

Think Twice Before Starting A Company - garbowza
http://robgo.org/2012/05/14/think-twice-before-starting-a-company/

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spodek
A lot of advice VCs give entrepreneurs seems to me versions of "make my job
easier," like how to write a great business plan, how to pitch, etc. In this
case, I see him asking entrepreneurs to improve the signal-to-noise ratio so
he can have an easier time funding companies. Nothing wrong with trying to
make your life easier, but he makes the article look like he's helping the
entrepreneur, when he's writing it to help himself, discouraging some would-be
entrepreneurs who might love starting a company even if it didn't make a VC
money. For an entrepreneur who makes their business their life, leading the
company may be its own reward, making his advice meaningless, since he'll call
it a success only if it generates a return on investment.

At the very least, I'd appreciate the article more if he specified "Think
twice before starting a company _that might seek venture capital funding_."
Most entrepreneurs I know never approach VCs. Did he forget few companies
involve technology at all? His advice doesn't apply to them. Well, except that
thinking twice is obviously good advice to anyone, but his reasons for it.

Entrepreneurship is far greater than starting tech companies looking for VC.
I'd be wary of an investor who didn't realize he put himself in such a bubble.
With all that name-dropping, you can see how social bubbles can contribute to
investment bubbles.

If you love starting companies and you have an idea whose time is now, you'll
find a way to start your company. If you don't need venture capital, hopefully
you won't hear his advice in the first place, or will realize it doesn't apply
to you. Even if you do want VC, if your firm eventually dies but you loved
doing it and it helps you do better on your next one, it seems to me you've
succeeded.

EDIT: I fleshed out a few more ideas to this post afterward if anyone wants to
read past what I wrote here -- [http://joshuaspodek.com/entrepreneurs-advice-
venture-capital...](http://joshuaspodek.com/entrepreneurs-advice-venture-
capitalists)

~~~
AznHisoka
I agree with that VCs give "thin-value" advice that don't actually propel you
to success.

But this post was different. He gave a couple of good points: there's a lot of
competition: competition for users, competition for press, competition for
attention. And it's emotionally draining as well.

~~~
jpadkins
there is always a lot of competition if you in an established market. Either
your product/service is obviously better than the competition or you should be
in a new market without a lot of competition...

This doesn't change with what stage we are in of the boom/bust VC flow...

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tptacek
Note his core concerns:

* It's harder to "stand out" amidst the crowd of startups that easy capital has created.

* It's ridiculously hard to hire.

* Seed funding is slowing down.

* Something about the "innovation cycle".

These might be very good reasons to defer the dream of financing a startup
with venture funding, but they're also advantages for bootstrapped companies,
which:

* Lock in viable business models early out of necessity and can outlast most of the built-to-flip companies in the current VC cohort.

* Are founded by people who can actually execute on technology.

* Don't require outside financing at all, and can thus look at "increasing difficulty" of capital raises and grin.

I don't know what to say about the "innovation cycle" though. That might be a
killer.

~~~
sabat
It reminds me of something Caterina Fake (Flickr) said some years ago. The
problem is, both these things come off like "I got mine, but it's too late for
you."

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serverascode
I think a budding entrepreneur should think a lot more than twice about
starting a company, but at the end of the day this post sounds like trying to
"time the market" which just isn't possible. If you want to be an
entrepreneur, then you have to be willing to start almost any business that
has a chance to be profitable.

~~~
keeptrying
I'm very scared that this is something I have to learn. I have been jumping
around between ideas for the last 6 months now. I want to do something in
health or education that moves forward mankind ... but its hard to find a
problem that has these constraints.

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dkrich
It's no more dangerous to "do a startup" now than it's ever been, it only
seems like it's harder because everybody is doing the same stupid
fashion/flash sale/monthly curated box of shit startup ideas.

A successful business finds a need or desire in the market place, solves the
need or fulfills the desire, and people pay for its products or services. The
principles haven't changed, nor has the percentage of the population capable
of creating sustainable businesses. I think the author is confusing causality.
He is speaking as if the number of startups coming online somehow affects the
viability of other startups. That isn't really so. If you can create something
people will pay for and are able to scale it sustainably, you will succeed.

What has changed is people's expectations. Whereas it used to be that people
understood that building a successful business was a process of years of hard
work without a reliance on investment money, nowadays it is assumed that if
you aren't a millionaire after six months you've failed. I think Jeff Bezos
said that just by taking a long-term approach to your business you instantly
make the vast majority of the competition irrelevant.

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pudakai
We're doing the platform approach. I don't think this was part of any grand
calculation of where the technology wave is, just that it is the idea we have
and it meshes w/our skillset.

The field does seem awfully crowded with social/mobile lightweight apps.

People prosper all over different parts of economic/tech cycles. My father was
a developer (real estate kind, a regular "A Man In Full") in Atlanta, he used
to always make all his bank during recessions when all the other developers
were going broke. Conversely, during the fat times, he never did very well.

We (including Dad) were all aware of this pattern, but never could really
figure out why things worked out that way.

~~~
brc
He's probably too honest, ethical and has a good understanding of risk.

I don't mean to say that everyone else is dishonest and unethical, or that
they all have the risk ratio upside down.

But in times of boom, people can sail a lot closer to the wind which can have
a big upside on the results. However, in down times people like to deal with
those that they can trust.

~~~
firebones
When the tide goes out, we discover who wasn't wearing their bathing suit, the
old saw goes.

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sayemm
Timing and picking your battles will make you or break you.

Starting a company just because everyone else seems to be doing it and because
it's the hot new trend are the worst reasons. Good reasons to do a startup
though, what counts as being in the right place at the right time, I think
are: (a) having a great product in a strong market, (b) meeting exceptionally
talented co-founders with good chemistry, and (c) being in a good position to
take risk in life (minimal debt, decent finances, good confidence in being
able to rebound and get a job amidst this recession, just in case the venture
completely fails)

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6ren
Industries often have sayings that turn out to be relevant only in the short-
term. It used to be that you needed to tackle a "technically difficult
problem"; but many startups have succeeded by building something that people
want without creating new technology but "executing" well. He's suggesting we
cycle between technology and applications of it.

Obviously we need both tech and apps, but is there evidence in the past of
them occurring in cycles?

That said, it's true that everyone is complaining that there's nothing really
new, that most apps are trivial. And of course, in the last few years
bandwidth/browser/cloud has gotten good enough for web-apps to go mainstream
and cause modernization across many industries, which requires domain
knowledge and "execution".

I'd love opportunity to be in "enabling technologies and platforms" - but it
seems innovators in software infrastructure (libraries, languages, middleware)
today often get nothing. Exceptions from the past: databases, postscript.
Please prove me wrong!

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michaelochurch
Concur. I think this is a very volatile and potentially dangerous time to "do
a startup" if you don't have a very focused and somewhat proven plan. I think
it's time to ignore what the Cool Kids are doing (in 2-4 years, they won't be
cool) and go _away_ from where they are so as to avoid following them into
idiocy.

This sounds easier than it actually is. The advice of "focus on real work and
ignore the idiotic social climbing" or "build something useful" seems obvious
and easy to follow, but when complete jackasses are getting funded and acq-
hired for millions, it's easy to be swayed, embittered, confused, or otherwise
influenced by the distractions. It's really hard for a 2x-year-old first-time
founder _not_ to find himself doing stupid stuff amid all the insanity.

Winter is coming. That doesn't mean that "the crash" is here. It might be 4
years out, or 4 weeks away. It might be a sudden drop or a slow deflation. I
have no idea when or how it will come, and I don't think anyone does. Still,
there are some conclusions to take away from it. First, those of us who aren't
ready to be Founders properly (that means, having enough VC connections that
VCs consider you a social equal and will take the time to mentor you if they
don't fund you) should probably sit this bubble out. Sure, being a _founder_
provides a unique and immensely educational "startup experience", but taking a
subordinate role as employee #37 at a VC darling is not much different and
rarely any better than taking a regular job. Actually, I'd argue that it's
often worse for subordinate employees, because VC-istan tends to have crappy
health benefits, inexperienced and unstable management, and a lack of long-
term focus on peoples' careers (because the company may not exist in 5 years).
If your ambition is to be a Real Founder (again that's not some guy whittling
at his trust fund, but someone who VCs are actively interested in, and who
could get an EIR job with a phone call) and you're not there yet, there's
probably not enough gas in this bubble left to get there before the end of it.
People who are out of school now have a decent shot at being Real Founder
material by the start of the _next_ startup boom, if they really crack the
books and work hard starting now and right through the bust... during which
the wantrepreneurs and social climbers will get discouraged and leave, making
the field less congested and giving the real players a chance to shine.

Which means... it's time to take the focus away from what TechCrunch and
Sequoia are doing, and back to the difficult and often obscure (if
intrinsically rewarding, and often lucrative in the long term) campaign to
improve one's technical skills through practice and hard work. This doesn't
have to occur at a startup, although it can. But now is also a good time to go
back to school, to work in a more established organization, to try out Real
Technology instead of these silly social apps, and to start networking.

~~~
il
I don't think this is good advice. If you have the burning desire to start a
company, you should start the company and not worry about timing the market to
ride the bubble. People start startups because they have a solution to a major
problem inside their head that's dying to get out, and because the
alternative(getting a stable job) is out of the question, not because they
think economic conditions are more favorable.

~~~
bad_user
You can also build the initial version while still going to your regular job.
So you don't have to give up on your safe salary.

If you can't do that because of a lack of focus, then maybe you are not ready
to start a company. If a lack of time is what gets in the way, then maybe you
need to be smarter about it and build less. If you can't do that, then maybe
you don't have the discipline required to start a company.

IMHO, it's a bad investment to start a company without having real proof that
the product is wanted by people. And ideally you must also have a couple of
paying clients.

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mgkimsal
"three years ago, I was telling everyone I met to start companies."

"First, part of my perspective is just driven by my natural instincts to be
counter-cultural. When there seems to be a lot of hype around an area or
activity, I find myself pretty un-attracted to it. "

So... create/contribute to the culture of 'start a company' ("bias towards
action") and then claim "counter culture" thinking against "hype" (which you
helped foment).

Interesting angle...

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YuriNiyazov
It's never a bad time to start a consulting webdev shop where you get paid to
implement other people's products for a nice fee.

