The fundamental factor in entrepreneurship is the search for growth

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A start-up company is often defined as a fast-growing company, and only start-ups cannot make themselves into a start-up company. For any start-up, it is not necessary to establish what technology, to get venture capital, or to have an exit mechanism.

If you also want to start your entrepreneurial journey, it is important to understand this. Starting a business is so difficult that you can't just hang out and expect to succeed, you have to understand that growth is what you need to pursue throughout. The good news is that if you grow, then everything else will come naturally to you, which means that you can use growth as a compass on your way to make decisions in the face of all your needs.

Towering tree (redwood)

We are talking about this topic from the most obvious and often overlooked places: not all start-ups are startups. In the United States, the number of new companies is millions per year, but only a handful are startups. Most are service businesses-restaurants, barber shops, plumbing businesses, and so on, except for very rare cases, which cannot be called startups, and a barber shop will never be defined as a fast-growing company, but a search engine company is obviously.

When I say startups are characterised by rapid growth, I mean it's obvious in two ways. One of the first I said qualitative or design (designed) in a sense is purposeful and prepared, because most startups will fail. But from the natural side of nature, startups are not the same, because the seedlings of a towering tree have different fates from the beginning of their germination.

The difference is why there is a different word "startup" that specifically describes the fast-growing companies. If all companies are essentially the same, but some rely on luck or the efforts of their founders to get them to grow fast, we don't need a separate vocabulary to describe them. We just need to make it a very successful company and a less successful company. But the fact is that startups have dna,google that are completely different from other businesses, not a barber who has been a lucky or hardworking founder, and Google has been unique from the start.

To achieve rapid growth, you have to create something to sell to the mass market (products or services), which is the difference between Google and a barber shop, a barber shop (barbershop) does not have the nature of large-scale expansion.

For a fast-growing company, it must have:

The business (products, services) offered is what most people want

The products or services provided can cover all of these people and serve them

In the first article, the Barber shop fits very well because everyone needs a haircut. But the biggest problem it faces is the establishment of chain stores, which means it doesn't meet the second one. A barber shop is for individuals and few people go to a store for a long trip, but even if someone is willing to do so, the barber shop is unlikely to be accommodated.

Developing software is the best way to solve the second article, but you will eventually be bound by the first. If you develop a software that teaches Hungarians to speak Tibetan, then you can cover most of the people you want, but the market is still too small; if you develop software that teaches Chinese to speak English, it's not the same, and you're in the field of entrepreneurship right now.

Most businesses are either bound by the first or constrained by the second day. The difference between the successful start-up companies is that the above two can not restrain themselves.

Idea (Ideas)

Starting a business trip seems a lot better than opening an ordinary business, and if you're planning on starting a company, why not start with the most promising types? The problem is that it's a very efficient market, and if you're writing a Tibetan-language software for the Hungarians, you won't have too much competition. And if you write a software that teaches English for the Chinese, you will face very fierce competition, because obviously, it can bring much greater rewards.

The constraints that limit the rapid growth of ordinary companies are also protecting them, which is a compromise or trade-off. If you open a barber shop, you only need to compete with local barbers, and if you want to build a search engine, you have to compete with the world.

However, the most important protection for restricting ordinary business development is not competition, but lack of new ideas. If you open a barber shop next to a special neighborhood that restricts your future development or protects you from competitive competition, it also helps you define your company. Bar + Neighborhood (bar+neighborhood) is a good idea to start a small business, and of course such companies are bound by the conditions. Your field (niche) not only protects you, but also defines you.

When you want to really start a business, you have to think about something very new. The idea that a start-up company must be able to offer a service or product to a larger market is so priceless that all the other obvious ideas have been discarded.

The space for ideas has been turned upside down, so startups have to be based on what everyone ignores, and I said that people should try to look for ideas that were overlooked by most other people, but that's not where most startups started. Most of the time, successful startups appear because their founders see what other people don't see and what they think is obvious. Perhaps later they will find that the idea they found before was indeed a blind spot for many others and began to work on it. But when a successful start-up is officially launched, most of its innovations are unconscious.

So the difference between successful entrepreneurs is that they can see different problems, being good at technology and being able to confront the problems solved through the technology is a very good combination, because the changes in technology are so rapid that many bad ideas become good ideas inadvertently. Steve Wozniak, Apple co-founder, had the problem of wanting to own a computer, an unusual problem at the time of 1975. But technological change is making it very common, because he not only wants a computer, but also knows how to build it, and Wozniak can build one. The problems he solved for himself then evolved into Apple's problem for millions of of people. But at that time, Wozniak's idea was obviously a very big market for the average person, and Apple built it up.

Google also has a similar initial experience. Larry Page and Sergey Brin want to search the Web, but unlike most people, they have technical knowledge that allows them not only to discover the deficiencies of existing search engines, but also to know how to improve them. In the years that followed, the problems they encountered became a problem for everyone, because with the rapid development of the web you have to choose a better search engine, and in this process you will find that the old algorithm is not good enough. Like Apple, Google is in a good position when everyone else realizes the importance of search.

This is a link between entrepreneurial ideas and technology, and rapid change in one area will uncover and solve big problems in other areas. Sometimes these changes are progress, and the things they change can be solved. That's the kind of change that drives Apple, and the change in chip technology ultimately allows Steve Wozniak to design the computers he can afford. In the case of Google, the most important change is the rapid growth of the Web page, and it changes the market that was not resolved at that time but had great demand.

Another link between startups and technology is that startups build a new way of doing things, and in a broader sense new technology. When a start-up company not only starts with ideas that are driven by technology, but also includes these technologies in their products (what we call "high technology"), it is easy to combine them. But the above two connection principles are not the same, in the first connection, we created a start-up company is not driven by technological change, and its products often do not contain related technologies, in addition to some broad sense of technology.

Rate (Rate)

So how fast can a company grow to be a start-up? There is no specific answer. "Startup" is a pole, pole (pole), not a threshold (threshold). At the very beginning, starting a project is almost as good as an ideal manifesto, and you're trying not to just start a company but to start a fast-growing company, while you need to search for ideas that match their type. But in the beginning, you have only a few promises. Start a start-up company as an actor, "actor" is also a pole (pole), not a threshold (valve value). When he started his career as a performer, an actor was a constantly auditioning waiter, who worked to make him a successful actor, but not necessarily an actor when he was successful.

So the real question is not what speed makes a company a start-up, but how successful startups tend to grow. For the founder, this is not just a theoretical issue, because it is also equivalent to asking if you are on the right track.

Generally speaking, the growth rate of successful start-up companies will go through the following three stages:

To figure out what you're doing at the beginning of this stage, startups grow very slowly or without any growth

As startups know what most people want and how to cover them, the growth of this time will be very rapid

The eventual success of the start-up company will become a big company, which will slow down in part because of internal constraints and partly because the market for corporate services has begun to limit its development

Putting these three phases together creates an S-curve, and what really determines a start-up is the growth of its second phase, and its length and slope (slope) determine how big the company will grow.

The slope is the rate at which the company is growing, and if you want to define a number that is known to every founder, that is the rate at which a company grows, which is also a measure of a start-up. If you don't know the number, you don't know if you're doing well or not.

When I first met a lot of founders, I asked them about their growth, and sometimes they told me, "We're going to add 100 new customers a month." "This is not a growth rate, and I'm really concerned not with the specifics of its new customers, but with the ratio of new users to existing users." If you get a constant number of new users every month, you're in trouble because that means your growth is falling.

In Y Combinator, we measure growth every week, in part because each startup is short on demo day, and partly because early startups need to quickly get feedback from users to keep adjusting to what they're doing right now.

At YC, a better growth rate in the weekly law, if you can reach 10% per week, then you are already very good. But if you can only do 1%, then there is something wrong with what you are doing.

The best way to assess growth is revenue, and for startups that have not yet earned revenue, another way is for active users. The rationale for this is that whether or not startups start making money, their revenues may be a constant multiplier of their active user volume.

Compass (Compass)

We often advise startups to get the growth they think they can achieve, and they are just trying to achieve their goals as much as possible. The key word here is "just", if they decide to reach 7% per cent a week and eventually get there, they will be successful that week, otherwise they have nothing else to do, but if they do not, they will fail at this point and have a corresponding warning.

Programmers will realize what we are doing and we are turning a start-up startup into a problem that can be optimized. Anyone who has tried to optimize the code understands how surprising the impact of focusing on a narrow point can be, and optimizing the code means simplifying and changing existing programs, usually simplifying the result of less time and memory. You don't have to figure out how the program works, just make it run faster. This is a very satisfying result for most programmers. A narrower focus can give you a sense of how quickly the problem is solved.

By focusing on achieving a certain growth rate, you can simplify the complex problems that you encounter in your start-up process, and you can use this target growth rate to serve all your decisions, and any service that needs to be targeted for growth is right. Do you take two days to attend a recent meeting? Do you need to hire another programmer? Do you want to focus on the market? Do you spend time with some big customers? Does the product need to add a feature? All of this can be decided as long as you are at the center of your growth rate.

Doing your own weekly growth assessment doesn't mean you don't have to think long, once you have experienced the pain of a week when you failed to reach your goal (the only thing that is most important and you fail), you will be interested in all the things that may ease your pain in the future when you encounter similar pain. You will be willing to hire new programmers who may not be contributing to your growth this week, but some of the new features that come with them may bring a lot of users in the coming months. But making such a decision must meet the following two conditions:

The distraction of hiring new recruits doesn't affect your short-term goals.

If you don't hire new people, you have every reason to worry that you won't be able to achieve your goals.

So this is not to say not to consider the future, but to consider whether it is necessary.

In theory, such a climbing-style growth will cause trouble for startups, who may end up at a certain local peak. But in fact such things never happen, and a certain rate of growth per week can make founders have to act, and the chances of success are much higher than inaction or indifference. 90% of cases have shown that waiting for a strategy is just another form of procrastination. The founders ' intuition is often better than their understanding of which peak to climb. Plus, entrepreneurial ideas are not so sharp (spiky) and isolated that most good ideas tend to have better idea next to them.

Optimizing and focusing on the biggest benefits of growth is the process that allows you to discover a better idea of entrepreneurship, and you can take the things you need to achieve this growth goal as a step forward. If you start with the original plan and adjust it as needed to maintain growth, say 10% a week, you end up finding that your company may be completely different from the original idea. But any idea that allows you to maintain a 10% growth rate per week will certainly be a lot better than your original one.

Similar to small businesses, conditions that are constrained to locate a particular area help define a bar that helps define a start-up with a constant growth constraint.

It is better to follow the guidance of the constraints that you encounter in your upbringing than to be swayed by your original vision, just as scientists always follow the lead of facts rather than be taken for granted. When Richard Fernman says that the imagination of nature is far deeper than the human imagination, he means that if you follow the facts and the truth, you will find more cool things. As with startups, growth as a constraint is like fact and truth, and at least part of every successful venture comes from the imagination of product growth.

VALUES (value)

Finding a product that grows by a few percent a week is very difficult, but if you find one you may find a gold mine. Look at the table below and you can see at a glance:

Our ancestors rarely encountered this exponential growth case, because our intuition is not a guide here. Even founders will be shocked when such fast-growing start-ups emerge. If a company's growth rate is 1% per week, its annual growth rate is 170%, and when it is 5% per week, its annual growth rate is 1260%. If the company earns 1000 dollars a month (a typical figure in the early days of YC) and keeps 1% growth per week, it will earn 7900 dollars a month after 4 years, less than a good programmer in the Silicon Valley region. If a start-up company keeps its growth rate at 5% a week, it will earn $25 million a month in 4 years.

Small changes in growth rates will make a very big difference in the final outcome, which is why there is a single word "startup" that describes startups and why startups do things that ordinary companies can't do, such as financing, acquisitions. Of course, this is why they frequently fail.

Given the value of how a successful start-up will become, anyone familiar with this expectation will be shocked if its failure rate is low. If a start-up company can generate 100 million of dollars in revenue for its founders, even if its chances of success are only 1%, he will have as much as 1 million of the expected value of setting up the start-up, and a group of intelligent and determined people will surely succeed more than 1%. It's not hard to understand why so many people want to invest in the right people, such as Bill Gates when they are young, where the odds of success are between 20% and 50%. In an efficient market, the number of failed startups is proportional to the number of successful startups, which means that the more successful startups are, the more failed startups should be.

This means that at any given time, the vast majority of startups ' work will be built in areas where no one has been involved, and this effort is called entrepreneurship.

It's not going to bother me, it's the same as other careers like actors and novelists with higher beta coefficients. I've been used to it for a long time, but it seems to be troubling to a lot of people, especially for those who build ordinary businesses, and some don't understand why these so-called startups get all the attention.

If they step back and see the full picture, they may not be so indignant. The mistake they made was that the idea was still based on the ancestor's view of median (median), not the average. If your evaluation of startups is based on intermediate values, the whole concept of starting a startup is a ruse. You have to invent a bubble to explain why founders want to start their own startup projects and investors want to invest in them. But it is wrong to use the median concept in a domain with so many variables, and if you look at its average income instead of the median, then you can see why investors like them and if they are not of the middle value type, then they choose to start a business as a rational choice.

Trading (Deals)

Why do investors like startups so much? Why are they so keen to invest in picture-sharing apps rather than businesses that can make money? The obvious reason is not so obvious.

Any investment test is a risk-return problem, and startups can pass the test because, despite its huge investment risk, the payoff will be very high once it succeeds. But this is not the only reason investors like startups, and for ordinary slow-growing businesses, if their risks and rewards are kept at a very low level, then risk returns will be better, so why is VC still interested in high-growth companies? The reason is that they are rewarded by capital gains, Especially after a start-up company has an IPO, or when it is acquired.

Another way to get a return on investment is in the form of dividends, although there is a certain percentage of income, but very few VC invest in these companies, this is why? Because it's easy for people to control a private company to transfer profits to their wallets (for example, to buy accessories for their own controlled suppliers), This makes the company's profitability look bad. Anyone who receives dividends by investing in private companies needs to be constantly concerned about their statements.

VC companies like to invest in startups is not just because of their return, but also because their investment is relatively easy to regulate. The founders could not benefit themselves without allowing investors to benefit.

So why do founders want to take VC money? Growth! The constraint between good idea and rapid growth is going to work in two directions, not just the need for a large scale of thinking to achieve growth. If you have such a idea but can't grow fast, your competitors will soon catch up. Too slow growth is especially dangerous for businesses with a network effect.

Almost every company needs some capital to start its projects, but startups often raise money even when they can make a profit. The sale of a profitable company's stock may seem silly, but it's certainly smarter than buying insurance. In essence, this is the way most successful startups look at financing. Companies can use their own earnings to achieve growth, but capital from VC can make growth faster. Financing allows you to choose faster growth.

The use of capital to achieve rapid growth is often the majority of good start-up companies to the VC requirements, because VC need them more than they need VC. If you want, a for-profit start-up can achieve growth through its own earnings, and slow growth may be risky, but it is unlikely to fail. VC companies need to invest in startups, especially good startups, or they may be squeezed out of the market. This means that any start-up company with a lot of promise can get money, and because of these big successful startups, VC can still gain from their investment.

Almost all successful startups will receive acquisitions from other companies. What makes other companies want to buy these startups?

Essentially the same, everyone wants to succeed in the stock of startups: a high-growth company is of great value. For example, ebay is a good thing to buy PayPal, because PayPal now occupies 43% of its sales and more growth.

But acquirers have more reason to want startups, and a high-growth company is not only of great value but also dangerous. If it keeps expanding, it may invade the buyer's own domain, and many product acquisitions are also based on concerns that, even if the acquirer is not threatened by startups themselves, they may also think of a competitor. From this perspective, startups are doubly valuable to acquirers, so buyers tend to pay more than average investors.

Understanding (Understand)

The combination of entrepreneurs, investors and acquirers forms a natural ecosystem that works well, but those who don't understand tend to invent conspiracy theories to explain something. Just as our ancestors used to explain the workings of nature, as the earth is round, but its operation has no secret.

If you start with the wrong assumption (Instagram worthless), you can only explain the acquisition by inventing a secret boss for Mark Zuckerberg to force it to buy Instagram. For those who know that this assumption is absurd, Mark Zuckberg bought Instagram because it is valuable and dangerous, and the real reason for him to make the purchase decision is its rapid growth.

If you want to understand entrepreneurship and understand growth, I want to say that growth drives everything in the world. It is also why startups are often technology-based-because the idea of a fast-growing company is so scarce, the best way to find it is to discover some of the changes in recent years where technology is the best source for driving rapid change. Growth is also the most rational choice for entrepreneurs to start their businesses because growth makes successful companies so valuable that, despite the enormous risks, the expectations of entrepreneurs are still high. Growth is the main reason why VCs want to invest in startups: not only are their investment returns very high, but they will be easier to regulate than investment and equity dividends. Growth explains why most successful startups still get investment from VC even when they don't need the money: it allows them to choose their own growth rate. While growth explains why most startups receive acquisitions from many companies, acquiring a fast-growing company is not only valuable but dangerous.

If you want to succeed in a field, you need to understand the driving forces. Understanding growth itself is part of the entrepreneurial process. What you really do when you start a business is to solve some of the problems that are harder than ordinary business, and you need to search for the idea that leads to high growth, because these idea is very valuable and it's very difficult to find it. Startups are by far the best medium for your new discoveries, and the journey to starting a business is the same as deciding to be a researcher: you're not going to solve any particular problem, you don't know exactly what to solve, but you have to try and find something that hasn't been discovered before. What a start-up founder does is actually similar to an economist, most of them will not have a very significant discovery, but someone will find some relevance.