Being a startup can be conceived of as one possible path taken as an early phase in the business cycle, hard to see that changing. What is changing is now you have to be more realistic about justifying to others that you can be quickly scaled for a return. You need to have high natural growth underlined by great unit economics and the right plan to utilize capital to super charge that. Free money just meant wider bounds to take risks, which in a lot of cases turned into mediocre business. This is bad for everyone involved, VC down to consumer.
You now need to be more realistic about what is a lifestyle business or something that can be bootstrapped into a solid medium sized business through slow methodical growth instead of taking capital, flailing, reducing the product quality in a bid to survive, harm consumers and then dying anyway.
What I think this does harm unfortunately are moonshots, now you'll need to be even closer to some idealized SaaS with easily digestible metrics and plans to get funding. I imagine it's very very hard to separate a true moonshot that will succeed and revolutionize vs bunk and the risk profile has changed a lot, and quickly.
As a side note I also hope this reduces startup solely as a vehicle to acquisition and restores some novel public companies being created.
I sort of dislike the term "lifestyle business" as to me the term implies something you can do without working too hard at it--which is not necessarily the case. That said, I agree that putting a bunch of the background tech and supporting services together is easier than ever. Yes, it's easier for the competition too and maybe no one involved will make a ton of money but the basic approach is more viable than ever. You don't need to hire large supporting teams.
There is nothing wrong with the term. I first encountered it in the early 80s, but I think it dates back to the 60s when people started to question the big company profile of the then social contract.
Yiu say, “which is not necessarily the case”. Well in that case it’s not a lifestyle business, as that’s 60% of the definition.
The classic lifestyle business is a surf shop or dive shop: you like the activity, you don’t need a lot of money, you can shut the business for a day (or early) when the weather is good and just go surfing/diving. Some bike shops were like this too, before that business changed.
A consulting business can be like this too. I have friends who are EEs and programmers and they live the same way. One works Jan-march and then takes the rest of the year off unless something is particularly interesting. Another won’t take jobs during ski season. One key is that they love the work (I see comments on HN from people who don’t enjoy programming; for them programming could never be a lifestyle business).
Other businesses like being an electrician can be like this too but for whatever reason don’t get swept under the same rubric.
If things change it won’t be in a Wicked Witch of the West meltdown after which the flying monkeys of Silicon Valley burst out singing Ding Dong the Witch Is Dead.
Things haven’t changed.
Higher scrutiny, tighter purse strings, the dynamic has been shifting for a while.
Apple and Microsoft were born in the oil shocks of the late 70s and survived Volcker’s high rates through the early 80s.
Google barely took off before the tech crash wiped out the Valley in 2001.
Many companies we use today were young and dicey affairs during the 2008-2009 financial crash.
Just because the bloom is off the rose, and both VCs and financial tourists like Tiger are overfunding fewer ideas, doesn’t mean the fundamental engine of innovation leading to huge companies is dead.
Quite the contrary. The engine is still ticking, but there is less noise.
Most startups fail regardless of the economic climate.
So, is this a legit claim?
So yeah, it's legit and always has been.
Given the profound malinvestment and market distortions groups like SoftBank/WeWork and FTX/Theranos/AirBnB/A16Z have created I frankly say good riddance.
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Shopify is all in one for many business, contrast that to 10-20 years ago where you had to build the entire storefront. There are several ways to accept online payments, the easiest by far being apple/google in-app.
Amazon fulfilment services mean you can skip on logistics (if you're a PHY company). Customers are used to buying things online now, everyone has a phone of some kind so you have an app channel you never had before...
If you don't need money, like a bootstrap, the odds are in your favor.
If you are a startup that hasn't quite made a name for itself yet and the coffers are getting low and it's time for another round of funding, you're going to have a rough time.
Downmarket trends make companies solve real problems that generate real revenues and get rid of the easy money that supports unsustainable business models.
They clear out of cruft of technologists who only come to the valley for the high salaries and push common sense technology frameworks that are more focused on productivity than large scale Enterprise-style collaboration to the forefront.
They force essential effort to be applied due to scarcer resources, and discourage frivolity by punishing financial schemes and forcing businesses to focus on the bottom line.
I’d love to see some fundamental restructuring so new generation players can emerge, and unfortunately, in order for the new to come to market, the existing system needs to be shaken up a bit.
Downmarkets are hard, but we need them.
I did not use it as an example because of the merit of its amount, merely because it was the quote in the post:
> Remember stories like "I was a student, I got an idea, so I raised a million and hired a team"? It’s safe to say we can forget about them.
Startups are a symptom of technology advancing, the basic human psychology of desired progress and dissatisfaction, and an economic system.
Macro policy can warp startup priorities on average but it can't stop them without stopping the whole economy.
Lurking in the background is analogy to e.g. car manufacture. There was an era of fomentation, followed by an era of consolidation. Eventually, we wound up with a handful of automakers.
But the market for software is fundamentally different. For one thing, there is not the same reliance on mass labour, nor is there significant material cost; nor is there the need to maintain a sales network.
Sure, there are always network effects which replicate some of the momentum/inertia of a physical-goods market, and yes, ZIRP was one heck of an accelerant, and it's not coming back soon.
But software has not finished eating the world. It might not even be halfway through, as AI has opened up new regions of the (if you will) 'carcass' for software to ingest (much as fire and the cooking of food opened up new nutritional pathways for humans.) And even when software is finished eating the world, opportunities for disruption will remain plentiful, as incumbents will have a hard time maintaining moats.
Now, that said, I expect three things to happen in tandem: (1) the average software engineer salary will stagnate or decline; (2) credentialism, long foreign to the industry, will begin to creep back in; you'll see CS and Eng degrees rise in importance, along with more situation-specific certifications; (3) the average market cap of startups (specifically: SaaS startups) will decline, along with growth cadence.
This isn't death. It's just middle age. A touch of grey, as Jerry Garcia put it.
When GDP is so high, it creates a momentum that does help every sector. One thing that would help would be an administration that is pro-business and doesn't pick winners and losers. Maybe leadership that has an idea of what economic theory means.
I admit that I don’t want this to be true. I want my own startup. But…how can you possibly know this? Nobody knows how long the interest rates will stay high and nobody knows what new companies will emerge in the future and how profitable their economic model will be. For all we know, investing in startups will be even more profitable than it was in the past. The article was light on details…
I'm willing to believe that statement, I'm sure there can be tons of arguments made to back it up, lots of data to be seen, but there's none in this post and we're left to guess with a generic Ray Dalio economics video.
The general self-substantiation of that post doesn't blend well with its general snarky "o, sweet summer child" tones.
> as tough for any Web2 startups outside of AI (and soon for them too)
says who?
> And it will get worse because new funds are (not) being raised right now,
Wait are they or they aren't? And is there some data to support this? I am not saying it's incorrect but it'll be good to support this with some sources.
What terrible idea....
Startups will have to be profitable and auto finance themselves, like it has been normal for companies in the past.
They will need to find a way to create value and survive sooner. It will make for smaller and slower growth companies but also more stable.
There is no such thing as "Web2". Into the trash it goes.
