Thoughts on Startups
One of my secret passions in recent years has been learning about startups - how they run, what they need, how they reach their audience, the value-prop they offer and so on. Some people have a thing for GTD but I have a crush on startups. Why do I love them so? Take for example Markus Frind, the founder of the dating site Plenty of Fish. He is the sole employee of the company and single-handedly created one of the most trafficked sites in its league, pulling in over 10 million pageviews and $300,000 per month. That’s nothing short of incredible.
Andrew Hyde’s latest venture
Other than reading about amazing startup stories, I enjoy finding out about running a startup and how other startups orchestrate themselves. Paul Graham’s essays are a great place to start if you’re in the same boat, as well as his Hacker News (née Startup News) website.
Aside from being a passion, startups for me are an unavoidable part of the tech scene. Some of the most innovative products come from some folks living in the same tiny apartment churning out code. I figure I better pickup on startups now and hone my currently lacking business running experience with Skribit. I don’t know what the future holds but I think I would rather work for a startup where I can make a large impact on the entire company compared to working for a massive Internet company and have little say in product development much less direction. I would rather be on a team of 3 that changed X or reinvented the way people use Y, or maybe even made Z obsolete than hidden away under the corporate umbrella of some Internet giant.
Reasons people avoid the startup life
There are many startup skeptics out there that would never consider starting their own company or working for an already established startup. The obvious reasons deal with the relative lack of job security. Your idea could end up not having the prospective market you once envisioned. Another reason/excuse people avoid working for startups - Google or another innovative startup is probably already doing what you’re doing. That reason doesn’t hold but I’ll leave that for later.
Bootstrapping is a b!tch. Starting a company needs capital. You’re going to need money to buy ramen while you grow your idea, and so are your co-founders. I’m not saying you need to immediately look for funding, in fact I’m saying quite the opposite and side with Fried et al (at least you don’t really need funding initially).
Opportunity cost will bite you. You might lose sleep when thinking about how you could have been making bank at a large, established company instead of working for a startup that doesn’t make any profit for a year.
Reasons why I disagree with those people
Startups are all about risk and rewards. You can take the blue pill and stay in a stagnant corporate job with a bit of career advancement headroom. Or you can take the red pill where your contributions are markedly more visible and you have more control over the direction of an entire startup. Risk also includes competition. Competition will always be present so there’s no reason to avoid the startup life just because of that. Competition is great for product development. It gives you a way of seeing what the market wants based on the competitor’s offerings and their success and thus enhancing your product.
Likewise, opportunity cost affects every decision you make. What would have happened if I went to a different college? If I had been a PC user all my life? If I never started a blog? In terms of startups, thinking about opportunity cost is hard to avoid but it usually comes down to your passion to change something and taking a risk to reap the rewards. When/if I start working for startup full-time, I know I’ll have to face dealing with a paltry income initially while my recent graduate friends take up $100k+ jobs at law firms and consulting agencies. My response to them is usually something along the lines of at least I enjoy what I do.
Should you do a startup?
I’ve thrown around the word passion quite a bit in this article. To me, startups are all about following your passion. If you have a great idea and really think it could work, why not give it a shot regardless of the risks? You’ll end up meeting many influential people from trying to push your product out there as well as seeking investment.
You’ll need..
For those of you that have only recently started reading this website, one of my “extracurriculars” is the web startup Skribit. It’s a service that lets bloggers cure writer’s block by opening a conversation with their readers by allowing readers to provide article suggestions, among other things I’ll leave for a separate article (we have some features coming soon). Skribit is by no means just my startup. There are a lot of people involved with Skribit (Calvin, Jason, Lance, Alan, Rob, Mike and quite a few more).
The hardest thing, even harder than the business plan, is hiring - finding people that will make a great addition to your startup that are in it for the same reasons. If you’re in it for the passion and have dreams of building a great community around your product, you probably won’t get along with someone that’s only in it for the money. People purely in it for the money will only develop ways to milk the cow but they won’t always work since they were not built with the market and end-user in mind. However, some compromise is unavoidably necessary as you need to have product direction and make money in the process.. just make sure you have enough passion people to keep the suits in check.
What about direction? It’s easier to run a company if you know where you want to take it. This includes laying out a product plan early on - potential avenues to explore as you iterate through product development and see what works and what doesn’t. As the product makes its first steps into the spotlight, you’ll realize which features are safe to explore based on how people use your product and the feedback you receive. Keep the direction of your startup easily accessible to all employees/co-founders so they stay on the same page.
I’m going to close with Paul Graham’s stance on making new things - something you might consider taking to heart with your next venture:
I like to find (a) simple solutions (b) to overlooked problems (c) that actually need to be solved, and (d) deliver them as informally as possible, (e) starting with a very crude version 1, then (f) iterating rapidly.
Startups: yes or no?
Disclaimer: You realize I’m only 21 right? Think twice before taking business advice from me.
Great arrive Paul. I’m currently working at a start up and I’m 19. I’m also a student so its been a great learning experience for me which I dont think I could have got anywhere else.
Anyway just wanted to say thanks for the article. I’ll give it another read in the morning when I’m not so tired.
Paul, I have been on the same page as you for quite some time now. Also being around the same age, it makes me feel warm and fussy inside knowing that there are other people with the same mindset and passion.
The way I see it there are some people who will never be happy to work for someone and always have an addiction or craving for doing some innovative on their own. Innovation could just start with doing any kind of business and does not have to be innovation in terms of technology. I think you hit the right points in saying that after a certain point in time you just don’t care about the money. It is almost like an addiction and you just want to do a startup for the sake of building a startup, have ownership and building value. Obviously money and profit is a big part of doing a startup otherwise your business plans could take a hit if you just care about the product but money is not the most important thing.
The thing that I fear the most is finding a partner or a co founder. I think starting a company by yourself is extremely tough. I always find myself thinking about finding the right person, or someone who shares the same passion and who has the same mindset as you when you are thinking about a startup idea.
An interesting insight into something I’m interested in doing in the next few years - thanks!
I certainly agree when you say you’d rather work for a small startup than a massive corporation.
Yeah I took a job at Yahoo! for a couple reasons. I need more experience and connections in Silicon Valley and I didn’t have money or others who could seriously do a startup. So I work nights and weekends coding mine. As you said, at least I enjoy what I do :)
Im totally going to be apart of a tech startup when I’m out of college. Passion, my competitive drive, and ego won’t let me go the “work for somebody else until you’ve reach the age of retirement” route. That’s all too boring, and life to me is more enjoyable when you take risk and remove that safety net. You’ll really see a person’s true colors then
Silicon Valley is the only place that gathers all these like minded people that share my same values, I just wish they had more places like that around the states, and Europe too.
Right on, startups certainly have their downsides (large hour counts, generally lesser non-equity compensation when salary/benefits/hours are all factored in, uncertainty), but it makes work not work. I’ve only worked for one company larger than 50 people and could barely stand the size of that place :)
At 25 I am on my 4th startup overall and 2nd involving founder’s equity and I don’t expect i’ll ever leave for a regular job. I stopped short of moving out to CA though, I like it here in the southeast.
This truly a great post with some great links. This really helps when you REALLY want to start something of your own.
If you are ever going to do a bootstrap startup, do it before you turn 25. Do it before you graduate college if you can. Some of the best schools for producing startups (MIT, Stanford, etc) have this almost unwritten expectation that you really haven’t graduated unless you’ve participated in one startup.
Another thing is that bootstrapping is a bitch even at your age. But it is truly horrible if you have a mortgage, a wife, and kids. Stephen Fleming has a nice deck on raising capital (http://academicvc.blogspot.com/2007/11/raising-capital-part-01.html) and in it he mentions bootstrapping. His one very useful data point is that all of the bootstrapped companies he has seen has ended up with the founders getting a divorce somewhere through the process. So if you are going to do it, do it before you have those kinds of obligations.
And if you are going to live this life or think you may at some point, please tell your significant others now….
To me, it’s not just “startups” but any kind of small business. For example, the growth of MacUpdate right now is huge and it has an atmosphere similar to startups with funding, but without the financial pressures of paying the bank back. So you keep the passion and fun and implementation of ideas, but you loose the crazy stress of rubbing the feet of your angel investors. ;)
I LOVE STARTUPS. There’s just so much thrill associated with the thought of being an entrepreneur and running your own company. Last night, I finished reading the book Bounce, by Barry Moltz, which touched on a lot of things in your article as well. True entrepreneurs aren’t in it solely for the money. It’s the thrill of it all. Knowing that one day your product could be THE product. It’s seeing the public respond favorably to your creation. Some say that it’s the closest that a guy can get to that mother-child bond.
However, oddly enough, I also enjoy Corporate America. There’s something to be said about the energy you feel when you work for a company that employs ivy league students and you get to work together every day. While it takes a lot longer to make a difference in these kind of situations it’s also really amazing to look at a Fortune 500 company and say “see that…i built that”.
Excellent read. No better way to start off the day then reading something like this with a warm cup of coffee.
From a business standpoint, don’t underestimate the importance of the idea. You can do everything the right way and have the right attitude, but if no one is going to use your product or service, you are destined for failure. That being said, the mindset you portrayed here is essential to success if your idea is good enough to last. Good read.
I’d love to be part of a startup in the next few years, so I was delighted to see you were posting about it. And a wonderful post it is too!
I completely with Akshay here: ‘there are some people who will never be happy to work for someone and always have an addiction or craving for doing some innovative on their own’.
Knocked the nail right on the head.
Yes
Sweet post with some questions that I guess everybody in such a position faces every now and then.
What intrigues me most is the actual entrepreneurship within young people and how it is stimulated and incubated.
In Europe, I have the feeling that the startups are founded by people less youngcompared to those in the States. Probably there is a reason for this, yet I do not know whether it is a positive one.
I always had the feeling that it relates to the negative stigma that holds with young people that fail in starting up… once, twice and only then succeed. Whereas in The States, this seems to be regarded as proof of perseverance and credibility for being real, also knowning the downsides of entrepreneurship.
What lacks in Europe is a broad and well-known network of venture capitalists that can broaden the support for young entrepreneurs.
Anyhow, for me it is simple: the downsides of sole entrepreneurship never outway the freedom, dynamics and personal experience that it brings.
That is why i’m with a startup. Most of the “risk” people associate with working for a startup is a minute dot on the radar looking back.
The reality is I have a job, work my butt off, but have everything I need. Well worth the future reward!
So what are your plans when you graduate?
Interesting article. I think one of the key points you are missing is the notion of having a good idea, and being a leader. I’ve worked as a consultant and for startups for the past 11 years, and have encountered many startups and startup CEOs. The truth behind why most startups fail (and most DO fail) is because they either have a poor idea and/or a poor leader at the helms.
On another note, I think the notion of being a permanent “startup guy” is questionable as well. How do you learn from others who have come before? Who mentors you? How do you get exposure to BIG deals and leading BIG teams?
I applaud the enthusiasm you have, and of many other new startup founders. I hope you all find success in what you do, but I can’t help but be convinced you could all learn a few things by spending a couple of years working for others. If nothing else, learning what mistakes not to make is invaluable, and most certainly not a waste of time….
Excellent thought… as an entrpreneur, I would add “loneliness” to the things that people fear when they create their business…
I think one of the most important parts of building a company is the energy it takes to get started. Most people have buckets of energy at the beginning, but it’s *extremely* difficult to maintain it as the project moves forward (especially if you don’t see any returns).
I also think that there’s no standard solution to this problem, and it’s really up to the individual as to how they solve it. (Maybe that’s part of why so many startups fail? Who knows…) Whatever the case, sustaining positive energy is crucial, which makes it all the more important as to who you “start” with (partners), and who you hire later.
I seriously think that the modern web-defined “startup” is the stupidest thing I have ever heard of. 95% of the time it’s some kid who loves to write software but doesn’t want to get a real job (unless he can work at the Apple store). And maybe they can write good software or develop a half-decent web app, but being able to do those things doesn’t automatically give you good business sense or the ability to manage customers or complaints or any of the other thousand things that come with running your own business.
It’s my personal opinion (from experience) that in order to be successful running your own business, you have to: 1) have a lot of experience in the industry you’re starting the business in, and 2) be educated in what it takes to run a business and turn a profit. In other words, if you don’t even know what the proper channels are to register your business or collect and remit taxes, keep the part-time job at Starbucks and the other part-time job at Lenny’s Computer Shack, because you’ll never make enough money to keep buying the latest Apple products to impress your friends if you go the “Startup” route.
(Disclaimer: This comment is geared at the “95%” of people I mention above, not the other ~5% of legit individuals that I didn’t mention.)
Awesome post Paul. Your comments re: competition/risk remind me of something I read a while back. I think it might have been from The 4-Hour Work Week. The argument was that running your own business, becoming a world-class expert on something, or doing something else “great” is actually much easier than being average and doing the same thing everyone else does. And the reason is simple: less competition.
For every fortune 500 CEO, there are probably 10 people who are equally intelligent and capable who simply never thought it was possible to make it to that position, so they never tried. The result is, at their job level there’s 10 times as much competition than there is for a typical fortune 500 CEO. I think there’s some credence to that argument.
I don’t think you’re the only one who is a startup fan.
I’m only 21 as well and I’m in the same boat as you. I’ve taken a good mix of IT classes mixed with business classes. I couldn’t think of a more exciting professional dream than to be a part of a startup that succeeds and “mixes, mashes, and creamates the x,y, and z of traditional thought.
I am currently running a startup that took two years of development time on my spare time from my regular job as a software architect. It is called RideSearch.com and I have funded it and developed it myself and made it to be self-sustaining. I think the old Web 1.0 method of startups is gone. The era is upon us that for a company to mature requires very little money but a lot of experience. Read Wired latest “free” article to see where I am going. To do it solo requires knowledge in sales, public relations, development, support, SEO and internet marketing. Once you get this knowledge and you are truly passionate about your site, like I am, there is nothing to stop you from succeeding. I am relying on no one but myself and my daytime income and I am 32 and married and my wife is happy. Always think outside the box.
BTW, you should review my site, I’ve got a reviewme request out for it…
Hey Paul, great article. I actually work for a startup myself and love the experience. I really feel that I am and have the ability to make an impact and help lead the company in the right direction. There is a lot of value there and at the end of the day it makes me enjoy my job and explore new avenues for business.
I’ve also worked for a large company in which you get lost in the shuffle and your role is just that a role. A very small piece in the puzzle. I felt I got stuck in the motions at the larger company and now have enough freedom at our startup to make big time decisions.
basically, startups are the way to to go!
I can’t imagine you not starting a company or working for a startup. You’re young, experienced and have all the tech experience and knowledge necessary. Given your friends in the web community and your stature as a blogger, anything you do will get plenty of attention. Keep us posted on your post-college moves.
BTW, was this in response to a Skribit post? Or are you waiting till it comes out of private-beta to promote the service?
@Blake: Paul seems like a smart guy and all, but to call him “experienced” as a 21-year-old is either an insult to the rest of us who are older, or just very naive. In fact, the words “young” and “experienced” are *almost* mutually exclusive.
(no offense Paul)
@Jeremy - none taken. I still have a lot to learn.
How did the idea for Skribit come to you?
I think that being part of a startup is much easier said than done. Sure, we can point out all the people who have succeeded and made their millions, but I think that they are the exception.
I don’t mean to be negative, but I think that before diving into a startup a really good idea is necessary, like you said. Certainly, a lot of thought and consideration should go into the decision.
I’m a fan of startups and the spirit behind them, but I don’t think that they come easily. Ideally, if I could, I would love to be able to create something that I was passionate about, but I probably lean towards the conservative/get-a-job-to pay-the-bills side.
Paul, you should come to Boulder - great startup atmosphere - home to Andrew’s original Startup Weekend (was a blast!).
love the disclaimer, priceless.
good article, and even better links. thanks paul.
My mid-fifties father and early-twenties self had a long talk about startups during a road trip into the mountains. It’s funny to read you bringing the same issues into play — particularly finding people and bypassing the consultant road-warrior life. He’s almost convinced me working for the Man isn’t the best way to go.
Good post. I’m a 21-year-old graduating in May and I’m hoping to find a job with a start up or similar company as a user interaction designer. Paul, are you graduating from GT this May or do you still have some time there? I’m interested to hear about what you’re planning for after graduation. I know you want to head to California, but any thoughts past that?
Definitely, great reading as I sit here in a corporate training. This was right up my alley… The question of leaving what I feel is “safe” for something more “risky” and with no roadmap. These articles are great and help reignite that creative energy. Great stuff Paul!
Sorry I’m so late to the party in responding to this one. I felt it important that I give my comments, so I’m posting.
Paul,
I love your comment on startups. Kudos to you. Your age is your number one benefit in this arena. Number two is your position in life. The reasons you give for working on a startup are great… for your 1 and 2.
Get beyond those, however, and it’s not just about you. If you miss that boat early, it’s not just about you. Having a startup fail me doesn’t mean I just eat bologna for a year. It means my loving wife and three beautiful kids eat bologna for a year. I can’t do that to them. I can give them a great life by working the 9 to 5. It doesn’t mean I’m not going to keep trying. I’m the earner of a single income family of 5. Part of that is the daily grind, and the other is the work I do online, which generates revenue that my wife might make if she worked (she stays home with the kids).
Bottom line: I don’t mean to be insulting when I say if you’re at the point in your life when your decisions affect YOU and nobody else…. GO FOR IT!
Thanks for the forum, Paul! Good luck to you.
Older people should say nay to startups. Younger people should keep trying to get rich. The people that are older would probably want to be paying more attention to getting their retirement fund together. That’s a good thing about working in the corporate world, if you succeed there then you have a comfortable retirement waiting for you.