Saturday, May 3, 2014

Startup = Growth by Paul Graham (Summary)

Startup = Growth - everything else is ignored.

Startups are all about growth and can scale.  A barbershop is not a startup b/c it can’t scale.

Growth of a successful startup usually has 3 phases:
 a) There’s an initial period of slow or no growth while the startup tries to figure out what it’s doing.
 b) As the startup figures out how to make something lots of people want and how to reach those people, there’s a period of rapid growth.
 c) Eventually a successful startup will grow into a big company.  Growth will slow, partly due to internal limits and partly because the company is starting to bump up against the limits of the markets it serves.
(these together produce an S-curve)

Calculating Growth Rate = Ratio of new customers / existing ones.

A good growth rate at YC is 5-7% per week, if you hit 10% a week you’re doing exceptionally well.  If you’re at 1% then you haven’t figured out what you’re doing.

If pre-revenue, the next best thing to measure is number of 'active users’

At YC, they pick a growth rate they think they can hit and then just do that.  This becomes an optimization problem, and this narrow focus can be very effective, because you don’t have to think about what the program should do, just make it better.  For most programmers, this is very satisfying work.  The narrow focus makes it a sort of puzzle, and you’re generally surprised how fast you can solve it.

Focusing on hitting a growth rate:
 - narrows startup down to a single problem
 - use growth rate to make all of your decisions for you (should i spend 2 days at a conference, hire another programmer, focus more on marketing, spending time w/ big customer?)


weekly growth yearly company size
1% 1.7x
2% 2.8x
5% 12.6x
7% 33.7x
10% 142.0x

Founders, investors and acquirers form a natural ecosystem.

The reason Facebook bought Instagram was that it was valuable and dangerous, and what made it so was growth.

Understanding growth is what starting a startup consists of.  

"A startup founder is in effect an economic research scientist.  Most don’t discover anything that remarkable, but some discover relativity.” - Paul Graham

No comments: