
The world needs more modest, linear growth companies. Please make some - duck
https://m.signalvnoise.com/the-world-needs-more-modest-linear-growth-companies-please-make-some-609b5a10a9e0
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ceeker
I agree we need to companies that don't chase exponential growth. That being
said, I am not sure if this advice is broadly applicable:

1\. If you take VC money, they are not going to keep giving you more money if
all you can show is linear growth. It may take a really long time for the
company to become self-sustaining and just will not work with VC economics.
Expecting them to change their mindset is not realistic unless the
fundamentals also change.

2\. If you don't need VC money, then you probably are not chasing exponential
growth anyways. You have limited capital so you build a sustainable business
(if your idea has legs) by chasing meaningful growth. So this article does not
impact these companies.

3\. If you are one of those rare companies that need some good amount of
capital initially (hard to penetrate industry like healthcare or finance) but
once established, maybe you can build a sustainable business without a lot of
new capital. For this group this advice may make sense, find VCs who believe
in linear but sustainable growth but you are definitely viable and the returns
are still going to be attractive as you may need only 2-3 rounds of funding.

I would guess the number of startups that will fall under #3 is going to be
really, really small.

In short, the article could have just argued for more bootstrapped businesses.
But then, there may be many such companies already and we just don't hear
about them... So maybe the article's point is to make more of those startups
more visible so not everyone thinks they need exponential growth.. That just
requires all consumers to crave stories that are ordinary so media companies
can start writing less sensationalistic articles... maybe that's the billion
dollar startup with linear growth!

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tebura
For #3, [http://www.indie.vc/join](http://www.indie.vc/join)

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tfehring
I agree with many of the tangential points in the article, especially the
point regarding monopolies and oligopolies made up of rapidly-expanding
companies. But while I appreciate the sentiment of the core argument, the math
doesn't treat it kindly.

A company that is growing linearly is necessarily growing at a decreasing rate
as a factor of its size. Absent dividends or share buybacks, "size" here can
refer to equity outstanding; in that case, returns to owners/shareholders will
necessarily decrease over time as a proportion of their equity. Alternatively,
by regularly issuing dividends or repurchasing shares, a company that is
growing linearly by some metric other than equity (e.g., profit) can provide
constant or better returns by concentrating its profits within a smaller
equity base. But that just forces its shareholders to invest elsewhere, and to
avoid decreasing returns over time, their money must ultimately find its way
back to a company that is growing exponentially.

Admittedly, that argument probably seems nitpicky - the article could just as
easily referred to slow, stable exponential growth rather than linear growth.
But for startups, that still creates a poor risk-reward tradeoff, because many
(though not all) of the risks that apply to fast-growing startups also apply
to slow-growing ones. Your ideas may not be marketable, or you may not
implement them properly, or an established player may jump in and take over
your market, or whatever. Why should an investor take on that risk, in
exchange for blue-chip-like returns in the best-case scenario, when they could
just invest in established blue-chips instead?

For a particular founder with the right business model, there are workarounds
for this issue. You don't have to be dependent on external investors if you
can get started with a small amount of capital, operate and scale efficiently,
and turn a profit early enough to remain solvent. But those constraints are
significant enough, and the rewards for succeeding are modest enough, that I
think it's unrealistic to expect the "proliferation of a thousand or million
smaller businesses" that the article refers to.

