shaswat123/etnlp · Datasets at Hugging Face

text stringlengths 0 412k
say no to drugs. You end up saying no to
science as well.
I worry we may be heading for a future in which only a few people
plot their own itinerary through no-land, while everyone else books
a package tour. Or worse still, has one booked for them by the
government.[4]
People commonly use the word "procrastination" to describe
what they do on the Internet. It seems to me too mild to describe
what's happening as merely not-doing-work. We don't call it
procrastination when someone gets drunk instead of working.[5]
Several people have told me they like the iPad because it
lets them bring the Internet into situations where a laptop would
be too conspicuous. In other words, it's a hip flask. (This is
true of the iPhone too, of course, but this advantage isn't as
obvious because it reads as a phone, and everyone's used to those.)Thanks to Sam Altman, Patrick Collison, Jessica Livingston, and
Robert Morris for reading drafts of this.
October 2015When I talk to a startup that's been operating for more than 8 or
9 months, the first thing I want to know is almost always the same.
Assuming their expenses remain constant and their revenue growth
is what it has been over the last several months, do they make it to
profitability on the money they have left? Or to put it more
dramatically, by default do they live or die?The startling thing is how often the founders themselves don't know.
Half the founders I talk to don't know whether they're default alive
or default dead.If you're among that number, Trevor Blackwell has made a handy
calculator you can use to find out.The reason I want to know first whether a startup is default alive
or default dead is that the rest of the conversation depends on the
answer. If the company is default alive, we can talk about ambitious
new things they could do. If it's default dead, we probably need
to talk about how to save it. We know the current trajectory ends
badly. How can they get off that trajectory?Why do so few founders know whether they're default alive or default
dead? Mainly, I think, because they're not used to asking that.
It's not a question that makes sense to ask early on, any more than
it makes sense to ask a 3 year old how he plans to support
himself. But as the company grows older, the question switches from
meaningless to critical. That kind of switch often takes people
by surprise.I propose the following solution: instead of starting to ask too
late whether you're default alive or default dead, start asking too
early. It's hard to say precisely when the question switches
polarity. But it's probably not that dangerous to start worrying
too early that you're default dead, whereas it's very dangerous to
start worrying too late.The reason is a phenomenon I wrote about earlier: the
fatal pinch.
The fatal pinch is default dead + slow growth + not enough
time to fix it. And the way founders end up in it is by not realizing
that's where they're headed.There is another reason founders don't ask themselves whether they're
default alive or default dead: they assume it will be easy to raise
more money. But that assumption is often false, and worse still, the
more you depend on it, the falser it becomes.Maybe it will help to separate facts from hopes. Instead of thinking
of the future with vague optimism, explicitly separate the components.
Say "We're default dead, but we're counting on investors to save
us." Maybe as you say that, it will set off the same alarms in your
head that it does in mine. And if you set off the alarms sufficiently
early, you may be able to avoid the fatal pinch.It would be safe to be default dead if you could count on investors
saving you. As a rule their interest is a function of
growth. If you have steep revenue growth, say over 5x a year, you
can start to count on investors being interested even if you're not
profitable.
[1]
But investors are so fickle that you can never
do more than start to count on them. Sometimes something about your
business will spook investors even if your growth is great. So no
matter how good your growth is, you can never safely treat fundraising
as more than a plan A. You should always have a plan B as well: you
should know (as in write down) precisely what you'll need to do to
survive if you can't raise more money, and precisely when you'll
have to switch to plan B if plan A isn't working.In any case, growing fast versus operating cheaply is far from the
sharp dichotomy many founders assume it to be. In practice there
is surprisingly little connection between how much a startup spends
and how fast it grows. When a startup grows fast, it's usually
because the product hits a nerve, in the sense of hitting some big
need straight on. When a startup spends a lot, it's usually because
the product is expensive to develop or sell, or simply because
they're wasteful.If you're paying attention, you'll be asking at this point not just
how to avoid the fatal pinch, but how to avoid being default dead.
That one is easy: don't hire too fast. Hiring too fast is by far
the biggest killer of startups that raise money.
[2]Founders tell themselves they need to hire in order to grow. But
most err on the side of overestimating this need rather than
underestimating it. Why? Partly because there's so much work to
do. Naive founders think that if they can just hire enough
people, it will all get done. Partly because successful startups have
lots of employees, so it seems like that's what one does in order
to be successful. In fact the large staffs of successful startups
are probably more the effect of growth than the cause. And
partly because when founders have slow growth they don't want to
face what is usually the real reason: the product is not appealing
enough.Plus founders who've just raised money are often encouraged to
overhire by the VCs who funded them. Kill-or-cure strategies are
optimal for VCs because they're protected by the portfolio effect.
VCs want to blow you up, in one sense of the phrase or the other.
But as a founder your incentives are different. You want above all
to survive.
[3]Here's a common way startups die. They make something moderately
appealing and have decent initial growth. They raise their first
round fairly easily, because the founders seem smart and the idea
sounds plausible. But because the product is only moderately
appealing, growth is ok but not great. The founders convince
themselves that hiring a bunch of people is the way to boost growth.
Their investors agree. But (because the product is only moderately
appealing) the growth never comes. Now they're rapidly running out

say no to drugs. You end up saying no to

science as well.

I worry we may be heading for a future in which only a few people

plot their own itinerary through no-land, while everyone else books

a package tour. Or worse still, has one booked for them by the

government.[4]

People commonly use the word "procrastination" to describe

what they do on the Internet. It seems to me too mild to describe

what's happening as merely not-doing-work. We don't call it

procrastination when someone gets drunk instead of working.[5]

Several people have told me they like the iPad because it

lets them bring the Internet into situations where a laptop would

be too conspicuous. In other words, it's a hip flask. (This is

true of the iPhone too, of course, but this advantage isn't as

obvious because it reads as a phone, and everyone's used to those.)Thanks to Sam Altman, Patrick Collison, Jessica Livingston, and

Robert Morris for reading drafts of this.

October 2015When I talk to a startup that's been operating for more than 8 or

9 months, the first thing I want to know is almost always the same.

Assuming their expenses remain constant and their revenue growth

is what it has been over the last several months, do they make it to

profitability on the money they have left? Or to put it more

dramatically, by default do they live or die?The startling thing is how often the founders themselves don't know.

Half the founders I talk to don't know whether they're default alive

or default dead.If you're among that number, Trevor Blackwell has made a handy

calculator you can use to find out.The reason I want to know first whether a startup is default alive

or default dead is that the rest of the conversation depends on the

answer. If the company is default alive, we can talk about ambitious

new things they could do. If it's default dead, we probably need

to talk about how to save it. We know the current trajectory ends

badly. How can they get off that trajectory?Why do so few founders know whether they're default alive or default

dead? Mainly, I think, because they're not used to asking that.

It's not a question that makes sense to ask early on, any more than

it makes sense to ask a 3 year old how he plans to support

himself. But as the company grows older, the question switches from

meaningless to critical. That kind of switch often takes people

by surprise.I propose the following solution: instead of starting to ask too

late whether you're default alive or default dead, start asking too

early. It's hard to say precisely when the question switches

polarity. But it's probably not that dangerous to start worrying

too early that you're default dead, whereas it's very dangerous to

start worrying too late.The reason is a phenomenon I wrote about earlier: the

fatal pinch.

The fatal pinch is default dead + slow growth + not enough

time to fix it. And the way founders end up in it is by not realizing

that's where they're headed.There is another reason founders don't ask themselves whether they're

default alive or default dead: they assume it will be easy to raise

more money. But that assumption is often false, and worse still, the

more you depend on it, the falser it becomes.Maybe it will help to separate facts from hopes. Instead of thinking

of the future with vague optimism, explicitly separate the components.

Say "We're default dead, but we're counting on investors to save

us." Maybe as you say that, it will set off the same alarms in your

head that it does in mine. And if you set off the alarms sufficiently

early, you may be able to avoid the fatal pinch.It would be safe to be default dead if you could count on investors

saving you. As a rule their interest is a function of

growth. If you have steep revenue growth, say over 5x a year, you

can start to count on investors being interested even if you're not

profitable.

[1]

But investors are so fickle that you can never

do more than start to count on them. Sometimes something about your

business will spook investors even if your growth is great. So no

matter how good your growth is, you can never safely treat fundraising

as more than a plan A. You should always have a plan B as well: you

should know (as in write down) precisely what you'll need to do to

survive if you can't raise more money, and precisely when you'll

have to switch to plan B if plan A isn't working.In any case, growing fast versus operating cheaply is far from the

sharp dichotomy many founders assume it to be. In practice there

is surprisingly little connection between how much a startup spends

and how fast it grows. When a startup grows fast, it's usually

because the product hits a nerve, in the sense of hitting some big

need straight on. When a startup spends a lot, it's usually because

the product is expensive to develop or sell, or simply because

they're wasteful.If you're paying attention, you'll be asking at this point not just

how to avoid the fatal pinch, but how to avoid being default dead.

That one is easy: don't hire too fast. Hiring too fast is by far

the biggest killer of startups that raise money.

[2]Founders tell themselves they need to hire in order to grow. But

most err on the side of overestimating this need rather than

underestimating it. Why? Partly because there's so much work to

do. Naive founders think that if they can just hire enough

people, it will all get done. Partly because successful startups have

lots of employees, so it seems like that's what one does in order

to be successful. In fact the large staffs of successful startups

are probably more the effect of growth than the cause. And

partly because when founders have slow growth they don't want to

face what is usually the real reason: the product is not appealing

enough.Plus founders who've just raised money are often encouraged to

overhire by the VCs who funded them. Kill-or-cure strategies are

optimal for VCs because they're protected by the portfolio effect.

VCs want to blow you up, in one sense of the phrase or the other.

But as a founder your incentives are different. You want above all

to survive.

[3]Here's a common way startups die. They make something moderately

appealing and have decent initial growth. They raise their first

round fairly easily, because the founders seem smart and the idea

sounds plausible. But because the product is only moderately

appealing, growth is ok but not great. The founders convince

themselves that hiring a bunch of people is the way to boost growth.

Their investors agree. But (because the product is only moderately

appealing) the growth never comes. Now they're rapidly running out