
Sorry Entrepreneurs: You’re Probably the Rule, Not the Exception - citizenkeys
http://techcrunch.com/2011/02/27/sorry-entrepreneurs-youre-probably-the-rule-not-the-exception/
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mixmax
It's all about cause and effect, which a lot of people seem to miss.

I remember starting a company some years ago, and our investors insisted on
filling the board of the company with politically well-connected high-rollers
that knew how to do multimillion dollar deals, the reasoning being that all
successful companies have these kind of people on their boards.

But this is backwards, it's like saying that all multimillion dollar companies
have a canteen for 100 people, so if you build a canteen that will seat 100
people or more you're a asuccess. Yes, all successful companies use an
internationally recognized and expensive accouinting firm, yes all successful
companies have a welldefined strategy for how to assign e-mail addresses to
employees, and yes all successful companies print their annual report on
glitted paper.

But that doesn't mean that if my small company builds a 100 people canteen,
uses an expensive accounting firm, and prints it's annual report on glitted
paper it will be a success. These thing are the effect of success - not the
cause.

The cause of Zynga's success isn't that they don't do a lot of marketing and
quora's success isn't due to the fact that they don't disclose their numbers.
It's an effect.

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tansey
Steve Blank gave a great presentation at WealthFront the other day. One
poignant quote:

"There are about 50 or 60 people in this room right now. About 4 to 5 of you
will make 10 million dollars; one of you will probably make 100 million. The
great thing about this room is that you're all feeling sorry for everyone
else."

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entangld
This is about the easiest thing a person can broadly state about anyone or
anything. Probably <\-- isn't very definitive.

Entrepreneurs are the exception among society, but when you're comparing
exceptional people to each other, yes the differences become tiny.

The real difficulty is for people scouting entrepreneurs. They're observers
and the differences between founders and projects probably blurs as they see
so many. It's difficult to precisely measure mental agility and fortitude, so
they have to use other factors to mitigate risk (e.g. past success, strong
team).

An entrepreneur has to fix a problem with the world and overcome the obstacles
associated. But analysts have to turn us into objects that make their
predictions easier. That may abstract away characteristics which they could
miss. For them it must be like trying to predict which marble will roll the
farthest down a hill. Possible, but difficult when every marble starts to look
the same.

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stevenp
Why do people keep saying that Zynga doesn't spend money on marketing? They
spent millions in advertising for the launch of Farmville
([http://www.insidesocialgames.com/2009/07/28/social-game-
deve...](http://www.insidesocialgames.com/2009/07/28/social-game-developers-
spending-millions-on-facebook-advertising/)) and some estimates I've seen have
said that they spend over $100mm per year on advertising on Facebook.

Fred Wilson talked in his blog post about Zynga not doing any advertising when
there were only 3-4 founders, and that they built their user base in that way.
But their eventual astronomical growth has been largely due to their ability
to spend hundreds of millions of dollars on acquisition.

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orky56
Thank you! Seriously, this type of article really invigorates me. This may go
against hacker mentality, which is eliminate every single step until all you
are left is with an awesome product. Get that out the door as quickly as
possible and pray for users. 100 to 1k to 1 mil to 100 mil users! Revenue
model? We can worry about that later. How much is each user worth?

Sorry for the rant but steps that do exist in the traditional process are
there for a reason. Correlation does not imply causation yada yada. You should
finish high school and at least get a bachelor's. You do need to consider a
business plan. You do need to understand the legal aspects. If all we take is
shortcuts, then we will never understand what is missing!

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A1kmm
The core point makes sense, although I don't think there is a clear line
between 'rule' and 'exception'; instead, the influence of companies probably
follows something like a power law on metrics like 'how many people recognise
the brand' - there are a few heavy hitters like Facebook, and a long tail of
much less recognised companies.

I don't agree with their analysis that there is no bubble in Facebook's
valuation because Facebook has revenue; you can't look at one company in
isolation and say 'they aren't part of a bubble', you need to look at the big
picture. Facebook has value because it has a lot of users and information on
those users, and can use the information to target ads at those users. As pg
has pointed out before, the 2000 dot-com bubble also had players like Yahoo
bringing in high advertising revenues. Advertising revenues are much lower now
compared to then on a CPC or CPM basis, but, especially for some targeted
users / keywords, are still very high, and companies using them probably make
a loss paid for from capital unless they have very high LPVs for customers, or
from advertising revenue.

In other words, advertising revenue is largely hot air circulating inside the
bubble, and VC capital and cross-subsidisation from other areas pays to inject
into the bubble. Some companies operate entirely in the bubble - they receive
large amounts of bubble advertising revenue and reinject into the bubble by
spending it on advertising, to cannibalise someone else's bubble revenue.
Bubbles aren't stable - as soon as investors lose confidence in the market,
investment will slow down, so there will be less advertising spend, which will
reduce both direct and indirect advertising revenue and reduce confidence
further.

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StavrosK
On a tangent, that was a horrible movie that missed its own point. I also
watched it on the plane, I wish I hadn't.

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fleitz
If Quora doesn't give user numbers it's probably because they have good PR
that projects value in terms other than user numbers. You shouldn't refuse to
give numbers, instead you should talk about how the user number isn't
important. Quora doesn't have to give user numbers because they are perceived
to have _important_ people.

Note: If you're an ad-sponsored consumer internet startup then users are
probably important unless you can quote an insanely high eCPM

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solsenNet
Get 2 or more VC's together and they'll sure to be complaining about
valuations! ha!

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mkramlich
Wilson's post, which the OA was referring, actually jives with my own current
"best practice" ideals, namely:

1\. don't take investment. it over-complicates things, and it's better to get
money from customers anyway. it scales up and down better. customers hate you?
well, you won't be burning much money because there's nothing much to burn.
customers love you? you'll have more money, which in turn makes it easier to
acquire more customers

2\. don't advertise. less money spent on advertising is more for, oh, product
development and "keeping the lights on" and metaphorical Ramen, and less need
for investment. also, less advertising means less wiggle room for your product
to suck. with less advertising, your product MUST be better, inherently, and
people MUST want to tell others about it more, inherently. these are good
things. a virtuous cycle.

that said, of course, given two otherwise good products/teams/markets, yes an
advantage will go to whoever can advertise more. but it's rare that you have
two otherwise identical and equally good products competing at the exact same
time and with the same feature set and market. if it happens, fine, advertise.
but probably the smarter strategy is to keep your head down and focused on the
product, and to pick niches which don't appear to have big money competitors
(yet). I believe there's a bottleneck and shortage of talent and taste in the
world, with probably time the second most bottleneck, and both money and ideas
are much farther down the list. Therefore, advantage goes to those with more
talent & taste, under otherwise equal conditions.

take all this with grain of salt, as I'm somewhere between semi-am/semi-pro
and wantrepreneur at this point.

~~~
redthrowaway
I'd argue that Digg vs Reddit in the early days would be a counterpoint to
your argument. They were very similar, doing the same thing for similar
people. Digg went VC and advertised heavily, reddit sold quickly and stayed
under the radar. Had Digg not imploded, or had they sold at their peak for the
60MM they were offered, theirs would have seemed the much better path to take.

~~~
khafra
Is that a counterfactual counterpoint? Given the complexity of business
success and failure, it's probably best to pick examples which don't rely on
facts demonstrably not based in reality.

~~~
redthrowaway
>it's probably best to pick examples which don't rely on facts demonstrably
not based in reality.

Which facts are "demonstrably not based in reality"?

