Growth curves of startups

Pick whatever metric you want for gauging the success of a particular startup: profits, revenues, pageviews, etc. A graph I’d love to see is those metrics, graphed over time, for a wide variety of startups. From my experience, you’d be surprised how often those graphs show sudden growth. Something happens in the world (an “exogenous shock”) and the startup suddenly takes off.

I remember first observing this when I worked at Bessemer. For example, there was a startup that supplied services to video websites. For years, the company soldiered along, barely growing. Then, suddenly, YouTube blew up and this company took off along with it.

As a founder, these exogenous shocks are out of your control, but you can 1) understand what exogenous shocks you depend on, 2) try to guess when those shocks will hit, 3) manage your runway so you survive long enough for them to hit.

http://simplifilm.com Chris Johnson

Or…don’t be a webservice and sell consulting to customers.

http://www.cdixon.org chris dixon

I think this applies to all types of businesses.
http://twitter.com/MartyCrampton Martin Crampton

Sell consulting to customers? Isn’t that selling ‘stuff’ to them whether products or services? I don’t get you…??

http://simplifilm.com Chris Johnson

Well, you can do consulting gigs- service business type stuff – to keep the fires stoked.

http://twitter.com/sankaruppuluri Sankar Uppuluri

cdixon is most probably talking about the metrics in a relative sense.. 2 million views might be equivalent to 20 consulting clients in certain industries.

Anonymous

How about sharing that graph for Hunch ? Love to see that…

http://www.cdixon.org chris dixon

I think you need to do a systematic study to glean any general truths out of it.

http://MeetInnovators.com Adrian Bye

its great you are back and posting a lot!

http://www.cdixon.org chris dixon

thanks trying to post at least once a day to avoid writer’s block.

http://mikelewis.me pescatello

Yep, this happened to us at Qloud.com. We were a music startup and plowing along. Then the facebook platform launched in 2008. We were one of the first music applications (along with iLike). All of the sudden, we went from basically 0 to a million users in 2 months. Then from 2 million to 10 million in another 3 months. Then 10 to 25 in another few months. We caught the facebook platform wave. Inviting new users was easy and we were in turbo-viral mode. The word you used was “explosive” and that’s exactly what it was.

Surviving long enough is key. Runway is a very underrated thing for a startup.

http://www.cdixon.org chris dixon

Yeah, i like to think of it as a startup is either playing “short ball” (e.g. fast follower to successful startup like Groupon) or “long ball” (betting on new trend hitting). Especially in long ball case having a long runway is key.

JamesHRH

Long ball takes patient money…..

Matthew A. Myers

And patient founder…

http://twitter.com/aortenzi Anthony Ortenzi

Also, always know your bottlenecks, even if you choose not to move them. You’ll need to know the first things to attack when you hockey-stick.
http://www.justinlong.org Justin Long

Should compare to what Taleb says about Black Swans and not reducing risk in his latest article in Foreign Affairs. http://www.foreignaffairs.com/articles/67741/nassim-nicholas-taleb-and-mark-blyth/the-black-swan-of-cairo. Some brief notes on the article (but in a wildly different context from yours, admittedly) are here: http://www.justinlong.org/2011/12/suppressing-volatility-leads-to-greater-danger/.

The upshot: I agree that you need to be able to think about and predict black swans, but a la Taleb’s article perhaps more time should be spent investigating the systems that create the black swans which would enable your startup to take off. And invest in feeding those webs of interconnections.

Or, as Kevin Kelly so succinctly put it, First Feed the Web
http://www.kk.org/newrules/newrules-5.html

http://twitter.com/vlaskovits Patrick Vlaskovits

By definition, you cannot predict Black Swans nor manufacture them – but perhaps one can maximize their exposure to postive Black Swan events.

http://www.cdixon.org chris dixon

yes I think that’s right

http://www.justinlong.org Justin Long

Yeah, that’s what the original article said. By investing in the webs of interconnections that lead to Black Swans, you are essentially maximizing your exposure to those events.

http://ryangraves.org Ryan Graves

lets jam on some Uber growth charts next time in NYC!

cheers bud.
RG

http://www.cdixon.org chris dixon

up and to the right I’m sure

http://ryangraves.org Ryan Graves

makes for a fun convo
Matthew A. Myers

Unless you’re looking at them upside down..

http://twitter.com/vlaskovits Patrick Vlaskovits

Hey Chris — I see the YouTube story (along with many other startups we know & love) very similarly — as you might know, Taleb calls these exogenous shocks Black Swans. I wrote about Black Swans, YouTube & startups a while back:

http://market-by-numbers.com/2010/01/cognitive-biases-positive-black-swan-events-and-startups/

Cheers,
Patrick
http://twitter.com/arieldistefano Ariel Di Stefano

That’s why we have chosen to develop using MS Kinect, after spending more than 1 year trying to make some thing with the mac app store.
Suddenly, all is about kinect, and techcrunch and engadget covering our product confirm that we have made the right choice.
BTW: We made this google analytics for the real world using kinect: shoppertracker.agileroute.com
http://www.alearningaday.com Rohan

This is tough tough tough to do.

But right.

http://earnedmedia.wordpress.com/ Christian Brucculeri

I think three toughs is about right

http://twitter.com/_garrilla Garry Haywood

Before you do this can I suggest you read a bit of Gibrat http://en.wikipedia.org/wiki/Gibrat’s_law - its not a law, it just got called that. It runs true at the level of the firm, and then as you move up through levels aggregation it stops running true, e.g when you get to a system level the distribution shows a power-law.
http://twitter.com/rupe_greenhalgh rupert_greenhalgh

“1) understand what exogenous shocks you depend on, 2) try to guess when
those shocks will hit, 3) manage your runway so you survive long enough
for them to hit”

Sorry whilst scenario planning can be part of the business planning toolkit, I think the better approach is to ensure your business is adaptable to change which implies:
1) you are scanning customers/suppleirs interests, needs, wants (not always those in the same supply chain!)
2) preparing your organisation to be open to change, responsive to change – through workforce development/skills, leadership and empowering staff
3) making many quick and small steps to develop products and services and learning from mistakes.
Collaborative, Adaptive, Responsive – but not deterministic.
Matthew A. Myers

It’s important to understand this. But I’m wondering though Chris, how many investors would want to hear that you’re waiting for a particular shift to occur for your company to blow up (in the good way)?

I’m wondering if it would be a detriment to mention this when talking to potential investors, or just focusing on what’s possible immediately and in near future (assuming it has enough positives on their own to substantiate investment being made).

http://www.cdixon.org chris dixon

I wouldn’t ever characterize it to investors as “we’re waiting for X.” I’d say X is happening (have good arguments why) and we will be poised to take advantage of it. For example, successful mobile advertising companies like AdMob started before mobile apps exploded, but smart people could see the writing on the wall, and those guys timed it perfectly. VCs are generally willing to take a bet on something like that.

Matthew A. Myers

Awesome way to frame it in the positive. Thanks.

http://pegobry.tumblr.com/ Pascal-Emmanuel Gobry

This is an idea I’ve had for a while. To go ’round the top 5 firms in the Valley and get anonymized data on all their portfolio companies going back 10-15 years. Just a few metrics. Surprised a researcher hasn’t done that yet.

http://www.cdixon.org chris dixon

Yeah I’d love to see that too.

You reminded me of another good example: Evernote. I remember using it back in 2003. I am not connected to the company but I bet you growth really took off with adoption of iOS/Android.

http://twitter.com/daslee David Lee

we are looking at this right now with consumer internet breakouts facebook, twitter, youtube, etc. and i will blog about the results. this graph was the inspiration: http://www.buzzom.com/2011/07/growth-of-google-plus-vs-twitter-vs-facebook-stat/
Pingback: Exponential Growth « Das Blog
Pingback: Growth curves of startups part 2 | Ipso Fabulous

Chris Dixon