A possible new startup “order”

9 Sep

If it’s true that Lean Startups product more output with less input and that the definition for the “big win” hasn’t changed, then there’s only a couple of ways to get big: (1) hope you fund the right startups, or (2) smartly combine startups.

via Welcome to the new startup

Recent events have shown that startups do not need more early-stage capital, they need less.  More and more startups in niche markets show that its possible to actually be profitable and be a relatively new company–a phenomenom that used to be considered rare.  However, the combination of cheaper startup costs and quicker profitability seems to be disappointing the startup community.

This seems to be because there aren’t the big wins that there used to be.  But maybe we need to change our definition of what constitutes a “win” by asking a win for who?

  1. A win for an investor that put in $25,000?
  2. A win for an investor that put in $500,000 or more?
  3. A win for the entrepreneur that hopes to take his one year investment of 90 hour workweeks and cash out at least $5-10 million?
  4. A win for newly happy customers?
  5. A win for our community because there is a new small business that generates jobs and profit?

Too long we’ve been defining a “win” in the technology startup community as requiring annual return of 5-20x.  But in a business that requires less than $300k to actually generate $1 million or more of annual profitability, couldn’t a “win” be defined by metric #5?

There is a valuable place for small technology companies just as there is a place for small restaurant chains.  The difference is that the latter are less profitable for more investment.  Yet we still consider our local 3-location restaurants to be wins, in fact big wins, for our community.

Maybe instead of inculcating a culture of entrepreneurship that demands $50 million exits, we should be encouraging the next generation of entrepreneurs to build innovative and sustainable businesses that generate actual profits.  Maybe the new startup order is actually just a focus on building a business to last not designing a company that’s easy to sell.

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