Thank you for sharing these golden experiences here.
If you'll bear with me, I will try to articulate my perspective on the slugging out parts and risk-taking. Would love to hear your thoughts on this.
There are two types of markets - open markets and winner-takes-all markets. You can tell the difference between these markets by the number of sustainable players in each market and by the distribution of available revenues across these players. Revenue distribution in open markets follows a power law distribution with a fat tail. Revenue distribution in winner-takes-all markets resembles an exponential distribution with a virtually non-existent tail.
The market you are trying to go after should define your approach to slugging it out and to the way that you take risks.
If you are participating in a winner-takes-all market, you should be pushing your balls to the wall and taking any risks necessary to give yourself the best shot at being one of the winners.
If, on the other hand, you are participating in an open market, there is a pronounced asymmetry between upside and downside from each risk that you take. This asymmetry means that you should be maximizing the number of risks that you take, but you should limit amount that you bet so that a risk not panning out is not catastrophic. The longer you survive, the better chance you have of hitting it big.
Most founders I know act as if they are participating in winner-takes-all markets. However, if you are running a startup, chances are that you are participating in an open market with a fat tailed distribution of long-term valuations for players in that market.
The reason that it is easy to fall into the illusion that you are in a winner-takes-all market is because VC funding is a winner takes all game. It is easy to conflate the act of raising money with the act of growing a business.
Personally, once I understood that my market was open, I was able to comfortably take my foot off the pedal a bit and this had a positive impact on my whole team and on our business.
But back to your point about slugging it out, I think you slugging it out was you taking those small bets in an open market. It was a necessary step to your current success. Because the alternative is sticking with your day job, and that just makes you far too slow to jump on opportunities.
That's a very thoughtful take and I am glad to see other people putting a lot of thoughts into this. The only thing I would question is are there really any evergreen open markets. Sure, they might be open today, but will they stay open 5-10 years from now? I mean, just look at home care - could have anyone envisioned back in 2014 that this is going to turn into a VC battlefield? Between Honor and Papa, it will be hard for any independent agency to stay competitive for many more years.
If you'll bear with me, I will try to articulate my perspective on the slugging out parts and risk-taking. Would love to hear your thoughts on this.
There are two types of markets - open markets and winner-takes-all markets. You can tell the difference between these markets by the number of sustainable players in each market and by the distribution of available revenues across these players. Revenue distribution in open markets follows a power law distribution with a fat tail. Revenue distribution in winner-takes-all markets resembles an exponential distribution with a virtually non-existent tail.
The market you are trying to go after should define your approach to slugging it out and to the way that you take risks.
If you are participating in a winner-takes-all market, you should be pushing your balls to the wall and taking any risks necessary to give yourself the best shot at being one of the winners.
If, on the other hand, you are participating in an open market, there is a pronounced asymmetry between upside and downside from each risk that you take. This asymmetry means that you should be maximizing the number of risks that you take, but you should limit amount that you bet so that a risk not panning out is not catastrophic. The longer you survive, the better chance you have of hitting it big.
Most founders I know act as if they are participating in winner-takes-all markets. However, if you are running a startup, chances are that you are participating in an open market with a fat tailed distribution of long-term valuations for players in that market.
The reason that it is easy to fall into the illusion that you are in a winner-takes-all market is because VC funding is a winner takes all game. It is easy to conflate the act of raising money with the act of growing a business.
Personally, once I understood that my market was open, I was able to comfortably take my foot off the pedal a bit and this had a positive impact on my whole team and on our business.
But back to your point about slugging it out, I think you slugging it out was you taking those small bets in an open market. It was a necessary step to your current success. Because the alternative is sticking with your day job, and that just makes you far too slow to jump on opportunities.