Cliffski's Blog

I read a lot about ‘startups’, and see the term used everywhere. it’s especially common for tech or internet companies, where people seem to use ‘startup’ as an interchangeable term for company.
The obsession with startups implies that new, young, unproven businesses are where all the value is. The accepted business model seems to be that a business is a ‘startup’ for a year or so, then gets acquired Entrepreneurs often talk about their ‘exit strategy’.
I’m very old fashioned in this respect because I believe that your exit strategy should be retirement. In other words, you should build your business to last. Your five or ten year plan should envisage your business still existing. Maybe bigger, maybe much bigger, but not bought out by some megacorp.

This implication that startups are sexy, but established businesses are dull encourages incredibly short-term thinking. People don’t care if their business has a firm foundation or if it makes a profit, or will ever be sustainable. They just need to keep paying the bills long enough for some big company to buy them out, then they don’t care what happens.
The rumor is that people working at onlive knew they were losing money but thought it would be ok because they could raise more money or get bought out.
It never occurs to people to build long term sustainable businesses that produce profitable products.

Ok, here’s something I’ve mulled over for a while. I read a lot of business books, and websites, and am interested in everything from the very early movie entrepreneurs (talk about goldrush…) right up to the silicon valley startup mania. One thing that often sticks out to me is the incredible speed with which a lot of the big companies accelerate at the start. They can go from 1 employee to a hundred in a year. That sort of growth is just baffling to a tiny little operation like positech…

It often bugs me that I am aware that deep down, I am just too risk-averse. Running positech at a loss for five years in order to grab market share? total madness, I’d never risk it. Mortgage the house to get money for the next game? No…can’t see me doing that either. And I consider both of those things to be good, because without them, there is a real danger of ending up like ‘that guy’ who had a successful business once, but blew it, and now works in McDonalds.

However, I do seem to take it *too far*, in that the company actually has some money in the bank, is working on two projects at once, and yet I am often having to fight with myself to spend any of the companies money on expansion, artwork, music, promotion, PR etc. Why is this?

I think the problem is, because I own the whole company, I have a natural tendency to look at the companies earnings and companies money and think it is *my money*. And really, I think that is a mistake. We all know it’s much easier to spend someone else’s money than your own, and I think I need to trick myself into thinking that way. The money in the company account is not *my money*, it’s the current working capital of Positech Games, and Positech games should make sure it manages it’s money well in order to make great games. Some of that money will get paid out to the owner, which happens to be me, but that’s a business expense just like buying advertising space, sponsoring flash games, paying artists or buying new software or hardware for the business.

When I think like that, I find it much easier to look at the sales and revenue and expenses and realize that compared to almost any other business, Positech seems to be a super-cautious and incredibly unadventurous enterprise. I need to remember that ferengi rule of acquisition “The riskier the road, the greater the profit”.