Written January 1st, 2024
There's a new kind of company. I've been working for one over the past year.
First, let me oversimplify the old model.
Someone has an idea they actually decide to start building.
They build an MVP and get enough early traction to raise a round of funding.
They use this funding to scale their team and product. Ideally, this leads to growth. Enough to raise another, more favorable round. Oftentimes they repeat this until they IPO or get acquired. The investors and employees make $$$.
Sound nice in theory, but there are some problems. The first is that the vast majority die.
It's often said that 90% of startups fail (https://moneyzine.com/startup-resources/what-percentage-of-startups-fail/) but in reality, it's much higher. Getting funding is extremely difficult, and most don't. Even when you do, you're faced with a collection of ongoing threats.
For one, you must now generate a massive return.
Investors don't want to make a 20% profit. They want a 5-20x return, depending on the stage and size of the round. If you don't produce that, you're dead to them. Profitability means nothing.
Success to you might mean failure to them. This is a big problem, because they'll heavily control your company. Many fine businesses have been killed, just because they couldn't be a unicorn.
But most companies don't need to be unicorns. There is a better way.
They're often referred to as "lifestyle companies". Businesses built to grow linearly, operate profitably, and generate consistent returns to stakeholders.
Let's first address financing.
These companies will operate efficiently. They won't need much funding. This is partially because they don't intend to achieve hyper-growth – that hockey stick graph everyone dreams of.
Some will raise community rounds. They'll be small in size, and pay out dividends after profitability. As an investor, you won't have to wait for an exit. You'll get a check each month that consistently grows over time. Employees will get the same, but in the form of larger salaries (and potentially ongoing dividends, depending on the comp structure).
Instead of hiring large, expensive teams, they'll operate with a small number of people who focus on shipping. A lot of shipping.
Reflect, where I’ve been Head of Growth for the past year, is such a company. There’s 4 of us and I’m the only non-engineer. 2 of us are in the US, 1 in Europe and 1 in Asia. We have almost no meetings. We’ve only raised a community round of $1M, which we shouldn’t need much since we are no profitable. As we grow more, investors will get dividends and employees will make more.
Instead of meetings, documents, org structures and systems, we focus on shipping. Execution is fast and simple. There are no decision makers because everyone is a decision maker. There is no waste.
AI is pushing us into this era.
Every "employee" will be a 10x performer. Not bogged down by management and using AI as an omnipotent assistant, they'll accomplish what entire teams have done traditionally.
Company politics will be eliminated overnight. There is no ladder to climb, only money to be made. No one will be fluffing their resume or chasing a new title. What's the point? Incentives are 100% aligned.
Disagreements will of course still exist. But can be resolved in the light of clear, nearsighted goals.
These companies will attract most of the best talent for these roles because they can offer an ideal lifestyle. Work from anywhere, at any time, while making a lot of money in real-time.
Keep in mind, these companies will be drastically more pleasant to work in. When you focus on shipping for the sake of increased profitability, you spend time building instead of playing bureaucratic games.
But perhaps the best part is that there will be so many more of these companies. Entrepreneurship will become a viable career track, in any industry for anyone with an idea and excitement.
I want to say, this is not the only way. There will and should be moonshot companies. Companies that try to accomplish massive, long-term goals in complex industries. Space travel, pharmaceuticals, and hardware will never be bootstrapped.
This is not what most of us realistically want. If you want to live anywhere, living any lifestyle and spending your life exactly how you please, we are about to enter a golden era.