I'm 33, and a lot of this has been occurring to me lately too. I still waffle over "lifestyle business" versus "startup", but as time goes on, I feel more and more attracted to the lifestyle business.
Startups are making a lot of people very wealthy, and many of them aren't people that might become as wealthy were it not for the startup scene. Still, there's something that really stuck with me a while back: pg's favorite sandwich shop was closing, and he had to appeal to others to try to save it, because he didn't have the liquidity to do much himself.
I think sandwich shops are important. And, I realize that the vocal majority on HN considers value measured in dollars, so if I said that I thought that a good local sandwich shop was just as valuable as, say, Zynga, that would probably generate this huge argument that wouldn't generate any value for anyone.
But, if value is measured in terms of what's important to people -- well, Zynga's a lot easier to do without than a good local sandwich shop.
So I think I'd like to put myself into a position to save a sandwich shop once in a while. Or maybe even have one of my own, as a hobby. For that matter, I think there ought to be better programs for things like sandwich shops that helps them stay out of trouble.
And more and more, I think lifestyle businesses are a better way to reach those goals.
I clicked that arrow up and am commenting because I started feeling the same way once I turned 30, in fact I'm now 33. Sometimes I am concerned that my beliefs are a measure of my cultural experiences and not arbitrarily based on my success. In the latter case success would be defined by something like money and not by in personal achievements which is the domain of the former.
So, I too started a "sandwich shop", but instead of Real Estate and food, I build productivity tools in the Apple App Store and sell them through my own company (which I own). I figure helping people by making work-related tasks automated is a manner in which I bring joy to my community, (the community of people who own an iOS device). I don't feel a need to disrupt the world anymore. Or maybe I'm getting old and I've given up on big things and instead am working on improving/automating the small things.
That was a really great read. It's always good to see the other side of the coin; whereas Y-combinator promotes a build big and fast (hare) environment, there are definitely advantages to being the tortoise, especially if you consider that you aren't even running the same race.
It's a great article and it asks the right questions, but it puts aside what I consider the biggest problem : impact.
A lifestyle business means to me a life with a very low impact. It can certainly be a good life, but can't we do better for mankind? If the best and the brightest just care about getting a comfy lifestyle, what sort of examples does it sets?
How many people do you need to affect, and at what level of salience, does a business need to hit to graduate from low impact for you? Just give me a number and a suitably important problem, I will find you high impact lifestyle businesses and low impacted funded businesses.
Just to make it clear- I didn't want to disrespect anything you did or the original article (which I did upvote - something I don't do very often), but I like to dream big and I'd like do something good - real good.
If you want some numbers and a problem, say improving the healthcare of at least half a million persons in a first world country where there are no so many low hanging fruits.
I'd think about say merging lab results from various source and running predictive analysis software or gathering imagery (say CT scans) and see if some computer vision techniques could outperform human interpretation - such as detecting abnormals images very early on.
Things like that would require a decent size and funding.
Then I see DrChrono (YC funded BTW) - wow, a glorified ipad data entry form. It is interesting and will certainly do some good, but it seems not so ambitious unless they plan to keep the data and exploit it later, but I don't think HIPAA would look the other way if they did :-/
So you could certainly be right, but at the moment I believe that most lifestyles business aim at low impact problems, if only for a matter of scale.
And to be crystal clear on that - I'd be delighted to be proved wrong.
Ooh nevermind examples of low-impact VC businesses, I like that example even more.
You can improve the healthcare of over 500,000 Americans by successfully outcompeting the nation's primary healthcare communications and recordkeeping technology: Mk1 Reprocessed Wood Pulp. If you think that glorified data entry doesn't improve healthcare, you're optimizing for sexy but not really optimizing for impact.
A similarly unsexy problem is making sure people actually come to the doctor's office by telephoning them to remind them to come to the doctor's office. (The folks who most urgently need to be at the doctor's office are least capable of successfully making that happen without outside assistance.) This is approximately 2% a technical problem, 3% a compliance problem, and 95% a sales problem.
You're welcome to your own guesstimate of whether one can hit 500,000 patients served without taking VC funding. I have my own guesstimate.
This post brought to you by the letters N, D, and A and the number $LOTS.
Changing the medium (dead wood to electrons) will not IMHO make a difference.
However the "unsexy" problem you mention is an excellent example. I wouldn't call it unsexy. It's something that would be nice and interesting, even if low on technical complexity, and there is a clear and mesurable outcome.
The way I see it, it does not matter if 100 businesses are improving the lives of 1 million people at a time, or 1 business is improving the lives of 100 million people at one go. Every problem that people pay are willing to pay for to help someone fix is in some way decreasing inefficiency and improving productivity in some way. Overall, they will add up.
Ofc, there are also large problems that require funding etc. but when you say something like lifestyle business means to me a life with a very low impact - you are looking at the micro picture, and not the macro one.
Echoing patio11, but yes indeed you can have an impact with the sort of business Matt is advocating for, here. For example, his own site: Metafilter. It's made a profound impact on me and many others. There are tons of personal stories, but here's a topical one from the past hour:
Not trying to degrade that VC startup ecosystem but I'm not entirely sure that typical startup is creating more impact than the typical lifestyle business. (Note the word typical) I might even side with the typical lifestyle business probably having more impact. Now that being said I would agree that most likely the small handful of startups that really shoot to the moon have immense unmatched impact.
> "I feel like Ycombinator in particular takes too much ownership stake from such a low investment (10% of your company for $6k/founder of investment? That seems insane)"
I wonder if this is actually an issue. I don't see any founders complaining about YC's equity (perhaps due to self-selection). Have founders ever needed more money than what YC and Start Fund but not enough to justify raising a round?
I mentioned that specifically because I've invested myself in a few startups and typically I only get 1% at most for sometimes much more money than what Ycombinator offers.
People get much more than just funding from yc; I think people are happy to give 10% of their company for $6k plus all the connections and expertise that yc offers. If yc only offered money, they wouldn't get a 10% stake for $6k.
I for one specifically did not apply to Y Combinator this year because of the big stake/small amount of cash they offered, though would have loved the mentoring and publicity. Six per cent for $6,000 per founder might be okay if you are a couple of guys or gals with an idea but if you are already profitable, it just does not make sense.
There almost needs to be a Y Combinator for small-but-already-profitable web businesses, offering much better terms.
Great talk, btw, Matt. As a fellow bootstrapper, it resonated with me.
Commercial banks offer what you're seeking. In our local scene when one of our cash-flow+ portfolio companies is seeking further capital for expansion, often debt is a better (cheaper) option than taking on VC investment (if they're CF+ they shouldn't be seeking angel terms!). We've actually had a big bank actively trying to sell such debt.
If you're CF+ and need capital, talk to your bank.
Startups are making a lot of people very wealthy, and many of them aren't people that might become as wealthy were it not for the startup scene. Still, there's something that really stuck with me a while back: pg's favorite sandwich shop was closing, and he had to appeal to others to try to save it, because he didn't have the liquidity to do much himself.
I think sandwich shops are important. And, I realize that the vocal majority on HN considers value measured in dollars, so if I said that I thought that a good local sandwich shop was just as valuable as, say, Zynga, that would probably generate this huge argument that wouldn't generate any value for anyone.
But, if value is measured in terms of what's important to people -- well, Zynga's a lot easier to do without than a good local sandwich shop.
So I think I'd like to put myself into a position to save a sandwich shop once in a while. Or maybe even have one of my own, as a hobby. For that matter, I think there ought to be better programs for things like sandwich shops that helps them stay out of trouble.
And more and more, I think lifestyle businesses are a better way to reach those goals.