back
10 comments
So the research seems to have identified:

(1) A set of behaviors which companies seeking high growth engage in, and which high growth tends not to occur without,

(2) The fact that even with fewer total startups, more startups are engaging in these practices,

(3) The fact that startups that engage in these practices are growing less likely to actually achieve high growth.

(Given the actual behaviors identified, it seems to be the kind of thing that experienced and institutional investors will demand before investing, and its quite likely that what they've identified is that knowledge of these demands is better distributed and more businesses are engaging in them and seeking -- and receiving -- institutional investment, but that those behaviors, while they are still key filters/demands used by institutional investors, are -- perhaps because everyone knows them now -- no longer particularly effective filters, they may still be useful and necessary, and there absence may still indicate failure, but their presence is getting weaker as a signal of potential success. Which isn't surprising, they are easy enough to do once you identify that people are looking at them as signals, so they are no longer indicators of particular sophistication on the part of founders.)

(I'm the author of the linked article.) At the margin, it's plausible that the effect you're describing is having an impact. But the real distinction the researchers are making is between companies that are looking to expand and those that were always intended to be small businesses. They intentionally avoided an overdetermined model ("Companies that rhyme with 'Gamma-zon' always grow huge!") and chose attributes that more generally signal the intention to grow.
There seems to be a gap between your rhetoric around "The next Amazon" and the actual paper.

In particular, the definition of success (selling for more than $10m) seems a bit low for VC-backed startup companies and is a huge gap between that and Amazon-sized economy changing companies.

Maybe I'm stuck in the HN bubble, but $10m seems like a small amount for anyone who has taken post-seed funding, and those activities (registering in delaware, filing for patents, etc) seem totally expected if you're taking funding.

I guess the question I have is: are there a large chunk of non-venture funded companies who fit their criteria? Do those have any indication of leading to huge growth? If not, then these indicators seem to be just another way of finding those companies that took funding.

Thanks for joining us. What reception has the research cited received among economists? Not being one myself, I'm not sure if I'm reading something widely accepted, an innovative new idea, something untested or even fringe. I lack the ability to distinguish between those things myself.

(Also, are you an economist? FiveThirtyEight's bio of you is pretty sparse.)

It's great to find some sophisticated analysis and content on the web, rather than more talking heads. Thanks for writing the article!

I'm a journalist, not an economist, although these days my role is probably a bit in between the two. (I have the luxury of digging a lot deeper than your typical online journalist.)

This research is still new, so there's no clear consensus yet. But so far the reception has been positive. The paper tries to get at a core question that's bedeviled economics recently: How is it possible that startups could be declining, given everything happening in SV? This is probably the most sophisticated answer so far. But it doesn't mean it's 100% correct.

We changed the linkbait title to something anodyne, but if anyone can suggests a more accurate and neutral title, we'd appreciate it.
I liked the linkbait - it got me interested enough to click the link (on fivethirtyeight.com), and then I enjoyed the article. Agree that the article title does not match the main theme of the piece--the piece is too long for that anyways. The title for this post is probably too general to get many people interested. There's new "research" on startups written about almost every day.
Can you describe what the current policy on titles is? Are you pro-anodyne?
I meant "anodyne" not as a good thing but as "the best we can come up with for now", i.e. at least it wouldn't provoke a big argument about linkbait. That's why I asked readers to suggest something better. Nobody did, so maybe it was just hard.

What the HN guidelines say about titles has been the same for years:

  Please use the original title unless it is misleading or linkbait.
We deliberately avoid having detailed policies, but in this case we can derive a few corollaries. What we want is the opposite of what we don't want:

  1a. A good title is accurate and netural.
The reason for preferring the original title is to let the text speak for itself, so:

  1b. When changing a title, try to find representative language 
      from the article, rather than making something up.
And since one big reason for the guideline is to minimize bikeshed-style complaining about titles:

  1c. The best way to comment that a title is bad is to suggest a better one.
There's a narrative about new businesses and startups that politicians and pundits in the U.S. like to tell.

It's a magic wand that creates jobs and economic activity without any public policy or investment - it solves problems without any effort on anyone's part - heck, you don't even need to go to college, they'll tell you, so we can cut education funding too.

It's also appeals to the idea of rugged individualism.

Unfortunately, the world doesn't work that way. I'm willing to bet that the next big Silicon Valley success won't be founded by a minority person who grew up in poverty, but by a white male, probably college educated, from a middle-class or wealthier background. Most other people don't have access to these opportunities.

Also, the idea promotes the 'gig economy', an unstable, poor-paying alternative to real employment.