Starting v. Building a Company

Durability is the rarest thing in technology. –Joe Kraus

Fred Wilson has a series of classes on building sustainable companies. His related blog posts highlight the differences for me between “starting” and
“building” companies.

It’s never been easier to start a company in Silicon Valley and New York. And on balance, my personal view is that’s a good thing (more below). But, while it’s never been easier to start a company, it’s never been harder to build one.

“Building” a company suggests creating a durable franchise that innovates and thrives through multiple tech cycles. That’s a ten to twenty year time horizon. Joe Kraus once told me, “Durability is the rarest thing in technology.” He meant that it is really hard to have a long-term, consistent and persistent impact through technology cycles given how rapidly these cycles change. People/companies who personify (or have personified) this for me include Andy Grove, Jeff Bezos, Steve Jobs and Google. Facebook is certainly on the cusp of that.

We’re in a time that glorifies the company starters. Startups get all the attention while the company builders go on quietly building their businesses. And it’s completely understandable since it’s a sexier story. We at SV Angel are probably partly responsible for this given our activity in this area. My view is that (theoretically) anyone with the guts and smarts to start a company should be given that chance. America’s distinctive quality world-wide is its entrepreneurial spirit and culture. Making it easier to start companies should be the norm.

Some don’t share my view. And it may only apply to the echo chambers of Silicon Valley and New York, anyway. It’s not an unqualified good – there are undoubtedly costs that come along with the trend. It’s a healthy debate. But on balance, I’d rather err on the side of making it easier and not harder for bright people to have the opportunity to start companies. And these companies generally get their first financings from people and entities (e.g., former entrepreneurs or other wealthy individuals) who can bear the losses individually. It’s almost like a graduate school fellowship to me.

I don’t feel the same about making it easy to “build companies.” It should be really hard to raise $5-10 million dollars or more. That’s when a company’s actual investors are probably pension funds, university endowments and other public/private entities. That’s when you ask people to move their families cross-country in many cases to help “build” a company. That’s when you think you found product/market fit but still may be wrong. Unless you’ve done it before, at this stage, you should enlist people who have either individually or collectively helped do it before. And as mentioned above, these people are really hard to find.

We at SV Angel focus on the company-starting phase. We also work with companies at inflection points in all phases. But we generally invest in founders who start their companies with the hopes of “graduating” to the hard part – building a company. Our involvement is usually in the first 18 months. And if they do graduate, we hope that the next phase is a ten to twenty year run.