The Pooled-Risk Company Management Company - The Diigo Meta page

• 10 Sep 17
  

  Rita Zerrizuela
  • The main economic motives of startup founders seem to be freedom and security. They want enough money that (a) they don't have to worry about running out of money and (b) they can spend their time how they want. Running your own business offers neither. You certainly don't have freedom: no boss is so demanding. Nor do you have security, because if you stop paying attention to the company, its revenues go away, and with them your income.
  • The best case, for most people, would be if you could hire someone to manage the company for you once you'd grown it to a certain size.
  • running companies is a lot more complicated than managing rental property, but let's suppose there were management companies that could do it for you. They'd charge a lot, but wouldn't it be worth it? I'd sacrifice a large percentage of the income for the extra peace of mind.
  • If company management companies existed, there would be an additional service they could offer clients: they could let them insure their returns by pooling their risk.
  • a company that managed a large enough number of companies could say to all its clients: we'll combine the revenues from all your companies, and pay you your proportionate share.
    
    If such management companies existed, they'd offer the maximum of freedom and security. Someone would run your company for you, and you'd be protected even if it happened to die.
  • The catch is that because this kind of trade would be hard to undo, you couldn't switch management companies. But there's a way they could fix that: suppose all the company management companies got together and agreed to allow their clients to exchange shares in all their pools. Then you could, in effect, simultaneously choose all the management companies to run yours for you, in whatever proportion you wanted, and change your mind later as often as you wanted.
  • Good news: they do exist. What I've just described is an acquisition by a public company.
  • Joe Kraus says you should try charging customers right away. And yet some of the most successful startups, including Google, ignored revenue at first and concentrated exclusively on development. The answer probably depends on the type of company you're starting. I can imagine some where trying to make sales would be a good heuristic for product design, and others where it would just be a distraction. The test is probably whether it helps you to understand your users.
  • Being profitable ensures you'll get at least the average of the acquisition market—in which public companies do behave as pooled-risk company management companies.
  • David isn't mistaken in saying you should start a company to live off its revenues. The mistake is thinking this is somehow opposed to starting a company and selling it. In fact, for most people the latter is merely the optimal case of the former.

  8 more annotations...

• 08 Dec 14
  

  Jordan Goldman

  At this year's startup school, David Heinemeier Hansson gave a talk in which he suggested that startup founders should do things the old fashioned way.

  start-up tips

• 25 Sep 08
  

  Michael Giles
• 04 Aug 08
  

  Frank Colcord

  System Dynamics Cui bono Parachute

• 03 Aug 08
  

  Richard Tibbetts

  business startup management entrepreneurship delicious

• 01 Aug 08
  

  Gustavo Chaves

  paul_graham startup

• 28 Jul 08
  

  Riyaz Mohammed Ibrahim

  toread

• 26 Jul 08
  

  Olifante *
  • what if your manager was hit by a bus? What you really want is a management company to run your company for you. Then you don't depend on any one person.
  • If company management companies existed, there would be an additional service they could offer clients: they could let them insure their returns by pooling their risk. After all, even a perfect manager can't save a company when, as sometimes happens, its whole market dies
  • If such pooled-risk company management companies existed, signing up with one would seem the ideal plan for most people following the route David advocated. Good news: they do exist. What I've just described is an acquisition by a public company.
  • while on average public acquirers behave like pooled-risk company managers, you need a window of several years to get average case performance. If you wait long enough (five years, say) you're likely to hit an up cycle where some acquirer is hot to buy you. But you can't choose when it happens.
  • David isn't mistaken in saying you should start a company to live off its revenues. The mistake is thinking this is somehow opposed to starting a company and selling it. In fact, for most people the latter is merely the optimal case of the former.

  3 more annotations...

• 
• 25 Jul 08
  

  Atsuhiro Teshima

  business paulgraham management

• 24 Jul 08
  

  Mohit Just

  though public acquirers are structurally identical to pooled-risk company management companies, they don't think of themselves that way.

  PaulGraham management organization startup business ideas

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