How To Be A Successful Startup … Go For Rapid Growth?

Paul Graham published an essay this past weekend titled “Startup = Growth” and while I recommend it to all, I couldn’t help but find myself disagreeing with his main point. Heresy I know, as I can only dream of having the amount of startup knowledge PG possesses, but I’m not gonna give him a free pass just because of who he is. I decided I should write a post about my issues, but before I was able to finish, Mark Suster beat me to it. His response, “Is going for rapid growth always good? Aren’t startups so much more?” highlighted many of the same issues I had with PG’s essay, but far more eloquently than I could have hoped to.  That being said, I felt compelled to finish what I started and add my two cents on the topic.

PG’s overarching theme is that a company is only truly a startup if it achieves massive, rapid growth, and as such, growth should be their only focus. I found this statement tough to swallow. While I agree that the term “startup” might be thrown around a bit too cavalier these days, this definition seems overly restrictive. I think a more fair statement would be if you want to be an ultra-disruptive and hugely successful startup, (AKA one that PG wants to invest in) you need rapid growth. Without it you probably won’t ever be a $500+ million company, but that doesn’t mean your company is not a startup or that it can’t be successful.

Mark Suster makes a similar point in his article. He uses the first startup he founded as an example of a company that did not experience nor-strive for rapid growth, but was nonetheless a success. He goes on to say that he blames this SV culture of wanting only rapid growth as a contributing factor for many recent failed ventures that might otherwise been avoided if the companies had been less pressured to be HUGE, and instead, been more patient with their growth. PG is looking at this from an investor’s perspective and not a founder’s perspective. The majority of the money he makes is from hitting big homeruns. So despite the fact that a $30-50 million deal can have a profound positive impact for both founders and employees lives, it doesn’t move the needle for a big time investor such as PG.

My other main issue with PG’s article was the insistence that a startup’s only focus should be on growth, and achieving it by any means necessary (PG footnotes this point saying that the long-term benefits must outweigh the costs). I know startups need to grow in order to command high valuations, so in theory that should mean that growth is all that matters (especially from an investor’s perspective), but why can’t they be about more than that? What about creating a startup that helps change the world positively but slowly, or one that is hugely helpful for a small but dedicated core group of users, or something that is much more long-tailed and so rapid growth is not part of their plan, or anything that the primary focus isn’t purely about growth? Maybe I am being overly idealistic, but part of the reason I decided to ditch my finance career path in favor of startups is because I thought they allowed for more diverse ways of measuring success… that they didn’t necessarily have to be driven purely by the desire to maximize profits. But if our focus should purely be on growth then that doesn’t seem to be all that different.

I want to emphasize that I found PG’s post to be very educational, and I highly recommend it, but I think he needed to clarify that he is discussing this subject from an investor’s standpoint. I am curious to hear your guys’ opinions on the relationship between startups and growth in the comments.