Organic Growth vs Get Big Fast

Fred Wilson shared the talk Joel Spolsky gave to the Y Combinator Startup School session. Joel wrote about it in his popular blog Joel on Software. I think it is one of those important decisions that Entrepreneurs and Investors need to make and understand. I have struggled with my own education on this and believe me it has been hard to convince people that Odds or “Risk” does not matter. Anyways, this presentation has become pivotal to the way I am thinking right now. I believe Iceland needs to be betting all our resources

Source: Stanford Venture Program

Source: Stanford Venture Program

on companies that are in the Get Big Fast category. I am not saying investing in organic growth is bad, I am just saying that I like the odds of betting something that will get big fast. Why do I say this is one of the most important decisions Investors need to make? well, because the metrics and everything else that guides the behavior of the board, the advisors and the market participants relies on this decision. Think about it, if you need to get big fast as Joel says in the post and in the video, you can afford to break things and try new things and learn from your mistakes because you are moving quickly and can pivot, whereas if you are doing an organic growth company and you make mistakes it can kill you. I have come to believe that we as humans make mistakes all the time and why put ourselves into a position where a mistake can kill us. There is a reason why we survived a couple of thousand years despite disease, wild animals much powerful than us humans etc we ensured that we put ourselves out of harms way. A lot of my thinking is based on the arguments Taleb has made, or keeps making. I like the positive white swan argument. If you don’t know what that is read this.

What is the context to Iceland? well, lets think about it. The total amount of money that has been invested in Get Big Fast Companies in Iceland is pathetic if I am being honest. I have the feeling investors in Iceland would rather see companies fail Slooooowly than invest heavily in companies that can grow fast. All this comes to education of the Startup Community. Most investors that I talk to want to invest in Get Big Fast Companies but don’t understand what it takes to get such a company off the ground and competitive on the global market. There is no magic bullet, the community has to invest in it. Lets talk about the Pension Fund system in Iceland, I have written about it and I will say it again, this is a freight train that is going to collapse, unless they start actually putting a small fraction of their money in the Get Big Fast Companies category but according to rules, they are prevented from taking these bets. That is just tragic.

3 Responses to “Organic Growth vs Get Big Fast”

  1. Fred Wilson shared the talk Joel Spolsky gave to the Y Combinator Startup School session. Very interesting talk. It gives you inspiration.
    ….You mention a very hot topic; where failure to deside may kill !!? You say: Lets talk about the Pension Fund system in Iceland, I have written about it and I will say it again, this is a freight train that is going to collapse, unless they start actually putting a small fraction of their money in the Get Big Fast Companies category but according to rules, they are prevented from taking these bets. That is just tragic…..
    There are many (too many) Pension Funds in Iceland with boards, directors, staff etc. with unclair investment goals. In addition the Government & Public Affairs have for years failed to pay their full share of pension costs. The recession is not the chief cause of this part of the pension problem it won’t be wiped away although if the economy may improve.
    “It took us a long time to get into this hole, and it’s going to take a long time to get out of it.
    We need to ACT now !

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  2. I have had many conversations with you about this subject and I think both organic and fast growth are exeptable ways of running a startup. However I agree with you that it is important to put more money into the get big fast companies as that would help the startup community in Iceland to develop faster.

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