The same thing does not generally apply to interpreting "This lottery ticket is a winner" (a lie) to mean "This lottery ticket could be a winner" (not a lie).
[+] [-] unknown|10 years ago|reply
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[+] [-] x0x0|10 years ago|reply
Also, I feel like the article directly addressed your, imo, somewhat dated impressions. In the new unicorn world
(1) startups take much longer to go public: there was a recent discussion here about how exits have now become 7-10+ years on average
(2) companies aren't shy about preventing employees from selling: viz examples in the article, or the cto of another startup (I originally wrote slack but my memory was incorrect) on here describing how they effectively prevent even fully vested employees from leaving (while often the cto/ceo/c* are allowed to sell a million or two, if they aren't already wealthy)
(3) unicorns taking huge rounds often give the next round's growth to the current employees and create giant preference overhangs; this is the flip side of raising a huge round if you can
Does the above mean nobody makes $1-2mm? Certainly not, but it does shift the probability distribution.
[+] [-] ffn|10 years ago|reply
SV's second biggest lie is that you need the so-called "hockey-stick" growth curve to be competitive in order to be successful. This lie is clever because you're so caught on hockey-stick that you forget to question the premise of competitive. In the beginning of founding your startup, knowing about your competition might help you build your own product, but worrying about your competition is worthless because the world is more than big enough for the both of you (especially considering you don't exist yet). And if you don't have overhead (i.e. you didn't take SV money and hire a ton of SV's cleverest and most paid engineers), the world will always be biggest enough for you to survive.
SV's third biggest lie is coffee can replace sleep. That's not true, and one of your organs (usually your liver, but I've heard stories of kidneys, lymph nodes, beards, and even ovaries) will let you know after a bit.
[+] [-] flyinglizard|10 years ago|reply
2. The hockey stick is mainly needed to deal with impatient investors, not in itself. If you had a stable supply of money, you could grow over any number of years, but without showing the right graph its hard to raise money.
3. At least in SF you have a pool of clever engineers or cofounders. Its not like that in all places.
I think it really depends on what kind of company you are building. If its something startup oriented like APIs, or any fad (like IoT), SV is your place. If you're in a capital intensive business, SV is again you place. If you're solving problems for tech companies.. then again. And if its social, you'd be cool if you're in SV and backed by an SV firm. You need the networking and coverage to succeed, and its much easier to come by in SV.
If you're making enterprise software, real hardware products, SMB tools and apps, then you can be anywhere else really.
Besides, SV has that startup vibe going for it. Its not quantifiable but it sure energizes to some degree.
[+] [-] AndrewKemendo|10 years ago|reply
I don't think anyone in the valley is saying that. I think what they actually do say is that if you want to build a $BN company, the best place to do that is in the valley - which I think is probably true.
Look. Something like 80% of the world's Venture Capital money is in the valley. It has the highest number of exits and the most concentrated group of developers. So if you want to maximize your chances of massive success that's where you go.
Just like if you want to be an actor, you go to LA, or if you want to be an Ibanker you go to NY.
[+] [-] roghummal|10 years ago|reply
[+] [-] unknown|10 years ago|reply
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[+] [-] jordanpg|10 years ago|reply
The magic internet hasn't been able to revolutionize away any of the basic realities of economics.
In other news, I hear that Amazon just turned a profit for the first time! ;)
[+] [-] prostoalex|10 years ago|reply
You're right, but it's important to note the distinction between startup and a small business. Category changers generally rely on influx of capital to scale up and gain advantage of economies of scale. Businesses that depend on network effect also require high growth, and it's usually bought with capital.
http://paulgraham.com/growth.html
"Millions of companies are started every year in the US. Only a tiny fraction are startups. Most are service businesses—restaurants, barbershops, plumbers, and so on. These are not startups, except in a few unusual cases. A barbershop isn't designed to grow fast. Whereas a search engine, for example, is."
[+] [-] austenallred|10 years ago|reply
It's all about what you're aiming for. I have to make a living, but I want to change the world. To do that my company would have to scale more quickly than revenue would allow, so I must raise VC.
[+] [-] rokhayakebe|10 years ago|reply
[+] [-] busterarm|10 years ago|reply
Hahaha, I lost it at this one. Thanks for the laugh!
[+] [-] damonpace|10 years ago|reply
[+] [-] rhaps0dy|10 years ago|reply
[+] [-] socrates1998|10 years ago|reply
Why does everyone have to try to be the next Google?
Why isn't it okay to start a company and just want to build it consistently and be profitable from the start?
I get that it's the nature of the types of businesses that get VC money. I just don't get the hype attached to it.
You are setting yourself up for failure, especially by telling everyone that you are "killing it" and your new product is going to "change the world".
That is just asking for failure. You don't have to "Kill it" to be successful and you don't have to change the world to be a good person.
It actually makes you look naive and stupid when your "start-up" fails because you were bragging about it for the year or two that it existed.
[+] [-] AndrewKemendo|10 years ago|reply
It is "ok" and done all the time, all over the world. It's just not exciting or newsworthy. Just look at dry cleaners - they are everywhere, and usually family owned small businesses that do well enough to put kids through college. In some cases they are even using exciting new technologies to make the process more efficient. It's not exciting though Maybe you don't need that, which is also ok, but there is no sense in vilifying that.
The people doing startups are self selecting as people who want to be involved in something that impacts a lot of people, very quickly. The Valley is full of people who want to do moonshot exciting stuff - even if it doesn't seem exciting to a lot of people outside of it.
[+] [-] paulkon|10 years ago|reply
Early on, it's simpler to function as a small business; one which caters to a niche sector of the target market. One which thoroughly understands the needs and satisfactions of customers in that niche. One that creates a solid, self-sustaining feedback loop within the company to address those needs before moving forward. Putting the cart before the horse hurts worse than dying from not having any customer's at all.
There's a natural progression to how large companies grew from children to fully-functioning adults. It's akin to using a slow cooker vs. throwing the steak into a microwave and wondering why it doesn't taste good.
[+] [-] prostoalex|10 years ago|reply
You will have a hard time attracting good talent if your vision is to become a decent small business.
[+] [-] jmspring|10 years ago|reply
With startups, we have seen the individual gain success for themselves and the money backing them What we see here finally happening is that the success of startups depends upon people who are becoming more aware of their own contributions to the process. "Technical cofounder", "non-founding cto", early engineers, etc. are starting to question the asymmetric relationships.
Yes, engineering talent is available, but the execution of a startup in this day and age is nearly on par with the idea itself. Those engineers that can take your idea, run with it, help grow the team, and make it successful are aware of their talents and at a premium. Even worker-bees hired for a particular task are understanding their role and often more important than the management layer hired to shield them from the founders.
Interesting times we are in.
[+] [-] lkrubner|10 years ago|reply
"For one of the most hyper-rational populations in the world"
and yet the essay uses that phrase without irony. A better term might be "bounded rationality":
https://en.wikipedia.org/wiki/Bounded_rationality
For certain narrowly defined aspects of career and business, the people in Silicon Valley demonstrate rationality. Yet, as the essay itself makes clear, in many other respects, the people in Silicon Valley demonstrate remarkably high levels of irrationality.
[+] [-] ArekDymalski|10 years ago|reply
No we don't. What everyone needs is a higher level of tolerance for the risk. The "Big Lie" was simply a way for people to cope with the risk. The over-analyzing is a current way to deal with a risk. Both ways doesn't solve the basic problem: not all humans are ready to take risk.
[+] [-] x0x0|10 years ago|reply
ps -- valley ethics go like this: my employer just had layoffs; we let an engineer hired 7 weeks previous go. He was an immigrant, and I don't know if he was on an h1b or he'd gotten his green card. It's a giant dick move either way, but a super giant dick move if the former.
[+] [-] idlewords|10 years ago|reply
[+] [-] paulpauper|10 years ago|reply
[+] [-] mattzito|10 years ago|reply
[+] [-] lifeisstillgood|10 years ago|reply
The advent of software means more complexity can be codified so we will see smaller firms and more outsourcing (socially beneficial) but, if you need to hire someone, it basically means you cannot find a suitable replacement in the market.
This may of course be your fault - but still :-)
[+] [-] tomphoolery|10 years ago|reply
[+] [-] brudgers|10 years ago|reply
[+] [-] pavlov|10 years ago|reply
[1] https://www.trygigster.com
[+] [-] tdicola|10 years ago|reply
[+] [-] ryanSrich|10 years ago|reply
The break down might look like this:
($100-$120/hr contracting + 0.025% equity)
- 20% time to company x
- 20% time to company n
- 20% time to company z
- 40% time to company y
[+] [-] rhino369|10 years ago|reply
[+] [-] ForHackernews|10 years ago|reply
[+] [-] imh|10 years ago|reply
[+] [-] amelius|10 years ago|reply
That is unfair competition.
[+] [-] marincounty|10 years ago|reply
The cutthroat business practices of SV seem to be evolving faster than technology itself? I guess it's true with every sector of business these days, including non-profits?
[+] [-] fffrad|10 years ago|reply
[+] [-] MichaelCrawford|10 years ago|reply
The GOOG shares held by Larry Page and Sergey Brin give them control that its publicly traded shares do not. I don't know either way about the shares obtain through employee option exercises.
Stocks are authorized in a sequence of "series": Series A, Series B and so on. What series are your options from? The corporate bylaws sometimes grant different rights to the shareholders from different series.
[+] [-] MichaelCrawford|10 years ago|reply
http://www.warplife.com/tips/business/stock/venture/capital/...
My Live Picture stock certificate sure looks nice. I dont really know but would be unsurprised were someone to tell me I was the only one to exercise our options.
It's not just startups, most businesses of any sort fail in their first five years. While there are advantages to funding there are disadvantages too. Even if you don't blow your VC on aeron chairs and craft beer you must sell a product or service that, while perhaps not profitable at least conceivably could be, and ship it so that it achieves convincing market penetration by the time you burn rate has burned the round you are presently burning.
Most arguments for self funding focus on the dilution of equity that comes with investment but there are many other arguments. Another is that if you fund your project yourself you don't have to answer to anyone.
Whether that is a good thing depends on your own judgement; don't self fund a product that does no one any good.
Every last one of us has the capacity to create a product that could could earn us a tidy living, maybe pay a few employees. At that point we face a choice: improve that one offering, or use some of the cash to fund something completely unrelated?
There are many good arguments for each of the two choices. Ball Metal Container makes every pop can in America. Nokia at first made rubber boots while the predecessor to IBM made bacon slicing machines.
I grant that there is appeal to working for a startup: it's nice to be noticed. I contributed to some products that were huge hits at trade shows. I would make my Mama proud were I to make front page at the Wall Street Journal.
By contrast self-funders often labor in obscurity, sometimes poverty for years. Even so, many succeed, often spectacularly so, as did the father and son who invented Flow Hive, and improved way to harvest bee honey. Their is some possibility that Flow Hive all by itself will reverse colony collapse disorder, in that it makes beekeeping far more accessible to the nonspecialist.
In my own estimation venture backed startups are no more likely to be in business ten years later than the sole proprietorship.
[+] [-] unknown|10 years ago|reply
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