A New Kind of Company

I recently read Paul Graham’s new essay, What I Did this Summer, which details the Summer Founder’s Program he and a few other tech-wealthy friends recently started founded. They took eight companies, all with founders between 18 and 28 (average age 23) and purchased 5-7% of their “companies” (which were nothing more than ideas) for between $6,000 and $20,000. In addition, the founders were given a ton of guidance with business issues and decision-making. Graham thinks 3-4 of the 8 will succeed.

The article got me thinking about how companies like Google are trying to maintain the feel of a startup as they become mature companies. Startups are signified by innovation, motivated employees, and large rewards for stakeholders. I’m not sure if they’ll be able to hold onto it, but history indicates they have to lose it sooner or later (look at Microsoft, Yahoo!, and Apple).

I’m a huge fan of Google and post regularly on their merits, but it wouldn’t surprise me if a startup comes along in a few years and flips their paradigm upside-down (as they’ve done to Yahoo! and Microsoft) because the startup has motivated people working 90 hour weeks with the hopes of the big payoff. If Google can’t keep people motivated like they are today, it’s inevitable that they will lose their edge. There’s talk that Microsoft isn’t the coolest place to work anymore, probably spawned by the recent exodus of several key Microsoft employees, some of whom left for Google.

So what is it that what makes startups so damn cool, and why can they take a behemoth company to school even though the behemoth outweighs them by billions of dollars?

The bottom line, at least with software startups, is that most programmers are highly motivated by the potential to create something amazing and to make a ton of money. The software entrepreneurs I know wouldn’t want to make a bunch of money in the stock market (an example used by Graham in his article). They want monetary reward, but they want to receive that reward for doing something they love; creating.

So startups are cool because developers are motivated by creating cool stuff and making money, two things startups allow you to do almost exclusively (they definitely aren’t known for the boost to your social life), and motivated developers create software faster, giving them a huge advantage over the larger competitor.

What if someone put a bunch of development teams together who had complementary ideas but not enough money to start companies? In other words, pair the advantages of a startup with the size and capital of a larger organization.

Imagine if Google’s development teams were a handful of smaller startups with bits of seed money and the potential to work together to make stacks of cash? Teams of 2-20 developers that are nearly autonomous, but linked together under a funding umbrella and a collective name, with motivation to work together for mutual benefit (based on the monetary structure of the deal), but also motivated to work their butts off because they’re allowed to keep a huge chunk of the profit their little company generates. Something between an incubator and present-day Google.

It would land somewhere between anarchy and chaos, but would be amazing to watch.

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