Newsletter #30: Why start a startup?
7 minutes reading time. Thoughts on startups, growth, and technology 🚀
Welcome to another edition of the Struggle.
The Struggle is a weekly newsletter where I share my thoughts and learnings from running a fast-growing startup in Southeast Asia.
A few weeks back, I wrote an essay on where good ideas come from, today, I want to follow a similar chain of thoughts and discuss why would anyone start a startup.
On the one hand, starting a company, it’s easier than ever before (cost-wise):
Source: HubSpot introduced this data at its latest accelerator program called Elevate, where Greenhouse participated.
The image shows a breakdown of your approximate costs of starting a company back in 2006 and what the costs are today.
On the other hand, as per the image below, the number of new companies has increased considerably.
Source: HubSpot’s Elevate program. Please note that this data is primarily focused on marketing solutions.
The cost of starting has drastically decreased, but that has led to an increase in the number of people starting companies.
The outcome is that we have a lot more people competing for the same marketing channels. Hence, if you do not have 1) a strong product-market fit and 2) a product designed with growth loops, it gets costly to acquire users.
Another worrisome fact is the number of startups failing to raise a following round of funding. On average, 67.6% of startups fail to raise a consecutive series, and 81.2% fail to exit.
Source: HubSpot Elevate program
Meaning, it has never been easier to start a company, but it has never been harder to be a scale-up.
To top it all, if you are a talented person, it’s relatively easy to get a job and make a large salary. Many large companies offer opportunities to work on exciting problems that occur at scale and will compensate you very well for your effort.
Then why would you even embark on such a challenging journey with little prospect for success?
According to Michael Seibel (Partner and CEO of the Y Combinator startup accelerator program), the answer is the following:
"there is a certain type of person who only works at their peak capacity when there is no predictable path to follow, the odds of success are low, and they have to take personal responsibility for failure (the opposite of most jobs at a large company)."
Starting a tech startup is risky and hard, successful outcomes are not guaranteed, but it’s one of the most challenging things you can choose to do.
Most probably, there are three sets of people who have the necessary traits to start a company and would not regret the process:
The only thing they can do is to work on a radically entrepreneurial job - such people would not enjoy working in a big company.
People who want to be challenged by work - such people, fit both startups and large companies.
People who continuously want to optimize a process or a product - once again, such people can be a good fit for both large and small organizations.
In my view, I am part of the second category.
I got my first job in the hospitality industry, where I worked in various roles in the span of seven years. That path resulted in career opportunities across four countries (Bulgaria, Denmark, Greece, and Taiwan). Eventually, I got offered a great job at Accor, one of the world’s leading hotel chains.
Considering that my parents have humble beginnings and never experienced such a career across several countries and managerial opportunities, I was tempted to take it.
But then something happened. In 2013, my university organized a startup competition that was mandatory for my class. That was my first exposure to the startup world, and I felt challenged like never before. I was performing at the peak of my capacity and could directly see the impact of my work.
Ever since then, I have been working on startups and do not consider having a different career path. The combination of impact, challenge, and accountability resonate with me.
Nowadays, whenever choosing what to work on, I like to think of Richard Hamming’s quote on how you decide what to work on:
“what are the important problems in your field, and why aren’t you working on them?”
Startups are tough but offer incredible growth opportunities as you are pushing your limits, learn, and start understanding better the difference between what is impossible and possible.
Resources worth checking out:
🎥 A Decade of Learnings from Y Combinator | Michael Seibel - Michael Seibel is CEO and a partner at Y Combinator and co-founder of two startups – Justin.tv and Socialcam. He has been a partner at Y Combinator since 2013, advised hundreds of startups, and has been active in promoting diversity efforts among startup founders. Hear his take on the future of work with a decade in learnings from YCombinator.
📝“You and Your Research” / Richard Hamming - For many years, Bell Labs ran an internal speaker series known as the Bell Communications Research Colloquia Series. This particular talk, given by Dr. Richard W Hamming in 1986, was focused on answering one question: “Why do so few scientists make significant contributions and so many are forgotten in the long run?”
A quote worth remembering:
💬 A quote by Reed Hastings (CEO of Netflix) on humility, from his new book “No Rules Rules: Netflix and the Culture of Reinvention”:
A book recommendation:
📖 The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg
At its core, The Power of Habit contains an exhilarating argument: The key to exercising regularly, losing weight, raising exceptional children, becoming more productive, building revolutionary companies and social movements, and achieving success is understanding how habits work.
Positive news worth sharing:
After significant declines at the end of the last century, the number of rhinos is finally rising. It’s thanks to massive conservation efforts, anti-poaching measures, and a global shift in attitudes. The slaughter of these beautiful animals is no longer prized but condemned.
Check out the source here.