- The number of people in startups focusing on peripheral activities like podcasts, newsletters, and investing appears to be growing rapidly. Why?
- Tech’s health check
- Is Rabbit R1 the future, and why not? (It looks cool nonetheless.)
- OpenAI launches GPT Store.
I started this newsletter for several reasons.
Firstly, following my last AI startup, I wanted a less tech-heavy project. As a programmer, I’m aware of the common pitfalls in our field, like the tendency to become fixated on development, hoping someone will discover and use our app. This time, though, I chose to prioritize distribution. The scripts behind a newsletter are quite simple—and aside from creating content and engaging with readers, distribution is the most fascinating aspect of running it.
In other terms, launching a newsletter is easy, but attracting a large readership is challenging. And I wanted to improve my skills in the latter aspect.
Secondly, I’ve seen the benefits of having an audience among my peers who started at the same level as me. Unlike me then, they focused on regular writing. If I were to I launch something, it would go unnoticed, but their launches would attract many users. This is a big edge for anyone starting a new business. While I’m not great at platforms like Twitter, Instagram, TikTok, or YouTube, I do a good job at writing. It makes sense to connect with people who might appreciate my work through it.
Thirdly, a realization that came only after I began—and it wasn’t my original thought, but I like it a lot— is that this project represents a shift from a big TAM founder to a smaller TAM startup. (TAM as in Total Addressable Market.) My previous approach as a founder was typical of a zero-interest-rate policy environment: target the largest market, address the biggest problem, and easily secure more funding from investors after enough progress. This approach taught me a lot, but these days are now gone. What if I applied the skills I developed in pursuing large markets to a smaller-scale project like a newsletter?
Here's an example of this very idea in action: newsletters. You’ve seen the jokes about the smartest people in the Valley starting a Substack instead of an ambitious VC-backed startup.
Who are they? Big TAM founders. People who have the experience and skills to tackle something with huge potential. What are they doing? Working on a small TAM startup (at least a noticeably small-er TAM than they’re believed to be capable of tackling). And why? Because they see a higher chance of success, even if the potential outcome is smaller.
—Big TAM Founders, Small TAM Startups
Writing newsletters, much like starting podcasts, often gets a bit of a bad rap because of how easy it is and how easily people delude themselves into thinking what they have to say is interesting—even though, in reality, it’s pretty basic. And even those with valuable insights are often asked: why write about building stuff instead of, you know, actually building it? This is a great question, and I thought about it deeply before launching Before Growth. That’s also a key reason I wanted to share my thoughts with you.
I agree that actively building things is crucial, which is why I don’t plan to replace my daily startup job with this newsletter even if I could. Instead, I view it as a strategic hobby. If I were to try a new, significant project, I’d likely scale back my writing here. My goal is for this newsletter to be a practical resource, grounded in information based on real-world experience. Should an opportunity arise to gain more of that experience to share later, I would seize it and return to writing afterwards. This approach feels intuitively right to me.
So let’s see how this goes.
Your questions, answered…
As an employee, how does negative capability affect the culture and decision-making processes in an early-stage startup?
This is a question that was sent to me by a reader after the last article in December—and it’s a good one. I think lots of frustration that I noticed early-stage employees have about their founders can be derived from tolerance to negative capability: both their own and the founders’.
Let’s consider a simple example. Here are two contrasting thoughts: as a startup, you need to have incredible patience, because it may take years for your work to really impact the world at large, and meanwhile pretty much everybody except some nerds will ignore you, but at the same time you need to move with incredible urgency on a weekly basis, because otherwise your project will most likely die.
We can now translate this to a more practical situation, one you probably encountered if you have every worked at a startup: let’s say you work at an early-stage company where sales are in a slump and the CEO is urging patience for the vision, while at the same time rousing the rest of the team for more urgency. To me, this makes sense: the best way out is often through. But I’ve seen people react with some resentment, because, after giving their all, they found it difficult to understand why they’re asked to give even more while the main problem, from their perspective, lies in another department. It’s very human.
In times like these, it’s important to foster a culture of togetherness—founders should maintain balance while also making sure everybody feels like they’re rowing the same boat.
Tech’s health check
Last year marked the downturn in the tech sector.
2023 was the toughest year for startup liquidity since the global financial crisis 14 years ago. There was a 38% decline in venture capital firms actively making deals, equating to 2,725 fewer firms engaged in dealmaking. The industry saw only 474 funds raised, the lowest since the venture capital boom started in 2013. Total funds raised dropped to around $70 billion, a significant decrease from $173 billion in 2022. The data indicates that funding is now more concentrated in a smaller number of elite funds.
Concurrently, tech companies are downsizing and laying off staff. Already in mid-January, companies like Discord, Google, Amazon, Twitter, Twitch, Humane, Unity, and Cloudflare have announced layoffs. They’ve also cut back on spending with vendors, leading to the most significant churn in years for non-essential SaaS services.
The current situation has huge downstream effects. Firstly, there’s been a sharp decline in startup formation, with more than a 40% drop. The funding landscape has essentially divided into two segments. The first segment is the seed round, which is high-risk. Think young AI startups—especially ones build on top of huge platforms like OpenAI. Despite the risks, these startups often find it relatively easy to secure a few million dollars due to the huge potential upside and the industry’s enthusiasm, allowing them to test a few initial hypotheses.
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