At first, this thought was bouncing inside my head for quite a while just after I have completed my first year real work experience. During that time I was single (as in not in relationship) and full with ambitions for world dominance as any teenager would have dreamed of. One of my best friend even think of quitting his job and thinking of setting up handyman matching service. His idea was pretty cool, but at that time I didn't take it seriously because the Internet adoption during that time wasn't as high. I still lived with my homestay so I have never experience any difficulty with fixing anything house-related nor trying to find one via newspaper ads.
During those time the term start-up was also very distant, noone ever think that a small team of people would be able to create significant change in people daily live. The big leap in the last 10 years are the creation of development tools and framework that are open source and available for free. These tools allow developers to create significant sized solutions in small teams. Some of the infrastructure also available cloud-based, making it extremely easy and low-cost to develop a running software system. Any necessary infrastructures like servers rack and full-fledge office expenditures that costs around 10k a month in the past, now can probably be covered for 1k a month. Such a drop in cost lowers the barriers of entry for many new companies that are willing to learn the rope.
Here in Indonesia or Asia especially, the number of start up companies have grown very rapidly. Some government agencies have actively participating to build an innovation hub. Some works like a charm but most died out slowly due to lack of focus. Here in Indonesia, most telcos have great iniatives to create the so called startup ecosystem. Telkom came with indigo incubator, Indosat with its IWIC and ideabox program. Both runs on yearly basis to provide opportunity for digitalpreneurs to actualize their idea and built a meaningful companies. Although interestingly, you can find some similar companies are incubated under both incubation programs (Indigo vs. Ideabox). Some of these are the Pikavia vs. Gogonesia. So far both programs have shown to produce great and meaningful products.
Start-up valuations have gone through the roof in a relatively short amount of time. As part of the ecosystem, the increasing number of venture capitaslists have created a huge demand and expectations as to how these startups will shaped. At the beginning I wasn't quite get my head around these capital investments until I realised how the expectation play a role. These expectations probably better explained by this infographic on the right (created by Anna Vital from fundersandfounders.com).
I you analyse this infographic its all seems good and solid, especially if you keep your observations on the lower part of it. However, if you look at the valuation figure, you should realize too that those numbers will not grow by itself – it is not automatic. So you need to know that $ 1 million valuation may not be that hard because your main aim is to get the investor expection aligned with your pitch. Especially if you already have a running prototype, things should be straight forward in this step. However, from $1 million to $4 millions are the part that you have to work very hard to achieve. Mentors may help but it come down to your execution ability and the market reception of your products and services. If one of them didn't work, you either have to pivot to achieve that goal or your company may not survive that funding round.
As a result of high rates of startups being established as we speak now, the salary base for all programmers and their related professions have gone through the roof. Some media like Businessweek has discussed some talent grab among large startup corporations like Matahari Mall and tokopedia. Yup, you heard it before – "with great funding, comes great expectation", so some of these startups with enormous funding, they are running very fast to fill their ranks and raise their reach to market. Some even disregard the cost vs income ratio, choosing to spend big on TV ads, street banners, and cash incentives to invite customers to do the trial. Most of these initiatives are expected to create large pool of return customers, although the actual results are yet to be seen.
With the rising setup and running costs of these companies, the next question will be the company profitability. Pressed between the VCs high growth rate and rising costs of staffs the company is running at high burn rate. Some of this burn rate can sometimes last for quite a while, like tokopedia vs bukalapak. With one after the other getting onto the next round of funding to beat the competition, also not to mention new startups funded by the big old conglomerates that are wanting to get a piece of this "new world".
So, what is my view on these start-ups phenomenon?
Despite some values being created, some of these companies are in very deep financial loss such that it can take very significant amount of time to recover their capital loss. One may argue about the case of Amazon, which took some years to be profitable. But one must also consider that Amazon was one of the first company to have this business model this during that time, which means that it can grow its market share without much competitors with the same vision as Amazon. Compare to now, for any company to do this is very risky as funding and people that are willing to do the same keep coming at accelerated rate, especially from those big old businesses that experienced market loss due to obsolete business model.
As for which position you choose, founder or builder it boils down to your tolerance level of stress. I have built few different type of startups but at the end stuck with one that I believe can grow to significant size. Even then I still do pivot now and then, especially as the competition starts to heat up. However if I have got the opportunity to do it all over again, I'm still not quite sure though, which path I would take since both path have a huge gap in between. Being entrepreneur you have great challenge that are faced with many years of hard work and perseverance. This compares to the steady and stable life you can have as a builder in corporate world – can be very difficult to choose. Especially during the current tech boom, where significant burn rate is taken as granted for any type of company.
At the end I choose to build my startup not just for the dream of glorious fortunes and fame, but more for the great ride and learning as we grow the company. I usually would treat my employees as part of the "corporate family" not for the political correctness of getting them to work full heartedly though, but for having been able to work together and ride along with them and experience enjoyment and sadness together also. I usually would encourage my people to face challenge together with company, meaning that company will cover the risk associated with new innitiatives or plan that they may have. Success or failure is not a big deal as long as we do it with great care – in the case of failure we still learn great deal from it anyway.
So, what do you think of this? Let me know in the comments below =)