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of runway. They hope further investment will save them. But because
they have high expenses and slow growth, they're now unappealing
to investors. They're unable to raise more, and the company dies.What the company should have done is address the fundamental problem:
that the product is only moderately appealing. Hiring people is
rarely the way to fix that. More often than not it makes it harder.
At this early stage, the product needs to evolve more than to be
"built out," and that's usually easier with fewer people.
[4]Asking whether you're default alive or default dead may save you
from this. Maybe the alarm bells it sets off will counteract the
forces that push you to overhire. Instead you'll be compelled to
seek growth in other ways. For example, by doing
things that don't scale, or by redesigning the product in the
way only founders can.
And for many if not most startups, these paths to growth will be
the ones that actually work.Airbnb waited 4 months after raising money at the end of Y Combinator
before they hired their first employee. In the meantime the founders
were terribly overworked. But they were overworked evolving Airbnb
into the astonishingly successful organism it is now.Notes[1]
Steep usage growth will also interest investors. Revenue
will ultimately be a constant multiple of usage, so x% usage growth
predicts x% revenue growth. But in practice investors discount
merely predicted revenue, so if you're measuring usage you need a
higher growth rate to impress investors.[2]
Startups that don't raise money are saved from hiring too
fast because they can't afford to. But that doesn't mean you should
avoid raising money in order to avoid this problem, any more than
that total abstinence is the only way to avoid becoming an alcoholic.[3]
I would not be surprised if VCs' tendency to push founders
to overhire is not even in their own interest. They don't know how
many of the companies that get killed by overspending might have
done well if they'd survived. My guess is a significant number.[4]
After reading a draft, Sam Altman wrote:"I think you should make the hiring point more strongly. I think
it's roughly correct to say that YC's most successful companies
have never been the fastest to hire, and one of the marks of a great
founder is being able to resist this urge."Paul Buchheit adds:"A related problem that I see a lot is premature scaling—founders
take a small business that isn't really working (bad unit economics,
typically) and then scale it up because they want impressive growth
numbers. This is similar to over-hiring in that it makes the business
much harder to fix once it's big, plus they are bleeding cash really
fast."
Thanks to Sam Altman, Paul Buchheit, Joe Gebbia, Jessica Livingston,
and Geoff Ralston for reading drafts of this.
Want to start a startup? Get funded by
Y Combinator.
November 2009I don't think Apple realizes how badly the App Store approval process
is broken. Or rather, I don't think they realize how much it matters
that it's broken.The way Apple runs the App Store has harmed their reputation with
programmers more than anything else they've ever done.
Their reputation with programmers used to be great.
It used to be the most common complaint you heard
about Apple was that their fans admired them too uncritically.
The App Store has changed that. Now a lot of programmers
have started to see Apple as evil.How much of the goodwill Apple once had with programmers have they
lost over the App Store? A third? Half? And that's just so far.
The App Store is an ongoing karma leak.* * *How did Apple get into this mess? Their fundamental problem is
that they don't understand software.They treat iPhone apps the way they treat the music they sell through
iTunes. Apple is the channel; they own the user; if you want to
reach users, you do it on their terms. The record labels agreed,
reluctantly. But this model doesn't work for software. It doesn't
work for an intermediary to own the user. The software business
learned that in the early 1980s, when companies like VisiCorp showed
that although the words "software" and "publisher" fit together,
the underlying concepts don't. Software isn't like music or books.
It's too complicated for a third party to act as an intermediary
between developer and user. And yet that's what Apple is trying
to be with the App Store: a software publisher. And a particularly
overreaching one at that, with fussy tastes and a rigidly enforced
house style.If software publishing didn't work in 1980, it works even less now
that software development has evolved from a small number of big
releases to a constant stream of small ones. But Apple doesn't
understand that either. Their model of product development derives
from hardware. They work on something till they think it's finished,
then they release it. You have to do that with hardware, but because
software is so easy to change, its design can benefit from evolution.
The standard way to develop applications now is to launch fast and
iterate. Which means it's a disaster to have long, random delays
each time you release a new version.Apparently Apple's attitude is that developers should be more careful
when they submit a new version to the App Store. They would say
that. But powerful as they are, they're not powerful enough to
turn back the evolution of technology. Programmers don't use
launch-fast-and-iterate out of laziness. They use it because it
yields the best results. By obstructing that process, Apple is
making them do bad work, and programmers hate that as much as Apple
would.How would Apple like it if when they discovered a serious bug in
OS X, instead of releasing a software update immediately, they had
to submit their code to an intermediary who sat on it for a month
and then rejected it because it contained an icon they didn't like?By breaking software development, Apple gets the opposite of what
they intended: the version of an app currently available in the App
Store tends to be an old and buggy one. One developer told me:
As a result of their process, the App Store is full of half-baked
applications. I make a new version almost every day that I release
to beta users. The version on the App Store feels old and crappy.
I'm sure that a lot of developers feel this way: One emotion is