

Big Startups vs Little Startups - ezl
http://ezliu.com/1-startup-2-startups-big-startups-little-startup/

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wtvanhest
I feel like people use the small is safer logic with lots of life decisions
but never offer any proof. What if you are wrong about the risk and you make
nothing? You ended up in the same spot with much less experience.

Some niche markets may be great, but you didn't find one. It is dominated by
fairly large players with cost advantages.

What happens if you do this for a while and add a product? Maybe that becomes
a big business? I just have never ever seen evidence that going small anywhere
in life works out better than always going big.

~~~
ezl
Hi there, thanks for the feedback. I don't claim I'm right, this is just how I
view opportunities. i DO think of every opportunity as a distribution of
payouts with varying probabilities. Before going into the venture (and even
after it... only once measurement), you can't actually _know_ what that
probability distribution looks like.

That said, I don't really believe small is _safer_ -- I'm just saying small
costs less and generally has smaller upsides and smaller return variance.

If you read to the end, you'll notice that I don't actually make a value
judgement on which path is "safer" or "better" in any way. I think it's just a
question of personal preference, influenced by your individual station in
life.

I think this has more to do with outcome utility. I personally will probably
never spend more than 1mm a year, so building a startup that has a significant
tail above 1mm/year in recurring revenue would be great -- but the utility of
that tail is very low to me, so its not worth sacrificing success probability.

And yep, just totally guessing what that return distribution looks like.

For me it's not that small is safer, its that there are a lot more resources
to fall back on for small. I personally don't have the chops to build twitter
scalability. But if I wanted to open a restaurant, there are tons of resources
and many people have blazed that path for me, and I can look to them for
advice. It's not "easier" it's just that the path to "success" is more well
documented, and I consider that a valuable tool that increases the odds of
"success".

~~~
wtvanhest
I definitely agree that entering an established market with a product that is
just going to take a bite out of it is easier due to the prescribed path.

And like i said, maybe it makes you some cash and allows you to build more
stuff on top.

I'm coming from some experience in that I've built some small businesses that
just didn't make enough and didn't have enough potential to be worth the
stress.

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dmor
I landlord 3 properties and I REALLY need your little startup. Spread the
word! The pain landlords feel, and the crap we sometimes put tenants through
because of crappy tools/laws should be solved.

~~~
dwrowe
Can you expand on that? I've been interested in that market but don't know
where to get involved. I'd love to hear your thoughts - even if in an email.

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adennis4
On the whole, I agree with you. However -

1) Unless you're Instagram - a big startup will cost you much more than 2
years of life. The monetary price probably doesn't matter much as you will
have acquired funding.

2) I also think the expected value of any given random point on the "startup
dartboard" is smaller than the values you threw out there.

That all said...my interests align with yours. Hitting singles is more
attractive than swinging for the fences. Goals change though...Rocket Lease
may be a safe bet on your part. If traction picks up and it becomes an
undeniable juggernaut...I don't think you or anybody else wouldn't take the
"big startup" ride.

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marchustvedt
Given the headline, I was expecting a comparison of large teams versus smaller
nimble (Instagram, Path) ones. There's a whole lot to be written about group
dynamics in terms of headcount.

But in terms of this discussion. I have to take issue with choice of market
opportunity based on personal financial situation.

" _Where are you now? There’s no right answer to this. If you’re 30 and broke
and wondering how you’re going to pay the rent in 6 months, its harder to
swing for the fences. If you sold your last startup so you’ll never have to
worry about food and rent again, big startup board._ "

Not only does this lead to rather arbitrary founder-market fit, is the success
rate curve of the smaller startup really that more evenly distributed than the
larger ones? I doubt it.

That said, it sounds like you may have been a landlord yourself, saw the pain
point in vetting tenants, and went for it. Niche, but already a service that
1) is arguably underserved and 2) your customers are used to paying for.

Best of luck and it sounds like you might have some takers here on HN already.

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dasil003
I think startups are too plastic to be characterized this way. Well, software
startups anyway—hardware, durable goods, science, or other capital intensive
startups are a different story.

I suppose there are small markets to go after and big markets, but there are
also unknown markets, and to go truly huge and be the VC darling of the decade
you might need to create your own market. But the kicker is that the market
you are targeting is not fixed. Software is sufficiently abstract, and it's
reasonable to run lean enough that you can literally change your target market
overnight. And in the case of the really huge startups, they all get there
through a series of pivots to scale progressively. None of them start with the
vision of what they ultimately become. The people who think
Facebook/Google/Apple scale at the beginning are probably more dreamers than
doers. The trick is to grow your ambitions as you grow your business. So I
don't disagree with the advice, other than to caution against letting your
bootstrapping thought process color your future ambition.

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michaelochurch
I used to be a trader, too.

What is interesting to me is that the ethics I encountered in finance (n.b. I
was in statistical arbitrage, and I'm pretty sure I'd have a different
perspective if I'd worked on mortgage-backed securities) were a lot better
than what I've seen in these VC-funded (or VC-hungry) startups. We tend to
have this reflexive attitude in technology that people in finance are scummy,
when the reality is that they're just more honest about their greed than VC-
istan types.

The engineers in these companies are great. Really ambitious, really talented,
and often fully believing in whatever marketing-copy "vision" the VC darling
comes up with so people will be glad to work for 0.01%, vested over four
years, of a company that will probably be flipped for 100-500M. I've never
disliked the engineers anywhere. At least 85% of the VPs and above are fucking
slime, though.

I think the "little startups" point you make has sense, but I think the ideal
is a small, stable startup that also has a chance of becoming larger. I think
the objective should be to build a stable and small business doing work of
very high quality, and later growing-- a "get rich slowly" strategy of solving
interesting and hard problems on the small scale first and eventually
developing the tools and expertise to solve major ones. Maybe I'm naive, but
this is what I'd like to see in my next company. A "change the world in 20
years" approach, rather than an all-out effort to bank it in 48 months that
(a) leaves everyone burned out from working too hard, and (b) almost always
involves ethical compromise.

What's behind the VC/build-to-flip mentality is competitive paranoia and the
attempt to exploit social trends to get a first-entrant effect. Many of these
social networks _are_ winner-take-all, sure. But there are a lot of creative
and technological ventures that don't have to be like that. If you're a game
studio, for example, of course there is competition... but if you make a great
game and another studio does so in the same year, the result is that you both
win and it's a great year for games. I wish people focused more on that, and
less on "destroying" other companies. Every time I interact with a company
that says their business model is to "destroy <tech company X>" I always find
them to be really unethical.

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btrautsc
I'm not sure I can agree that small vs big is so black and white.

Why is the small board dotted with different values and the big board a vast
wasteland with only a few potential outcomes? Is it VC pressure? That could
definitely eliminate some options - however, if you intelligently take on
capital and have the ability to hire better and brighter people - you should
have more positive outcome possibilities.

I think the general idea is pretty sound, but definitely not so black and
white. I believe most "big" startups were small startups initially.

~~~
ezl
It's definitely not black and white.

I think of every opportunity as being a different dartboard with different
values. These were just examples of _A_ small startup and _A_ big startup.

It's our responsibility as an entrepreneurs to pick the board that best fits
our risk profiles for the best cost.

Not all boards have a positive EV.

The "use dad's connections to buy my product" startup board is just 1 big fat
positive number (imagine some nearly "risk free" opportunity)

The "punch people in the nuts for a dollar" startup looks like a board of all
zeros (as far as I know, most guys aren't interested in this service)

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ernestipark
As someone who is currently struggling with finding an apartment to live in, I
hope to God your startup becomes popular. Awful, incompetent real estate
agents, terrible PDF forms that don't work properly on a computer, and an
overall terrible process has stressed me out these past few weeks.

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devs1010
'Rocket Lease is me saying that 40k a year would be life changing for me'

I really don't get this line of thinking. I'm assuming the author isn't a
programmer as otherwise I don't see how 40k a year would be an acceptable or
life changing amount of money, and, if he isn't, then why not learn to code?
Or maybe I'm just missing something and the intent is this is only a part-time
project that doesn't take up much time so any money it makes is just extra
(and 40k extra per year would be welcome by most people I'm sure).. honestly
I'm curious, as while I have an interest in entrepreneurship, the potential
payoff would have to be fairly high as being able to simply work as a
programmer for others already provides a fairly decent quality of life.

~~~
ido
I am guessing he means that $40k would enable him to work on his own stuff for
a year instead of having to get a job.

I've been self employed for a bit over a year, and I'm paying the bills but
make maybe 1/3-1/2 of what I used to when I was working as a programmer for
someone else - working on my own things in my own time is a premium that's
worth the lower "salary" for me.

Additionally, going into business yourself gives you a chance for a much
higher payback in the long run (you're probably not going to make more than
$200k/year inflation-adjusted as a programmer, but you could still make
millions in a few years as a small business owner).

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jamroom
I like this - and just because you start small doesn't mean you can't think
big in the long term. Small but steady growth goes a long way towards building
a lasting business too.

~~~
michaelochurch
Thank you.

The danger scenario of a grow-slowly business is that you usually rely on
clients, and sometimes they can become so demanding that you never escape the
mediocrity of ad-hoc client demands. You want to avoid providing "custom"
services that usually end up with you doing their grunt work without being
able to automate it. You also need to constantly be looking out for better
clients. Good clients aren't always the ones who pay the best. They're the
ones who will let you do things right and who give you the freedom to actually
grow, rather than living in a maintenance slog.

There's always a boss. The appeal of a VC startup is that your boss _wants_
your company to grow at 100+ percent per year. He wants you to play the anti-
martingale strategy.

I think the problem, both for a person and a company, is that it's hard to
find a "boss" who is looking for serious but not ridiculous growth. A
corporate boss won't let you rise faster than him, and large companies get
sluggish and stupid. So the typical job results in a boss who won't let you
grow (personally) more than 3 or 4 percent per year. A VC wants you to triple
your valuation every year. It's best to work for people who are on board with
"get rich slowly": a 15 to 20 percent increase in the value of your knowledge
base and skill set (and 15-40% growth in the business imprint) year after
year.

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ezl
Really, I guess this is my really old response to the "ambitious startups"
threads from a while back...

