Actually there wasn't anything in DHH's talk that I really disagreed with, except the use of the word "startup" for the kind of company he was describing. There's already a word for companies like Italian restaurants: businesses. A startup is a very specific kind of business: one that starts small but could grow very large. Only a fraction of the 30 million businesses in the US are startups.
I think what made people think DHH's advice was relevant to startups was that he was talking about starting a business to write software, which is also what most startups do. But structurally the kind of small business he was talking about was more like a landscaping company or a shoe store or a restaurant. Which is a perfectly legitimate thing to do; it's just not a startup.
I think that's a pretty narrow definition of a startup. Also, there are plenty of businesses that start out small and then grow very large over time. Actually, most large businesses took a long time to get there.
Say like foot locker or Zappos for a "shoe store" (both big business) and say McDonald's or Olive Garden for a restaurant.
By the same measure, we're building 37signals to grow as well. Grow revenues, grow customers, grow influence. We're just not that hooked on growing head count or office space (which are often the most visible indicators of growth for a private company and thus often mistaken as the only indicators).
To me a startup simply means a new business that's getting off the ground. That business may well end up big one day and it may not, which is okay too.
I generally don't think that you can become a star by trying to be a star. I think you just try to be the best at what you do and if you are, hopefully the star part will take care of itself.
I think that's a pretty narrow definition of a startup.
Maybe, but I didn't invent it. It's just the definition in current use. As most people use the word, it's more specific than a business that's merely new. As most people use the word, it doesn't include barber shops, gas stations, shoe repair stores, etc.
There are structural differences between that kind of company and a startup. McDonald's and Olive Garden aren't restaurants, but restaurant chains. They do things very differently from your local Italian restaurant.
Most restaurant chains didn't start as chains, they started just as that single restaurant. Most big businesses didn't start big, they started small.
But that's again off topic. I do agree that the startup term is most frequently associated with technology companies, but you do hear about startups within a fair number of other lines of business too.
pg has been specifically keeping the definition of "startup" narrow, to describe only the businesses that go through the two-guys-plus-vc-plus-sleepless-nights-equals-fast-megabucks pattern that we saw in 2000. I think that's the model he's most interested in, that he sees as the most dynamic and rewarding.
Shiny.
That said, the things you describe closely match what I've wanted to pursue. For me, and many others, it's the more rewarding, long-term way of doing things. Your talk at SS08 was a huge breath of fresh air.
But, I don't think it's all that fair to dilute someone else's definition of a startup with your own idea of what a startup is. It might be time to come up with a different term, and let startup mean the thing that pg and the vc guys and others want it to mean.
I think that's a hijacking of the word that's not helpful at all. And I don't think that pg would argue that you can only call yourself a startup if you're going for VC funding and a sale or IPO.
If so, there's an awful lot of tech companies that have been wrongfully labeled as startups under this narrow definition. And you'd only be able to call yourself a startup in retrospect once you saw whether you ended up being a megabucks exit.
So 37signals would have been a startup if we sold to Google tomorrow, but not if we kept on as an independent company just making money?
pg has been specifically keeping the definition of "startup" narrow
Argh. I haven't been doing anything to the definition of the word. I'm just using it as everyone does. Think about newspaper headlines, for example. Wouldn't you be surprised if a company described in a headline as a "startup" turned out to be a shoe repair shop, or Exxon?
Am I the only one that thinks 'startup' simply means a new business without profits? This just seems like a silly semantic debate. 37signals was a startup once, it just happened to choose a different outcome.
Every startup should be free to choose their outcome, and if most choose to try and quickly flip, then more power to them. If they choose to try and build a profitable independent business, great! There is no need to turn the 'liquidity event' vs 'sustainable business' camps into warring factions, like some weird language flame war.
It was refreshing at SUS to see a contrasting opinion, but neither side is trying to argue that their way is the only way. Both ways obviously work, and I think anyone would be happy with either of them over not succeeding at all.
One of my problems with DHH's talk was the examples he used. Starting your own restaurant is incredibly risky from a statistical standpoint. Even if you don't die in the restaurant business, you hardly make any money at all. And since this thread is ostensibly about work-life balance, the restaurant business is probably the only example DHH could have chosen where everyone works longer hours than a pg-defined startup.
Zappos was also a poor choice. It wasn't as if Zappos was a small time shoe store that decided to put up a web storefront and somehow magically scaled up its operations into a billion dollar business in the course of 5 years. Zappos was started buy a guy who had 250 million dollars from selling a software startup to Microsoft. It was specifically started to corner the online shoe market, in the same way Amazon was started to corner the online book market. It was also funded by Sequoia capital, further making it more like a "startup" startup than a DHH work-life-balance startup.
I think that this is an important point. The term "startup" has been narrowed to the point where it doesn't include what are disparagingly referred to as "lifestyle companies".
And I think that's really unfortunate because controlling the language controls the thinking.
Let's face it: people (at least in tech circles) think it is very cool to be in a startup. And it is in the VCs interests to further that sense -- of being caught up in something big and exciting.
It lends a rockstar sensibility to a startup that is NOT conferred to a lifestyle company.
Even reading at Paul's posting on this tends to reinforce that subtle dig -- look at the examples: "landscaping company or a shoe store or a restaurant". None of those sound exciting to me.
Perhaps my issue is that the measure of "grow very large" is ambiguous. Does it mean large profits? Sorry, Facebook. Large revenues? Sorry Youtube. Spending lots of money? Yay Webvan! Perhaps it means employing lots of people -- which the left-winger in me approves of mightily!
I've always felt that the goal should be to touch as many lives a possible. That's my personal metric on which I base "large". This is consistent with Paul's examples -- you can touch a limited number of people with a landscaping company or a shoe store or a restaurant.
But on the web you can touch a LOT of lives with a small set of money. I would hazard that David's touched far more lives at 37Signals through their consumer products and through Rails than all by one or two of the startups on YC or part of YC.
how is the business model of wufoo different from 37 signals? Are they a startup or a shoe store? A startup should simply be a company that is just getting started. Once they become profitable feel free to call the a "business".
A company that starts small but grows very large could describe exactly the 'Italian Restaurant' sort of startup. On the web you have a much bigger neighbourhood than any Italian restaurant. The limitation on a landscaping company, for example, is its ability to scale and the geographic area it can serve.
I think Graham's analogy is more apt that he realizes. Here's where it takes us:
Yes, the majority of breakout chains/startups are started as chains/startups.
But, plenty of breakout businesses aren't built to scale out fast. Starbucks didn't break out for over a decade. Microsoft didn't get the DOS contract until '81.
Meanwhile, lots of small businesses are small deliberately. Thomas Keller isn't franchising Per Se. Grant Achatz isn't franchising Alinea.
So what does it tell us when a company runs a single restaurant for 10 years, or refuses to take VC funding or hire ahead of revenue?
Celebrity chef restaurants are not really businesses - they are more like old-school arts patronages. They are started with funding by rich finance guys who are looking for a hobby project to make themselves feel cooler. The only people who go there are also uber rich finance guys, other people in the celebrity class, and the occasional not-as-rich foodie. As soon as the rich people and celebrities get bored with the restaurant, it shuts down.
Alinea was funded by 8 futures traders who each put in half a million dollars.
Just want to say that was a great talk (watched the video) last week. Also, I saw you in Vancouver (Fuck You!) a while back and was impressed with your speaking ability then as well.