Marc Andreessen posted the following comment on Gabriel's blog.
"Great post -- this is what my partner Ben and I have always believed. Starting a company is just plain hard. It's not clear that starting an ambitious company is any harder than starting a less ambitious company. Your points on market size and being attractive to the ecosystem (particularly talented employees) are dead on.
The other thing we find is that less ambitious startups in Silicon Valley are often built to appeal to an acquirer as an exit strategy -- the cliche of "we will work for two years and then Google will buy us for $50 million". The big problem with that is what we call the "then what" problem -- if Google doesn't buy you, then what? Whereas ambitious companies built to stand on their own two feet and succeed in big markets are both highly attractive as acquisition targets and are viable independent companies. "
That's only true if you're following the "build to flip" model. Many supposedly companies all around the world become successful businesses by focusing on a problem that is perhaps less ambitious, but makes money.
Absolutely not. There are many ways for a founder to get rich. Liquidity is just one of them. A pretty standard way is for the company to start issuing dividends. The founder is presumably a major shareholder, and so if a big dividend is issued, they'll get a big chunk of that.
Obviously if you've raised VC, then that won't work - though angels will probably be more understanding. So, the conclusion is, liquidity events are only necessary if you've raised VC money. So don't raise VC money if you don't have to.
Actually, once one proves herself with some success it becomes easier to dare to focus on harder ideas. I see the signs of that at PG or Google's Larry Page and Sergey Brin. Once having tasted success, they feel anything is doable and possible. For the majority of start-up entrepreneurs, just succeeding the first time is the hard problem and requires ambition.
Not only it isn't proportionally harder, but I think that Google feared your essay when you were indicating search as a possible startup.
First, Matt Cutts said "Paul's #1 suggestion is reinventing search. I happily welcome competition in search because it keeps us on our toes, but his #2 suggestion resonated with me more: reinventing email."
They just today released (for the first time, and they even call it huge news) a video about what they do on a search, I'm sure watchers must have thought that search is so advanced and hard seeing that video that they might give up ;-)
I wonder what pushed them to post this video. It's not even very informative, it talks about searches of N-grams and spell corrections, it seems more like something to show how advanced the changes they make are. It must be so hard to catch up with them ;-)
Maybe GOOG is afraid of a plethora of startups reinventing search. One may succeed.
"It's harder to work on an ambitious idea, but not proportionately harder."
Sure it may not be harder to work on an ambitious idea than to start an Italian restaurant (or the startup equivalent - something that is ubiquitous and stands a good chance of succeeding if executed correctly).
But although I acknowledge that the possibility of hitting it big from opening the "restaurant" is small compared to an ambitious idea, the chance of the restaurant succeeding and being an ongoing concern is magnitudes greater than the ambitious idea.
The simple fact is non ambitious ideas don't pay off for investors and that's why investors are biased to not encourage those types of ideas.
I think he is somewhat right. I do not think you can go directly after large markets. Most successful companies have gone for small markets that then disrupted large markets. I'm (100M exits are not that great for the record!).
you could infer it from the number of employees and the size of the exit, adjusted by the age of the company. This will roughly give you a dollar earned per person-year, assuming that person-years are fungible (they aren't) and will not tell you about chance of success -- but would be interesting nonetheless.
I think it's easy to choose an ambitious startup once you have a success under your belt, and aren't worried about paying the bills (ie. have a small exit/cushion already).
On the other hand, if you still got to pay the bills, and have a family, it makes sense to pursue a smaller idea that doesn't require $10 million in venture capital, or a team of 20 people.
You say that you can start small, and go big.. but I'm not so sure many people here have the luxury on working on any project for 2+ years, and still not have any profit to show for it. It makes more sense once you have some cushion as OP does with his first success.
"On the other hand, if you still got to pay the bills, and have a family,"
You're right. And all of this is nonsense anyway. The people who encourage all this risky behavior aren't going to be there to clean up the mess when you fail and can't pay your bills. And passed up your chance to go to Harvard to do YC.
It pays for them to encourage you to take big risks and encourage big ideas. And they will pick from those risks and if 2 in 10 are a home run then they win big. They are spreading the risk over many ideas (you're only doing one idea) and they are risking other peoples money in general. (Sure they have reputation and other worries but not the same as your loss.)
My guess is, and this is only a guess, that when they evaluate an idea they don't take into account at all what will happen to the founder of the big ambitious idea when it fails. It probably doesn't even enter into the decision to fund the idea or not.
It's like encouraging a friend to go to Hollywood and follow their dream to become a star. If they succeed you have a friend who's a Hollywood star. If not no loss on your part.
What type of failed startup was it? Was it a VC backed startup that failed? If so then there is definitely a halo effect in that (in the startup world). But that will only work with the 1% of the world that cares and understands the startup world. Unfortunately the traditional world (where many failed startups founders might end up) doesn't view it the same way.
It also depends on how long you spent doing the startup and the opportunity cost of doing so. It's one thing if it takes a 6 month chunk out of your life and another thing if it takes a 5 year period. And prevented you from doing something else.
I spent about two years on it, but a lot of that was weening off my traditional job. The tech worked perfectly eventually, however me being a business person and learning to market was not so successful. Most definitely not VC backed. More MC backed.
Exactly, would Gabriel have been able to start DDG without the money from selling NamesDatabase (or other private money)? I think a lot of these guys who have "made it" forget how difficult resources can be for the rest of us, especially when talking about webscale projects.
I respect that, but I think having that financial cushion also affects you emotionally. You have the freedom and luxury to take your time and be more patient, and not take any rash short-term risks because money isn't an immediate issue.
That's true, and also brings in the question why rich people don't (typically) start ambitious startups with all their money. Elon Musk is an opposite example however; all his projects being something really big and ambitious on blue ocean markets. There would be so much to explore beyond making the next twitter, but it seems that people aren't just crazy enough.
I think this is a great post, and this is so true. The only caveat I would add is that sometimes ideas that don't seem ambitious end up being super ambitious.
Facebook is a great example of that. In a video you can now find on Youtube, Mark Zuckerberg was describing theFacebook as a directory for college students. Not super ambitious. But then, he realized that he could open it up...and make it a platform, and that became super ambitious.
You could say the same about Twitter, I think.
The risk of being too ambitious at first is being unable to ship your MVP because it appears too narrow vs. the ambition you have in your head. I know many entrepreneurs that failed because of that. Great entrepreneurs can ship a great MVP for an ambitious idea and thrive from there...
The size of the market and obstacles in the way. For example, K-College education in the U.S. is about a $1 trillion a year economy. Government and self-interested trade organizations stands in the way of disruption (they don't want to be disrupted they want to keep their jobs at the expense of everyone else).
I think I have to disagree with your logic. Apple, Microsoft, Facebook and Twitter would not have been considered ambitious. They mostly created their own markets or were so early to a market that had huge potential that they didn't have significant market size or 'obstacles in the way'.
Think big. Plan in meticulous detail. Then shelve your plan and just do it. Come back to your plan a year later and see how you are doing. Business plans are great exercises for thinking through issues. However, don't let it stop you from picking up on important opportunities down the road. Prepare a new plan every year. Again, don't look at it during the year.
1 strategy might be to buy an established university and get rid of the wasteful excess.
Another strategy would be to attract the brightest away via some sort of YC/Theil education combo (we provide an education for a cut in your future income and we put you in touch with the brightest minds). You'd then have to overcome all the problems with licensing associated with the alliance between higher ed and local/state government (you can't train engineers, doctors, lawyers without approval from certification schemes, ...software engineers don't require certification yet). You would do this by demonstrating your students are smarter and more capable than the certified students.
Once you've taken down the licensing and certification scheme you open the road to disrupt higher education for everyone else.