[HN Gopher] Why to Start a Startup in a Bad Economy (2008)
___________________________________________________________________
Why to Start a Startup in a Bad Economy (2008)
Author : karimf
Score : 181 points
Date : 2022-05-14 07:55 UTC (15 hours ago)
(HTM) web link (www.paulgraham.com)
(TXT) w3m dump (www.paulgraham.com)
| coldcode wrote:
| I tried to start a travel company once. It didn't even get
| started at all because it I begin to plan the first week of Sept,
| 2001. Sometimes bad timing is as bad as a bad economy. In
| retrospect what I was wanting to do was impossible anyway;
| building a search engine for vacations using raw
| airfare/hotels/cars data + geographical info (I had experience
| with reservation tech and high volume search). Oh well, I never
| tried again.
| arjvik wrote:
| Why impossible?
| steve_adams_86 wrote:
| I think it was close to impossible at the time for a start
| up. Not today, but a crazy amount has changed in 20 years.
| Access to this kind of data has really opened up.
|
| I remember how expensive a lot of this stuff was back then
| too. Access to an API for fairly trivial data could have a
| meaningful cost to a business back then. Tying all of this
| together, especially with useful geographical data, would
| probably have been very expensive.
| coldcode wrote:
| Yes the data was not really there, I knew how enough to
| build the search part, but without sufficient raw data
| (i.e. not scraped or just via API without being able to
| search it directly) it would not have been possible. But
| that was a long time ago now. Oh well it was only a week...
| rmbyrro wrote:
| I don't understand, aren't there many successful travel search
| engines doing something quite similar to that?
| hardwaresofton wrote:
| RIP bountii[0][1] which was mentioned in the past
|
| [0]: https://www.ycombinator.com/companies/bountii
|
| [1]: http://bountii.com (now owned by a SEO/click farm?)
| jollybean wrote:
| I think a better essay would be :
|
| 'It doesn't matter that much at which time in the economic cycle
| you start your startup'.
|
| Because for most of the relevant inputs, it doesn't matter that-
| that much.
| georgeburdell wrote:
| > When times get bad, hackers go to grad school.
|
| Aint that the truth. A PhD from 2009-13 wasn't a bad way to spend
| 4 years for me, but it definitely set me back personally and
| financially
|
| A PhD is basically a years-long nerd snipe
| Traster wrote:
| I feel like the headline mis-states the actual case - and implies
| something that people believe but probably isn't true. Which is
| that it's _better_ to found a company in a recession. I don 't
| see any reason to beleive that, and it's certainly not the case
| for most companies.
|
| The obvious thing though is that the only really important things
| are: Are you reliant on discretionary consumer spending, and are
| you dependent on investment capital. If either of those two
| things are true you're going to have a tough time during a
| recession.
| rmbyrro wrote:
| Unless you find a way to print dollars, I don't see much option
| besides those two. What would be the alternative to revenue or
| capital to pay the bills?
| lelanthran wrote:
| >> Are you reliant on discretionary consumer spending, and
| are you dependent on investment capital. If either of those
| two things are true you're going to have a tough time during
| a recession.
|
| > Unless you find a way to print dollars, I don't see much
| option besides those two.
|
| Selling to government, selling to business (B2B). If you're
| starting a company that does either of those two things, the
| risk is generally a lot lower because you'll have your first
| customer before you even start the company.
| rmbyrro wrote:
| Ah ok, the comment referred specifically to B2C, not B2B.
| imachine1980_ wrote:
| If you are a tool to cut spending for companies maybe not as
| bad tool for automatically reduction billing in aws,as trying
| to sell 500 headphones.
| tluyben2 wrote:
| My best startups were started in 2001 and 2008. I am doing a new
| one this year again. It is a good time for sure; enough choice of
| colleagues and employees and competitors (especially the growth
| oriented VC funded) dropping like flies.
| antupis wrote:
| Yup I think right now is like best time found company, if you
| can get funding semifast you can start hiring when layoffs
| begin.
| sigmaprimus wrote:
| >If you can get funding semifast...
|
| That is the problem with the current times, people are
| selling off sure things like bonds and precious metals just
| to maintain liquidity and meet margin calls right now.
|
| I agree now is the best time to found a company, yesterday
| was better and tomorrow is almost as good as today! Very much
| along the lines of the best time to plant a tree!
| thesausageking wrote:
| Is the economy actually bad? Tech stocks are down recently, but
| are still above where they were 2 years ago. Unemployment is
| under 4%. I don't understand all of the doom and gloom in VC and
| startupland.
| ransom1538 wrote:
| IMHO The people that come out ahead here (for good or bad) are
| large locked debt holders. EG. You have a 700k mortgage that
| you locked in 2020 at 3%. Each month inflation eats away the
| loan - and the bank can do nothing accept eat it. Property has
| already inflated 10-15% in a year. I don't see interest rates
| that low for a decade -- that group of people lucked out. I
| don't see a huge home construction boom due to supply
| constraints - so those investments are pretty secure.
|
| The people that get screwed are cash users/holders and maxed
| 401k holders. EG People about to hit retirement paying rent.
| Young people working two jobs to trying to pay bills. There
| will be nothing but rent hikes for years - shrinking ETFs, with
| tight restrictions to become debt holders. As usual the poor
| guy gets shafted. :(
| soared wrote:
| Does inflation help mortgage holders if their income is not
| increased at the rate of inflation?
| disgruntledphd2 wrote:
| Nope, but the kind of people buying houses tend to have
| their salaries match inflation.
| ryanSrich wrote:
| Generally things are pretty bad yeah.
|
| - housing issues are reaching levels we've never seen. Not just
| buying, but renting is becoming exceedingly difficult for some.
| The fed raising interest rates so far has done nothing to level
| home prices.
|
| - supply chains are crumbling. It's nearly impossible to find a
| new vehicle. Used vehicles are selling for more than new ones.
| It's yet another bubble that will burst miraculously.
|
| - gas prices are still through the roof. It's not uncommon to
| see $6/gal on the west coast (in any of the three states).
|
| - the baby formula shortage is actually much worse than people
| realize. It went from hard to find to literally no one has any
| over the course of 7 days.
|
| - stocks and crypto are tanking. Yes, some stocks aren't seeing
| it as bad as others, but it's not insignificant.
|
| - food prices are increasing, and it's very noticeable walking
| around a grocery store. Meat is $1-3/lb higher than it was 6
| months ago. Certain produce is either not available or marked
| up 1.5-2x what it should be.
|
| Now, a lot of these are going to get much much worse. The
| government seems content with really doing nothing other than
| seeding billions to countries not named the United States.
|
| I think it's fair for financial analysts and investors to be in
| full on bear mode.
| mdp2021 wrote:
| > _It's not uncommon to see $6 /gal_
|
| You'd be "relieved" to know that some places in Europe saw
| 8$/gal in the past weeks.
| whiplash451 wrote:
| Historically, gas prices have always been much higher in
| Europe than in the US. I was used to a 3x difference over
| the past decades. $6/gal in the US is brutal.
| rkk3 wrote:
| > The fed raising interest rates so far has done nothing to
| level home prices.
|
| They've barely raised rates! 0-1% federal funds rate is not a
| normal range, especially when inflation is ~10%
| PuppyTailWags wrote:
| > The government seems content with really doing nothing
| other than seeding billions to countries not named the United
| States.
|
| I think this isn't quite accurate for a variety of reasons,
| much of it is that the federal government actually has
| significantly limited control of the above + what control it
| does have it has to pass through a hostile senate to
| accomplish.
|
| - The federal government cannot force local government to
| build housing to increase supply, it can only try to
| incentivize, and housing can't be built fast enough to offset
| current demand
|
| - The federal government cannot factories, particularly
| overseas ones, to produce more
|
| - The federal government can, at most, go through a faster
| approval process for foreign baby formula; it cannot force
| current domestic makers to produce formula
|
| - The federal government literally doesn't control crypto
| that's what the attraction of crypto was lol; its bombing is
| entirely crypto's fault; and the stocks have been pushing
| back against government regulation for ages already
|
| - The gov't cannot set food prices
|
| So precisely what do you expect the government to be doing
| here?
| csdreamer7 wrote:
| This is so wrong.
|
| > The federal government cannot factories, particularly
| overseas ones, to produce more
|
| I am assuming you mean 'force'. Trump literally used the
| defense production act to keep hamburger patties flowing
| when workers were complaining about COVID.
|
| https://thehill.com/homenews/administration/495175-trump-
| use...
|
| While keeping hamburgers coming was the purpose of this EO.
| This act allows the president to force producers to change
| production to benefit the defense needs of the united
| states. To produce 'more' of something through retooling or
| other means.
|
| https://en.wikipedia.org/wiki/Defense_Production_Act_of_195
| 0
|
| > - The gov't cannot set food prices
|
| Please see a history of price controls. The article
| literally has a poster prohibiting charging more than govt
| set prices. Not saying price controls are a good idea, but
| do not claim something easily disproven with a google
| search. I learned about this in middle school.
|
| https://en.wikipedia.org/wiki/Price_controls
| spicyramen_ wrote:
| So basically you are saying that federal government is
| useless in a crisis. That's inaccurate, there are mandates
| that can be overwritten, constitution is very clear about
| it.
| cmrdporcupine wrote:
| Yes, the parent poster is being disingenous IMHO.
|
| Federal gov'ts could do all these things, and did, before
| the advent of the current neo-liberal governance in the
| 80s and 90s. The choice _not_ to be able to do so, to
| strip governments of planning and industrial policies,
| was a _conscious policy choice_ made by several
| consecutive administrations and governments across the
| whole G20 (at least).
|
| Even more so federal governments _especially_ did these
| things during war times. And we 're basically in a proxy
| war with Russia (and IMHO, for the first time in my
| memory this might actually be a conflict with an actual
| morally justifiable cause), yet governments in the west
| have not put themselves on a footing yet to really
| weather such a war.
|
| We should have put ourselves on that footing during
| COVID. Or hell, to deal with the climate crisis. And now
| here we are with this latest situation in Ukraine...
|
| eeeeeeeee
| marcosdumay wrote:
| Whatever is your opinion of the current economy, it's about to
| get worse. Investment is drying up, and that has a delay before
| reaching the factors most people care about.
| Comevius wrote:
| I would argue that the supply chain is the economy, and the
| rest is fantasy if and when money can't make the supply keep up
| with the growing demand.
|
| Innovation used to save our bacon, but now you have to innovate
| just to stay in the same place. Just pouring money on the
| problem doesn't work, it increasingly won't with climate
| change.
|
| So we are between a rock and a hard place, inflation and
| recession. Choose your adventure. If the future could vote it
| would vote for curtailing demand across the globe.
| SkyMarshal wrote:
| _> I would argue that the supply chain is the economy,_
|
| Agreed, though that includes not just the supply of things,
| but the supply of money as well, which is also being reduced
| as the Fed raises interest rates.
| victor106 wrote:
| > I would argue that the supply chain is the economy, and the
| rest is fantasy...
|
| An increasing and rapidly growing part of the economy is
| Services and Services are not that dependent on supply
| chains.
|
| Also supply chains were disrupted mainly due to the world
| economy being overly dependent on China and China being
| shutdown.
|
| In the long run this might actually be bad for China as
| countries pass laws to not be so dependent on China.
| Comevius wrote:
| What you are thinking is manufacturing versus services,
| what I'm thinking about is the distinctly B2B supply chain
| that includes both. Then there is B2C, which depends on the
| supply chain.
|
| The financial markets are used to facilitate the operation
| of this economy and my argument was that it should not be
| seen as the economy itself.
|
| The current inflation is because of China, Russia, the
| pandemic, lack of investment into the supply chain (during
| deflation, resilience being seen as inefficiency,
| preference for stock buybacks), bad investment (during the
| pandemic), lack of innovation and increasingly climate
| change. Something weird is going on with the fuel prices
| too.
| mr90210 wrote:
| Bad is relative...
| lr4444lr wrote:
| In terms of raising money, which is a major concern for
| startups, yes, it's bad.
| cmrdporcupine wrote:
| When you have the high priests of capitalism demanding old-
| school industrial policy and state planning and intervention,
| you know the economic model in place since the Reagan & Clinton
| years... may have jumped the shark:
|
| https://www.youtube.com/watch?v=Q-5US4J03Wo
|
| I'd say we're in the mid-stages of what might be called an
| "economic crisis"; that doesn't necessarily mean riots in the
| streets and stocks plummeting to zero. But it means severe
| transformations that will displace the way things are done.
|
| In most crisis it's usually the working classes who suffer
| first and most deeply. And that's been happening for some time;
| long prior to COVID, probably dating back to 2008. Once the
| upper and uppder middle classes start saying things like what
| you see above, you're already in the trenches and now shit's
| gonna get real.
|
| Maybe.
| scarface74 wrote:
| Because VC funding is by its nature a Ponzi scheme hoping they
| can throw enough money at a business until it _looks like_ it
| might be a viable _profitable_ business to the "bigger fool" in
| the future ("$x is a gazillion dollar market. If we just
| capture 1% then we can be worth billions"). That "fool" can
| either be some other tech company that acquires it and let's it
| whither (and the founders post a message about "our amazing
| journey") or the public markets.
|
| The retail investors don't have any desire when the stock
| market is tanking to buy stocks in money losing former
| unicorns. The investment bankers who organize the IPO also
| won't see the initial "pop" that allows them to make a quick
| profit.
|
| Of course the employees who sacrificed real compensation in
| cash or RSUs in a public company in lieu of statistically
| worthless "equity" come out on the short end as the companies
| repeatedly delay an IPO waiting for the "environment to
| improve".
|
| All this to say, if you want to be a founder, go for it. But
| unless the startup you are thinking about has enough funding to
| compensate you as an employee at market value _in cash_ , skip
| it.
| DragonStrength wrote:
| > But unless the startup you are thinking about has enough
| funding to compensate you as an employee at market value in
| cash, skip it.
|
| Yes, and the good new is these companies have been paying
| significantly more cash in the last few years. It may not be
| enough to justify moving or staying in the Bay Area, but many
| small companies are paying the same remote, which seems like
| a better deal than the big tech companies in the short term,
| if you're looking to cut costs while their equity is down.
|
| There's a lot of bad jobs out there right now, but if you're
| not in a gambling mindset, there are some good opportunities
| to improve your overall financial position.
| mjthrowaway1 wrote:
| Yes, it's bad. Gas and rent are very high. People are broke and
| not spending. Everyone in retail, including myself, is feeling
| it.
| treeman79 wrote:
| And food. Stuff is almost double from a couple years ago.
|
| Local restaurants that survived Covid are shutting down due
| to cost of food. Others are adding x% to food bill to cover
| cost. Things are rising so fast they don't want to keep
| ordering new menus.
| mehphp wrote:
| Eating out now is ridiculous. It's extremely easy to spend
| $100 for a family of four.
| addajones wrote:
| It's extremely easy to spent $100 on restaurants in LA
| just for 2 even. It's obscene.
| czbond wrote:
| It is! Our family of 4 generally goes out on Friday; as a
| sign of change last night we decided to order out, but
| eat at home. What would be $80, was now $45. (getting rid
| of the 4 drinks, appetizer, and ample server tip).
|
| I have to imagine consumers will become tired of the cost
| increases - we put up with it a few months, and decided
| "no".
| silisili wrote:
| Sorry to hear that. I have no idea how most people afford
| rent. I do OK, and rent hikes the last 2 years were making me
| nervous. I cannot imagine how someone making retail/service
| wages are even surviving. I really wish the government would
| or could do something to help here.
| adam_arthur wrote:
| What they could do,
|
| lower tariffs, subsidize capital investment into production
| of lumber/housing, aggressively push and fight for higher
| density residential zoning, limit leverage allowed for
| investors of buy and hold rental properties, eliminate
| capital gains tax advantage for income above $1
| million/year, enact temporary taxes on non essential
| consumption items, restart student loans (billions a month
| in excess spending for consumers). Etc etc
|
| Instead they keep trying to tie BBB to inflation fighting,
| when its provisions are nothing of the sort.
|
| They handed consumers far too much money, and need to suck
| it back up in a way that targets discretionary spending (vs
| essential spending). Too bad they won't...
| PuppyTailWags wrote:
| How much of this would be approved by both parties? [The
| democrats in the house, the republicans in the senate]
| adam_arthur wrote:
| The Democrats passed the ARP with 0 republican support,
| and they can do the same now via reconciliation.
|
| But they are proposing BBB, not these things.
| Reconciliation does have limitations in that the matters
| must be budget related, but seems pretty easy to fit most
| of these under that umbrella.
|
| They can resume student loans at the stroke of a pen
| moistly wrote:
| The Wiltshire 5000 indexes basically the entire US market. Take
| a look at its chart. It has lost more than a year's worth of
| gains. I think if you look deeper, you'll find that almost
| every public company is on the decline.
| lordnacho wrote:
| It's what's on the horizon that matters. Interest rates look
| like they're coming off the floor, and that will have an effect
| on those kinds of investments. When rates were zero it made a
| lot of sense to have a punt on VC. Once they come off zero they
| might not be back for a long time.
| Simp4Zuck wrote:
| The main thing is some companies doing hiring freezes &
| layoffs. Twitter has started rescinding some offers, Meta
| implemented a hiring freeze, Coinbase & Robinhood stock are in
| serious pain, etc. This kind of stuff is making most speculate
| that tech is about to be in a lot of hurt, especially for less
| profitable companies.
| devoutsalsa wrote:
| I started my company in 2009. It was great to have lots of great
| people able & willing to work for cheap because I could barely
| afford to pay anything. It worked out well.
| rmbyrro wrote:
| Compared to the revenue a successful product and sales process
| can generate today, people are still quite cheap.
|
| If your product solves a real problem that is painful, there's
| big enough market paying for it, and you know how to reach thid
| market and sell, you can pay a good engineer year salary in a
| week of sales.
| devoutsalsa wrote:
| I was starting a recruiting business w/ a consulting model
| (charge for time, not commission on placements), which is a
| cutthroat, competitive business. I needed big fat margins
| because I had to grow the business w/ cash flow, and I
| started from -1000 USD in the bank. I got one customer to pay
| me 5000 USD in advance for one job, and that was how I got
| traction. I needed help, and my first hire was a woman w/ a
| STEM masters from a good school, and she needed a job. I paid
| her 15/hour while paying myself 12/hour. Things were tight
| for a really long time!
| rmbyrro wrote:
| I'm not sure that was the intention or not, but from my
| perspective, your experience reinforces that people are
| still quite cheap.
|
| What's really hard is building a product/service that
| solves a big enough problem, is marketable and you can
| sell.
|
| If you don't have those skills, it's quite expensive to
| develop them. Way more expensive than salaries, even well
| paid engineers.
| [deleted]
| [deleted]
| sixie6e wrote:
| rmbyrro wrote:
| For sure. Living in a cave and hunting pigs is the only honest
| way of living.
|
| That's what you're doing, right?
| lvl102 wrote:
| Yet, we continue to have innovations and standard of living
| across the world is rapidly increasing...hmmm.
| geranim0 wrote:
| Yes, and that can't go on forever. We are abusing our planet
| faster than its recovery, and unless we discover a way to
| make a lot more energy, at some point people are gonna die by
| the millions. Just don't want to be there when it happens.
| DethNinja wrote:
| But this isn't true for everyone. My skills and productive
| output is increasing each year but life quality and
| discretionary income just keeps going down.
| abhayhegde wrote:
| Great article! But what's the aversion towards grad schools?
| lifeisstillgood wrote:
| Give 100 random HNers a salary for five years and say "start and
| grow a company"
|
| Amazingly they will all have grit. They will be working full time
| on starting a company because it's just the day job.
|
| will those 100 companies succeed? who knows depends on markets,
| products etc.
|
| Founders are no different from early employees, so make them
| early employees.
| czbond wrote:
| Ever started a company and stuck with it for a long while? Yeah
| - founders without funding are VERY different than early
| employees, do not kid yourself.
|
| Early employees go out and get a job; founders live through
| hell, making their lives very difficult to get to where they
| can hire. I know of many that went from tech salaries to living
| below poverty for years to make things work. [at least for
| those not funded in the valley]
| rmbyrro wrote:
| For likely >80% of HN readers, entrepreneurship is not their
| day job.
|
| Signing for a job and showing up mon-fri is not nearly the same
| as building a business from the ground.
| lifeisstillgood wrote:
| I think I am feeling jaundiced - I just smell another "elite"
| class brewing. Turns out the thing distinguishing the elite
| from the masses throughout history has been money. Often
| money in order to for example train in warfare (ie knights or
| samurai) but money just the same
| rmbyrro wrote:
| I don't mean to imply thar entrepreneurs are "superior".
|
| Just that they're quite different roles.
|
| Entrepreneurs definitely developed (and are willing to
| continually develop) skills that the vast majority of
| employees don't. And that's fine. It's not meant that one
| is superior and the other inferior. Just different
| contributions, risks taken, etc.
| czbond wrote:
| Our you have this belief that companies are started mostly
| by people with money.
|
| A high number of the founders I know were all broke as heck
| to get to company success with no personal or family money.
| lbotos wrote:
| I don't get your point? I think you are saying "early employees
| become future founders"?
|
| As a former early employee, I was different from a founder in
| that I wanted to _help_ build something, I didn 't want to
| _lead_ building something. Founder got more equity because of
| it. No problem from me.
|
| The founders skills had to be way wider and more diverse than
| my own, and I got to stretch a bit, but still hone my core
| skill set.
| Aulig wrote:
| I needed to hear this. I wouldn't say we're in a bad economy yet,
| but I was worrying about the future a bit.
|
| I like the advantages pg mentions (like less competition), which
| are a great way to look at potential problems. There's always 2
| sides.
|
| Since I run my business (https://webtoapp.design) with relatively
| low monthly fixed costs (around 200EUR) I think I should be fine.
| I don't think I'll run out of money under these circumstances. So
| I'm already avoiding startup killer #1 according to pg, which has
| calmed me down :)
| rmbyrro wrote:
| Why's this being downvoted?
|
| Plug? C'mon, let people get their work out folks...
| lkrubner wrote:
| There are different ways to measure a bad economy. For instance,
| there are formal measures, such as GDP, and under that measure,
| the economy formally shrunk in the USA in Q1. Which is bad, but
| not catastrophic.
|
| There are some informal measures that are also interesting. There
| is the feeling you get on any particular street, the vibe of a
| place, whether it seems fun or dead or boring or even dangerous.
|
| Last week I had lunch with a friend who I had not seen since 2019
| (I've been doing a lot of post-pandemic catch-up recently.)
|
| I'm in New York City, up on 98th, UWS. I like my neighborhood but
| I've often thought of moving to one of the really cool
| neighborhoods. My friend lived down on 72nd, much closer to
| everything cool. I asked him if he still liked 72nd.
|
| "Oh, I've moved back down to Chelsea," he said. "Where I lived 6
| years ago."
|
| Wow! Very cool! And how is that, I asked, full of envy.
|
| "There are so many homeless people. The streets feel dangerous
| now. When I get off the subway I have to think about how to walk
| home, otherwise I get very aggressively asked for money."
|
| That was a shock.
|
| On a related note: two months ago I needed to get some writing
| done. I've some long-term guests at my apartment, so I can't
| think straight there. I decided I'd rent a hotel room, go relax,
| shut out the world, and focus on writing. I got a room at the
| Marriot down in Tribeca. This is 2 blocks away from all of the
| events that I described in my book "How To Destroy A Tech Startup
| In Three Easy Steps."
|
| I remember this area as somewhat industrial, but also popping
| with startups and co-working spaces and some very cool hotels,
| like the Ace. And some great restaurants, kept alive in part by
| the startup workers and entrepreneurs. Some of that vibe probably
| comes through in the book.
|
| Now it was dead. Very dead. Almost all of the restaurants were
| closed. The streets were shockingly empty.
|
| Several things occurred to me:
|
| I no longer know which neighborhoods in NYC are "cool". I no
| longer know where the best restaurants are, where the coolest
| people hang out, where the best bars are, where the most
| interesting people want to hang out. The whole city is alien to
| me.
|
| That long decline in crime, from 1993 to 2020, is over. That
| automatic feeling, which lasted (in NYC) 27 years, that each year
| would safer than the last year, is gone. The certainty that even
| a rough neighborhood will be safe in a few years is gone. Just
| the opposite now. Some of the coolest neighborhoods are getting
| rough.
|
| All of the above combines in ways that make it more difficult to
| network, to get a job, or to recruit people for a team, or to
| talk to investors, or to talk to someone who knows investors,
| etc. The whole chain of meetings and friendships and networking
| has been disrupted. It will take some time to put all of that
| back together. Or to put that differently, it's not just the
| supply chain with China or India or Mexico that is disrupted, for
| millions of us, it is our personal supply chain that is
| disrupted.
| hwers wrote:
| This whole "what matters is the founder" idea really discourages
| me. It's such a VC perspective. The VC has a flock of people they
| pick from to invest in and if your traits doesn't fit the
| necessary requirements you shouldn't start a startup. And I'm
| sure it's true too. It's just that it feels like if you don't
| have the grit etc necessary you're just out of luck and out of
| this club and it's not really something you can work on. (After
| all if it was something you could improve then it could be taught
| but PG et al seems to think - and I think they're right - that
| it's an innate thing.)
| jandrewrogers wrote:
| Having grit is probably the single most important trait of a
| founder, and one of the few which could reasonably argued to be
| innate. Just about everything else is learned, often by doing,
| which is why you need grit -- the learning curve is long and
| steep. Grit is how you bootstrap your way to being good at the
| other parts of building a startup.
| sigmaprimus wrote:
| I think grit is obtained through adversity.
|
| Hard times create strong people, Strong people create good
| times, Good times create weak people, Weak people create hard
| times.
|
| What time is it?
| moron4hire wrote:
| Hard times create weak people. People aren't iron that gets
| tougher when forged in fire. People are bags of meat.
| People accumulate damage and damage creates scars. Scars
| are only "tough" in the sense that they are less easily
| damaged than the virgin tissue before. Otherwise, the
| function of the tissue is degraded in every other property.
|
| Stress causes health issues. Particularly traumatic stress
| causes (wait for it) Post-Traumatic Stress Disorder. All
| else being equal, a person with ulcers and anxiety
| disorders and depression and PTSD is a less capable person
| than one without.
| sokoloff wrote:
| The body's response to exercise argues the opposite of
| your first paragraph.
| moron4hire wrote:
| Sitting on your butt and punching keys at a startup for
| 60hrs a week is not anything like exercise.
| ant6n wrote:
| It's ,,weak people"?
| [deleted]
| gitfan86 wrote:
| When they say "founder", they are talking about building
| BILLION+ dollar companies. They are talking about someone who
| is going to give up everything else in life if necessary to win
| at building a billion dollar company.
|
| They are not talking about someone who is going to build a
| company with 5M in profit a year and live a balanced life.
| Almost by definition they are talking about an insane person.
|
| Personally, I don't think it is a insult for someone to look at
| me and say. "That guy seems like he spends a lot of time with
| his family and traveling and staying healthy, he isn't good
| founder material since he is so busy with those other things"
| Bubble_Pop_22 wrote:
| > When they say "founder", they are talking about building
| BILLION+ dollar companies
|
| Last time I checked the most successful companies in American
| corporate history are:
|
| 1) Standard Oil
|
| 2) IBM
|
| 3) Microsoft
|
| All 3 of them managed outcompete any other company in their
| field and were only stopped by the U.S. Federal Government
|
| None of them ever needed VC capital. VCs are like sirens,
| they are bankers in disguise.
|
| Given all that you might as well do like the 3 aforementioned
| GOATs and just go to a banker if you need money.
|
| There is nothing wrong with debt. When you have to add a
| liability to the balance sheet you might as well add a
| liability that looks and feels like a liability instead of
| falling for the sirens who promise to make that liability
| into an asset. It ain't.
| vikramkr wrote:
| How are those the most successful companies in corporate
| history? By what metric? Apple took dilutive investment, as
| did Amazon, as did Google and famously Intel did also. Even
| the formation of general electric involved financing from
| jp morgan, who financed a lot of the early giants.
| deepnotderp wrote:
| Apple is the most successful company in American, and well,
| human history
| Bubble_Pop_22 wrote:
| Tell me you are born after 2000, without telling me you
| are born after 2000.
| nxmnxm99 wrote:
| Umm... that's because "VC" as an asset class has only
| existed for a few decades, and didn't come out of the
| fringes until around the dot-com bubble. So pointing at
| companies started decades earlier with massive first mover
| advantages as a call against VC is a bit silly.
|
| Perhaps instead talk about the % of VC funded decacorns
| over the last 10-15 years?
| Bubble_Pop_22 wrote:
| > Umm... that's because "VC" as an asset class has only
| existed for a few decades, and didn't come out of the
| fringes until around the dot-com bubble
|
| Rockefeller and Gates wouldn't have wanted VCs on the cap
| table anyways, even if they were around back then.
|
| That's because they knew they had the means to repay the
| 27%something interest rate loan that a newborn Standard
| Oil or Microsoft commanded.
|
| People resort to VCs because they don't have the
| entrepreneurial arrogance to believe that the thing that
| they'll build is gonna be a hit.
|
| Actually given that any movement is a bottom-up
| movement...VCs exists solely because entrepreneurs have
| lost their entrepreneurial arrogance.
| [deleted]
| NAHWheatCracker wrote:
| Oh come on, you don't know what Rockefeller or Gates
| would have done if VCs were in vogue at the time of
| founding their companies. It's entirely possible they
| would have taken VC money. The advantage of getting a
| huge boon of cash to grow the company may have seemed
| worth it for the reduction in risk.
|
| Times have changed from when Rockefeller or Gates founded
| their companies. It's far riskier and harder today to
| build successful companies. Competition is fierce due to
| globalization. Increased standards means a longer road
| before people will pay you. The population has the same
| distribution of "entrepreneurial arrogance" by nature,
| but there's less viable options to exercise it.
|
| Instead, people turn to VCs for a multitude of practical
| reasons: - Capital to get the idea off
| the ground - Networking - Guidance of
| experienced people
|
| Someone who is absolutely sure their jump to conclusions
| mat company is going to be a hit isn't arrogant, they're
| just stupid. On the other hand, an arrogant but smart
| person with an idea on how to design a better wind
| turbine recognizes the practical problems that building
| wind turbines is expensive.
| rileyphone wrote:
| Gates chose to put a VC (Technology Venture Investors) on
| the cap table even when flush with cash.
| Bubble_Pop_22 wrote:
| He picked him, like he picked Ballmer. Not because of the
| cash but because he wanted that particular person on
| board and they were particularly adamant about joining in
| that particular fashion.
| yowlingcat wrote:
| Interesting argument, just a minor comment/question
| here...are you aware of the history of the Silicon Valley
| come and modern VC? Would you say that your argument
| already accounts for that history?
| Bubble_Pop_22 wrote:
| Silicon Valley is the last 10ft effort at the end of a
| 5000 years long race made possible thanks to debt.
|
| I also don't buy the hype of Silicon Valley , from a
| social standpoint it seems a place full of arseholes.
| Zeros and ones in the bank account, however many won't
| compensate having to live in such environemnt
|
| Being one of the many "millionaires next door", that is
| what the American dream has always been about.
| scarface74 wrote:
| Let's be more blunt, VCs pattern match. If you don't look like
| Zuckerberg, you're much less likely to get funding.
|
| https://www.holloway.com/g/venture-capital/sections/pattern-...
| closedloop129 wrote:
| I would only consider the lack of grit unfair if you have
| passion for achieving a specific goal and you cannot achieve it
| due to the lack of grit. Is that possible? If you deeply want
| to achieve something, don't you automatically have the grit to
| achieve it?
|
| Lack of grit should be more a problem for people who see
| startups as a job where they are team-leads and they need some
| level of perseverance to overcome obstacles.
|
| Still, why shouldn't grit be trainable? It's just that VC make
| money by selecting founders with grit. In a sense, they corner
| the market by investing into the best. Why should they destroy
| their moat by flooding the market with viable founders?
| solatic wrote:
| > why shouldn't grit be trainable?
|
| Grit is not trainable in the sense that one can add it to a
| grade school curriculum and reliably graduate people with
| grit. Fundamentally, grit is formed by coming up against
| obstacles, failing, and getting back up again and
| perservering. No curriculum on the planet can standardize the
| experience of failure - even the Kobayashi Maru was beat by
| Kirk.
| closedloop129 wrote:
| You don't need a guarantee of failure. Let the students do
| several challenges at their skill level and they are bound
| to fail at some. That's where they can learn.
| solatic wrote:
| > Let the students do several challenges at their skill
| level
|
| Define "their skill level". Particularly in large
| classrooms with mixed skill levels.
|
| Coming up with such challenges is more difficult than it
| would seem.
| moron4hire wrote:
| Kirk didn't beat the Kobayashi Maru.
| eropple wrote:
| "Cheating is fine because I'm the main character and I'll
| get away with it" is not a bad summation of "hustle
| culture", though.
| solatic wrote:
| Depends on your perspective.
|
| If you think Kobayashi Maru is about measuring your
| ability to function under pressure, loss, and failure,
| then you're correct. Kirk's unwillingness to face failure
| made him fail.
|
| If you think Kobayashi Maru is about how the captain is
| supposed to react in an unwinnable scenario, then you're
| wrong, and you're not just wrong, Kirk is the poster-boy
| for exactly the correct approach. Ultimately, there are
| no real rules in war - only who survives. Business is
| different, but not that different. The annals of history
| are awash with the red ink of failed companies who
| insisted on letting the perfect be the enemy of the good.
| heyflyguy wrote:
| Don't let it discourage you, because it's motivation to
| discover what they're trying to key in on. For us and our
| investors it was whether we'd mortgage our houses
| (hypothetically) to keep the business afloat and see the vision
| through.
|
| As it turned out, we started in Feb of 2020, with much of our
| sales pipeline (over 2mil) disappearing in a day and a half
| when things shut down. So we didn't mortgage our houses but we
| buckled in, reduced expenses, found alternative revenue streams
| and survived.
|
| We are here today and executing on our original vision after
| going through all that. I did end up selling my house to fund
| my family while we navigated everything, and it was not easy.
|
| Now our investors treat us well because we did that. If you
| asked me ahead of time if we had the grit to do that I would
| think almost certainly no. When you're in the thick of it (And
| especially if you PG'd something), it changes perspective.
|
| For me, it was really a life lesson of don't raise money or
| take a chance unless you really believe in it and there's a
| fuzzy path to victory. Sales fixes everything, even if you have
| to temporarily pivot.
|
| You have it in you, I promise.
| kleinsch wrote:
| What an awful criteria. Your investors aren't mortgaging or
| selling their houses. They're just giving you other people's
| money. Unfortunately, in a bad economy investors will hold
| all the cards and will be able to pressure founders into
| questionable life decisions.
| sokoloff wrote:
| If you had a choice to invest in founders who had such
| clarity, commitment, and grit that "they'd mortgage their
| house" vs a choice to invest in founders who were "in it as
| long as things keep going well", which would you pick?
| laserlight wrote:
| The latter, because the former clearly doesn't understand
| the game.
| Bubble_Pop_22 wrote:
| Do they face the same constraints with their LPs?
|
| Does CALPERS or the Texas Teachers Pension Fund require
| an Austin based VCs to mortgage their house?
|
| Hardly.
|
| Founders who have been around a long time know the game.
| Founders are disposable soldiers , VCs are Lieutenants
| and GPs/Asset Owners are Generals.
|
| It's that simple. And it's okay. The BS part is when
| Lieutenants feel the need to conceal the truth or make
| motivational posts such as the OP .
|
| The absolute worst is when a soldier manages to be
| decorated in battle...all the Lieutenants become absolute
| fangirls and ask him for autographs and pictures whereas
| they treat other soldiers like crap. Of course such
| behavior is in the hope to impress the Generals.
| zhte415 wrote:
| One that had a savvy to stay focused on the bottom line
| and the gut to say no to investors making vastly
| asymmetrical demands of risk, reward and personal
| security.
|
| I do however wish the GP all the luck in the world.
| heyflyguy wrote:
| No, they gave us their own money as angel investors.
|
| The criteria isn't awful if you rationalize what the goal
| is: don't lose the money without a good fight in a good
| strategy.
| dustingetz wrote:
| Startups are a game of kings, courts and conquerers. Everything
| written by a player is propaganda, it was written with
| intention to further an interest. No one gives a fuck if a
| peasant can become Alexander the Great but they very much
| benefit from getting you to dream that you can, and your
| compliance.
| cercatrova wrote:
| I don't see how a VC benefits, they'd be throwing their own
| money at a peasant who might not be successful.
| dustingetz wrote:
| VCs do not market to peasants. When a VC emphasizes "team"
| - that is a specific euphemism for "not peasant". But if
| they said that outright they would be cancelled.
| projectazorian wrote:
| Most VC's don't fund peasants. Founders tend to be the
| children of lesser nobles, with a few social climbers
| thrown in to add spice.
| SeanAppleby wrote:
| I grew up working class and found that VCs were more
| accessible than, in my experience, any other upper class
| institution I have seen.
|
| When I was younger I had an easier time getting meetings
| with partners at decent VC funds (including YC) than
| interviews with Google, for example. And accordingly an
| easier time getting seed funding than a prestigious
| internship.
|
| VCs would generally look at prototypes and listen to the
| story, if you made the initial case concisely and it made
| sense, whereas other institutions would just throw my
| resume away with no calls because it didn't match
| whatever filters. I just wouldn't even get to talk to
| hiring managers at decent companies.
|
| I didn't raise a really meaningful amount of money, but
| it seems implausible that VCs/angel investors who were
| willing to give me five-six figures for pre-seed wouldn't
| have given me six-seven in the next round if traction was
| there.
|
| They said they would, and if they wouldn't, they knew the
| company had a runway such that it would need to raise
| again, so giving me anything would have been irrational.
| If I was going to be discriminated against for being from
| a working class background/not going to a good enough
| school/being a technical cofounder who didn't study CS,
| it would probably be at the very beginning.
| projectazorian wrote:
| Willing to believe that this used to be the case,
| especially when YC was less famous and G was wildly
| elitist in its hiring practices (less so now). But I've
| seen very few venture funded startup founders, then or
| now, who lack either family wealth or an elite education.
|
| In fact I'd say the diversity of founders seems worse
| than it was five years ago, back then it seemed like
| founders from underrepresented groups were becoming more
| common.
| cercatrova wrote:
| Yes, hence why I was confused at the parent's line:
|
| > _but they very much benefit from getting you to dream
| that you can, and your compliance_
|
| I can't see how VCs benefit from selling a dream to
| peasants.
| [deleted]
| projectazorian wrote:
| The employees need to come from somewhere, and selling
| the dream helps with that. It's also good investor
| storytime for the LPs, and great PR for prospective
| customers.
|
| Not to mention it boosts applications from the
| unconnected, from which you can find the most appealing
| diamonds in the rough - or, if you're more underhanded,
| you can just pass their ideas on to someone in your
| network.
|
| This is the model Ivy League schools have practiced for
| decades; most applicants who get marketing materials from
| Harvard have no chance of getting admitted, and Harvard
| knows this.
| sigmaprimus wrote:
| > This whole "what matters is the founder" idea really
| discourages me.
|
| Yep that is one of those pesky traits...not getting discouraged
| from rejection.
|
| I think everyone should at the least start their own business,
| even if just to become a better employee in the future through
| their failure and gaining perspective of how difficult starting
| and running one successfully is.
|
| Before this turns into a rant about how soft the world has
| become and I share my unacceptable opinions, I will just say
| that if you allow fear of failure to keep you from making the
| attempt you fail by default.
| mytailorisrich wrote:
| Not everyone can start a successful business. When you start
| you have your idea and yourself, and as the saying goes ideas
| are cheap.
|
| So I think that the founder is key, indeed, and whether VCs are
| involved is not relevant. But of course this means that VCs
| will judge the founder, not just the business plan.
| hardwaresofton wrote:
| > This whole "what matters is the founder" idea really
| discourages me. It's such a VC perspective. The VC has a flock
| of people they pick from to invest in and if your traits
| doesn't fit the necessary requirements you shouldn't start a
| startup.
|
| In an uncharitable interpretation, this is tech/VC returning to
| the mean -- this is the "good ol' boys club" (the sex of the
| person in particular is not important) that generally people
| talk about, and it's how society works most of the time. VC is
| not charity, they are incentivized to filter, and they do. That
| does not necessarily mean it's the same discriminatory
| environment but that depends on the person doing the searching
| and their ethics/principles/choices.
|
| That said, YC is just about the antithesis of the
| aforementioned phenomenon -- they were one of if not the first
| to significantly drop the barriers to accessing VC. They took
| their program abroad and lowered barriers to entry for smaller
| international economies abroad. They've upped the amount given
| to founders and are running hot trying to accommodate huge
| incoming batches. They make founder school and other resources
| available absolutely free. YC's made it a breeze to work at any
| of their companies and get on the hundreds/thousands of
| rocketships they launch every year, VISA difficulties aside
| (there was also some mention of them working on a VISA "fast
| track"-ish path or something).
|
| > It's just that it feels like if you don't have the grit etc
| necessary you're just out of luck and out of this club and it's
| not really something you can work on. (After all if it was
| something you could improve then it could be taught but PG et
| al seems to think - and I think they're right - that it's an
| innate thing.)
|
| This is an extremely reasonable thing to filter for -- judging
| startup ideas is hard/impossible, and with lots of reflection
| it seems that grit is one of the things that sets founders
| apart (clearly ideas don't, execution usually will but maybe
| sometimes doesn't, etc). It makes sense for all VCs to filter
| for these qualities.
|
| Now where I do agree is that people who can game the system --
| but maybe grit is hard to fake. At some point you end up
| just... acquiring grit, because the situation is hard.
|
| Grit and perseverance can definitely be learned. What it takes
| to embed it in yourself and motivations may vary from person to
| person, but it can definitely be acquired most of the time, I
| think.
|
| [EDIT] - forgot about free founder school and stuff on YT
| yowlingcat wrote:
| Great points here especially about YC, and but I want to
| highlight one that you missed which I think is most
| impactful, which is the innovation of a SAFE.
|
| Early stage fundraising before SAFEs became a norm sucked.
| You had to deal with awful convertible note terms if you
| wanted a note, or deal with highly dilutive priced rounds;
| either way, there was so much friction on both sides. With
| the SAFE, you had a highly standardized instrument that both
| parties understood and which was very founder friendly. If
| investors wanted special things beyond that, they need to
| specifically carve it out into a side letter which spells out
| the special things they want. Just a different conversation.
|
| Beyond that, it's not just that the SAFE as an instrument
| revolutionized early stage funding, it's that YC made it the
| de facto norm. This, more than anything else YC has done IMO,
| has permanently changed the landscape for early stage
| founders. I'll always be thankful to YC for that.
| hardwaresofton wrote:
| Ahhh yes, you're totally right -- the invention and forcing
| forward simplification/normalization of the process of
| raising money and running a startup is huge.
| sigmaprimus wrote:
| I agree 100%,
|
| I donate every year to charitable causes but VC is not
| charity.
|
| This thread reminds me of my softer youthful years, I can
| still feel the despair while standing with my back against
| the wall at the school dance, wondering why and noting how
| unfair it was that I wasn't dancing with anyone...
| sixie6e wrote:
| tomhoward wrote:
| This is probably my biggest topic of contemplation and
| experimentation.
|
| The startup I co-founded was funded by YC the month after this
| essay was published. It was the same batch as Airbnb. We didn't
| tick the VC boxes. PG commented later that we were "so nervous"
| in the interview; he had no idea how much.
|
| It was said that all the startups in our batch were chosen
| because we seemed particularly resilient. It's amazing how
| being told that by someone like PG will make it come true.
|
| Our startup didn't make it as a "home run" success, and we
| found it hard to raise VC funding, partly, I think due to not
| ticking VC boxes. But the company still exists in a different
| form. It employs over 10 people and is doing really important
| work to help airlines recover from the effects of the pandemic.
| It could yet be a huge success, thanks to the resilience and
| determination of the people still there (I left about 7 years
| ago).
|
| Thanks in large part to the YC experience and vote of
| confidence, I've been undertaking a very profound journey of
| self-discovery and growth, and have worked on several important
| and successful projects. I'm now exploring multiple
| opportunities to start or join new startups, some related to
| the work we were doing in our YC-funded startup, and others
| completely different.
|
| I think the last few years has been a tough time to be the kind
| of founder who doesn't tick VC boxes; the whole startup world
| has been dominated by glitz and hype.
|
| It feels like that's changed in the past week. It seems the
| latest hype era is over, and we're re-entering a period where
| resilience, resourcefulness and determination will be in strong
| demand.
|
| Please don't be discouraged. If you really want to build
| something important and valuable, you'll find a way to do it,
| and you'll get the support and funding you need when you're
| ready. It may take a long time, but important work always takes
| a long time.
|
| I hope you find the purpose and motivation you need to have a
| go. It really can be the most amazing, life-changing
| experience. Feel free to contact me (email in bio) if you want
| to ask or discuss anything.
|
| Best wishes.
| cercatrova wrote:
| Looks like the site is Adioso, but I don't see a link to it
| on the Internet. A reddit post which you replied to says you
| shut it down for now [0], is there a link I can visit? Or are
| you talking about another startup that employs 10 people?
|
| [0] https://old.reddit.com/r/travel/comments/owdpnj/it_seems_
| adi...
| RMthrowaway wrote:
| I'm a little skeptical of the thesis because the company
| you're referring to survived by becoming increasingly VC
| friendly. It got leadership with connections to investors and
| pivoted to VC-legible products. There's only one person still
| there from the beginning, who is, admittedly, resilient and
| determined, but would also tick the VC boxes because he's
| just generally a stud
| tomhoward wrote:
| This is mostly false, except perhaps for the suggestion of
| my co-founder being a stud.
|
| The company survived by becoming commercially focused and
| profitable, which happened after we recruited a leader with
| experience/connections in the airline industry, not to
| investors. The products the company pivoted to were not
| more "VC-legible" than what we started out doing; they were
| just products that could generate enough short-term revenue
| to enable survival. The company hasn't raised funds from
| VCs; its funding has been from angels, airline/travel tech
| companies and family offices.
|
| It has unquestionably taken a ton of resilience to get the
| company to where it was before the pandemic, then to
| survive the pandemic, and to find a way to thrive on the
| other side of it.
| acchow wrote:
| > After all if it was something you could improve then it could
| be taught but PG et al seems to think - and I think they're
| right - that it's an innate thing.
|
| But who will do the teaching and how can anyone figure out who
| it can be taught to?
|
| Allowing the innate trait to emerge naturally avoids needing to
| solve these difficult problems.
| yobbo wrote:
| "Grit" is another word for the ability to distinguish between
| surmountable and insurmountable obstacles. Otherwise we would
| have to believe that insurmountable obstacles don't exist. If
| you believe an obstacle is insurmountable, it is rational to
| give up.
|
| Therefore, grit can only be identified (or distinguished from
| irrational belief) in retrospect.
| solatic wrote:
| > It's such a VC perspective
|
| Ideas don't execute themselves. Problems are everywhere and
| ideas are a dime a dozen. Reddit is full of armchair generals.
| Companies are ultimately run by _people_. They live and die by
| whether the people running the company can build a solution,
| sell a solution, recruit people to expand the solution, and
| keep the people they have come to depend upon. Everything else
| - even money - is secondary.
| krono wrote:
| > Reddit is full of armchair generals
|
| So is the local pub. Sometimes what they say is based on some
| inside information, a unique perspective, or otherwise makes
| a lot of sense. There can be actual value in those comments,
| even if the commenter themself doesn't recognise this or
| simply isn't in a favourable position to exploit it.
| Dismissing all that's said off-hand is rather wasteful :)
| klysm wrote:
| Nah I think it is absolutely not innate. There are so many
| other factors at play into the success or failure of a founder
| beyond their innate characteristics.
___________________________________________________________________
(page generated 2022-05-14 23:01 UTC)