It’s an axiom that startups are defined by growth. If it’s not growing 10% a month, then your company is seen as something less - a “lifestyle business”.
The association of startups and growth is an incredibly useful one for the investor class. They buy call options on a bunch of talented people, and convince them to scale their businesses as quickly as possible. Most crack under the pressure. At the best of times, a small company is a series of poorly arranged Jenga blocks. If you add on new blocks as quickly as possible, most will collapse.
Only a lucky few survive long enough to reach scale and return 100x+ to their original investors. These are the startups you’ve heard of - like Uber, Instacart, and Facebook. They’ve made the careers of their early investors, and they’ve made their founders incredibly wealthy.
But they’ve done this by creating a system of regressive taxation. Yes, Uber is an incredibly useful service for helping people get around. But it’s also a way to skim 40% of the wages of their drivers - some of the lowest paid people in their countries - and redirect them to the pocketbooks of the rentier class. And sure, Facebook is a way to keep in touch with your family. But it’s also a way for the wealthy to monetize the attention of everyone else. I guarantee you that Facebook’s early investors weren’t spending 41 minutes a day on the site.
There are people making 7 and 8 figures a year at Uber and Facebook thinking about how to increase these tax rates. For Uber, this is lowering how much drivers make. For Facebook, this is “engaging” (read: sucking up more and more of your attention) you more. This is what happens when your primary obligation is to your shareholders. You just find more and more ways to squeeze.
It’s through pursuing growth at all costs that we get a world where 26 people own as much wealth as 4 billion. On that list are Elon Musk, Mark Zuckerberg, Jeff Bezos, and Larry Page. Each of their companies has underpaid workers, knowingly flouted labor laws, and dodged taxes. It’s hard not to see the companies these men created as a form of regressive taxation.
I hope I’ve painted a picture of how the mantra of startup=growth can lead to horrible externalities. So what should startups be about?
To figure this out, I think we have to step back to the very earliest days of a startup. When it’s just a couple of founders, and an idea. What gets a startup from this point to growth in the first place? It’s ambition. Ambition to solve a pain point for a customer. In Uber’s case, it was helping wealthy people get rides more efficiently. For Facebook, it was connecting kids on college campuses.
To grow, a small company needs to serve its core customer incredibly well. So ambition comes before growth. Would Facebook have been less ambitious if they’d just focused on connecting college students to each other? I’d argue no, because there is a lot of depth there - everything from better events to dating to textbooks. Serving a small audience with depth isn’t inherently less ambitious than serving a larger audience more shallowly. It requires just as much product innovation, and is more impactful to the audience. Think of a teachers. It’s hard to argue that teachers aren’t making an impact - they make an enormous impact on the lives of students. It’s not an impact that scales. But that doesn’t make it any less meaningful.
Framing startups in terms of growth means that companies eventually subjugate their impulse to serve their customer better to their impulse to serve their shareholders better. Facebook could have built a monetizable service around the needs of college students. But the company chose to chase growth over serving its customers better. And this growth has ultimately been negative for the world.
It’s time for a new definition of startups. One framed in terms of ambition. Startups focus on being the best at solving a particular customer problem. And if growing faster means sacrificing that ambition, then a startup chooses ambition over growth.