Lifestyle Startups Stigma

Gimme a break. There's no mystery here. "Tech elite" is a code word for venture capital. VCs pooh-pooh lifestyle and bootstrapped businesses because there's no opportunity for them to profit. VC-backed founders have been successful at raising investment, so of course they're not interested in a business that doesn't require it. Both groups want to define success in terms that give them a business advantage.

I think this stigma exists because on some level, sometimes, when things suck at your high growth crazy startup (even if its just a bad day or week) you think, "man I wish I ran a skate shop in Huntington Beach with an online store". And it stings to see other people doing that.<p>It's a lot harder to delay gratification and swing for the fences, not just intellectually harder but emotionally harder. Sometimes I feel like my friends doing lifestyle businesses just don't understand what I'm going through, and other times they give me really bad advice that would be great if I was building a company to operate like their's but doesn't do anything for me at scale.<p>My family business is a lifestyle business in finance, I worked there from age 14 - 20, and its a totally different animal from a startup. Because it isn't a startup, its a self-sustaining business. Was after 12 months. So it makes me think a lifestyle startup is a myth - these aren't startups, they're small businesses trying to dine out on the glory of the name "startup" without takin the risk. What do you think?

An odd insight to "lifestyle startups" I had (and posted about) a while back...<p>For a while I was fascinated and amazed at projects pursuing absurd mega-goals, attempts to get something off the ground so big it was nigh unto stupid. A floating city configuring an independent libertarian utopia nation. A billion-dollar indoor ski resort just outside Atlanta. A bridge from Spain to Africa sporting a 5 mile suspended span. A world-class [fill in the blank, how much ya got?] facility annex to a super-mall in "why would anyone move there" Syracuse NY. A "fast ferry" across Lake Ontario connecting Toronto with "why would you go there" Rochester NY. And so on, one project after another with big flashing "ain't gonna happen" signs over them.<p>Then I realized. It wasn't success of the project that was the goal, it was keeping a small team of creatives employed in a perpetual state of promotion and study-funding: find someone with deep enough pockets, and they'll shell out a livable fee to be able to say "hey, look at this..." to other deep pockets. No way that Atlanta ski resort would happen, but the idea was exciting enough to elicit enough funding for studies to pay the bills (at least until the vital-to-snow-making nearby lake almost dried up) for a few people in modest offices. You can make a nice, if modest, living promoting stupid ideas.<p>And if the stupid idea actually pans out, takes off, and succeeds, well, the possibility of success is awesome enough to keep trying.

There's already a word for a lifestyle startup: a business.

It's simple really: lifestyle businesses supply enough profit to fund the creator and his or her employees and suppliers. They do not typically create enough free cash to interest investors.<p>Investors/VCs/Angels define "success" as an investment that returns enough cash to not only make a positive return on its own, but also to offset losses from the other "misses" in the portfolio.<p>That investment return can come directly from profit, or it can be achieved by telling a compelling growth story that allows others to buy out the investor's position and provide an exit for the early investor.<p>So, the question is really one of audience: do you aspire to provide a good living for yourself, your employees, and your business partners? Or are you swinging for the fences and able to provide returns to the investment community as well?<p>Whether you consider Google, Groupon, or Joe's Garage to be a success really depends on who your constituents are.

My personal view is that this stigma stems largely from two sources:<p>1) VCs who have a vested interest in getting people to give up equity in order to raise money.<p>2) People who have sold equity in exchange for VC money need to make themselves feel good about their decision so they look down on others who have a business plan solid enough not to need to tap the capital source of last resort.

However, I think a lifestyle business can evolve into a startup. These discussions sometimes seem to forget that life isn't always neatly planned out in advance. For those of us living outside of the Valley, the tech community needs to remember that not everyone and their brother is plotting their next "startup."<p>What can happen is (and this is an amazing thing about the times we live in) that a side project takes off, slowly becomes profitable, allows the founder to quit his job, focus on it full-time and then one day, he looks up and thinks "wow, I could swing for the fences." I guess that could be classified as a "lack of ambition" for not having a vision in the first place. OTOH it could be considered a smart move because the founder has already made something people want.<p>Mailchimp, Balsamiq, DuckDuckGo to an extent, and in a smaller way, my own "startup" are examples.

"Revenue generation is third on the list. It is really “nice” your balance sheets to have 7 or even better 8 zeros next to Revenue. Profit…"<p>This is just wrong. Even Google had early minor revenue. Revenue traction is king, it's the best kind of traction. User traction is a higher-risk proxy and thus must be more impressive to result in the same valuation after the risk discount.<p>Aside: Wanting to start a lifestyle startup does imply, correctly so, less ambition than the swing-for-the-fencers founders. That's why they're easy to pick on, ambition makes for much better stories.

I agree with you. However sometimes it feels as if building a lifestyle business takes the same effort (in the beginning) as building a large business.<p>For example think about all the small web development companies with 3-6 people in their teams. That is a lifestyle business. On the other end think of Instagram, 10M users, 6 people. Or Weebly, millions of sites, 3-4 people. Or Craigslist hundreds of million in revenue, 30ish people.

So what I don’t get is the hate. I run a small crowdsourcing biz, (that was pretty risky to start btw, it ate both the founders life savings and more), and I’ve once or twice been told I don’t belong at various startup/hacker meet-ups. Or to "start a real company."<p>From my perspective the companies are the same size, the tech is the same, the risk to personal wealth is if anything greater, and heck sometimes the market is the exact same. Why I can’t talk about these problems with people just 'cause I didn’t take funding mystifies me.<p>Of course, not for long, as generally the people who make these comments are just rude, and not the kinds of people that I’m going to think too much about. Still in the moment it kinda stings.

I was always under impression that lifestyle business is a startup which cannot or is not willing raise money.<p>Meaning sometimes even if your business is profitable (like my little business), VC will not invest since it lacks growth potentials.<p>So business goes like this:<p><pre><code> "find business model" -&#62; "optimize business model" -&#62; "scale your business" </code></pre> Sometimes, in the first step you find a business model which is profitable but it can optimized only on small scale or it cannot scale.

I wouldn't call it a stigma. I'd call it a general disinterest. It's the same kind of disinterest that follows bootstrapped businesses or any business that chooses to make money instead of burning it.<p>As the cofounder of a bootstrapped business myself, I'm no fan of the shadow we operate in, but I understand it. The story of a company that doesn't have the luxury of positive cash flow to fall back on when things get tough is fundamentally more risky, and therefore exciting. You get larger magnitude successes and a larger number of failures, which is far more dramatic. And narratives with more risk, more reward, and higher drama, are the kind of narratives human beings love.