Gimme a break. There's no mystery here. "Tech elite" is a code word for venture capital. VCs pooh-pooh lifestyle and bootstrapped businesses because there's no opportunity for them to profit. VC-backed founders have been successful at raising investment, so of course they're not interested in a business that doesn't require it. Both groups want to define success in terms that give them a business advantage.
I think this stigma exists because on some level, sometimes, when things suck at your high growth crazy startup (even if its just a bad day or week) you think, "man I wish I ran a skate shop in Huntington Beach with an online store". And it stings to see other people doing that.
It's a lot harder to delay gratification and swing for the fences, not just intellectually harder but emotionally harder. Sometimes I feel like my friends doing lifestyle businesses just don't understand what I'm going through, and other times they give me really bad advice that would be great if I was building a company to operate like their's but doesn't do anything for me at scale.
My family business is a lifestyle business in finance, I worked there from age 14 - 20, and its a totally different animal from a startup. Because it isn't a startup, its a self-sustaining business. Was after 12 months. So it makes me think a lifestyle startup is a myth - these aren't startups, they're small businesses trying to dine out on the glory of the name "startup" without takin the risk. What do you think?
Most startups are flights of fancy trying to dine out on the glory of the name "startup". Let's all get back to work trying to create real value for customers and enjoying our world, and not posture for social rank among friends and strangers.
> these aren't startups, they're small businesses trying to
> dine out on the glory of the name "startup" without takin
> the risk
The only difference between a "lifestyle" business and a "high growth crazy startup" is that in one, you're betting small amounts over a long period of time. If one of your bets fails, you're not broke.
In a more VC-style startup, you're betting most everything up front. Pardon the gambling metaphor, but this allows you to play higher-stakes games, but this also means that when you lose, you lose your whole roll.
They're all businesses, the founders are all entrepreneurs. We're all in this together.
Dulce et decorum est pro patria mori is what I think.
I don't care about the 'glory' of a startup, glory is something you tell stupid 18 year old kids so they feel good about going to die for 60 year old kids.
If you can make money with out risk you're an idiot to go and find a business with lots of risk controlled by someone else.
Don't dig for gold, sell shovels!
Did you know that the people who sell plastic wrap for hard drives have a higher profit margin than those who make hard drives? Think about the ramifications of that for a second.
Laugh inside when you get made fun of for not having the stomach to risk digging for gold. Enjoy your life find your esteem from yourself and not from the opinions of the masses, it's you who has to live your life, not the others commenting on it. If raising VC makes you happy, then raise VC. If a lifestyle biz makes you happy run a lifestyle biz. If being a programmer in a cubefarm at a megacorp makes you happy, do that!
"I don't care about the 'glory' of a startup, glory is something you tell stupid 18 year old kids so they feel good about going to die for 60 year old kids."
Beautiful :-) But what about passion?
"Did you know that the people who sell plastic wrap for hard drives have a higher profit margin than those who make hard drives? Think about the ramifications of that for a second."
No I didn't, but that's very interesting. Yet I doubt anyone here would be funding a company making new plastic wraps.
I'd put passion largely in the same category of glory. It's an emotional good used to get people to accept lower returns.
I'll use the video game industry as an example, people are passionate about writing video games, their not passionate about not being able to see their family and friends for weeks. People are told they need to sacrifice to follow their passion but really they are sacrificing so the company can hit some arbitrary date and extract more rev from each employee, eventually to be discarded by the company when they are no longer profitable.
If your passionate about video games it's probably better to get a iPhone / Android / XNA dev account and make video games than to go work for a video game company (or your VC).
People are passionate about leaving their mark on the world via a business, not making sure their VC gets their 2X earn out.
I disagree. You need to solve a problem you're passionate about. Not all problems are BIG problems that require massive scale or raising money.
Lifestyle startups aren't a myth. They're just working on a different scale of problem than the VC backed startup. I don't know that there's anything inherently better about either, but treating a lifestyle startup as a scalable startup, or vice versa is a mistake. They're separate entities, with different goals. Each has it's pros and cons.
I suppose our definition of "startup" differs. It seems a startup can only be a startup if it's attempting to solve a problem that requires significant upfront capital and scaling. I disagree with that view.
For me, a startup is a company exploring the solution to a problem. That can be a BIG problem and that requires significant scaling, or it can be a smaller problem. Once that solution is found, and can be replicated easily, it's no longer a startup.
The question is, how long can a startup be a startup? I'd argue that as soon as any scaling is involved, it's no longer a startup and it's just a business. Startup implies that it's the start. Lifestyle businesses and regular businesses can both be guilty of claiming to be a startup long after they've become "regular" businesses.
When it comes down to it, they're all just businesses, but it can be helpful to have terms to distinguish the scale of the business. If you feel that lifestyle businesses and lifestyle startups are diminishing the prestige of startups, then you're probably in business for the wrong reason. That smacks of too much ego and too little passion for solving the problems you should be solving.
Reading this thread, I can't help but have the thought:
We're really arguing about semantics. This is the definition "startup" in the Silicon Valley echo chamber vs. the definition of "startup" everywhere else in the world.
Sometimes I rather dislike the term - it seems to, at least in a small way, justify the bubblicious way many companies in our field are run, particularly in the Valley. Can you imagine saying to someone "I run my own business" and then be unable to answer "so what do you drive revenue from"?
It seems to me in this community there's a tendency to believe that "startup" businesses (as SV likes to define it) somehow transcend the traditional rules of business, and this quibbling over nomenclature doesn't help at all. By believing that you're "not just like those antiquated 'businesses'", you're more liable to, well, do things like run a company without a plan for revenue.
An odd insight to "lifestyle startups" I had (and posted about) a while back...
For a while I was fascinated and amazed at projects pursuing absurd mega-goals, attempts to get something off the ground so big it was nigh unto stupid. A floating city configuring an independent libertarian utopia nation. A billion-dollar indoor ski resort just outside Atlanta. A bridge from Spain to Africa sporting a 5 mile suspended span. A world-class [fill in the blank, how much ya got?] facility annex to a super-mall in "why would anyone move there" Syracuse NY. A "fast ferry" across Lake Ontario connecting Toronto with "why would you go there" Rochester NY. And so on, one project after another with big flashing "ain't gonna happen" signs over them.
Then I realized. It wasn't success of the project that was the goal, it was keeping a small team of creatives employed in a perpetual state of promotion and study-funding: find someone with deep enough pockets, and they'll shell out a livable fee to be able to say "hey, look at this..." to other deep pockets. No way that Atlanta ski resort would happen, but the idea was exciting enough to elicit enough funding for studies to pay the bills (at least until the vital-to-snow-making nearby lake almost dried up) for a few people in modest offices. You can make a nice, if modest, living promoting stupid ideas.
And if the stupid idea actually pans out, takes off, and succeeds, well, the possibility of success is awesome enough to keep trying.
In current usage, a startup means a new business that is designed to scale rapidly. (Most don't actually manage to, but they're at least intended to.) It would be inconvenient if people started using the word to describe new businesses generally, because then we'd need to invent a new word for the subset designed to scale rapidly.
That's about as precise as most dictionary definitions. It doesn't mean the actual meaning of the word is that broad, just that dictionaries don't go into excessive detail.
There seems to be varying opinions on what a startup actually is. Some definitions focus on the ability to rapidly scale, while others emphasize the fragility of startups. For instance, Eric Ries, author of The Lean Startup, defines a startup as "a human institution designed to deliver a new product or service under conditions of extreme uncertainty." This definition would tend to include almost every new business, while your definition of a startup would only include those which are structured for rapid growth. Maybe I'm being a bit too pedantic, but it seems the word "startup" is being used so inconsistently nowadays that it has lost a bit of its meaning.
The problem lies in the definition of "new" and "extreme". Both are very loose.
In the standard Techcrunch definition of "new", and "extreme", "new" is "new" and hasn't been done successfully before (or at least in the reach of the startup in question).
And "extreme uncertanty" usually means: you have a burn rate which forces you to rapidly achieve product-market fit, pivot, get more money, or give up. The above definition of "new" adds up to the "extreme uncertanty", as you are not sure what you are currently doing is something people want, and even if you pivot into something else, you will not be sure about it as well.
Therefore, a new old' fashioned bakery is a new business, but it is not doing something "new", neither has "extreme uncertainty" attached to it.
Yes, but won't that new old' fashion bakery still have "extreme uncertainty" in its successful outlook, especially in today's dire economic conditions?
The old' fashioned is not creating anything "new", by definition. If it is delivering it in some way like Zappos delivers shoes, or Uber send cabs, it is another story.
The "extreme" part usually conceives that you don't know if what you are doing is something people want. We know old fashioned bakeries is something people want. This can be seen on how much Eric Ries talk about "pivots". A bakery pivoting will not be an old' fashioned bakery.
Again, the definition is loose. Eric Ries' mentor Steven Blank has a more precise definition[1] which removes these cases:
a startup is an organization formed to search for a repeatable and scalable business model.
I don't think these definitions are made to replace one another, they are made to give different views of the same object. The same way an elephant is not a wall, snake, spear, tree, fan or rope[2].
Edit: Swombat recently argued[3] that the difference between a startup a and a lifestyle business is that a "lifestyle business" lacks vision.
PG I actually thought about my article heading a lot and went back and fort between lifestyle "startups, businesses and entrepreneurs" for the right word to describe my post. At the end I decided on startups since the other two words are further off what I intended to convey. But I definitely can see your point and how it can become confusing.
A lifestyle business is a particular type of business, and a startup is another distinct type. They each have different requirements and business models, just as either one is different from a large public corporation.
Most of the Silicon Valley startup infrastructure is basically extraneous to a lifestyle business. Incubators, angel investors, VCs, all the other support pieces built for rapid growth -- all of that is geared toward businesses that have a chance of getting huge and IPOing and giving back a huge return to everyone who helped it along.
With a lifestyle business, by contrast, you tend to self-finance, you shepherd your cash and investments carefully, and if you need to expand, you might go talk to your bank about a line of credit and show them your cash flow and consistent returns to date in order to help secure it.
Lifestyle businesses can be great. My dad has a successful retail store, a low-stress environment, a great house, and plenty of time to enjoy it all. We should all be so lucky. They're just not the same thing as startups.
PG, this is only tangentially related, but I've noticed you quite often use phrases like "starting a startup".
Considering you're an excellent writer, I figured you must have a reason for employing redundancy. Is there a reason you don't say "starting a business" or "starting a company"?
Because I'm writing specifically about how to start a startup and only incidentally about how to start a business. The redundancy is phonetic, not semantic.
I think Balsamiq[1] provides an interesting exception to above article as well as many comments.
Peldi's a guy with incredible vision. I would not be surprised in the least if he swings for the fences without VC. Institutional folk have tried courting this boutique " lifestyle " business without success.
(My searches didn't reveal this question asked previously - though it must have been. IIRC, YC was more broadly as a company that makes companies, rather than a startup that makes startups.)
It's simple really: lifestyle businesses supply enough profit to fund the creator and his or her employees and suppliers. They do not typically create enough free cash to interest investors.
Investors/VCs/Angels define "success" as an investment that returns enough cash to not only make a positive return on its own, but also to offset losses from the other "misses" in the portfolio.
That investment return can come directly from profit, or it can be achieved by telling a compelling growth story that allows others to buy out the investor's position and provide an exit for the early investor.
So, the question is really one of audience: do you aspire to provide a good living for yourself, your employees, and your business partners? Or are you swinging for the fences and able to provide returns to the investment community as well?
Whether you consider Google, Groupon, or Joe's Garage to be a success really depends on who your constituents are.
My personal view is that this stigma stems largely from two sources:
1) VCs who have a vested interest in getting people to give up equity in order to raise money.
2) People who have sold equity in exchange for VC money need to make themselves feel good about their decision so they look down on others who have a business plan solid enough not to need to tap the capital source of last resort.
However, I think a lifestyle business can evolve into a startup. These discussions sometimes seem to forget that life isn't always neatly planned out in advance. For those of us living outside of the Valley, the tech community needs to remember that not everyone and their brother is plotting their next "startup."
What can happen is (and this is an amazing thing about the times we live in) that a side project takes off, slowly becomes profitable, allows the founder to quit his job, focus on it full-time and then one day, he looks up and thinks "wow, I could swing for the fences." I guess that could be classified as a "lack of ambition" for not having a vision in the first place. OTOH it could be considered a smart move because the founder has already made something people want.
Mailchimp, Balsamiq, DuckDuckGo to an extent, and in a smaller way, my own "startup" are examples.
"Revenue generation is third on the list. It is really “nice” your balance sheets to have 7 or even better 8 zeros next to Revenue. Profit…"
This is just wrong. Even Google had early minor revenue. Revenue traction is king, it's the best kind of traction. User traction is a higher-risk proxy and thus must be more impressive to result in the same valuation after the risk discount.
Aside: Wanting to start a lifestyle startup does imply, correctly so, less ambition than the swing-for-the-fencers founders. That's why they're easy to pick on, ambition makes for much better stories.
quite a lot of tragedies have ambition as the "fatal flaw" of the main character.
Having revenue or profit also starts to give a point of reference for your valuation if you are raising money, which may or may not be what you'd like.
I agree with you. However sometimes it feels as if building a lifestyle business takes the same effort (in the beginning) as building a large business.
For example think about all the small web development companies with 3-6 people in their teams. That is a lifestyle business. On the other end think of Instagram, 10M users, 6 people. Or Weebly, millions of sites, 3-4 people. Or Craigslist hundreds of million in revenue, 30ish people.
I totally agree with you, they take the same effort at the beginning. Because of that, I think a lot of people figure they might as well swing for the fences.
I think the point is that it's fine to swing for the fences, just make sure you don't skip other 'lifestyle' opportunities in the mean time. You may never get your homerun pitch, nothing wrong with a base hit. You watch enough pitches go by, you end up striking out.
So what I don’t get is the hate. I run a small crowdsourcing biz, (that was pretty risky to start btw, it ate both the founders life savings and more), and I’ve once or twice been told I don’t belong at various startup/hacker meet-ups. Or to "start a real company."
From my perspective the companies are the same size, the tech is the same, the risk to personal wealth is if anything greater, and heck sometimes the market is the exact same. Why I can’t talk about these problems with people just 'cause I didn’t take funding mystifies me.
Of course, not for long, as generally the people who make these comments are just rude, and not the kinds of people that I’m going to think too much about. Still in the moment it kinda stings.
Raising money does not necessarily mean taking VC or giving up equity.
Have you ever thought that VCs have a vested interest in perpetuating the idea that to be a "real" business you need to give up equity in order to raise money?
I wouldn't call it a stigma. I'd call it a general disinterest. It's the same kind of disinterest that follows bootstrapped businesses or any business that chooses to make money instead of burning it.
As the cofounder of a bootstrapped business myself, I'm no fan of the shadow we operate in, but I understand it. The story of a company that doesn't have the luxury of positive cash flow to fall back on when things get tough is fundamentally more risky, and therefore exciting. You get larger magnitude successes and a larger number of failures, which is far more dramatic. And narratives with more risk, more reward, and higher drama, are the kind of narratives human beings love.
