
State of Startups - ValG
http://stateofstartups.firstround.com/2016/
======
GrumpyNl
“One of the problems with raising money is it teaches you bad habits from the
start,” said Jason Fried, the co-founder of the software company Basecamp, who
has written frequently on the perversions of the venture capital industry. “If
you’re an entrepreneur and you have a bunch of money in the bank, you get good
at spending money.”

But if companies are forced to generate revenue from the beginning, “what you
get really good at is making money,” Mr. Fried said. “And that’s a much better
habit for a business to work on early on, to survive on their own rather than
be dependent on money people.”

~~~
justinzollars
I've worked at startups that have taken no money (0) and those that have taken
boat loads (Hundreds of Millions).

I made much more money from the former situation.

------
pascalxus
The 2 biggest reasons start ups fail are: 1\. No/not enough market demand for
what your building 2\. User acquisition costs exceed LTV.

Those 2 things should be the very top concern of any software
entrepreneur/founders. I don't understand why the survey doesn't reflect that.

They say hiring good talent is a primary concern, but if that were really the
case, wouldn't start ups be moving to cities where the labor supply was
greater than the labor demand? And wouldn't there be a corresponding
willingness to hire remote workers (as this greatly increases the pool of
candidates)?

Moving to an area where labor is 1/2 as cheap, could double your runway,
assuming there aren't other timed restraints.

>Nearly 1 in 5 founders say they're raising a unicorn This is not necessarily
optimism. some companies require that kind of scale in order to get the
economies of scale required for profitability.

------
nedsma
I love this one: How confident are you that you're building a billion dollar
company? Answers: 1\. I'm certain that we will - 18% 2\. I'm confident we have
a decent shot at it - 42%

Thumbs up for the optimism!

~~~
porter
Well, they are telling this to VCs afterall...

~~~
kornish
Recently on a John Oliver segment, Oliver was speculating on how Trump
University received 98% excellent approval ratings from current students.
Turns out that the students were asked to give feedback while still enrolled
in the course, meaning that giving a bad review could negatively influence
their grade or relationship with the teachers, and thus the students were
motivated to give more positive answers than they otherwise might have.

I wonder if founders giving answers here had names attached to their answers
or if they were anonymous at submission-time.

~~~
tedmiston
That's how every university course evaluation I've ever done has worked.
Though they say data is shielded from the instructor until after final grades
are submitted. Not sure if that applies to the Trump thing.

------
benmarten
Are we in a bubble answered yes is declining from 73% -> 57%. That means the
real probability of being in a bubble just increased ;P Remember the 2008
crisis was only seen by very few in advance...

------
EduardoBautista
> 9\. Are you optimizing for growth or profitability?

> Profitability - 39%

> Growth - 61%

This is what happens when your business goal is to get acquired and not to
have a business sustained by paying customers.

~~~
pc86
Well this is one of the few but key differences between a "startup" and a
"business."

A business that isn't profitable is either a hobby or a bad idea. A startup
that isn't growing is dead. Personally I'd rather make $5/10/15/25k a month
with a _business_ than kill myself trying to get millions in funding, pay
myself a $10k/mo in salary and leave with nothing through either failure,
dilution or some combination thereof.

~~~
rsp1984
Given that you can make $5/10/15/25k a month with a cushy 9-5 corporate job
where everything's taken care of for you, in most cases the choice is not
small-business vs. startup, it's corporate job vs. startup.

The "lifestyle" self-running company that spits out a comfortable amount of
cash and is easier to handle than a corporate job is somewhere between a myth
and a unicorn. It's _very_ rare. If you want to stay on the legal side of
things it takes a great amount of connections, experience, time and effort to
build such a company. You might as well invest that time in a "proper" startup
and get some funding. Chances of success will be similar in the end.

~~~
WhitneyLand
I don't notice that many people making 15/25k a month that think their jobs
are cushy. There are usually high expectations at that level.

------
vsloo
There's a disconnect between founders who want to build a startup and founders
who want to build a business. They think the two are the same but they're
really not and this study clearly shows that. There are situations where
startups turn into businesses but I'd rather build a profitable business for
myself from the start and our team than to build a startup purely focused on
"growth".

~~~
monkmartinez
I am very disconnected from the "startup" world, and something in your comment
has me asking: What is the difference between a startup and a business? To me,
they ought to be one in the same...

~~~
GFischer
Paul Graham (and Y Combinator I guess) believe that the difference is the
goals.

 _A startup is a company designed to grow fast._ PG, 2012

[http://www.paulgraham.com/growth.html](http://www.paulgraham.com/growth.html)

[http://www.forbes.com/sites/natalierobehmed/2013/12/16/what-...](http://www.forbes.com/sites/natalierobehmed/2013/12/16/what-
is-a-startup/#6b2321f14c63)

 _a startup is a company designed to scale very quickly_

Steve Blank believes a startup is determined by the search of a business
model. If you have a business model, then you have a small or new company, not
a startup.

[https://steveblank.com/2014/03/04/why-companies-are-not-
star...](https://steveblank.com/2014/03/04/why-companies-are-not-startups/)

~~~
angersock
Quite right.

Another distinction worth making, almost its own axis really, is the
difference between "a tech business" and "a business that uses tech".

Companies like Cisco, Facebook, Apple, Google, Canonical, and so forth are
companies that are tech companies--without their technology, they wouldn't be
in business at all. They provide a service or product that is IP in its own
right.

Companies like Chipotle, Subway, Uber, Lyft, AirBNB, DoorDash, Dollar Shave
Club, and so forth are companies that use tech to achieve economies of scale
and growth that wouldn't be as easy otherwise but could still be done. You can
imagine a way of making something that to the user is substantially like the
Uber today without a complicated backend, even just using call centers and
massive dispatch. The key part of their business is part-time contractor
drivers, which is a business and not tech innovation.

It's easy to assume that all startups are tech startups, but that's not quite
true and it also can limit and slow developing a good business model.

~~~
pzh
But then, can't you make the same analogy for early stage Google--basically, a
big marketing firm that manually places ads in the yellow pages? Similarly,
Facebook can also be executed over a phone system ("Press 1 to hear your
friends' updates, press 2 to post an update...")

I'm not sure there's such a strong distinction between a tech business and a
business that uses tech nowadays.

~~~
angersock
Google's core beginning was PageRank (under license from Stanford), without
which it would've been no better than similar offerings at the time.
Additionally, their approach to setting up their equipment and making use of
cheap gear and managing said cheap gear probably gave them a leg
up...something they still do today at scale. So, no, you can't really make
that analogy.

Facebook was a tech company specifically, and not a company using tech,
because the entire product was devoted to rapidly filling social profiles and
spinning up the microsites that were user accounts, mining those accounts for
information, and then integrating as a platform for advertisers and game
developers. None of that tech is really stuff they could've outsourced and
still had a business--they couldn't have just white-labeled MySpace for
example and gotten away with it.

------
coldcode
Did anyone else find the constant shifting colors irritating?

~~~
Etheryte
Yes! Closed the page as soon as I figured out what was going on.

~~~
Kiro
That seems like an extreme reaction to be honest.

------
aedron
Interesting answers on lack of gender diversity in IT: Most of the men believe
the reason is that there just aren't that many women entering the field, while
almost all the women blame bias at various stages of education, hiring and
promotion. Someone has a cognitive dissonance.

~~~
whoops1122
there were less than 5 girls on my computer science class, so unless woman are
claim that they should have the job without education. I can totally see the
reason why there is a gender diversity in IT?

~~~
beat
Why is a computer science background necessary for an IT career? I know many,
many IT professionals who did not study CS in college.

~~~
ci5er
"IT Professionals" is a broad label. Maybe we can think of getting a 'degree
in a field' as a proxy-variable for 'interest in the field'. What's
astonishing to me is through the 60s, 70's and into the mid-80s, computer-tech
interest in female cohorts tracked with science, law and medical fields. Then
it flattened and fell, while female participation in those other three fields
continued to expand at the rates they had before. (So, what happened in 1985?)

~~~
rrdharan
This Planet Money episode attempted to tackle that question:
[http://www.npr.org/sections/money/2014/10/21/357629765/when-...](http://www.npr.org/sections/money/2014/10/21/357629765/when-
women-stopped-coding)

Their tl;dr answer is that video games happened, and they were marketed
exclusively to boys; that's what created and drove the cultural rift.

~~~
ci5er
Thanks for that link. My original sighting of the phenomena used the exact
same graph, but made no attempt at being explanatory. I have since then, been
searching, but failed to re-find a copy of that graph to stick into my files.
Now, thanks you you, I have! Thanks!

------
codingdave
State of Venture-backed Startups. Just to be clear. It is a specific subset of
the larger startup picture.

~~~
tedmiston
This really depends on your definition of a "startup" vs small business,
lifestyle business, etc.

~~~
codingdave
I guess that is technically true, but if anyone who is NOT a VC is buying into
the idea that VC backing is the only valid definition of a startup... you have
drunk too much of the kool-aid.

~~~
tedmiston
I would say they more just look at it as an easy filter. While there will be
some false negatives, you have very few to none false positives i.e., venture-
backed companies that turn out to be non-startups but don't close or exit.

The example that comes to mind that breaks this is the failing startup turned
dev shop in attempt to revive the startup pattern.

------
traviswingo
Oh yeah, startup founders with venture backing aren't biased about this
topic...

------
gnicholas
> And it only gets less balanced with time. Among respondents' companies, the
> boards of later-stage startups are almost three times less likely to have a
> woman on their board.

If later-stage companies are older (probably correlated, but not perfectly),
then this could be a function of the year in which the boards were created.

There's more of a push for diverse boards now than there was 3 years ago, so
if a company got funding and formed a board back then, it's not surprising
their board would look different.

------
personjerry
> Now’s the time to launch companies and set sail.

> Though the majority of founders say we’re in a bubble, 9 out of 10 founders
> believe that it’s a good time to be starting a company. All aboard!

Wow that's the worst example of sample bias I've ever seen. It betrays the
fund's motives behind this post, I suppose.

------
jdavis703
I think this is a very interesting question to ask when interviewing at a
startup: "If you're not successful, why do you think that will be?" And also
"what leads the culture" (engineering, sales, design etc).

------
contingencies
Sector spread (Q51) is very biased; perhaps the method of sourcing respondents
was insufficiently broad or random.

------
misiti3780
1 out of 5 founders thinks they are raising a unicorn ?

~~~
almostarockstar
1 out of 5 founders want you to think that they think they are raising a
unicorn.

------
dmark3
So 10% of startups give out more than 1% of equity to a mid-level engineer ?

Perhaps this is a small sample, but it sounds odd.

~~~
brianwawok
What should first and second hire get? 1 or 2% doesn't seem crazy after a seed
round.

~~~
taneq
Anyone who puts in sweat equity should get double digits IMO (unless the
company has been around for years as a one man band, and maybe even then.)

~~~
ptero
Double digit ownership usually means the person is a cofounder. This question
was about engineers.

~~~
taneq
...who by definition aren't cofounders? Maybe I'm on the wrong site. O.o

~~~
brianwawok
If you join BEFORE seed money, and do a bunch of work for free, you can be a
cofounder.

If you join AFTER seed money, and get something like a market salary, you are
an engineer.

The gray area is the in-between places. If you join before seed money, but
only work 1 hour a week (say to help out a buddy), are you a cofounder? I
would likely vote no.

Or if you join AFTER seed money, but work for 75% of market rate. Or 50%. At
what pay do you appear to be a cofounder vs engineer?

~~~
taneq
So you're saying it _is_ a definition issue. Regardless of what work you do at
a startup, you are considered a "co-founder" if you put in initial sweat
equity (ie. did work for free) but an "engineer" if you only joined after the
company was funded and paying wages at market rates?

As for the grey area, it seems as if common-sense should prevail but sadly
that doesn't always happen so you always need a contract laying out exactly
what each side gets, even for volunteer work. I seem to recall a story earlier
this year (can't remember the company involved) where one of the founders'
friends had helped out occasionally before they got funded, then the company
got funded, ended up with a fairly large valuation, and the 'friend'
reappeared and claimed that they were owed a significant share of the company.

------
demonshalo
sigh... Europe does not stand a fucking chance!

~~~
cbcoutinho
What does this article have to do with Europe? I know First Round is based in
SF, but they don't state where the startups are located - the only mention of
the US is when comparing demographics of the workforce with the US itself.

~~~
demonshalo
What I mean is, Europe generally does not even come close to that level of
pay/compensation. So I assumed that these are US based startups. I could be
wrong though.

~~~
jdavis703
Yes but you (generally) get other things like universal healthcare, free or
cheap university, retirement plans, no need for a car due to proper urban
planning, etc. In the US you have to shell out for all these things, paying
into a private 401(k) for retirement, paying back student loan debt, paying
for your health insurance etc. And these are at well funded tech firms.

~~~
discordianfish
While true, that doesn't even come close to filling the gap.

In Berlin "the silicon valley of Europe", as people here like to say, there
are pretty much zero engineering jobs paying >$100k/year. There is some
magical ceiling of around $90k/year, no matter how senior you are. This isn't
only true for startups but pretty much any company.

That's one of the reasons I work remote for Silicon Valley.

~~~
dx034
On the other hand, costs in SV are way higher than Berlin. Berlin has very low
living costs, even compared to other European (and German) cities. With
$90k/yr you probably have the same living standard as in SV with twice as
much. Probably even a higher standard, with $90k/year in Germany you can
afford a large appartment, eat out regularly, don't have to worry about
retirement or health care.

Of course living in a cheap area and being paid the salary of the high cost
area is always better. But that's not specific to Berlin.

~~~
discordianfish
"$90k/year in Germany you can afford a large appartment, eat out regularly,
don't have to worry about retirement or health care" \- That's definitely
true. But I'd argue with similar profile you can make at least 2x that in SV
at which point I don't think you have to worry about those things either, even
if you pay $5k/month for your apartment.

------
greenspot
tl;dr because the presentation is super long.

I just picked data which I find interesting and not obvious, there's much more
information which I don't cover. Data is in chronological order and often
aggregated to less numbers. 700 founders inside and outside of FirstRound were
surveyed.

\- 7 of 10 say bitcoin is overhyped

\- cofounder relationship: 5% fired their cofounder, 5% are strained, 40%
collegial, 28% best friends

\- 13% sold secondaries

\- 61% optimise on growth, rest on profitability

\- 52% want to fire up to 10 people, 32% up to 50, 10% more than 50 the next
12 months

\- Hardest people to hire: tech, sales and marketing leader

\- 90% of mid-level engineers get <1% equity, 64% <0.4%

\- Most (55%) of mid-level engineers get between $100K and $150K

\- Primary drivers of company culture are tech, sales and design

\- Most (43%) people leave between 6-7pm, 10% work longer than 8pm

\- 75% could close a round in 4 months or less

\- 78% pitched less than 20 investors

\- 76% raise exactly or more compared to what they planned

\- 55% expect that raising gets harder the next 12 months

\- 22% of investors didn’t meet expectations

\- 20% <= 30yrs, 32% older than 40yrs, rest inbetween

\- Most popular sectors are enterprise, consumer, fin-tech

\- 43% web, 29% mobile, 1% VR

~~~
spyspy
What defines a mid-level engineer?

~~~
mi100hael
I'd say someone who's not in a senior position like team lead but more than 3
years removed from college.

------
Dowwie
This is a duplicate post.

First post:

[https://news.ycombinator.com/item?id=13080477](https://news.ycombinator.com/item?id=13080477)

~~~
ValG
Didn't see that when I posted. Usually HN catches dupes, but I posted this on
mobile on the go. My bad.

~~~
Dowwie
It's not on you. :) HN ought to match on dupes like this.

~~~
sctb
The software allows resubmissions of stories that didn't get significant
attention after enough time has past and there's no longer any hope for them.
It does this so that those stories have more than one chance, which is often
needed before they catch on. Sorry that it wasn't yours that did! Community
members have analyzed the submission data to see if there's any way for
submitters to do better than random here and it seems like there isn't.

