If you’re really big into the the startup and tech scene, you might read blogs like these:
And on and on. You know the list of popular “startup” blogs. They’re awesome. (Also sidenote: how many investors can you name who don’t have an active blog? Behold the power of a well-written blog.)
But I laugh to myself whenever I see Fred announce a new investment for Union Square Ventures. I’m usually thinking: ”My business is nowhere close in scale to what they just invested in.”
And the natural second thought: “I would never get an investment from USV for my curent company.”
Not because I don’t like USV, but because it just doesn’t make sense for my business (or theirs). Our market will never be as big as what they want.
So what’s the rub?
This matters because in the tech world we all use the same word, “startup,” to describe two very different things.
One is the business type mentioned above that USV invests in. Paul Graham even wrote about that type of startup.
The other kine of “startup” is what everyone else is working on. E.g. indie iOS companies, design and development agencies, SMB SAAS companies like 37signals, etc.
95% of the startup advice we read online is geared towards the first type. Towards companies seriously looking to raise VC money.
But the vast majority of companies out there are never, ever going to raise VC. It would be incredibly stupid on both sides of the transaction.
The problem is that many people don’t realize what type of business they’re in. They start making $10k a month as a sole-founder and start feeling like they have an awesome startup. But then they start taking advice from VC’s like Mark Suster (who even warns them not to!) and, as he says, they get forked.
Mark and others like Chris Dixon have tried to say this before. They frame their posts as “do you really need to raise VC?” which is their nice way of saying “The vast majority of you do not need or want VC money.”
Knowing who you are is really important because it influences decsisions like:
– Should I raise money?
– Do I hire now to show a “growing company” to VC’s or wait until profitable?
– Can I plan to take money out of the company or rely on salary only?
– Is it worth growing users at the expense of profits?
– How focused should I be on cutting costs vs pure growth focus?
This all goes back to a bigger lesson: “Begin with the end in mind.” To plan the best route possible you have to know where you’re going. It doesn’t have to be 100% — you can stay flexible — but the end route differences between a VC business and, say, most iOS indie devs is as different as Florida is to Alaska.
It’s very hard to survive headed to one when you’re built for the other.