Strong Opinions @marksbirch

Bear with me as I promise not to conflate startups with the slow food movement* or any other such nonsense.  Rather, the whole nature of growth and its impact on startups has been on my mind recently.  I wrote a comment last week on Rob Go’s post on the topic of hunches in the tech industry:

Here is my big hunch, the unaccelerator and rise of the slow startup.  I have no idea what that looks like, but the idea of incessantly searching and hacking for viral growth is a dead end.

My comment was an extension of a thought that had been rattling in my head for awhile and crystallized when I read a post about a startup that had some issues with marketing to normals.  This resonated because many of the tactics seemed more like cheap tricks used to fuel “viral” growth in a way that was forced and off-putting.  Thus the super-growth at all costs viral approach that captured so many early users could be the very thing that eventually causes it to crash to the ground.  Network effects can be a real bitch sometimes.

It was interesting to see the buzz end of last week around Paul Graham’s latest essay on growth and the reactions.  Most responded positively and some took exception to the definition of startup as growth.  In this instance I happen to completely agree with Paul, because that is the formula that he is seeking through Y-Combinator.  His lens is one that is 100% focused on hockey stick growth because that is what is going to attract investors interest around his accelerator program and drive his own returns.  By extension, this is also the model which has become the de facto Silicon Valley venture capital approach.

However, there are plenty of other companies not of the Google, Apple, and Facebook category which still deserve the title of startup.  These are ideas launched by intrepid entrepreneurs that burned their bridges and went all in on nothing but passion and hustle to build something innovative and amazing from the ground up.  A handful become massively successful, most fail utterly, but there are those that manage to survive on the outskirts away from the attention and glare of the Silicon Valley dog and pony show.   

What do these companies look like?  They have customers, they employ plenty of people, and they have offices and HR policies and revenues.  A lot of them are serving business customers, but there are some that are consumer focused or some hybrid.  Software and Internet certainly dominate the startup space, but there are entrepreneurs that are doing interesting things in other markets like hardware, food, medicine, clean tech, and the like.  None of these businesses may grab the cover story of Forbes nor may the founder’s face grace the front page of Wired.  CNBC and ABC and John Stewart may not come knocking.  VC’s are not fawning over them to invest in their latest round and Second Market probably has no market in their shares.  Despite all this however, they were indeed startups once.

So does hypergrowth really define a startup from not a startup?  As a VC, the answer is probably yes.  For some angel investors and most entrepreneurs however, the reality is much different.  Most startups began as the kernel of an idea driven by a larger vision that is innovative and disruptive to the status quo.  That is where I see the dividing line between a small business and a startup; startup entrepreneurs are not taking a page from an existing business plan, they are instead creating the business model as they go along and adjust as needed.  As long as the customer need is sufficient, the market is sizable, and the model is novel enough to create or radically alter the market, it is a startup.  Instead of looking at the eye popping 10x exit, let’s look at the intent at the start.

Growth is important.  Without growth, any business would quickly die.  That is simply the calculus of business and the necessity of working capital and cash flow to fuel the business.  Without cash, you have no startup.  Growth however does not need to happen at breakneck speed like Groupon or Instagram or Draw Something.  In fact, often the mad rush of users can be a detriment as it could be a passing spike that fades quickly or a burden that undermines your user experience.  Twitter and Tumblr could be considered lucky to have survived their notorious downtime issues of years past.  Draw Something was a fun obsession turned yesterday’s news once Zynga bought OMGPop.  Growth is a great problem to have, until it isn’t.

Often it is not growth at all cost that wins the day.  You need to build the right product at the right time for the right market.  My friends at Hometalk have done just that by building a loyal and engaging community of DIY home and gardening pros.  My portfolio company YourTrove is building a social search product and slowly adding users as they iteratively add features and improve the user experience.  The folks over at Consmr are building up an impressive database of online consumer product reviews through a measured approach of securing brand partnerships and individual user traction through mobile downloads.  Each is well poised to become their category leader and hit that hockey stick growth trajectory without relying on shady marketing tactics or viral tricks or other such fakery.  And these are but a few of the tens of dozens of examples that I have personally seen over the past year exhibiting positive, sustainable, purpose-driven growth.

Do not be afraid of being a slow startup.  There is no need to be discouraged or distressed that you are missing out or worthless by not having Facebook like growth per week.  You need time to figure out what your startup is all about and who your real customers are (rather that the fair weather TechCrunch crowd).  You need time to build a great product to address that latent audience.  You need time to make sure you have the right user experience and right type of community supporting your product.  If you are patient, stick to the vision, and continue to execute, the growth will come.

* Note that as a New Yorker, I view slow anything with suspicion, but this startup topic would be the one exception.