

Reality check overdue for start-ups that don’t fly - bond
http://www.boston.com/business/technology/articles/2011/10/16/reality_check_overdue_for_start_ups_that_dont_fly/

======
martinkallstrom
This article almost got me upset. The writer argues that young people should
know better than to try to make it on their own and instead go work at any of
the old institutions that make hundreds of millions off of their employees.
Maybe there is a reason why talented people don't want to work for them.
Growth does not need to happen in terms of company size, it can also happen in
terms of number of companies.

Huge companies exist because historically communication inside an organization
was cheap while communication between organizations expensive. Guess what,
with the Internet that doesn't apply anymore. Many small companies can
innovate faster than one big, and contribute to faster growth. It's the big
companies that are overdue with the reality check.

They are dinosaurs dying in a climate more fit for leaner creatures.

(Oh, if there is such a need for talent, why doesn't the bigger companies
scoop up some talent by doing acquisitions? Valuations shouldn't be to steep
in early phases. And it wouldn't take long for the entrepreneurs to get
lobotomized, sorry I meant institutionalized, and be happy cogs in the big
machine)

</rant> ...sorry.

~~~
ericd
Huge companies also exist because of economies of scale, and the limits of
brand recognition. There's a limited amount of mental space that non early-
adopters have in their brain for brands. I don't want to remember 5 different
things that do the same thing, and most people are the same way. This is a big
part of the reason that startups are hard to make work, despite their usually
superior product.

~~~
martinkallstrom
You are talking about horizontal economies of scale that means that companies
can increase margins by doing everything themselves. With online services,
vertical economies of scale just now are becoming more dominant.

Here's a for instance: If I were to create a new social network today, I might
host it on Heroku, send email thru Sendgrid, store my data in Neo4J and make
it searchable with ThriftDB, etc etc. There is only one consumer-facing brand,
but hundreds of small companies contribute to creating that brand. But each of
them also have hundreds or hundreds of thousands of other customers, which
creates the vertical economies of scale.

This is not new, corporations have had sub-contractors and suppliers
throughout history. But what is new is that the small one-man shop will have a
dozen suppliers from day one. It's a brand new ecosystem still in it's
infancy, it didn't even exist to this extent when Facebook and Youtube was
started. What existed then was the infrastructure services like server
colocation and CDNs. So they relied on open source software, but they still
had to deal with a lot of messiness you don't have to with SaaS.

This is the embryo of that eco system. Give it a decade to mature and my bet
is there will be a one man operation totally competing with Google on their
core business.

Oh wait, that already happened.

~~~
ericd
You seem to have ignored the much more important part of my comment, which was
to say that growing the number of companies isn't a direct replacement for
growing the number of people at a company. There just isn't enough space in
people's memory for a huge expansion in the number of popular brands, and that
reality provides a very powerful reason for consolidation. How many email
deliverability providers would you actually consider? You may research it
heavily, but most people would just go to Sendgrid, or one of the couple
others they've heard about. The others face a significant education challenge,
and there's only so much company news/PR one person can stomach from a sector
before they totally tune out. That is a fundamental bottleneck in the
scalability of the number of companies that can feasibly operate successfully
in any given sector.

You don't see the same effects with little pizza shops, etc, because their
reach is usually gated by locality, but the "flatness" of the internet causes
many more "winner take most/all" scenarios.

~~~
martinkallstrom
I think you are right that there isn't enough space in people's memory for a
huge expansion in the number of popular brands. But they don't have to,
because brands on the internet too are becoming localized.

A Swedish email company may very well co-exist with Sendgrid, catering to
other Swedish companies. The Swedish startup Kundo competes successfully with
GetSatisfaction, in Sweden. A company specializing in sending out the same
email to many people instead of one-to-one, may co-exist with Sendgrid, just
as Mailchimp is.

Create a matrix with the dimensions [every thinkable service a company needs]
x [the number of possible functional specializations for each service] x [the
number of geographical markets] x [the number of possible target groups in
each geographical market] x [the number of companies that can co-exist
catering to each target group] and you get a search space that can fit as many
startups as there are sands in Sahara. Even with a very low fill-factor of
that matrix there is room for millions of companies to co-exist over the
entire planet.

The debate is not to what extent there are huge numbers of market
opportunities, because it's a fact that there are. But whether a larger
corporation is more fit to compete within that matrix than many smaller ones.
That balance is rapidly shifting. The flatness of the Internet does cause a
lot of "winner takes all" scenarios, but it also makes it possible for the
winner to be a small company.

A company like Google still has to do PR to compete with Sendgrid if they
create their own email sending service. Yes, they have their brand recognition
to leverage, but it's possibile for Sendgrid to say "Google has mediocre
customer services and may be a great search company, but we do only what we do
best and that is one-to-one email sending with excellent customer service".

And people are increasingly discovering that it is on a personal level more
gratifying to be the founder of a small company competing for a very
specialized market opportunity than to be an employee in a large company
competing for a very broad market opportunity.

------
TomOfTTB
I was brought to the valley by a guy who came to my University (Harvey Mudd in
Southern California) and paid the aide in my freshman Java course to give him
the names of the most promising students. He then offered us $80,000 sight
unseen because he was so desperate for coders (and I was making $120,000 6
months later).

Bottom line: There has always been and will always be a talent shortage in
tech. start-ups. You just have to factor it in (and as my story demonstrates
maybe get a little creative in your recruiting)

------
mathattack
I can't imagine anyone on this board taking this article seriously. The
journalist positions "Work for someone else, or get your idea funded" as a
serious decision. There is no decision. You'll learn 10X more doing everything
on your own. You can find good mentors, and peers. You can find people to
learn with. And you have funding. The companies that complain they can't find
people just aren't paying enough, or sharing enough equity.

If it was positioned as, "Starve for 2 years as you build a start-up or work
for a medium sized firm with a good salary" - then it's a fair comparison.

Having lots of companies start, and fail, is a productive use of resources.
Having very smart people choose to do this rather than go into consulting,
banking, or working for large firms is also a productive use of resources.
That our market is still seeding these ventures with money is also productive
- and one of the great things about our economy.

------
DanBC
> _But a lot of them were two-person companies last year too, and the year
> before that._

So what? It takes X years (3? 5?) before you see a real profit.

> _At the same time, many of Boston’s most promising companies with 100 or
> more employees have a tough time hiring. Could too much of Boston’s talent
> be stuck in start-ups that are going nowhere?_

Or could some of $TOWN's most promising companies have toxic work
environments, with awful management and horrible structures?

Letting people work from home would improve hiring. Having sensible
expectations for working hours and vacation wouldn't hurt either.

~~~
Nutella2
Whenever someone moans about not being able to hire when other companies can
do it, the solution is obvious. Offer better jobs! Better working conditions,
better projects, better benefits, better salaries. The fact that this did not
occur to the author of the article is pretty sad.

------
endtwist
> _And I’d be the last person to discourage someone who feels compelled to
> start a start-up._

…Yet, you (the author) just spent two pages doing exactly that.

------
localhost3000
and this is why I want to leave boston. one of our most prominent startup
journalists is pushing a storyline of too much risk taking. This is so
'boston', it's almost unbelievable...as much as we try and fake it here,
Boston is full of skeptical people just like this guy.

------
wetbrain
One thing from that article I completely agree with is that “[Mid-Size
companies] need to figure out how to recruit and create jobs that are
attractive for entrepreneurial people". It's exactly how I feel.

I'm about to graduate, and other than the risk factor I don't see the
advantage of working at a large company over a smaller one or starting your
own. I can understand how lack of business experience and egregious student
loan debt can keep a recent grad from taking fewer risks, but this would be
the time to do it. I feel that if you're confident enough in your skillset to
work for Initech, why not go for it? Most recent grads don't have a family to
support and a whole life to play it safe.

A company needs to convince me that working five years for them would be
better than two at a failed startup. At least for me, a paycheck isn't enough
of a reason.

(This is part bullshit since I'm not fully following my own advice. My parents
co-signed my loans and have four more kids to put through college. Until
that's taken care of I don't feel comfortable risking defaulting on my loans.)

------
PaulHoule
The number one reason a certain kind of software developer doesn't want to
work at a company with 100 employees is that a company like that has a 'glass
ceiling'. At some level you're still the inferior of a salesman who can't
sell.

In organizations like that I've frequently seen a critical risk that would
endanger the success of a project, took every chance I could to warn people of
it and only got people to believe I was right after a year and a half of
wasted opportunity.

I tried improving my social skills, I tried wearing a suit, I tried
everything... But if you're one person in 100, it's very hard to change the
system. At some point I realized I had to go on strike and not work for that
kind of company.

------
anmol
So much for building a Boston startup eco-system.

------
seltzered_
"But he says graduating students ought to be more aware of the benefits of
gaining a few years of experience at a small- or medium-sized company before
going off to start their own."

This depends highly on where you end up working. If you find yourself just
maintaining someone else's crappy code, and/or working with people who can't
serve as great mentors, I see joining a company as a potentially bad career-
risk relative to either:

a) spending a couple months working on an open-source project used by a
company/group of hackers you really want to work for/be mentored by

b) starting a business.

(for a&b, be aware of your financial situation before considering the above
options)

I work with plenty of "industry" programmers who make much more money than me,
but are afraid of developing new things or learning new languages, calling
them "oh, that's one of those academic things" even after citing something
cool being used with them in production.

------
aoporto
This article shows how difficult it is for many to accept the idea that an
individual would choose an entrepreneurial path over a 'regular job.' Why
would anyone take the risk?

We take risks, but they are hopefully calculated and well thought out, not
reckless. What good is life without taking some risks, especially if you are
confident in yourself and your abilities?

"Laws, everything's a chance, isn't it?" - Tom Cullen, The Stand

------
ricardobeat
To all the companies complaining, just come over to Brazil and grab a bunch of
great engineers for 70k.

------
donaq
_"A lot of the most talented people are going out and getting funded to start
their own company,"_

Talent and ambition tend to go hand in hand, and that is the way it should be.
If the most talented among us don't attempt to blaze new trails, then the
human race would stagnate.

------
andrewflnr
I'm not in Boston, but this sounds like a perfectly normal, temporary
phenomenon that will correct itself shortly. The people and the economy will
probably be better afterwards. Besides excessive pessimism, is there anything
to really worry about here?

------
traemccombs
Some of you may know me from the old Themes.org days as "OctobrX". We had a
common place where people could help and work on desktop themes for X.

One of the things that drew me to Linux, was the ability to configure and
tweak and change things to suit ones personal tastes. This has always been a
hallmark, a calling card of the Open Source community.

With Gnome 3.0 and Unity, they have taken a giant leap towards the dark side.
I can't believe this has happened.

I wish I could put all my feelings into words as aptly as this author has. I
wish I could describe how betrayed, how abandoned and utterly dismayed I am by
what I've seen in these latest offerings, but I can't.

Where can you change the fonts? Where can you set keyboard preferences? Where
can you set it up so you can move the bar at the bottom of Unity? So many
issues, so little time.

All of these things are set-backs and not leaps forwards.

Canonical should hire me and I would guide this ship back to its former glory
as well as bringing a vision for desktop dominance in the future.

~~~
gojomo
I think you meant to post at: <http://news.ycombinator.com/item?id=3118125>

