It's simpler & dumber than it seems

Luxury beliefs and startup nonsense

Starting a company really isn’t complicated.

It’s not easy, but it’s quite simple. The whole game: Find some unique way to serve customers. This is common sense. Yes, with a lot of hard work layered on top.

So why does it seem so complicated?

Why does it feel so overwhelming?

And why are smart people like you so prone to doing dumb shit?

Where it all went wrong

Rob Henderson created an interesting sociological concept called luxury beliefs, which he defines as “ideas and opinions that confer status on the upper class at very little cost, while often inflicting costs on the lower classes.”

I think luxury beliefs extend to the startup world. They just might be central to the death of common sense in tech. Here’s how: The core beliefs & “best practices” in the startup world are defined by people who pay no price if most startups fail… and benefit in ways that aren’t aligned with founders succeeding.

This might sound like it’s exclusively a criticism of VCs (aka: deep-out-of-the-money options traders). But it’s not just them: Academics, influencers, authors, newsletter writers, accelerators/incubators, consultants, corporate climbers, even already-wealthy founders. All playing their own, strange games… and crushing founders as a result (perhaps without even realizing it).

Here are some examples of luxury beliefs in the startup world:

#1: Beliefs about venture funding

• Venture rounds are worth celebrating.

• Venture rounds are a marker of company progress and founder status.

• The path to IPO follows Series A → B → C → D, etc.

• VC funding is validation.

#2: Beliefs about startup success & failure rates

• There’s something about technology businesses that make them uniquely prone to fail, versus any other kind of new business.

• There are two kinds of businesses: “venture-scale” vs. “lifestyle.”

• Focus on winning big (instead of not dying)

• Application of the scientific method to startups to “de-risk” or “validate”

#3: Beliefs about growth

• To become big, you have to aim big from the start.

• Every hip new theory on how to grow - category creation, nearbound, thought leadership, conversational marketing, etc. (To be fair, these are a mix of luxury beliefs + vendor-created FOMO)

• It’s normal to fund really long CAC payback periods with investor funds

• SaaS revenue is all that matters for software businesses (vs. any other kind of lower-margin or non-recurring revenue)

• You need to “scale yourself”

#4: Beliefs about product development + management

• Basically every product development & product management framework

• Nearly every engineering management / process approach

• The fact that PMs/engineers have no variable comp tied to revenue/profit (???)

Now that you know the concept - feel free to send me more luxury beliefs!

What to do about it

If you feel like you’re LARPing, you are. Build a real fucking company. Use your common sense. Focus on serving customers - not just on “building a killer product.” Generate cash, grow thoughtfully, be ambitious but practical. Figure it out as you go along. Care more about customers than yourself. Touch grass, be human.

In the words of serial founder friend Praveen Gupta:

“I think what has helped me the most… is that I've never read any of the books or learned about any of the theories you referenced.”

You don’t have to believe the luxury beliefs. It doesn’t have to be crazy.

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PS:

• PMF Camp 3 Registration is now live (starts April 1, limited seats available)! Watch this video for more info.

• I recorded a free, 45-minute video masterclass on product-market fit (access here). It goes through everything I’ve learned about PMF + $0-$1M ARR that I wish someone had told me years ago. What matters & doesn’t, how to execute, and where founders get lost. Watch it, share it, send feedback!