Friday, November 2, 2012

Choose your path: Get big fast or grow organically

From Fred Wilson's blog, I found the talk by Joel Spolsky, the founder and CEO of Stack Exchange.  Spolsky talked about how FogCreek and Stack Exchange, two companies that he founded, were different in terms of their growth trajectory.  FogCreek was founded on their own funding with organic growth strategy on existing market.  Its strategy was to conserve cash, stay in business and release products that can find paying customers right away.  Stack Exchange, although it was founded without outside money, went the other direction.  It chose to get big fast using VC.  Generating revenue was not the first priority.  Instead it was going for land grab of building user base fast.

Highly recommend watching Joel Spolsky's talk.
His main point begins at 13 mins into the talk.

Spolsky's key point was this.  Failure to decide which strategy to take can be a reason for failed startup.

When I look back at my past failed startup attempts, I can now see how we completely missed choosing our growth path.  On my first startup experience, we were working on on-line dating site with photo upload feature and preference matching.  This was back in 1997, and we were just too inexperienced to realize that we were in grow-big-fast business yet acting as if we were going to start generating revenue soon.

Now that I look back at the experience, it ended up being a prototype project that never really got a fair chance to succeed.  Although we needed to ramp up fast on user base to create network effects, we did not know how.  Well, it's fair to say that we did not even realize that we needed to get big fast.

Today online dating is a $1 billion industry with 54 million users just in U.S.  Just imagine if we kept at it and executed on get big fast strategy.  Cost of not knowing what strategy to go after will surely run you dry fast.

Which type of startup are you working on?

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