I am looking for startup advice for founders that don't want to build a billion-dollar company or need VC funding. How to efficiently target a local market? Or perhaps start a niche business that appeals to a small market.
Every time I see a startup advice book, article, Stanford lectures, whatever it may be - it is always shooting for becoming the next Uber or Airbnb - including this article.
The Silicon Valley definition of startup is "company designed to grow fast"[1]. It's perfectly OK to use a different definition, and it's perfectly admirable to start a company with a different goal. If so, you should ignore all the advice about raising VC money because you really don't want to do that if growth is not your central goal.
"There's a distinct word, "startup," for companies designed to grow fast. If all companies were essentially similar, but some through luck or the efforts of their founders ended up growing very fast, we wouldn't need a separate word. We could just talk about super-successful companies and less successful ones. But in fact startups do have a different sort of DNA from other businesses. Google is not just a barbershop whose founders were unusually lucky and hard-working. Google was different from the beginning."
This is only a useful comment if it includes an alternative (and also widely used) definition, or at least a critique of the definition provided.
In fact, the wikipedia article on startups includes the grow fast component, suggesting to me that that is the most common usage:
> "an entrepreneurial venture which is typically a newly emerged, fast-growing business that aims to meet a marketplace need by developing a viable business model around an innovative product, service, process or a platform. A startup is usually a company designed to effectively develop and validate a scalable business model."
That is definitely not Steve Blank's definition. His is: "an organization formed to search for a repeatable and scalable business model."
You can have a rapidly growing company with an old business model. Look at McDonald's, for example. The business model, selling hamburgers, wasn't particularly different. But they took great advantage of the rise of car culture and TV advertising. Or look at the Android phone market. Selling phones is a pretty well understood business model, but companies there have grown rapidly by continual incremental improvement.
Repeatable and scalable sound like ingredients for fast growth.
To demonstrate that Steve Blanks definition is materially different from Paul Graham's, perhaps you could name a few successful startups which found a scalable/repeatable business model, but that were not designed to grow fast?
Seriously? I already demonstrated that it was materially different by showing that some-fast growing companies were not formed to search for business models.
All successful startups grow fast, because that's how we define business success. Not all fast-growing companies are startups, though.
Ok great, Steve Blank excludes companies that already have a scalable repeatable model? Somehow I doubt that's his intention
EDIT: Most ecommerce startups would fall into your "proven business model" category, and yet they, like McDonalds before them, do extensive experimentation to find the path to rapid growth. Which is why Steve Blank underscores that the search is never finished.
Not quite. His definition is about what the organization was formed to do.
If a company was formed to search for a scalable, repeatable business model, then he's still interested in it when they have found it. Then they're in the growth stage.
But if a company was formed, as most companies are, intending to use a proven business model, then it's not in his definition of a startup. No matter how fast it grows.
> But if a company was formed, as most companies are, intending to use a proven business model, then it's not in his definition of a startup.
This would seem to exclude virtually all delivery service, cleaning service, car service, etc. companies, which are usually considered the prototypical SV startups.
It depends on how they're doing it. Uber and Lyft, for example, are definitely startups under Blank's definition, because they were searching for a new model. Postmates too was new; I don't believe there was a successful delivery company that worked like they do.
If you were to start a Postmates competitor today, though, and were just doing what they did, then it wouldn't be a startup. At $250m ARR, their business model is already proven.
>That is definitely not Steve Blank's definition. His is: "an organization formed to search for a repeatable and scalable business model."
That's what "a company designed to grow fast" is.
>You can have a rapidly growing company with an old business model. Look at McDonald's"
McDonalds was a startup under this definition. If Ray's original plan was to take an old business model, redesign it for cars, and scale it rapidly with TV advertising, that's a startup by Steve and Paul's definition.
> That's what "a company designed to grow fast" is.
No. Most startups are designed to grow fast. But many non-startups are designed to grow fast. There is overlap in the Venn diagram, but they are not the same thing.
> If Ray's original plan
If that was Kroc's plan, you'd be right. Do you have some evidence it was?
As far as I can tell, he spotted an existing restaurant that had already found product-market fit and just scaled the operation using variants on known franchising approaches. I also haven't seen any evidence that at the time he foresaw suburbanization, white flight, and the resulting increase in value of heavy branding, trends that were nascent at the time he joined McDonalds.
I'd say it was more akin to the top-growing restaurants of today, ones I point out elsewhere in this discussion. They are fast growers, but they are scaling mild variations on well-known business models.
His insight was that the model was repeatable and scalable. The assembly line kitchen they developed not only made making burgers fast but also made them incredibly consistent. Because of this he could franchise the restaurants and be assured that quality would be consistent among them despite being operated by different people. He never intended to open large numbers of his own restaurants - just enough for experimentation purposes.
To this day this is a major selling point. When travelling you can take your chances on a local place or go with what you know.
Sure. I think we're saying the same thing: The McDonald brothers had found product-market fit. Kroc scaled it. Ergo, Kroc's approach was not what Blank calls a startup.
That's exactly what it means, no more, no less. Keep in mind that outside of the HN crowd absolutely nobody would know who either Steve Blank of Paul Graham are and neither of them get to redefine the English language.
>Do you honestly believe nobody used the term 'start-up' before Steve Blank or Paul Graham used it?
Did I say that somewhere or are you just straw manning me?
My post and paulsutter's are clearly referring to the Silicon Valley idea of a startup, not the general idea. The difference is one of intent, so it is useful to distinguish between the two.
Someone who opens a diner or a watch repair shop or a Kinko's franchise with the intent of servicing their locale is certainly doing "a fledgling business enterprise" and thus may technically be doing a startup. But SV is specifically interested in greenfield endeavors that can leverage the web or other new tech to find a large customer base and rapidly scale to billion dollar+ valuations.
Given your long history on HN I know you know this so why are we bickering over semantics?
Nobody suggested they originated the term. Paul Graham's definition for "startup" is exactly right for Silicon Valley, and the Merriam Webster definition is incorrect, for Silicon Valley.
It's true that lots of people use the word startup to mean fledgling business, and that's perfectly OK and cool, but if you use the term "startup", in Silicon Valley, to refer to a lifestyle business, people will view it as self-aggrandizement or delusion.
This is also true in any venture capital context anywhere in the world.
One of my friends runs a few small SaaS businesses in parallel. He really likes a conference called MicroConf (http://www.microconf.com/) which focuses on bootstrapped businesses. That might be something to check out if you can make it.
One book that's great, regardless of what scale of company you're trying to build, is Traction by Weinberg and Mares. It talks about how to pick marketing channels for getting traction + includes an introductory section on each of two dozen popular marketing channels. Very useful if you're trying to get traction for your product and not sure where to start.
Finally, a lot of startup advice should apply to companies more broadly: focus on building something people want; it's better to have 100 customers that love you than to have 10k customers that like you; do things that don't scale at the beginning; etc.
Check out the Indie Hackers podcast (and website). It's made for exactly what you're looking for. Courtland Allen interviews founders who are excited about making $20k a month in MRR, and they don't necessarily need to become a $1 billion company. Most of the people featured are bootstrapped or had only a little bit of funding.
One of the best things I ever heard and I wish this was taught everywhere, is: understand what kind of business you want to build and what the right stage in your life to build it is.
In startup terms, there are cashflow businesses and disruptor businesses (credit to Mike Dillard).
Cashflow businesses are generally sneered at in Silicon Valley ("lifestyle businesses") but in many cases, they are a great place for entrepreneurs to start.
Cashflow businesses can provide you with a level of financial independence on your own terms. Then, if you want more, either start more cashflow businesses or then focus on your disruptor business (Silicon Valley style startup). But if you do you cashflow business first, you are far less at the mercy of fickle VCs, etc.
The other useful thing to come out of this classification is it almost certainly informs your funding strategy.
If you're building a cashflow business, don't ever raise money. If you're building a disruptor business, definitely raise money, as much of it as fast as you can. If you've done your cashflow business beforehand, you'll already be quite well off and can think much more strategically in your disruptor business.
I would check out the writings of 37Signals (now Basecamp)/RoR founder David Heinemeier Hansson, who advocates bootstrapping for not-necessarily small markets.
I owned a pet store and would say most of this advice applies equally well to such a business. Go live, talk to customers and iterate. Make something people want.
Yes but "talking to your customers" is universally applicable and valuable advice. One could argue that it's of even greater value if you're targeting a niche with only "a few customers" because you need to ensure you really deliver enough value to get them onside and paying a rate that ensures you generate a profit.
I think most small companies were talking with customers for long time. The challenging part of this advice is talking with your customers at scale and separating signal from noise.
When I opened this thread, I expected to write a post that covered a few things.
The first was to beware of survivorship bias. Some of us have had experiences that were very different from the reality that most people face.
Second, I'd absolutely not listen to anyone who suggested you start a business you're passionate about, at least not as a general rule. If you're really passionate about it, your own biases are almost certainly going to prejudice your business in harmful ways. That doesn't mean not to be passionate about it, it just means don't make your passion your business.
Third, don't do it with the goal of getting out, selling for millions of dollars, and being the next Musk. Those are unrealistic goals. Instead, do it to make enough money to comfortably provide for you and your family. That's a much more realistic goal.
I think that third one applies to your comment, which is why I mention it here.
Then again, go back to the first thing I listed. I'd not take advice from me. In my case, I saw a niche and it fit in with what my research was about. I left academia and was making a comfortable living. The offer to buy my business was unexpected and the price was surprising.
Selling had never been my goal. It was just a fluke. I wasn't passionate about what I was doing, I became passionate about doing it well. I became passionate about working with brilliant people and exceeding goals. It was traffic modeling, that's really not a subject one becomes impassioned over.
Sometimes, you just get lucky. Sometimes, you're in the right place at the right time. You can maximize your chances but, at the end of the day, it's 'good enough' to just be able to provide comfort and opportunity for you and your family.
> If you're really passionate about it, your own biases are almost certainly going to prejudice your business in harmful ways.
I'd really like to hear more about this, because from what I've seen it's really important to "give a shit" about what you're working on.
Without a deep level of giving a shit you are quite likely to give up due to the waining of your interest level.
I mean, I've seen loss of interest as a major killer of side projects countless times in Nugget and also from speaking to lots of other entrepreneurs over the past 10 years.
There's a space between giving a shit and being passionate. I don't imagine one should be apathetic, but it probably shouldn't be your 'save the world, come hell or high water' project.
People passionate about an idea can make great employees. Someone giving direction should be a bit more objective. If you can be both objective and impassioned, you're in a small minority. Lots of people seem to think they can, but wait until they fall head over heels in love and see how objective they really can be.
Check out http://www.startupsfortherestofus.com/ and pretty much anything that the two guys behind it do. Beyond the podcast Rob Walling and Mike Taber have books and host conferences on the topic.
That's because the 'other people' in other people's money want billion dollar exits. you can pretty much use all this advice for a local niche market, just use your own money or friends or family's.
You'd be better off looking for general business advice rather than a "start-up". The "start-ups" à la YC looks to raise money, several rounds, IPO, Exit, spend millions to acquire users, etc...
It's much different than building a small business that scales to 10 employees in the next 10 years.
The difference also starts from the foundation. For startups you are looking for Corp C. For your case you are looking for an LLC.
What do you mean by "startup"? The one I normally use is Steve Blank's, "an organization in search of a repeatable business model".
If that's what you're talking about, then a lot of this advice still applies. Looking at the "Pocket Guide" section, for example, I think that all still applies for a niche startup.
If, on the other hand, you're just talking about a new company, one where you're applying a well-understood business model to, say, a new location, then yes, you need different advice. But I think that advice differs a lot based on what kind of new business. The advice for a first-time Subway franchisee should be pretty different than somebody who wants to launch their own consulting company. There, it seems like people form up into specific communities around the kind of business.
There are tons of literature, books, articles, and more already out there, written over decades, that talk through starting a new business. Even material specific to starting a software-based business if that is what you are after.
The chances of hearing some "new" advice about doing this that isn't just already out there is not terribly high.
Perhaps look at something B2B rather than consumer-facing, is the advice I have seen - along the lines of that advice in the YC piece that it's better to have 10 customers that love you (and are spending much more) than 1000 that are lukewarm and/or not spending much.
That's a "lifestyle" business, and it's very appealing. I don't want billions, I just want to work for someone else.
One curious thing is it's more selfish than a startup - after all, you're doing it for you, not for the business. You want it to be sustainable, so the ugliness of competition is relevant sooner. One pg essay likens a startup to a charity, and some, like Craigslist retain some of that quality, helping a lot of people without making as much money as they could.
Note: I'm not criticizing you for wanting this. I'd like it too, I just haven't found a way of doing it that doesn't become nasty. YMMV.
Could we stop using the term "lifestyle" to describe young companies that aren't chasing the unicorn dream? A lot of them are run by very driven founders who work long hours to build world-class products for smallish niches. They don't have vacation homes in Tahoe; they don't shut down for a week to go to Burning Man.
Instead, they are obsessed with a definition of business success that doesn't involve ten-digit numbers.
There is one "lifestyle" business that's rampant throughout Silicon Valley, in spite of its efforts to deny it. This would be the bottom quartile of the venture business. It's all about picking up management fees, taking long weekends, and living large.
It's largely semantics as any small business should ideally be cashflow positive but I think the nuance here is one that you can build these businesses to scale, just without VC funding. The time horizon for growth is much longer as a result but definitely there.
"I Love Lucy" was created so Lucille Ball and her husband could have a family. So, it was a "lifestyle business."* It also was the Star Wars of its era in terms of being technically cutting edge and changing an industry.
IIRC, Plenty of Fish never took VC money.
There are other examples out there. You have to research it if you want it, but it does happen.
Craigslist is a great example of exercising exactly the right amount of restraint in the cost-benefit equation. Most SV startups are subsidized (with attendant inflated expectations) to the point that they can't possibly live up to their valuations.
Every time I see a startup advice book, article, Stanford lectures, whatever it may be - it is always shooting for becoming the next Uber or Airbnb - including this article.