So if you can blag 8 million without any promise of revenue, then don't bother with revenue. Sounds fine, but I assume that this doesn't apply to bootstrapped companies in areas without large quantities of gambling billionaires.
This post is not at all meant to be about what to do with your bootstrapped business. It's only targeting high-growth, mostly b2c, companies in winner takes all markets with strong network effects (ex: Pinterest, Instagram). That's what I mean when I say "startup" though that term is completely overloaded and adopted by everyone nowadays :)
By his definition, Google was never a startup because they're not in an area with strong network effects. Nor is their money-source B2C---they're sell advertising space to businesses.
Sure...I think that's a big part of Rich's point. If you're bootstrapping or building a lifestyle business, this isn't the way you want to go. Neither is right or wrong (though some specific instances certainly seem a bit gross).
(And regardless, eventually you will need to make money)
If you manage to be sneaky with an exit strategy, you never need to make money as you bail with a ton of cash before that becomes neccessary.
And when things like Instagram come around, the amount of people making businesses purely with the motive of sneaky exit strategies starts to completely overshadow the amount of businesses created that are genuinely valuable.
None of these companies are "trying to be sneaky with an exit strategy". They are trying to grow very large, independent businesses. If you build to flip, you are most likely going to fail -- it's just not a winning strategy.
But putting off revenue != built to flip. Having a ton of usage and figuring out how to make money is easy. Getting a ton of usage is hard. They are focusing on the hard problem first, and the easier problem second.
@zmanji: Absolutely. What evidence do you have to the contrary?
Here's evidence I have: Steve Anderson, one of Instagram's earliest investors and a board member, is also on our board. Just because they're not trying to make money on year 1 doesn't mean they weren't ever planning on making money.
What evidence do you have to support your claim? As far as I can tell Instagram was a cool idea/product that got lots of users. I am unable to see a moneymaking opportunity from any angle from the current iteration of the product.
In addition, if they wanted to build a large independent business why would the sell out so early?
You presented no evidence. You just mentioned that you have a business relationship with someone who put money in, without saying anything else. That, in and of itself, is evidence of nothing.
Also, I never alleged that Instagram specifically was built to flip (although I can see little to suggest that it wasn't, although that is not the same thing), I merely pointed out that phenomena such as Instagram encourages a lot of people to enter the market with that as their motive, often enough to drown out other businesses. And that kind of behaviour was a major factor in the death of the last web boom.
Furthermore, the namedropping of someone you share a corporate interest with is generally an admission of probable bias and using it as an argument in favour of your position isn't particularly convincing.
That sounds more like faith based economics than anything else, of couse some of them must be doing this.
And offering a service for free at point of use can often be much easier than turning it into revenue later, especially if you have millions in the bank from investment already. There are plenty of stale corporate corpses littering that particular road, but with founders that did quite nicely out of it.
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So if you can blag 8 million without any promise of revenue, then don't bother with revenue. Sounds fine, but I assume that this doesn't apply to bootstrapped companies in areas without large quantities of gambling billionaires.
This post is not at all meant to be about what to do with your bootstrapped business. It's only targeting high-growth, mostly b2c, companies in winner takes all markets with strong network effects (ex: Pinterest, Instagram). That's what I mean when I say "startup" though that term is completely overloaded and adopted by everyone nowadays :)
By your definition of the term 'startup', the early Apple wouldn't have qualified.
By his definition, Google was never a startup because they're not in an area with strong network effects. Nor is their money-source B2C---they're sell advertising space to businesses.
Sure...I think that's a big part of Rich's point. If you're bootstrapping or building a lifestyle business, this isn't the way you want to go. Neither is right or wrong (though some specific instances certainly seem a bit gross).
(And regardless, eventually you will need to make money)
I remember this the first time round.
If you manage to be sneaky with an exit strategy, you never need to make money as you bail with a ton of cash before that becomes neccessary.
And when things like Instagram come around, the amount of people making businesses purely with the motive of sneaky exit strategies starts to completely overshadow the amount of businesses created that are genuinely valuable.
Then things can get very messy.
None of these companies are "trying to be sneaky with an exit strategy". They are trying to grow very large, independent businesses. If you build to flip, you are most likely going to fail -- it's just not a winning strategy.
But putting off revenue != built to flip. Having a ton of usage and figuring out how to make money is easy. Getting a ton of usage is hard. They are focusing on the hard problem first, and the easier problem second.
@zmanji: Absolutely. What evidence do you have to the contrary?
Here's evidence I have: Steve Anderson, one of Instagram's earliest investors and a board member, is also on our board. Just because they're not trying to make money on year 1 doesn't mean they weren't ever planning on making money.
What evidence do you have to support your claim? As far as I can tell Instagram was a cool idea/product that got lots of users. I am unable to see a moneymaking opportunity from any angle from the current iteration of the product.
In addition, if they wanted to build a large independent business why would the sell out so early?
@ktizo: I'm not name dropping, I'm presenting evidence that they were not "built to flip".
What evidence do you have to the contrary?
You presented no evidence. You just mentioned that you have a business relationship with someone who put money in, without saying anything else. That, in and of itself, is evidence of nothing.
Also, I never alleged that Instagram specifically was built to flip (although I can see little to suggest that it wasn't, although that is not the same thing), I merely pointed out that phenomena such as Instagram encourages a lot of people to enter the market with that as their motive, often enough to drown out other businesses. And that kind of behaviour was a major factor in the death of the last web boom.
Namedropping is no evidence whatsoever.
Furthermore, the namedropping of someone you share a corporate interest with is generally an admission of probable bias and using it as an argument in favour of your position isn't particularly convincing.
Are you honestly saying that Instagram's team was "trying to grow a very large, independent businesses"?
None of them?
That sounds more like faith based economics than anything else, of couse some of them must be doing this.
And offering a service for free at point of use can often be much easier than turning it into revenue later, especially if you have millions in the bank from investment already. There are plenty of stale corporate corpses littering that particular road, but with founders that did quite nicely out of it.