Is PaulGraham inaccurate in Startup = Growth?
#startupgrowth Was Paul Graham (co-founder of Y Combinator) inaccurate in saying Startup = Growth?
In his seminal essay ‘Startup = Growth’ which i think is akin to Newton’s law for Startups (i know, i know, YC ideas don’t apply to Indian context etc. but stay with me!), PG suggests startups measure weekly growth rates of some metric (he specifically suggests Revenue) and have that metric > 5% WoW for any new co to be really considered a start-up. I do believe that not any new co = startup!
Why we find this useful as a guiding principle at Omnivio (and why he was inaccurate in a bit):
1. It really forced us to sign-up customers even w/o a MVP.
2. Whenever we feel the answer to a question on strategy/ product/customer segments/spends/hiring et,al is not clear, we test whether it will allow us to hit our target growth rate. The multi-faceted problem of running a start-up is simplified to some extent.
3. And weekly/monthly growth rate focus allows for tightness on execution n solving problem in a time-boxed manner. In business and life, time is the ultimate currency, and folks n cos, which solve problems faster out-execute.
For details, highly recommend reading the essay:
http://www.paulgraham.com/growth.html
For some transparency, as we are completing two years at Omnivio, sharing some snippets of our tracking/MIS (where we do track n report it to our investors). We did manage 5%+ Wow since launch in July ’21 till Dec’22.
Now why i feel it is inaccurate:
1. PG specifically talked about pure software startups, where Revenue and Gross Profits are close enough (they are mostly 80%+ Gross Margin businesses).
2. When we apply it to tech-enabled startups (which many globally n in India are, and Omnivio also is), the high absolute revenues, high variable and fixed costs can create result in high burn for startups.
3. Weekly Gross Profit growth rate (post Yr 1) is in my opinion a better guiding principle, as it helps covering fixed costs, and get to break-even faster.
We started tracking and reporting that since Aug ’22, and seeing great results.
Aug’21 — July ’22: Revenue grew 3X
July’ 22- July ’23: Revenue grew 3.5X, GP grew 4.3X
So startup = growth, just that measure correct things.
As Peter Drucker (the real Newton of Management said): ‘Whatever gets measured, gets improved’
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😴😴😴 — It’s a long post!
