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What's a Startup, Anyway?

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Over the past couple of years I have dramatically changed the way I look at startups.

It used to be, when I thought of the word "startup", I thought of a couple guys and a dog in a garage making a cool tech product that will change the world. You know, like the Apple guys did. Or the Google guys.

But then I started learning a lot more about it. Paul Graham and others describe parts of a startup as a new venture with the ability to scale rapidly.

I'm not so sure that it has to be a new venture, however. Folks have made a persuasive case that "stick-to-it-ness" is one of the huge factors in startup success. Take a look at the MailChimp guys (Hey guys! Love the product!) Everybody thinks they're a startup because they've got that cool web look and freemium model, but hell, they've been around for a long time.

There are a lot of guys who have products they have made who are still working on them after years Yet they have tremendous scaling potential, so I'm beginning to think the ability to scale massively is probably the best indicator of a startup.

Would somebody selling rubber ducks be a startup?

It depends.

Based on the definition above, it's a combination of the market and the business machine that determine whether something is a startup or not. A guy selling rubber ducks on the street corner? Probably not -- he can only sell so many ducks a day, no matter how good his ducks are. A guy who created a program to gift virtual ducks between teenagers by using Tweets? Different story entirely.

And you don't even need the words "virtual" or "tweet" to make it a startup. It's not the tech. I used to think startups were all about the tech, but they're not.

I think one of the reasons we think it's the tech is that startups with tech angles have a much more natural ability to scale than those without them. At some point, automation plays a key role in scalability, therefore some form of automation plays a key role in startups. It doesn't have to be a website or some cool tech. It just has to scale.

That also means it has to be something people want -- can't scale to doing a lot of something if people don't want it. They don't have to be crazy about it -- it doesn't have to be the next Twitter. It can be very boring. In fact if you run the numbers it's immensely more likely that a startup is going to be boring stuff rather than be the next Google. All that is required is that a lot of people want it, not that it is exciting in any way. In fact, I'd make the case that if you are looking for really good startup opportunities, find the ones that developers find the most boring. That's where you are most likely to have less competition and more of a need.

How about a good team? Everybody and their brother seems to agree on having a good team as a key factor in startup success.

But it's not part of the definition of a startup. If anything, good teams help businesses pivot and automate. There's always a better product when a small number of folks work together. Pivoting, automation and better products simply are tools to help make something that can scale massively. There are a lot of tools out there. Learn to use them.

But tools are not a startup.

How about working in Silicon Valley? Everybody knows that all the "real" startups are out there.

I'm calling bullshit on this, once and for all. I love SV, and I love the entire Bay Area, but it's not a requirement for startups. If anything, it's kind of like Hollywood is for acting -- it's the place that has the most culture and the roots around startups. You want to meet a dozen guys who became millionaires before age 30 in startups? Go to SV.

Technology is a wonderful thing. It allows us to work from anywhere. Now that presentations and blogs and videos are available all over the world, SV is sharing their culture and roots and all of that with, well, everybody. If I wanted to personally meet really cool guys and learn at the feet of the masters? I'd go to SV. Just like if I wanted to learn acting or meet famous actors and directors I'd move to Southern California. Or if I wanted to learn investment I'd move to New York. But can you act other places? Sure thing! In fact, most acting takes place outside of Hollywood -- there are tons of local plays and off-broadway productions all over the world. Other cities are getting in on the movie-making act. Most investing takes place in small towns and the burbs. It's just 1) they associate with larger houses as a matter of convenience, and 2) they don't get the press the big guys do.

If this is true for acting and investing, it's a hundred times more true for startups. If I'm learning to act I need a whole universe of helpers. If I'm learning to make something people want that can scale? It's not as hands-on as acting is. With enough determination I should be able to do that from anywhere.

The startup world is like the theater -- if it were possible to take a local play and instantly turn it into a huge Broadway success. It would be like investing -- if you could take a small-town financial advisor and turn him into a giant investing conglomeration inside of a year. But you can't do that -- actors have to have theaters and investors have to have a hands-on customer base.

Startups aren't like that. They just have to have the ability to scale. You can't tell if my rubber duck site is being hosted in the home of rubber ducks -- wherever that is -- or from a barn in the middle of a cornfield. And why should you care as a customer? Why should you care as a founder?

And after considering the way things have changed, I'm willing to bet that for every SV startup there are probably 20-40 startups that are somewhere else. We just never hear about them. Why? Because the machinery of startups is in SV -- the press, the investors, the advisors. And they're the guys writing newspaper articles. SV is the place where you can feel and measure it, therefore it must all be happening in SV.

Not buying it any more.

If anything, quietly and without notice SV is doing what it does best: it is scaling out the ability to make startups to everybody in the world. You won't see that on the nightly news or in your favorite tech news site -- because there's nothing flashy happening. Just a lot of little guys making little boring products. With the ability to scale massively

Startups are about using some kind of automation to create ventures the make stuff people want with the innate ability to scale massively. They are not teams, not location, not technology, not tricky problem-solving, not scamming, not using the latest cloud-centric buzzword-filled hype. Sure, they may be all of that, but if you want a startup none of that is what you should be focusing on.

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This page contains a single entry by DanielBMarkham published on October 24, 2010 11:25 AM.

Programming is for Stupid People was the previous entry in this blog.

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