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Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
There's no evidence that this is the case.
Indeed, after founders are acquired their fierce competitive spirit and drive often starts to dissolve once the founders have gotten their exit and the teams run into the inevitable corporate realities that exist when teams are merged / integrated into a new culture.
Simply "offering more" does not address the reason why there aren't more Googles.
The hard truth is that technology incumbents fiercely defend their space making it very hard for new entrants to compete. Strong entrants either get acquired, and merged into the Borg, or are sidelined as the incumbents defend their turf sometimes through enhancements to the product / feature set, but often through somewhat anti-competitive actions that bar entry from new entrants.
While I would like to think the world is a meritocracy ("let the best product win"), the truth is far from that. And I think a lot of this piece from 2008 rests on half-truths and wishful thinking.
I know lots of founders will read this, please for the good of humanity stop being acquired. I know the money is so alluring, but how much is your soul worth and will that money make you happy? The future of humanity depends on tech people making tiny principled stands like this over and over. Donât believe the lies spewing out from the acquiring company. Nothing will ever be the same again and your product will be either killed or mutated into something hideous. Read the WhatsApp and Oculus and Nest stories over and over again.
While I totally agree with this comment, especially from experience knowing that the reality of an acquisition is far from the rosy picture promised to everyone, the truth is that founders and especially investors are motivated by the exit.
Some founders start their companies to be flipped. Some start with the intention of going for the long-game but find the reality of competing in the market exhausting and emotionally draining. Some realize that they won't be able to capture the market share they want. Other times internal strife or conflicts with investors get in the way.
There are many motivations for acquisition and the realities of the difficulties of startups make any good offer very appealing. It's very hard to resist.
One thing to help fix this is for the VC community to become more comfortable with (and even encourage) funding rounds which allow founders and early employees to get some liquidity from their equity. Taking a company from idea to IPO usually takes the better part of a decade (or longer), and it's pretty unfair to ask people who have already risked a lot to keep living on peanuts and hoping that some unforeseen situation which may be largely beyond their control doesn't send the value of their equity to zero before they get to IPO.
Related, does anyone think that founders believe the ârosy pictures promised to everyoneâ? Like you said, thereâs a ton of reasons for founders to want to sell, even ignoring the existence of investors who would obviously like a payout. Founders should known better than anyone exactly what theyâre agreeing to with an acquisition, but that doesnât remove the personal benefit.
More generally, I never really hear stories of founders stopping their work at a company that isnât after an acquisition or IPO. The alternative is the founder going âI am retiring and leaving this person in charge, but maintain my ownership of the company and will be taking 20% of the future profit in exchange for my 10 years building up this company.â Maybe it happens and we just never hear about it, but without some alternative for founders to cash out at the end itâs not surprising that selling the company off is what happens.
Somewhat ironically, Google is an example of two founders doing just this.
"...will that money make you happy?"
Yes. Very. More than you can imagine. Trading good work for great sums of money isn't selling your soul. No one is under a moral obligation to build something that benefits the future of humanity. Furthermore, the vast majority of startups (including the 3 mentioned) were arguably never going to be humanity-changing businesses regardless.
If this is a conversation worth having at least reference bio-science and space exploration startups that actually have a chance to change the world.
> I know the money is so alluring, but how much is your soul worth and will that money make you happy?
I _really_ don't understand this attitude. If someone offers me enough money so that I never have to work again, you expect me not to take it?
I'll sell any company if I could get $4 million after tax and never have to work again. Every single time I'll take that offer. I guess that's how much my "soul" is worth. And yes, that will make me happy!
Yeah, the only way I'm not selling my business in that scenario is if I'm already in a position where I don't have to work again.
To me it seems really preposterous and dishonest when somebody does NOT think like this.
We have one life. The time we do not spend with our children (or the time we postpone having them "for the greater good") can never be returned back.
Sanctimonious much?
The risk of a startup being acquired has also prevented me from buying startup's products, both personally and for my employers, because chances are the _"great news, we got acquired"_ is anything but great news for the actual customers. That announcement is usually the sign to start looking for alternatives.
Do you also not buy products from big companies? Because they also kill their own products or let them wither on the vine out of apathy.
Sure, but we're talking about probability here. Established enterprise products from large companies usually have a published roadmap and guaranteed support period years in advance. It may be a mediocre product, but a business knows Oracle isn't going to kill off their ERP system any time soon, and also knows the minimum sunset date for all versions and can plan updates & upgrades accordingly.
If Oracle ERP is your standard it might be hard to get anything modern. Thought experiment, for which product are you more confident about its longevity: Google Voice or Basecamp?
I'm just using Oracle ERP as an easy example. It's a spectrum though, Oracle ERP just happens to be on the far end of one side, while a < 2 year old startup or any new(ish) Google product is on the opposite end.
(Though even more established Google products that are not Search/Ads still never make it far past the middle)
How many people are buying Oracle ERP as a new purchase these days? Isn't that pretty much a legacy techology?
For a startup product to be "safe", the startup has to not go under (and many do) and also either not get acquired, or get acquired and have the product not change too drastically.
There's an awful lot higher chance of a startup product not being a "safe" buy compared to an established company to kill a somewhat popular product and you can always look at their track record before making a decision (something a startup, by definition, typically doesn't have).
No evidence this is "usually" true. It is sometimes true. It is also sometimes true that the acquired company thrives.
The deadpool of acquired companies runs very, very deep.
While it might not necessarily be true of 50%+ of companies that are acquired go into the deadpool, it's common _enough_ that an acquisition of a company's product that you use should cause you at least to make sure you have some sort of strategy to deal with a potential deadpool situation. Maybe it's not a guaranteed probability, but it is indeed very likely.
Sure. Agree completely. However it's worth noting that the customer-centric view, while valid, is rarely a good one. Companies are acquired b/c they are about to go out of business, because the IP is good, because the team is good, because the customer list is good, etc. Pissing off early customers is often the cost of growing the thing to its fullest potential.
This gets said a lot, but it's not internally consistent. If you are forced to piss off the people who love you, perhaps you shouldn't call it "growing". Call it "a pivot". You're taking a flyer for the _possibility_ of future growth.
>The future of humanity depends on tech people making tiny principled stands like this over and over.
Well put. And the reward? You + family/friends look back on your work with deep fondness & respect if you choose principles > acquisition $.
What about Instagram?
Acquired at 10mn users, not really used by anyone except SF hipsters.
Now a massive juggernaut and the same size (in MAU) as Facebook was when they acquired it.
And YouTube, and of course DoubleClick.
> The future of humanity depends on tech people making tiny principled stands like this over and over.
No it doesn't.
There are other stories like PayPal and the numerous new companies that came after. I'm much more in favor of having Tesla and SpaceX than not
>I know the money is so alluring
It's the only motivation. Why do you think wealthy and high income people fight so hard against repaying the society that educated them and provided the infrastructure to allow their business to flourish?
It's because most people want to believe that their success is due to their own specialness rather than some mix of luck and prior circumstances.
I forget where it came from-- I thin Warren Buffet but I can't source it now-- but there's a sort of thought experiment or anecdote about this: Give everyone in the US a dollar. Then randomly choose half the country and have them give their dollar to a specific person in the other half. Repeat this process with the remaining people until there's only 340 people that each have a million dollars, then talk to those 340 people: You'll have 340 stories of how they personally overcame the odds and beat out everyone else to become a millionaire
Absolutely. There are studies where groups of people were examined while playing "Monopoly", but some players started with a massive money advantage. If (usually when) they won the game, they attributed it to their own skill at the game, not the massive advantage they had at the start. Being wealthy fucks up people's brains.
People are capable of saying one thing, and thinking another. I do it all the time, mostly for political purposes. There are many times where it is not in my interest to tell others what I really think, and I assume other are also not playing the game with all of their cards showing.
I.e. I assume people know the role luck plays in life, but are also not interested in the consequences of acknowledging that, and/or are interested in the consequences of pretending like they deserved it.
This is known as preference falsification (
https://wikipedia.org/wiki/Preference_falsification
). It's something interesting to think about. I often try not to falsify my preferences, even if people don't like me because of them.
A minimal amount is preferred. But at the end of the day, itâs a very good tool to deal with allocation of resources. Itâs also the definition of politics.
People do it all the time with friends and relatives. You donât up front tell someone theyâre only worth 10 min of your time, or you prefer visiting someone else in your free time. But you make up excuses or stretch some truths to give both parties plausible deniability, which allows everyone to save face.
Workplace politics is the same. You have a limited amount of time and energy to devote, so you will have to sacrifice some coworkerâs or managerâs priorities for other colleagueâs priorities. But youâd be foolish to tell them up front. Enter workplace politics, where you have to figure out whose aligned with who and for what purpose do you can figure out your next move.
The more scarce/valuable the resource, the more politics comes into play. And if it gets too scarce/valuable, it will end up in violence/war.
Being able to navigate these signals is a crucial factor to succeeding in society, in my opinion.
>> Why do you think wealthy and high income people fight so hard against repaying the society that educated them and provided the infrastructure to allow their business to flourish?
Sorry, but I'm not seeing it. Here is a list of the Giving Pledgers:
https://en.wikipedia.org/wiki/Category:Giving_Pledgers
.
They have all committed to giving more than half of their wealth to charity. 5 of the 10 richest Americans are on that list. It amounts to around $1.2 trillion.
>> Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
> Simply "offering more" does not address the reason why there aren't more Googles.
You must put that advice in context...
The context here is that PG's job is to be the first investor in a company.
Advising potential acquirers to raise the offer can only grow his personal return.
It makes _perfect_ sense for PG to encourage potential acquirers to throw more money at startups.
It makes a lot more sense from a 2008 perspective. Google IPOed in 2004 for 2-3% of its current market cap. The tech monopoly dynamic wasn't where it is now.
Also, he turned out to be right. Acquisition prices (eg fb acquisition of whatsapp, IG, etc) went up. Investors made a lot more small bets. A lot of "new Googles" got made. That may be played out already, but this is 12 years later.
> A lot of "new Googles" got made.
Such as?
Half-truths and wishful thinking are the fuel of VC and speculative economics
Paul Graham is one in 7 billion who stands out among billions of lesser educated.
Heâs not a savant. His biggest success is early mover in a tech enabled society.
Thatâs not visionary, thatâs following the social meme and being there at the right time.
Visionary in contemporary society means coming up with the next big thing itself; unifying scientific theories. Not seeing half-truths of reality in cherry picked stat bubbles of finance. Thereâs been no prediction of relevance just repeated habit
Billionaires are nothing more than gamblers who are propped up by monopolized politics.
> Billionaires are nothing more than gamblers who are propped up by monopolized politics.
Also monopolized capital. Lots of people understood the prospects of the "internet" market. The question is who has access to capital and political protection.
Amazon could have been shut down when the dotcom bubble burst like so many other companies. How were they able to maintain funding/capital for nearly 20 years without making a profit? Amazon could have been shut down in the 90s if they were forced to collect taxes. How were they able to ward off paying taxes for so long? Why was amazon afford such capital/political shelter?
It's a matter of markets and who gets a share of the markets. Historically, it was people with connections. The right school, right family, right race, right nationality, etc. Now I'd say who has connections to capital though school, family, race, nationality, etc plays a role.
>Billionaires are nothing more than gamblers who are propped up by monopolized politics.
But if the success of a billionaire isn't entirely related to their singular genius and effort, what does that mean for me and my chances of success? It's uncomfortable to think about that so instead I'll pretend it really is only about their singular genius and effort and that means I can get there too some day. :)
Define success? If itâs material wealth from a social stand point look at the decades of math; itâs monopolized.
Thereâs always been a hierarchy; those lead to water are whacked into looking no where else for it.
Be pious.
Be materially rich.
Different words for chemical addiction to aligning with social memes.
Weâve seen the brain can rewrite itself to adapt to acquired handicaps. Is it so hard to believe it canât adapt to a less industrialized pressure on time economy and still feel fulfilled?
Map/Reduce, deal with it. Ultimately 1 in 7 billion is a shared identity none of us can escape. New logistics models should not be ignored for old ones.
I agree and logically it makes no sense, since what is the limit?
Theoretically everyone will sell at some point and the above argument can be made in each and every case.
Let's say Yahoo had offered Google $1B, and Google declined, Yahoo ups its offer to $2B, Google still declined.. this can go on forever till we reach Yahoo's maximum capacity to pay and if Google still declines with: it's not enough - the above argument would still hold.
Thus, IMHO, the above argument has no merit. While price is certainly a very important factor, there are always other underlying issues as to why some sell and others don't.
I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure.
This turned out to be absolutely right, and the < $2M checks have ballooned in volume. They are invested by firms that do not take board seats and do comparatively less due diligence.
That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets.
> That said with the benefit of more hindsight I think the reason there are no more Googles is that FAANG has a stronghold on the largest technology markets.
And the FAANGs _are_ willing to pay very large amounts of cash to acquire promising startups.
EDIT: Also why is it that the majority of the large tech companies are essentially marketplaces? Is there really that much friction in traditional markets (physical goods, movies, books, ads[!], apps) to fund their spectacular rise?
I would say yes. Ronald Coase did some excellent work to explain how transaction costs get in the way of optimizing economic activity among and within firms. Traditional marketplaces would clearly have higher transaction costs than these newer marketplaces. Search costs are much higher, coordination costs are much higher, and data analysis is much harder. Tech has a huge advantage in making all three of these things much lower and thereby making transaction costs much lower. Heck, just by not accepting cash, I bet they make transaction costs significantly lower than the traditional marketplaces. Heck, just by not having to operate point-of-sale card swiping devices, I bet they significantly lower the transaction costs too.
He won a Nobel Prize if that matters. I think his two seminal works, âThe Nature of the Firmâ and âThe Problem of Social Costâ do really well to explain why tech is winning so much compared to traditional marketplaces. Especially âThe Problem of Social Costâ, which explains how externalization of transaction costs creates advantageous and unfair effects.
I like the Coasean analysis. Now someone needs to build the Uber for unifying affected populations to demand rents for suffered negative externalities.
Yes.
Although thatâs basically just a competent, empowered, uncorrupted government. Still working on that one...
I would be happy with just competent. Would make a nice change
Because in a tech gold rush, nobody wants to dig out gold, or even sell shovels - everyone wants to get rich by renting shop space to shovel sellers.
_> everyone wants to get rich by renting shop space to shovel sellers._
That would entail having to own and maintain physical assets (assuming you mean physical shops rather than virtual shops). Isn't the preferred model now to be a "technology platform" that connects people with available shovels to people in need of shovels?
I meant renting virtual shops - i.e. being the platform. This was a riff off a popular saying that during the gold rush, it's not the people who went looking for gold that got rich, but those selling shovels and pickaxes.
Isnât it Paul Graham who also wrote a blogpost saying âHow to make a trillion dollars? Build a platform.â ?
> Also why is it that the majority of the large tech companies are essentially marketplaces?
They're not.
Non marketplaces: Apple, Microsoft, Huawei, SAP, TSMC, ARM, Intel, Samsung, SK, Cisco, Nvidia, AMD, IBM, Texas Instruments, Salesforce, Oracle, ASML, NXP, Netflix, Zoom, Dell, VMWare, Adobe, Applied Materials, Broadcom, Micron, Qualcomm, Intuit, Foxconn, Snapchat, Ant Financial, PayPal, Square, Stripe, Fiserv, Ericsson, Tesla, SpaceX, Activision, Electronic Arts, Nintendo, Sony, Twitter, Lenovo, HP, HP Enterprise, Lam Research, ZTE, Xiaomi, Western Digital, Seagate, Workday, ServiceNow, Veeva, Analog Devices, Canon, Spotify, Datadog, Cloudflare, Akamai, CrowdStrike, Elastic, DocuSign, Okta, Palo Alto Networks, Atlassian, Twilio, Fortinet, MongoDB, plus a hundred other companies.
Mixed marketplace conglomerates: Google, Facebook, Tencent, Baidu, ByteDance.
Marketplaces: Amazon, Alibaba, eBay, Etsy, Shopify, Craigslist, MercadoLibre, Uber, Lyft, Didi, Pinterest, Booking, Upwork, Fiverr, Redfin, Zillow, Expedia, Trip.com, Yelp, TripAdvisor, Groupon, and a few other small players.
It's not close at all, marketplaces are the modest minority of large tech companies, both in terms of market value and particularly when it comes to sales (giants like Sony, Dell and HP have relatively smaller market values and massive sales and large numbers of employees).
Many of those are hardware/network companies. They don't necessarily fall into the type of startups being funded now or going forward. Companies like Cisco are important but they represent the past.
Apple, Nintendo is a mix.
Paypal, stripe, square are products for marketplaces.
Netflix is a pass to a movie marketplace. Same for spotify. Groupon is a marketplace.
How is netflix a movie marketplace?
I think supermarkets are well run because they are highly competitive and you go every week so if you see it as a prisoner's dilemma where they "fulfill the brand promise" or "don't fulfill the brand promise" they get punished then they don't fulfill it so they have a reason to fulfill it.
Thus Amazon is going to have a really tough time in that sector, but other parts of the retail sector tend to have you come into the door infrequently enough or are in uncompetitive markets so that they don't get punished for failing.
It's too common for people to blame the victim here, or say that people are asking too much but that's just plain wrong.
Some examples:
* That time I went to K-Mart to buy three numerals for my mailbox but they didn't have the "2" in stock.
* That time my wife bought a bra at Target that had a nice print but had a completely nonsensical design that wouldn't be comfortable on anyone
* Buying clothes at Target can be really hit or miss. I bought a shirt there once that was great but so often I find things that don't really fit, are poorly constructed, I can't stand the style.
* Same with shoes at WalMart. At best you might go there and find a $20 shoe that is similar to an $100 shoe from Brooks, not quite as good, but certainly not five times worse. Sometimes they only have crap
* Inevitably in the early spring I still need cold weather equipment such as electric space heaters (sometimes desperately, as in to keep animals alive) but Home Depot, Agway and all of those other stores quit stocking it.
* Small storeowners decide they won't get any customers in their last hour so they go home early; so they've decided that the customers that do come will go to a big box store next time
* Years ago Staples used to stock only junk brands for cordless phones and similar things (e.g. vtech); today Amazon pushes no-name products from Chinese suppliers which are occasionally excellent but often junk
A common factor in those failures is that the stores don't get feedback. K-Mart never knew they lost the sale of a "4" and "7" because they didn't get "2". The small storekeeper doesn't realize that "nobody will come in" is a self-fulfilling prophecy, etc.
People also discount the idea that "the customer is always right" to normalize bad behaviors such as not stocking space heaters when you need one right now for your chicken house -- somehow it is my fault for needing heat at the end of the cold season instead of the beginning.
>People also discount the idea that "the customer is always right" to normalize bad behaviors such as not stocking space heaters when you need one right now for your chicken house -- somehow it is my fault for needing heat at the end of the cold season instead of the beginning.
This doesn't make any sense to me. Stores have limited space for inventory, and they have to make decisions about what the best use of that space is. It's very well possible it the probability of earning a profit on a heater at the end of a cold season is too small to merit stocking it. The store has no obligation to provide you with what you need at exactly the time you need it, so the concept of "fault" doesn't make sense to me in this scenario.
"Customer is always right" is a nonsense saying in my opinion. I always have informed my staff to show the customer the door if they're unnecessarily wasting their time.
>Also why is it that the majority of the large tech companies are essentially marketplaces?
They may earn money from a marketplace, but the reason is not because they have a marketplace. They earn money because one they did or do something that others can't or were too late to, such as creating hardware and software people want, creating and operating online services people want (Maps, Cloud Services), infrastructure for retail, or a network where everyone is and can provide some level of proof for identity or credibility.
> And the FAANGs are willing to pay very large amounts of cash to acquire promising startups.
But I think FAANGs also drain the talent pool for startups by paying very high salaries (& partially equity) to employees such that startups have a hard time to competing on this level. At least it feels it's getting worse than, say, few years ago.
Those high salaries though arguably just allow people to build nest eggs to go the startup route whenever they want.
The real challenge is that, rationally, startups an extremely large gamble on a lottery where your expected value is < 0. Most startups fail or take too long to get acquired and, unless youâre a founder/invested, youâre not seeing the really big amounts that make it really worth it (and sometimes even then). Fundamentally the challenge is that as a regular employee (even early) your stake is too small. I think startups can attract talent more easily by taking the salary disparity and matching it with stock (ie if youâre making 300k and the startup is paying 150k, for the first few years the startup should treat you like youâre investing at least 100k into the company because that is what youâre doing with your time).
As an anecdote, I have a friend who was working at a startup that got acquired by Google recently (heâs a Staff SWE so heâs making really good salary). He noted if he had just stayed at Google instead of working at a few startups over the years he would have been at least break-even or better based on salary + google RSU performance over that time. My personal experience with startups was a bit different. While the acquisition I went through was larger for me at the time, the biggest impact was that it pushed me into a far higher salary band. Startups and smaller companies can be a better way to âlevel upâ some times than the traditional corporate ladder climbing.
By the time they have the nest egg, it's too late to launch a startup without hiring people who FAANG are competing for.
Itâs not unreasonable by the time youâre 30 or 40 that you have sufficient funds that the team or project is more important to you than a salary for a few years, especially since itâll always be there later anyway.
Not following, why would they not need FAANG-qualified engineers now but they would later?
My theory is that the big firms can do this because those relatively fixed lob or costs over huge user bases. Smaller companies just donât have the leverage.
I also think this applies to internal applications at huge enterprises. The number of users for any given internal application is small, so you canât spread the development costs out very far. You have to connect the initiative to something that impacts the whole firm, the whole customer base to really invest in it. Even then youâre dealing with a user base that is way smaller than the big tech firms enjoy, so you still get outspent... unless you have dramatically better margins.
They also have a stronghold on a lot of the talent that would make the next big thing.
As in they buy them out. There should be a more laws preventing this from happening for large corporations.
We now see that Google Search is turning more and more to AI. Perhaps if Google didn't buy DeepMind, but some other smaller competitor did, they could've turned that into an advantage against Google.
Either way, it was a loss for the market for DeepMind to be bought by Google instead of forcing Google to come-up with its internal competitor.
Companies with billions in profit should be "incentivized" to use that money to create their own competitors against threats - not buy them all out (often just to kill them). I think we can all argue that large companies buying out small competitors is a net negative for the economy at large.
No, companies that have billions in profit have grown too big : they can just use regulatory capture to ward off real threats.
The only thing that can be done is to prevent them from getting that big (economic incentives ? limited company life ?) or to shut them down completely (which needs enough popular support for a politician to do this kind of a risky move).
Regulatory capture only works if we vote in people who let them do it. Itâs not a much different issue to enforcement of rules that stop companies from getting too big or shut them down. The same thing that does or doesnât let regulatory capture happen also stands in the way of any other government attempt to control the companies.
I've noticed that regulatory capture by lobbies generally happens as a long-term process. Public opinion quickly gets tired/bored of a specific issue, while lobbyists _never_ stop pushing.
On the other hand, a politician that makes one of his/her main goals to shut down (or block if not in US) the GAFAMs (or any other giant company), might be actually able to make a real and long-lasting change.
(Or the other way, to change a few of the most important laws that describe how ALL companies can function â also could be a main policy point.)
Yes, thought I think the smaller $ amounts have also been helped along by reduced startup costs. Heck, a startup can literally get $100,000 of AWS credit for free. In manufacturing terms that's like getting the factory for free, you just have to configure the assembly line to build your specific product. So $400,000 will go a lot further these days than it would have 20 years ago.
20 years ago, you'd be competing with much smaller salaries from the big tech companies, which would make recruiting much easier. If you meet some smart people in college, you could more easily convince each other to try building something together, especially if they're averse to corporate 9-5 culture. Whereas now it's pretty likely that they'll have their eyes on FAANG jobs.
Good point, that's true. The lack of FAANG dominance at the time meant that labor cost would have been cheaper even before inflation. On the other hand, founders & early employees of startups often accept little or very reduced salaries on the prospect of large gains on exit, especially after the bubble burst & Y2K went away, leaving excess talent unused.
It would be interesting to analyze the difference between the lowered infrastructure costs against increased salary costs to see what the net $ effect was in terms of funding a comparable startup. If you were willing to ignore the increased cost of scaling if/when you hit the hockey stick growth and simply opt for a few co-located dedicated servers running a LAMP stack, maybe infrastructure costs would still have been low enough that the difference would be negligible. Although you might still have needed more dedicated expertise in dev ops to manage it, increasing salary... I'm not sure. I was in college 20 years ago and not very caught up in following startup culture until a few years later.
This seems to be in stark contrast to some of Peter Thielâs theses. Would love to know if someone can clarify that.
He argues since returns are distributed by a power law, more due diligence and fewer invests make more sense for VCs.
The truth is that regardless of how well put together a firm is, break-out success is a crap shoot. A VC strategy that maximizes potential revenue (by heavy due diligence) is almost always going to end up with lower actual revenue than a VC strategy that attempts to maximize actual revenue, by having a larger, diversified basket. If the terms of the initial funding give the VC first crack/options for later rounds, all the better.
Gee this sounds like the argument against managed funds, in favor of index funds.
Which firms filled the $400-$500k gap Paul Graham outlined the niche for? Not asking for a friend.
I would expect it's the category known as "micro-VC".
Well, yes, but do they have that stronghold on the future of technology markets? I'm less convinced of that.
Super interesting question. I don't know.
I suspect they will dominate all the largest technology markets for the long run, unless the government intervenes. I might be wrong.
They may not dominate the future of "technology markets", though, if the sum of the long tail dominates. Right now FAANG is 42% of the NASDAQ Composite 100.
I don't think they do, at least in the long term. In the short and medium term its arguable either way. We're still at the very beginning of the era of truly distributed computing and what it tends to do when it spreads is replace centralized entities with protocols.
If this sounds like a very played out line of thinking, that's because we're now in the trough of disappointment of the hype cycle. You can't expect any fundamental new tech to live up to its hype only a few decades after invention. Also not all the pieces needed have been invented yet.
They filled the feasible niches for "internet-based monopoly". The next Google will have to find another way to get big.
I remember a time when altavista was a the only serious search engine around. I recently switched from google to ddg on mobile because I got sick of clicking away the privacy waiver in private mode.
If ddg would deliver better search results then google search would be in serious trouble (although it may take twice as long as yahoo to die). Of course itâs unlikely because if the talent google attracts, but that was true for IBM in the 80s as well.
>FAANG
Where is Microsoft?
Using a different definition of Google than TFA :
We have discussed recently a huge issue preventing new Google-like web crawling competitors from emerging :
If you're not GAFAM(-like), and so aren't whitelisted, then anti-spam/DDoS filters like Cloudflare will simply prevent your crawler from working !
Are in some way robots.txt and those Cloudflare measures anticompetitive and/or against net neutrality?
_>Are in some way robots.txt and those Cloudflare measures anticompetitive?_
Article by Matt Wells from Gigablast on Cloudflare. Gigablast has one of the largest independent search indexes.
https://www.gigablast.com/blog.html
Oh, wow, and he mentions that Cloudflare has received up to $110M from Microsoft, Google and Baidu !!
https://techcrunch.com/2015/09/22/cloudflare-locks-down-110m...
While I generally agree with Matt about the anti-competitive behavior of said tech giants, I just want to point out that:
1.Contents of robots.txt is created by the site owner, not those giants.
2.robots.txt is generally non-enforceable, unless someone like cloudflare translates it into proxy/DDoS settings (and can also actually distinguish a real google bot from a fake one).
3.Above behavior of cloudflare would be very problematic (in anti-trust terms) if this is not what the site owner wanted to achieve by writing said robots.txt. Now this is a (m/b)illion dollar question: *What is the site owner actually trying to achieve?* Are they only going for the DDoS protection or do they actually want to restrict other crawlers? Is it even legal to restrict other crawlers?
From my limited experience I have come to several conclusions.
First, there isn't a very big short term incentive for site owners to tolerate an infinite amount of crawlers and they usually don't bother. Heck, most of the times you talk to a SEO specialist, they only talk about Google. It is somehow assumed that if your site is indexed well in Google, all the other search engines (Bing, DDG ...) will work automagically.
Second, there is this category of listing sites, where most of the value is in the database itself (e.g. LinkedIn, Craiglist, various property/car/younameit listings). They generally don't want to be crawled by their wannabe competitors. But is it legal to restrict anyone but Google/Bing? From a legal standpoint, one can explore the analogy between physical business and a website. There is public and private access. Public access is considered the case when people can just walk in into your office/store and "look around". You can take some measures against "misbehavers", but not allowed to restrict access to only "good" people. Furthermore, visitors are not bound by anything more than the country's law. On the other hand with private access you require a login and some form of a contract (e.g. ToS). In this case crawling and copying portions of the site may be specifically excluded in such ToS as long as it doesn't contradict the law.
There are still some problems left though. Once you are blocked by such a data aggregator then the burden of proof is on your side and since there still isn't a clear ruling about these matters[1], how many average Joes will take it to the court? And even if you file it, how do you know the line between crawling and DDoS?
[1] https://www.eff.org/deeplinks/2019/09/victory-ruling-hiq-v-linkedin-protects-scraping-public-data
Perhaps Google can be seen as a public utility like the phone wires, and has to provide access to its index
I've been working on a project that involves executing web crawling on a responsible scale but this has concerned me when I ramp to wider/regular fetching how will it be received by the web distribution mafia.
I recall last time i set up my own mail server that it was very hard to do it in such a manner that emails from it were not automatically listed as spam
>web distribution mafia [...] set up my own mail server
One of the tragedies of the tech powerhouses is that their decision making that effects the rest of us is often thinly-veiled power tripping that they've convinced themselves is for the good of everyone. When in reality, they just haven't delivered good enough software to eliminate the problem entirely.
It's like a large scale version of a bad corporate computer security team. They can't quite design all the inconveniences out of their "solutions." Which is normally fine (after all what software and/or human-managed process is perfect the first time?), but out of a refusal to admit to their limitations they've convinced themselves that bureaucratic interactions with them to get day-to-day work done are necessary and important features of the design.
There are genuinely technical challenges with no good technical solution, so political ones are employed. But sometimes you start getting too many middle managers that think the answer to every problem that requires systems thinking is just more self-assured tough-talking or "we could make more money by NOT fixing this." And then suddenly all the nice properties of the system slowly start disappearing or have conditional access gates.
No. The reason there are few FANGS is that they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases.
This means winner-takes-all. There were others, but they did not grow users as fast, so they lost.
Another thing to point out is that while search and ads is Google's revenue, with chrome, gmail, android, etc they are achieving a form of lock-in. If anyone else "owned" these surfaces, replacing their search box would be much easier.
The spread risk investment strategy is also correct, since the value of any platform market is low before the winner emerges. After the winner emerges, the value of that platform is the value of the entire market.
> they are platform businesses, and the value of their services is proportional (or more?) to the size of their user bases.
I don't have much to add here, but this is known as a _network effect_.
https://en.wikipedia.org/wiki/Network_effect
nfx.com is a great source of different thesis on well, network effects in tech. They're also a VC
There literally _are_ more FAANGs than there were in 2008, when he wrote this.
Even Google itself was much smaller than it is now. A google's in a 2008 sense would not qualify as a new FAANG in 2020 terms.
From the evidence I've seen so far, startups that turn down acquisition offers usually end up doing better.
I bet causality is reversed from what he is hinting at. Startups that can see a pathway to becoming insanely valuable are more likely to turn down offers. Startups that see no path and that are, effectively, putting on a brave face do not turn down a profitable escape route.
By that dynamic alone, you'd expect startups turning down offers to be a very strong signal of success. How many idiots are there with the wherewithal to run a company but then try and turn down money in the face of going bankrupt?
Companies fill ecological niches. When new technologies emerge there is room for a new apex species/(company), and a few smaller wannabes. There just isn't unlimited room for large companies to emerge, and that is the principal reason why there aren't more googles and facebooks around. In the end it has very little to do with VCs and entrepreneurs, except for the ones who happen to be in the right place at the right time to take an as yet non obvious idea and turn it into something huge.
I think this is probably the closest to the truth.
In related news, DuckDuckGo has gone up ~10m DAU in the last month (~12.5%) and has gone up ~30m average DAU since January (~60%). [0]
[0]
DDG doesn't have its own search engine though.
Quibble: it has crawlers, though for small and specialised search, mostly Instant Answers IIUC.
https://help.duckduckgo.com/duckduckgo-help-pages/results/du...
Its primary SERPs are baased on Bing and Yandex.
(I'm a heavy long-term DDG user myself.)
Whenever Google only give me garbage results, duck duck go does as well. Apparently You cannot discover information on websites with a search engine these days, unless itâs news Or Wikipedia entries.
> Apparently You cannot discover information on websites with a search engine these days, unless itâs news Or Wikipedia entries.
Certainly not if it's any search term that can be "monetized" with an automated scraping script. Web search seems like an extremely adversarial problem with people constantly hacking your search algorithm instantly as you change it. One would hope that the benefit a giant firm can provide is the amount of R&D they could afford to devote to countering this. But perhaps when they're paying for ads they don't seem so adversarial to google.
_Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain._
Well, this is obvious in hindsight. The same logic applies saying "Tip for YC: when you turn down a startup, consider letting them in, because there's a good chance startup will later become a unicorn".
This is not a strawman argument because is there really a "good chance" when you consider the odds of startups and the value distribution.
This article shows its age with the quote:
_The median startup coming out of Y Combinator wants to raise $250-500k._
I think raising comparatively small amounts stokes a kind of vigour you can't get when sitting on a few million in cash. I wonder how this dynamic has shifted the outcome of Y Combinator alumni companies. Perhaps we would have more Googles if this trend of raising less had persisted.
Money breeding laziness is also what killed ICOs. Naive teams with revolutionary ideas (which may have changed the world in _startup_ form) raised tens of millions of dollars. This money removed the need for groundedness and scrappiness in the development process. As a result, a lot of value and time was squandered on tech that hasn't panned out.
I think it really depends. Money in the right hands can be amazing because you can aggressively pursue an idea that takes a lot more money to get off the ground. This requires a clear idea of what matters to the business. If you donât have that idea, money can allow you to pivot and tune your product quickly and hire the very best.
The downside is the temptation to do everything, to not make decisions. Money enables you to do that too with disastrous results.
In short, money is great. Not having a clear, disciplined strategy is the problem.
I'm not sure I agree with that.
Of course there are many moonshot projects where money is of vital importance. But for most things, the market is the best signalling mechanism available. Having little money forces you to be very attuned to the signals of the market, giving you an advantage over those who might insulate themselves from that feedback mechanism with a buffer of money.
It's hard to keep yourself attuned enough while also having money in reserve, though perhaps it is possible to have enough discipline to do so.
>Money breeding laziness ... killed ICOs
ICOs were killed by Solidity and the Ethereum ecosystem more generally being insufficiently expressive to create anything of value other than pyramid schemes (insofar as those have value).
Speculative comment: if the product is advertising, then Google and Facebook have cornered that market and it looks like search and personal social network advertising could be natural monopolies. So there wonât be more Googleâs, because there are already two and thatâs what the market can support.
If thatâs true the only way to generate Google-like companies (in terms of innovation) is to find a different business model, which means both founders and investors have to be more open minded, more patient, and more brave. Thatâs your first problem.
Probably the best alternative I can see is to charge individuals very small subscriptions for valuable products, but to make it at scale. Say you have 100m users and charge < 1 dollar each per month or even per year, and then you keep building new products using the great team that built the first one. Why hasnât this happened? See above.
What about China? There is a western heliocentricity to so many comments.
This feels like survivor bias.
Why aren't there more revolutionary startups? Well, it's because they sold out and some no longer exist.
Why aren't there less revolutionary startups? Well, it's because they didn't sell out and some went on to became tech giants.
The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985.
This has become more and more true over time, in particular as industrial-grade open source platforms, both software and hardware, have made super-scalable operations nearly free to implement. It is still difficult for me to grasp the magnitude of the fact that I can build a web-based service and make it immediately available to 5 billion other humans.
Here is my reverse ask: Why should there be? Isn't being an extremely highly valued company with a near monopolistic grip on the search and ads market, an outlier? Also, I am just not sold on the idea that undervaluation is holding startups back. Money guys did undervalue Google, but betting that Google will "go google" is a rather outrageous bet by most standards.
Earlier discussion (2008):
https://news.ycombinator.com/item?id=163552
Isn't it also that Google/FB/Apple just buy all the startups that could conceivably threaten them.
Even the ones where the founders did hold out for a lot of money they just buy them anyway. Like WhatsApp (they got about $22 billion in the end!)
Now, I have no idea how this actually works, but everyone seems to be implying that startups don't have a say in whether they at all want to be acquired, regardless of the price. I don't understand why are there no companies that refuse any acquisition offers because they want to retain their independence.
I think there must be some degree of fear - for example Snapchat refused Facebook and now Facebook has copied every single thing Snapchat has done.
But it also must be pretty tempting when someone dangles millions (or billions) of dollars in front of you. You could easily just sell, and then go whatever you want with the rest of your life, do whatever good you intended to do elsewhere.
Or maybe you believe the hype and think you could fulfil your mission better with the might of a tech giant behind you.
Something I donât understand in this article is the âPeople wonât understand your ideas if theyâre any good.â Like, the idea behind Google is, âLetâs make another search engine, but make it really good.â Thatâs not a crazy idea, is it? Was the problem that VCs thought existing engines were good enough and that Googleâs wouldnât be enough better to be worthwhile?
At the time that Google entered the market, there were _at least_ 16 other search engines in existence [1] and all Google did was search. They had the smallest front page of any of the search engines at the time. It was very refreshing, and Page Rank turned out to be incredible at returning results but the "making money" thing was still very unclear at the time.
I seem to recall they wanted to sell out to Yahoo for $10 million (1999? 2000?), but apparently, that was too much for Yahoo's liking.
[1] I only know this because I still have the bookmarks from the time on my machine. Back in 1996, I wrote a metasearch engine that queried 16 other search engines (
http://www.conman.org/people/spc/refs/search/search.hp1.html
).
1998, and _$1_ million:
https://finance.yahoo.com/news/remember-yahoo-turned-down-1-...
Four years later Google turned down a $3 billion offer from Yahoo, asking for 5.
At the time, people were thinking in terms of _portals_ and in my recollection, it was clear to anyone how to extract money from those ( ads ).
In the late 90's starting a new search engine would have seemed crazy to many. It was a competitive market, there were major incumbents, profit potential seemed low, and it wasn't obvious that search could be significantly improved upon.
It's kind of funny isn't it- starting a search engine in a really competitive market is crazy! Yet actually, I think that's a hell of a lot more enticing than starting a search engine today, where there's no competitive market, there's just Google.
The crazy idea behind Google was that they had no feasible plan for monetization.
There was an early and obvious insight that fast and simple search would win, but ads at the time were gif banners and flash animation.
They tried adwords, and it worked.
AdWords dates back to 2000-2001. At the time they IPOed in 2004 they had 90%+ of revenue coming from advertising. They didn't adopt cookie based tracking (DoubleClick) until the 2007-2008 recession:
https://en.wikipedia.org/wiki/Draft:Effects_of_the_2007-2008...
That's not really an idea though, that's a goal, the idea is the description of how you will reach your goal, which in Google's case was PageRank.
I was being glib in the description but itâs not like PageRank is a crazy idea either, is it?
The reason Iâm prodding at this is because there are different ways in which someone can fail to understand the value of an idea. The value proposition for Google doesnât seem far-fetched at all, but I could believe that investors simply didnât believe PageRank was a good enough idea to displace then market leaders.
first of all from our viewpoint PageRank doesn't seem like a crazy idea, I suppose at the time it would have seemed not crazy but interesting and unproved, thus very risky.
Furthermore it is my experience that people sometimes do not understand the value proposition of even simple things if those things are new, the value of the new must be demonstrated and often overwhelmingly.
The crazy idea was using commodity servers and set your infrastructure up so that you can just let them die and keep going.
AltaVista, for example, ran on a couple of pretty beefy Alpha servers at the time.
Could you explain more? I'd love to hear about this
Search is a very intense application - battering hard drives and memory until it dies, so being able to buy cheap PCs made google financially feasible and scalable. Google wrote great software to run on top of cheap, commodity hardware.
A 2020 version of this might be "why there aren't more Teslas."
Elon's might be a rare cat, but he's probably not one in eight billion. At this point, changing the world with a new FB or Google is more about dislodging monopolies then it is about innovation. Meanwhile, a promising startup in this space would find it quite easy to get big/late stage funding _because_ of acquisitions.
A "tesla" will have a hard time getting funded for precisely the reasons laid out by paul.
The difference though, is that manufacturing is actually capital intensive. Google & Facebook needed investors to cover rent and salaries for a few years. Making lots of bets isn't as viable. You do actually need to make good bets.
Meanwhile, in the google/fb space it is now more true that acquisitions and monopoly dynamics are a major hindrance to "more googles." Investors certainly aren't shy to make these investments. Investments in Teslas are depressed by conservativism and ability to pick winners.
> A 2020 version of this might be "why there aren't more Teslas."
It's interesting how many electric car companies are active in China, most of which westerners haven't heard of. (Check for example the video of the "Chengdu Motor Show" by FullyChargedShow on YT.)
Relevant to the topic at hand, it seems that the "More Googles" are more likely to be arising in China, mostly outside my reality bubble. Some helped by market segregation enforced by the current political situation. That's orthogonal to the overall topic, but not irrelevant.
I often think about how YouTube was the bargain of the century.
YouTube would be one if the biggest companies ever if it had remained independent.
Problem with them was the massive about of money they were burning on servers and being sued by RIAA (Music companies) and MPAA (Film companies) among others. They needed a big infusion of capital.
Instagram on the other hand could have remained independent and succeeded.
I think instagram is one of the (few) companies that could eventually have eclipsed Facebook really.
Which is the exact reason they paid a billion dollars to acquire it.
I don't think YouTube would have been one of the biggest companies if it remained independent.
The problem is that YouTube is still not profitable, and also without a support from a big company like Google they would be sued into oblivion by MPAA and RIAA.
I feel similar for android.
Android needed google to grow, YouTube didnât.
Google acquired android for 50m$.
Except there is another. It's called Chinese Google also know as Alibaba. And with EU regulations coming up I suspect another one will rise in Europe as well in next decade. Just give it time, Splinternet will happen and then each country will have its own Google.
_>And with EU regulations coming up I suspect another one will rise in Europe as well in next decade._
lol, what?! Just because Europe loves to regulate itself to death so that the useless politicians can justify their salaries doesn't mean that will produce successful software companies. That's not how innovation works.
Just look at Russia, who despite having less wealth than the EU, has managed to produce its own Google in the form of Yandex. The EU has no Google of its own.
If we could have made our own Google we would have done it already, without regulations. But we can't. I mean, we could do it if we would put our minds and money to it just like we did with Concorde or Airbus but we're too cheap and ignorant to do it when we could just use and work for the OG Google from across the pond.
Increasing regulation in tech will only benefit the huge and bloated big consultancy corps and no way help with innovation.
I'm inclined to think that in order for another search engine to thrive, there needs to be a segregated market created by a different language. The kind that creates a culture gap that can't be bridged easily.
Ex - Google dominates the English-language web primarily. Most Europeans, esp Western Europeans, while they may have their own languages, speak enough English that they can get good results from Google, enough better than any local competitor that they can't get a foothold easily. Thus, they tend to use Google, enough to help Google get pretty good results in their own language too. Russian, though, has a ton of native speakers who speak no English. It makes more sense for them to gravitate towards a search engine where Russian is a first-class citizen, for searching the Russian web. All of the energy from the Russian-sphere thus tends to go to that engine, and Google's presence gets neglected and gets worse. Ditto Chinese, etc.
Google has 80-90% of the market share. In practical terms, they control if your website gets visitors or not.
If you throw Yandex in the ring, then Europe has several search engines
Qwant, a French search engine
Mojeek, a search engine in the UK
YaCy, p2p search
Koreans seem fond of Naveer. Chinese use Baidu
Here's where you're wrong: Yandex is not just a search engine, it's the fifth largest search engine in the world(!) and is also an email provider, a social network service, a payment service provider, a smart assistant, a ride sharing service, a cloud provider, a ML/AI and autonomous vehicle researcher, a V.C. fund. Basically most if not all of what Google/FAANG is doing.
Which European company does all those things and at such a large scale? Having some random small search engines that nobody is using, funded and kept alive by EU grants just to show that _"we can"_, is in no way comparable to the scale of Yandex.
It's not so much "regulation vs non-regulation". Yandex is all intertwined with the government, and the Chinese giants have benefitted from a lot of government protection.
It's about political will. Like you say, Concorde, Airbus, or other government-sponsored and national-security-driven projects have succeeded. China and Russia saw their web properties the same way, while Europe has opted to not do that in the consumer web space, so the default is everyone just uses Google and FB.
Why There Aren't More Googles?
flippant, sarcastic response: because google.
actual response: I whole heartedly agree. when a founder/initial investor team turns down even a (mildly though truly) lucrative offer, itâs because they very strongly believe that they would be selling themselves short. if they turn down an (extremely) lucrative offer, even more so. Most people get into the game for money, ego, admiration and power. So, if someone is turning down any of these, itâs either because they are a âtrue believer,â in which case, bet on them, or itâs because they imminently expect all or most of the others, in which case, bet, the f, on them.
Discussed at the time:
https://news.ycombinator.com/item?id=163552
If you want a better formatted way to read (or print) this, I created a CSS proxy server
https://pg-essays.now.sh/googles.html
Yup: When I was looking for VC funding,
lots of VC Web sites claimed to like
_innovation_. Eventually I concluded much
the same as in Phil's essay.
The nutshell description I formulated was
the VCs want a startup with a
product/service easy enough for any
grandmother to understand, _traction_
growing _up and to the right_, in a huge
market, with five founders, with all
credit cards maxed out, with at least four
of the spouses pregnant, about to go
under, and desperate.
For one step more, they are looking in the
rear view mirror and want to bet on
_patterns_.
For one more, they want to fund the
company to go to "the next level", i.e.,
the big _go to market_ effort.
The VCs in effect believe that any startup
that is successful will, on the way to
being a big success, say, worth 1+
billion, at some point nearly necessarily
be desperate for some venture funding:
Then that's where the VCs want to write a
check and get on the BoD.
Even if the VCs are willing to do _seed
funding_, they believe that for each
_level_ more VC cash will be essential.
Then they hope to be the best positioned
to make the _series A_ round with the _up
and to the right_ and _go to market_
effort.
Here is where I see the VCs failing:
First, the _patterns_ they are looking for
are too rare to be promising. Instead,
for the future, the main pillar of the
success will be something new, powerful,
and valuable for a large market. For
this, it will be necessary for VCs to work
effective with things that are new,
powerful, and valuable. This is not
always easy. Relatively few VCs are able
to do that. Even if they are able, the
limited partners of the VCs won't like
that.
Second, there really is a good _pattern_
with fantastic evidence from the past. It
is just that the VCs don't see this
pattern.
Third, let's look at this pattern with its
fantastic evidence. At first, we will
just use some examples and then later will
explain with much more substance and
meaning.
(a) In WWII, the US had big need for some
better weapons. The usual VC approach
would have the US go to the designers of
the 16" battleship guns and ask for 18" or
20". Well, the US was smart enough not to
do that. Instead, Szilard, Teller,
Wigner, Einstein, Fermi, etc. led the US
to the A-bomb that ended the war in the
Pacific in about a week.
(b) Teller saw that fusion had promise of
much more yield and in a few years had
Castle-Bravo with 15 megatons of yield.
(c) The WWII aircraft engines went from 9
cylinders in one row to four rows of 7
cylinders per row and extreme efforts with
supercharging, intercooling, magnesium,
huge propellers with tips moving close to
the speed of sound, etc. But a few people
in each of Germany, England, and the US
saw the promise of gas turbines, and we
got some fantastic jet engines. Four of
these on an airplane quickly put the
Atlantic passenger steamships out of
business!
(d) A few people saw that reproducing the
marks on a sheet of paper would be a big
advance in office work and ... we got
Xerox with nearly a license to print
money.
(e) Ike wanted to see what the Soviets
were doing. So, Kelly Johnson at Lockheed
put some long, narrow wings on an existing
jet airplane and gave Ike the U-2. When a
U-2 got shot down, soon Kelly showed up
with an armload of engineering drawings
talking about titanium and a special
engine that Pratt and Whitney had (a turbo
jet up to about Mach 2.5 and then a ram
jet to Mach 3.2 or so). Kelly got his
check, and the US CIA got their SR-71 --
speed 3.2 Mach, altitude 80,000+ feet,
range on one load of fuel ~2000 miles, and
never shot down.
(f) Word whacking was a pain, really
expensive. The IBM correcting Selectrics
were only a little better. But an early
microprocessor, a simple operating system,
some simple word whacking software, a
floppy disk, and some simple printers
quickly eradicated the typewriters. We
got Intel, Apple, Microsoft, and more.
The examples (a) -- (f) are only a few of
the dozens we could list from military
projects, biomedical projects, various
tools, various services, etc.
So, for each of (a) -- (f), at the
beginning, the project had to be
evaluated. The rear view mirror as VCs
apply it would not help. Instead, the
need was to work effectively with ideas
that were new, powerful, and valuable.
Fourth, let's look at some "substance"
supporting the patterns illustrated by
examples (a) -- (f). What is needed is a
way to evaluate ideas that promise to be
new, powerful, and valuable for a large
market.
Okay, one more example: GPS. If the USAF
charged a penny for each commercial use,
they'd soon own the world and everything
in it???? Well, they'd have a lot. Uh,
at one time I was working at the JHU/APL
lab in the group that did the first
version of GPS, for the US Navy,
especially for the missile firing
submarines. I heard the stories. The
project was first on the back of an
envelope. With not much more in ideas, it
got funded and _the rest is history_.
So how was the evaluation done? Sure,
first some physics. Next some math. Next
some engineering. Money allocated. Work
done. Rockets launched. All done.
So, here it is: The foundation of the
pattern for the evaluation to confirm new,
correct, and significant was some science
and math that could be checked. That's
the pattern: The crucial core of the
project is an idea based on some science,
math, and engineering on paper that can be
checked. That's the pattern.
In the more advanced countries, there are
plenty of people who can generate such
ideas, do the science, math, and
engineering (e.g., the LHC) and plenty of
people who can check the work with high
accuracy. E.g., there are _problem
sponsors_ at the US NSF, NIH, DARPA, ONR,
etc. that can do the checking or manage
the checking done by others. Research
university Ph.D. committees do such
evaluations around the world daily.
Surprise. Please sit down for this: US
technology VCs just will not, Not, NOT, no
matter what, not even under promise of
$trillions, not with water torture, not
with anything, do or manage such
evaluations. Feet locked four feet deep
in reinforced concrete, they won't do it.
Results: First, from all I can see, the
most promising path to the future is new
ideas, presented just on paper, as
science, math, and/or engineering, that
are powerful and valuable for big parts of
our economy and that can be evaluated
accurately. Did I mention "just on
paper"?
That's what the JHU/APL did for the first
version of GPS -- on paper. That's what
Kelly Johnson (there's a picture) brought
to the CIA for the SR-71 -- an armload of
engineering drawings. On and on.
The B-29 is what carried the A-bombs that
ended the war in the Pacific. That plane
cost ballpark as much to develop as the
bombs! A joke about VCs is that they
would say "You build it, drop the first
bomb, and we will fund the gasoline for
the flight of the second bomb."
For entrepreneurs, paper and pencils are
cheap! Can buy a lot of computing for
$2000. A lot of Internet bandwidth is
cheap. So, do the math, etc., write the
software, build a server, plug it into the
Internet, go live, get users, run ads,
make money. To me that's the most
promising path to success. But VCs will
have nothing to do with it.
For the VCs waiting to fund the big _go to
market_ effort, in the past a lot of
companies that were successful grew just
from _retained earnings_ and never took
equity funding. Now with cheap paper and
pencils, computing, the Internet, etc.,
that path seems relatively promising now.
The damage from nuclear bombs in Japan was marginal or on par compared to the damage from massive firebombing in a typical Japanese city in 1945. The effects of atomic bombs on Pacific Theatre outcome in WW2 is overrated.
You are correct about the fire bombing. But the "effects" of the atomic bombs were fantastic -- ended the war in about a week when the fire bombing didn't.
So, what happened? One answer is that the atomic bombs were _dramatic_ enough to shift the balance of political power in Japan.
Yes, generally it is believed that just before the atomic bombs, Japan was defeated, knew they were defeated, were out of oil with no chance of getting more, short of food, etc. and were interested in negotiations to end the war. It appears that then the US insisted on something really simple, definite, final, humiliating, etc. -- "unconditional surrender". In the end Japan did get to keep their emperor which was good for the US since it meant that the US occupation of Japan was easier -- just work with the emperor instead of civil war in the streets.
Drama or not, the atomic bomb was darned scary -- one bomb, one airplane, one city, and the fire bombing was not nearly that _powerful_, that is, required lots of airplanes.
I don't know how many bombs the US had ready then, but Japan could fear that the US could destroy a city a day, including Tokyo.
But this is a bit off the subject: If you don't like the atomic physics, math for the critical mass calculation, the shaped charges, etc., then pick GPS, radar, penicillin, the SR-71, and the transistor as examples of where wildly successful projects were based on science, math, and engineering, proposed just on paper, and could be and were accurately evaluated and funded just from the paper.
And whatever Japan's response was to the atomic bombs, the bombs do illustrate one of my points -- they were evaluated, justified, and funded just from paper and worked as predicted.
Also notice that the US has lots of long range missiles with warheads based on nuclear fission and fusion but not based on the firebombs.
Past comments:
http://news.ycombinator.com/item?id=163552
I don't have any visibility into the VC world. But I wonder if they've moved at all in the direction PG was recommending since 2008.
Because {insert big tech firm like google} buys them out.
This is an excellent article.
The thing is that not only do VCs not fund startups which compete with big corporations, they don't even fund non-competing startups nowadays. They literally only fund startups whose only goal is to artificially launder revenue to corporations. For example, the startups load themselves up with debt and then they waste it all on Google or Facebook ads. Then they get acqui-hired just before they go bust so that the founders keep their mouths shut. Then the corporation shuts down the startup's product...
They never cared about the startup or its product.
Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain.
This isnt accurate at all. Google/Facebook turned down the offers because at the time the offers came, they were 'feeling' good about their business. This feeling changes over time and had google not chanced on the business model of selling ads next to search results, they would have probably regretted not selling earliers.
No one at Google/Facebook knew that the companies would be as big as they became and most startups who say to an acquisition face failure exactly like the 99% of other startups, sooner or later.
Be good to stick the (2008) in the title, even if many here recognise the link.
A modern-day "Why There Aren't More (Or Fewer) $1.2T Companies" might be a good article too.
https://en.wikipedia.org/wiki/Jewish_quarter_(diaspora)
is very powerful