[pg]

Actually most chains are started as chains. Bizarrely enough I happen to know a lot about this, because the only reading material at the Chinese restaurant near my house in Cambridge is restaurant industry trade mags.

Sometimes the chain guys will take a restaurant that's successful and turn it into a chain, but when they do this they usually keep nothing more than the name and a few recipes. McDonald's was a burger place started by the McDonald brothers, but it only became the McDonald's we know after Ray Kroc bought it and transformed it into a chain.

I agree that startups don't have to be doing technology. I don't remember saying otherwise.

[tptacek]

This turns out to be easy to research; just start from the R&I 400 list of chains and go read their corporate histories. If you were in business for many years before opening up satellite locations, we can safely say you weren't started as a chain.

You're right; restaurants conceived as chains dominate the top of the list, with some very notable exceptions, including KFC, Starbucks, and Subway.

Something else that the top of that list shares in common is that they were lucrative for their investors.

Something else that they share is that they are all crappy. Look how far down that list you have to go before you hit something you'd actually choose freely? In-N-Out is #89.

[aswanson]

What then, qualifies as a startup per your definition, even in the technology space? You could say that Apple, Microsoft, and Yahoo started off along the local restaurant model, selling (or providing services to) a small group of local hobbyists and expanding naturally as new opportunities presented themselves. [EDIT: In each of these businesses (except yahoo, maybe) the goal was to grow a business. I don't even know if MSFT ever took VC. They just sold product until the IPO. I doubt they saw VC or a public exit as an upfront goal. They just ran the business to the point where it was a natural progression.

[pg]

I try just to use standard definition. A startup as most people use the word means a comparatively small, comparatively young company that is designed to grow very big. Most but not all such companies create technology, because technology scales so well.

Basically, the difference between a small business and a startup is like the difference between a shrub and a redwood seedling.

The metaphor isn't perfect, because occasionally companies are transformed from one to the other. But this is extraordinarily rare.

[hacklite]

> A startup as most people use the word means a comparatively small, comparatively young company that is designed to grow very big.

How many YC companies fit this definition? I thought the goal was to make the founders rich, which so far hasn't included growing into a big company.

Amer. Heritage: A business or an undertaking that has recently begun operation: grew from a tiny start-up to a multimillion-dollar corporation.

Note that's just example usage; startup doesn't denote a design to become a big company.

[marvin]

  I thought the goal was to make the founders rich, which so far hasn't
  included growing into a big company.

I think it's a bit early to pass judgement on this point..how many big, sound companies have been built in three years?

[tptacek]

Could you defend your argument with evidence? Here's an example of company that "transformed": Microsoft.

Also, with only minimal snark intended: you're saying 37Signals is a "shrub"?

[menloparkbum]

It wasn't an argument, it was a metaphor... :-/

[menloparkbum]

Yahoo! became a business by accident. Apple was started by a guy who wanted to make the best personal computers, and Microsoft was started by a guy who wanted to put a computer in every home and on every desktop.

In the Apple/Microsoft initial period, there were plenty of smaller competitors who wanted to slowly sell stuff to hobbyists and "expand naturally" and none of those companies exist anymore.

[aswanson]

d Microsoft was started by a guy who wanted to put a computer in every home and on every desktop

There were no desktops when Microsoft started. There was the Altair, and they started by writing a basic for it. The market was not planetary as it is now.

Apple was started by a guy who wanted to make the best personal computers

Woz was making computers for himself and to show off at homebrew. From his own words, the Apple I was a PC board they sold to hobbyists for $40 apiece after manufacturing them for $20, per Jobs's egging. You're probably right about Yahoo, but MSFT and APPL did not start out as global reach companies. They started out as local restaurants.

[menloparkbum]

I'd love to be able to know exactly what Steve Jobs and Bill Gates were thinking when they started their respective companies, but I'm pretty sure they had bigger designs than what you're suggesting.

[aswanson]

You're probably right, as my psychic abilities and time travel skills have been failing of late...I can't imagine any rational business owner not wanting as much money and market share as possible. I know I do.

[wensing]

Well, as long as "as much money and market share as possible" doesn't equate to "growing as fast as possible." There are plenty of 'conservative' businesses that avoid growing fast like the plague. Risk management and all that.

[cellis]

I don't think Apple, Microsoft, Yahoo started off to build small businesses with family men. These were young , extremely ambitious, single people, out to change the world.

[tptacek]

37Signals didn't start off to build a small business; they keep score with revenue, not headcount, like the rest of the real world.

[dhh]

Actually, our primary metric is profit. But you're otherwise completely correct. We're interested in growing profit, growing customers, and growing influence the best we can.

If that happens to lead to a billion-dollar company, awesome. But the odds of business tells us that's probably not overly likely, so we're making sure we'll be happy even if that doesn't happen.

(Who knew merely being satisfied with millions -- single, tens, or even hundreds -- would sound like a humble goal in this context.)

[tptacek]

It is crazy to think that the perceived odds of building a billion-dollar company are less for a small established team already making millions of dollars than they are for a 3-month old team with $20,000 in the bank. But people do perceive the world that way.

[ashu]

I don't get it - who compared the odds anywhere in this discussion? It seems to me that the goals are just completely different. DHH is not explicitly aiming to grow the company into a billion dollar mammoth. A startup and its investors are very explicitly aiming for that (or somewhere close). Both are viable but completely different ecosystems.

[mattmaroon]

You're absolutely correct. I have a friend who works for a company that does nothing but launch franchise changes, and they've had a few monster scores. They do it in a few ways. One is by, as you mentioned, taking a pre-existing successful restaurant and using the name and some of the menu.

Some times they will simply develop concepts (often 4 or 5 at a time) start one of each, and see what sticks.

I've studied the restaurant industry quite a bit and can only think of a few chains that stumbled into it.