Growth is an important part of entrepreneurship. The following is my entrepreneurial information shared by J.L.: What kind of company is a real startup? Please continue to visit (www.ruiwen.com/wenxue) for more popular articles.
When starting a business, what you really do is to solve problems that are more difficult than ordinary companies. Your task is to find some rare ideas that can grow rapidly. Because these ideas are very valuable, they are hard to find.
A startup is defined as a company that can grow rapidly. "Just created" does not make a company a "startup company", and it is not the definition of "startup company" related to the Internet/technology, let alone to obtain venture capital. None of this is crucial for startups. The only important thing is growth, and other concepts we attach to "startup companies" come from this matter.
If you want to start a business, it is very important to know this. It is difficult to start a business. You can't expect to stand by and do nothing to succeed. You must realize that company growth is what you should pursue most. Once your company has achieved growth, other things will follow. Does this mean that you can use the indicator of "company growth" as a compass? Make almost all the decisions.
mangrove
Let's start with an obvious and often overlooked difference: not every new company can be called a startup. In the United States, thousands of companies are established every year, and only a small part of them can be regarded as "start-ups". Most of them are in the service industry? Like restaurants, barbershops, plumbing business and so on. With few exceptions, these are not startups.
When I say that startups are "set up" to grow rapidly, I mean two things. On the one hand, it is subjective consciousness, because most startups can't do it. On the other hand, there are essential differences between startups and other companies. Just like in the same environment, the seeds of redwood trees and pea seedlings have completely different fates.
This is why there is a special word "entrepreneurship" to refer to those companies that can grow rapidly. If all companies are similar in essence, but some of them eventually grow rapidly because of luck or the efforts of the founders, then we don't need a single word, just divide them into "very successful companies" and "less successful companies".
But in fact, startups do have different DNA than other companies. The difference between Google and barber shop is not because the founder of the former is lucky or diligent, but because from the beginning, Google is different from barber shop.
If you want to grow rapidly, you need to launch products with huge market demand. This is the difference between Google and a barber shop. Barbershops are hard to grow on a large scale.
There are two reasons why a company can achieve rapid development:
A: This company must be able to produce products that many people need.
B: The products it provides can reach these people and serve them.
Barber shops do well because almost everyone needs a haircut. But do barbershops have the same problems as other retail businesses? Can't solve B. Barbershops can provide personal service to customers, but few people will go a long way to get a haircut, and even if customers really want to do so, barbershops are not big enough to accommodate them.
Developing a software is a good way to solve B, but you may still be limited by A in the end. Most enterprises are strictly limited to A or B, but those successful startups are different. They are not limited by A or B..
Create business direction
It seems that starting a business is better than starting an "ordinary company". If you want to start a company, why not start with the most potential type? The problem is that this is an "efficient market" in the economic sense.
The restrictions that ordinary companies encounter are actually protecting them, which is a trade-off. If you open a barber shop, you only need to compete with the local barber shop, but if you develop a search engine, you will compete with the whole world.
However, for ordinary enterprises, competition is not the most important thing to protect them, but the difficulty of putting forward innovation. If you open a bar in a specific community, geographical restrictions protect you from competition and also limit your development potential, so geographical restrictions indirectly define your bar. Bar+community is a good idea to start a business. Of course, such a company will be restricted by A? Can't attract many customers. Your obstacles not only protect you, but also limit you.
On the contrary, if you want to start a business, you may have to come up with some novel ideas. A startup company must be able to launch products that can be put into a huge market; And such ideas are so valuable that all obvious excellent ideas are put into practice.
Generally speaking, the idea of starting a business has been thoroughly chosen by all kinds of people, so it seems that a startup needs to do something that others ignore.
I originally wanted to say that you must consciously look for the entrepreneurial direction that others have neglected. But in fact, most startups don't start like this. Usually startups succeed because the founders are different? Can find other people's thoughts that look unusual.
Maybe when they look back in the future, they will find that their original idea is really a blind spot for many people, and then try to stay in that area from then on. But when those successful startups started, most of the innovations were unconscious.
The difference between successful founders is that they can see problems that others can't. Being good at technology and being able to solve a problem with technology are a very good combination. Because of the rapid development of technology, bad ideas have gradually become very good ideas.
Larry Page and Sergey Brin want to search web pages, but unlike most people, they have technical expertise, and both notice that the existing search engines are not good enough, and they also know how to improve them.
In the next few years, everyone encountered the same problem. With the development of network technology, you have to choose a better search engine. At this time you will find that the old algorithm is not good enough. When people realize the importance of search engines, Google has become the overlord in this field.
This is the connection between entrepreneurial direction and technology. Rapid changes in one field will reveal and solve major and solvable problems in other fields. Sometimes these changes are far ahead, and they change whether a thing can be solved. As far as Google is concerned, the most important change is the rapid growth of web pages. The change is not solvability, but market size.
rate
How fast does a company need to grow to be considered a startup? There is no clear answer here. "Entrepreneurship" is a pole, not a threshold. At the beginning, starting a project is almost equivalent to issuing an ideal declaration. You should not only devote yourself to starting a company, but also start a fast-growing company, so you must look for this type of idea.
But at first, all you have is a new belief. In this respect, starting a company is like being an actor. Actors are poles, not thresholds. At the beginning of his career, an actor is a waiter who keeps auditioning. The first step to success is to keep looking for a job, but only when he is unsuccessful can he be called an actor.
So the real question is not how fast startups should grow, but how fast successful startups often grow. For founders, this is not just a theoretical question, because it is equivalent to asking whether they are on the right path.
A successful company usually has three growth stages:
1 At first, startups wanted to know what they were doing. At this stage, the company's growth rate is very slow or no growth.
When the startup company has understood what most people want and how to reach these people, it has ushered in a period of rapid development.
Finally, a successful startup will develop into a big company, and the growth rate will slow down at this time, partly because of internal restrictions and partly because the market the company serves has begun to limit its development.
These three stages form an S-shaped curve. What really determines a startup is its growth in the second stage, and its length and slope determine how much development the company will achieve.
The slope represents the growth rate of the company. If there is one figure that every founder should know, it is the growth rate of the company. It is an indicator used to measure startups. If you don't know this number, then you don't know whether you are living well or not.
When I first met the founders and asked them what the growth rate was, sometimes they would tell me, "We add about 65,438+000 new customers every month. This is not the growth rate. What we are concerned about is not the specific data of new customers, but the ratio of new customers to existing users. If you really get a constant number of new customers every month, then you may be in trouble, because it means that your growth rate is declining.
At Y Combinator, we calculate the growth rate once a week. In YC, a good growth rate is 5-7% per week. If it can reach 10%, you will do well. But if it's only 1%, it means you haven't figured out what you're doing.
The best way to calculate the growth rate is revenue. For startups that have not yet obtained revenue, another method is active users. The rationality of this is that whether a startup starts to make money or not, its revenue may be a certain multiple of its active users.
compass
We usually advise startups to choose a growth rate that they can achieve, and then what they have to do every week is to try their best to complete it. The key word is "JIU". If they decide to increase by 7% every week and finish it, then they have succeeded this week and there is nothing else to do. But if they don't achieve their goals, they will fail in the only thing they want to do, so they should be careful.
Programmers will know what I am talking about. We turned entrepreneurship into an optimization problem. Anyone who has tried to optimize code knows that concentration can bring very high efficiency. Code optimization means changing existing programs to consume less resources, usually time or memory. You don't have to understand how the program works, just make it run faster. For most programmers, this is a very satisfying job. Concentration can make you feel how fast you can solve problems.
Focusing on achieving a certain growth rate can simplify the complex problems encountered in the process of starting a business. You can make all decisions around the target growth rate, and anything that helps to achieve the growth target is correct. Do you need to spend two days in the meeting? Should you hire another programmer? Should we pay more attention to the market? Should you attract some big customers? Should I add the x function? All this can be decided accordingly as long as it is centered on the growth rate you set.
Just because you measure the growth rate every week doesn't mean you can't think for a long time. Once you have experienced the pain of not meeting the standard (this is the only thing to pay attention to, but you failed), you will be interested in anything that can alleviate the pain afterwards. For example, you may want to hire another programmer. He may not contribute to your growth rate this week, but he may improve some new functions to increase customers next month.
But you really need to meet the following conditions to do this: a. The interference of hiring new people will not affect your short-term goals; If you don't hire new employees, you have every reason to worry that you won't be able to achieve your goal.
It's not that you don't need to think about the future, but think within the normal range.
In theory, this mountain-climbing growth model will bring trouble to startups. They may stop at a local peak, but in fact such a thing has never happened. Every week, we must reach a certain growth rate, forcing the founders to take action, and the probability of success in action is always higher than that of inaction.
Nine times out of ten, waiting for a strategy is just another form of procrastination. Founders' intuition about which peak to climb is often better than they think. In addition, the idea of starting a business is not isolated, and most good ideas often have better ideas next to them.
Even better, constantly optimizing and focusing on growth can actually help you find better entrepreneurial ideas. You can think of the increasing demand as the pressure of innovation. If you need to constantly adjust your initial plan to keep growing, for example, the weekly growth rate is 10%, then in the end, you will find that your company may be completely different from what you originally wanted to do. But any entrepreneurial idea that can keep you growing at a rate of 10% per week will definitely be much better than your original idea.
Similar to small businesses, bars are defined by constraints located in specific areas, and startups are defined by continuous growth at a certain speed.
Usually, try to follow the objective situation and take you where, instead of being limited by the initial assumptions. Just as scientists should follow the guidance of facts, not the results of their own assumptions. Richard. Feynman said that the imagination of nature is stronger than that of people. What he means is that if you always follow the facts and the truth, you will find more and cooler things.
For startups, growth rates are like facts and truth. At least part of every successful startup comes from the imagination of product growth.
valence
It is very difficult to find a product that grows by a few percentage points every week, but if you find it, you are likely to find something very valuable.
If a company grows by 1% every week, it will grow by 1.7 times one year later, while a company grows by 5% every week and grows by 12.6 times one year later. A company's monthly income is $65,438+0,000, increasing at a rate of 65,438+0% per week. After four years, the monthly income reached $7,900, less than the salary of an excellent programmer in Silicon Valley. And a startup that grows by 5% every week can earn $25 million every month after four years.
Our ancestors must have rarely encountered exponential growth, because there is no such thing in our intuition. The rapid growth of startups sometimes even surprises the founders themselves.
Small changes in the growth rate will produce qualitative changes. This is why we have the word "startup" and why startups do things that ordinary companies don't do, such as financing and being acquired. Strangely, this is why they often fail.
Think about how valuable a startup can be. If its failure rate is not high, people familiar with this expectation will be surprised. This means that at any time, the vast majority of start-ups will devote themselves to areas that cannot succeed at all, and still praise their efforts with the grand name of "entrepreneurship".
This doesn't make me uncomfortable. Like other professions with high beta coefficient, such as actors or novelists, I have long been used to it. But it seems to bother many people, especially those who have started ordinary companies. Some people wonder why these so-called startups can get everyone's attention, especially in the case of small achievements.
But if they stepped back and saw the whole picture, they might not be so angry. The mistake they are making is to judge startups according to the median rather than the average. Judging from the median of startups, the whole concept of startups seems to be a scam.
You have to create a bubble to explain why founders want to start a business or investors want to invest in them. However, in a field with so many variables, it is wrong to use the concept of median. If you look at the average income instead of the median, then you can understand why investors like them. If they are not middle-value people, then their choice of starting a business is a rational choice.
Jiaoyi
Why do investors like startups?
Evaluating any investment is a question of risk-return ratio. Startups can pass this test because they have great investment risks, but once they succeed, the return is very high. But this is not the only reason why investors like startups.
Generally, companies with slow growth can also have similar risk-return ratio, because the risk and return values are relatively low. So why is VC still only interested in high-growth companies? The reason is that they can get a return by recovering their capital, especially after the IPO of a startup or when it is acquired.
Why did the founder get VC investment? Still growing. The restriction between good creativity and rapid growth is two-way. You don't just need an idea that can scale up and grow. If you have this idea and don't develop fast enough, your competitors will catch up soon. Slow development is especially dangerous for a company with internet effect, and the best startups have a certain degree of internet effect.
Almost all companies need a certain amount of start-up capital. But startups usually raise funds when they are already profitable or can be profitable. It may seem foolish to sell the shares of a profitable company because it looks more valuable in the future, but it is better than buying insurance.
Fundamentally speaking, this is the way the most successful startups look at financing. Companies can use their own profits to achieve growth, but extra money and help from venture capital will make them develop faster. Financing allows you to choose the speed of development.
The most successful startups can often use funds to achieve rapid growth. Because VCS needs them more than they do. If you like, a profitable startup can use its own income to develop. Slow growth may be a bit dangerous, but slow growth won't kill them.
However, venture capitalists need to invest in startups, especially the most successful startups, or they will lose their jobs. This means that any promising startup can get enough funds that they can't refuse. Because of the successful scale of start-ups, venture capitalists can make money from such investments. You can't believe that your company can achieve such a high growth rate so successfully, but some companies have done it.
There are also many successful startups that will receive offers from other companies. Why? What makes other companies want to buy these startups? Fundamentally speaking, this is the same as everyone wants to get shares in a successful startup: a fast-growing company is very valuable.
But acquirers have more reasons to buy startups. A fast-growing company is not only valuable, but also dangerous. If it continues to expand, it may expand into the acquirer's own field. Many product mergers and acquisitions are partly due to this concern. Even if the acquirer is not threatened by the startup itself, they are afraid that their competitors will buy them. Because startups have dual value to acquirers, they are usually willing to pay more money than ordinary investors.
Rational solution
Founder, investor and purchaser form a natural ecosystem. The effect is good, but laymen often engage in conspiracy theories to explain some things. Just as our ancestors explained how nature works, there is no conspiracy theory to explain everything.
If you want to know about startups, you need to know about growth. Growth drives everything in the world. Growth is exactly why startups are usually technology-based companies. Because the entrepreneurial direction that can grow rapidly is really rare, the best way is to find some changes in recent years, and technology is the best source to drive change.
Growth explains why it is a rational choice for so many people to start businesses: growth makes successful companies so valuable that the expected value of entrepreneurs is still high despite the huge risks.
Growth is also the main reason why venture capitalists are willing to invest in startups: not only because of high returns, but also because investing in startups will be easier to supervise than investing in stocks to get dividends.
Growth explains why most successful start-ups can still get investment from venture capitalists even if they don't need much capital: capital allows them to choose their own growth rate.
At the same time, growth explains why most startups receive many acquisitions. For the acquirer, a fast-growing company is not only valuable, but also dangerous.
Not only do you want to succeed in a certain field, you must understand its driving force. Understanding growth is an integral part of the essence of a startup. When starting a business, what you really do is to solve problems that are more difficult than ordinary companies. Your task is to find some rare ideas that can grow rapidly. Because these ideas are very valuable, they are hard to find.
Entrepreneurship is the carrier for you to explore this matter. Starting a business is very similar to your decision to be a researcher: you don't need to solve any specific problems; You are not sure which problems can be solved; But you are committed to exploring the unknown. The founders of startups are actually similar to economic researchers. Most people can't find anything great, but some people have found the theory of relativity.
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