> O(n) companies can’t afford to hire the absolute best talent.
O(n) companies tend to have more experienced founders and engineers in my experience. This is partly why they have "nice deadlines, clear SoW" and "understand their customers" enough to have PMF. The strength of their talent, experience and job networks often greatly outweighs the cash incentives, allowing them to hire top candidates. They do not just hire "to fit a job description" because, since money was tighter, they are super conservative about hiring, have always done the job they are hiring for themselves for a long time, and know exactly what they need. It is the O(n^2) companies that hire for job descriptions that fit the positions the VCs tell them they need. I think your experiential datapoints may be too sparse.
To quote a private equity investor friend: “I’ve known startup CEOs of billion-dollar companies that are flat broke. Meanwhile people with $50mm/ARR dating sites from Europe live like kings.”
A good reminder that it’s worth deeply understanding venture portfolio economics before you get on the ride. Not that it’s a bad ride. But it’s a ride.
I wonder what's optimal for me as an employee. I am working in a O(n) startup where colleagues are nice, work is streamlined yet challenging, and I do see growth potential in the long term. Several O(n^2) founders have reached out recently and the pay is attractive(even after accounting for a move to an HCOL area).
This is one of the myriad situations where Omega should have been be used, not O. What are they teaching in schools these days?
Since O(n^2) is used as a proxy for “something superlinear, but don’t get hung up on how much”, you might also choose O(n^(1+ε)), an upper bound characterised by some arbitrarily superlinear function.
There's an interesting misunderstanding in this article.
The argument for O(n) is well formed here.
O(n^2) is not, the core argument is that these grow faster because of compounding. Compounding is fundamentally an exponential process, far larger asymptotically than a quadratic.
Related: Black Swan Farming (2012)
https://news.ycombinator.com/item?id=4497461
https://paulgraham.com/swan.html
It is interesting that YC started as being more Founder friendly ... and I guess "Founder's Fund" did too
But there is still some divergence in interests ... i.e. if you have to make a choice between a safer O(n) path and a riskier O(n^2) path, then the investor prefers the riskier path
Or I'd be very interested in an argument that they don't
> I think many prospective founders, if their goal is money, should optimize for O(n) businesses from day 1.
Honestly, I don't think anyone "picks" the kind of business they want to run. You just kind of go with the flow. If you raise VC money, you follow their lead, if you're running a small bakery, you'll do whatever makes sense there.
So while this is a fun intellectual exercise, it's an exercise in hindsight. In the moment, you're really just trying to survive the day-to-day and not really "optimizing" for a specific growth pattern.
> An O(n) startup grows its key metric (revenue, users, etc.) roughly linearly with time—double the time, double the metric. An O(n^2) startup accelerates, with growth compounding super-linearly over time.
Kind of a strange formulation to have n represent the key metric. In algorithm analysis, we would typically have n represent time (or some other cost). So we would say that the startup whose key metrics accelerate exponentially with time is actually an O(log n) startup - they only have to spend (log n) time to get n results.
Don’t forget about us O(1) solo entrepreneurs!
> [The conclusion is that] O(n) companies are higher EV than O(n^2) companies. I mean that, on average, a founder will make more money pursuing an O(n) company than an O(n^2) company. And not an insignificant amount, the amount of liquidity and networth a 20m ARR O(n) company is extremely hard to match by a traditional VC backed O(n^2) company.
It's a bit like getting a regular job vs playing a lottery: the former gives you better financial results on average, while the latter gives you a chance to make it really big.
(I also wish it were "linear companies" and "quadratic / exponential companies", or maybe "snooker-cue companies" vs "hockey-stick companies".)
VC-land is a strange place with strange laws. If you stay in it for too long, you forget that most of the world doesn't follow the power law, and that most of the VC-reasoning just does not help.
> O(n) companies can't afford to hire the absolute best talent. [...]
> O(n^2) companies hire high agency people. [...] People are generally given a lot of equity to join and as a reward.
O(n^2) is often a matter of ZIRP-VC-powered artificial-growth (e.g., their example of Uber). That also includes hiring a large quantity of people.
For factors in genuine O(n^2) growth, you might be onto something: with structuring culture to leverage employee agency, and for using meaningful equity to help align employees with business success.
I wonder about the cultural effects at large getting the O(n²) most of the funding. That expansive, aggressive and not always safe behavior is promoted, while the slow but solid approach is not. That shapes the ecosystem and the people in it, in and out those companies.
Maybe it is a good way for short term profits, but that is just one metric. That kind of dynamic may be harmful in the long term, and in a really big scale.
An O(n) startup grows
If it grows at O(n) it is not a startup in the way "startup" is used in Silicon Valley. It is just an ordinary new business.
It's worth noting that starting an ordinary new business is hard. Probably as hard as starting a startup for anyone who has not started a new business a few times before. And maybe harder because most new businesses are undercapitalized and therefore likely to suck up personal capital while startups get to use other people's money.
Story applies to most people in regular life: the average return of working a regular job is far higher than playing the lottery. But for a rare few, playing the lottery works out.
Uber exploits drivers (car cost, maintenance, and depreciation) for illusionary freedom as a substitute for taxis. Not really groundbreaking except screwing people.
When I saw the headline I thought it was referring to complexity, legacy and stagnation of tech debt
Counter hypothesis: fast but linearly growing early stage startup acquire good early funding and enter into a growth loop dominated by the ability to invest these fund in marketing, which increase valuation and allow for further funding, fueling more growth etc.
After all cost of customer acquisition is largely dominated by external factors and cost per user mostly linear until close to market saturation.
Now there might be economy of scale intervening at some point increasing the margin per user, which feed back into growth, but on average fast growing startup are cash negative until much later in life.
TLDR I think the implications in the article is inverting cause and effect
What ever happened to providing a good service? Why does everything have to be a "unicorn"? You greedy capitalists, and billionaires have sucked out the life of everything — tech, food, airlines.
VC culture, private equity, and "hyper-growth" mentality has screwed over many good companies that once provided good services to the community. Good paying jobs with excellent benefits and providing upward mobility.
Now the labor benefits are shrinking, company loyalty is gone, customers screwed over, labor exploited with minimal in return, rising cost of living, increasing wage disparity, abuse of powers.
One can argue the neoclassical/neoliberal economic theory and "Reagan-omics" that birthed PE/VC culture gave power to the idiocracy we see today.
Huh.
Not working in the field, I assumed startups went like sigmoids (everything is a sigmoid after all).
Exponential at first as word of mouth spreads, then linear as your users start bumping into each other and word of mouth stops working, and then you eventually start leveling off near carrying capacity (you’ve hit your addressable market).
I thought the game was to try to get bought by some massive company while you are in the linear phase (where you are big enough to be treated seriously but your growth rate still looks absurdly high).