§Academia Constraints

Decoupling from market discipline is like cave diving

Current value capture mechanisms are crude

When should an idea that smells like research be a startup?

§Corporate R+D Constraints

Bell Labs is one of the few examples of an innovation org that was aligned with its money factory

Startups are good at point changes

Systemic decay theory of stagnation

Ideally corporate R+D enables work on a general purpose technology before it’s specialized

There are many tight feedback loops built into the ARPA model

Things that are not paper-worthy enough for academia and not product-focused enough for a startup

One function of a private ARPA is to fill in the gap once filled by corporate R+D

There are many important innovations that are just bad investments

Startup Constraints - essay

The market in for-profit organizations is fairly efficient

Profit-maximizing organizational structures can hamstring technologies whose impact depends on them

It is easier to have a multipoint mutation in technology than in evolution

PARPA could walk the line between profit and non profit

Startups  need to spend effort on sales, marketing, and productization

Startups and Academia are bad at addressing structural constraints

The Architected Innov􏰂ation Institute - Engineering Scientific Revolutions

An institution riffing on the ARPA Model could enable paradigm shifts that are not happening

# §Startup Constraints
- [[Startups need to make a lot of money or have a lot of users]]

- [[Startups need to conform to investor timescales]]
- [[Venture capital doesn’t work for things that only realize their value on long timescales]]
- [[Startups need an exit strategy]]
- [[Startups need a great story]]
- [[Startups need to produce a scalable product]] 
- [[Startups need to break development into correctly sized stages]]
- [[Startups need specific growth curves]]
- [[If a project has massive possible upside and low enough risk it is venture fundable]]
- [[Scalability and venture fundability happens when you turn a process innovation into a tool innovation]]
- [[Startups are good at point changes]]

- [[Startup Constraints - essay]]

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§Startup Constraints

Xora has unique structural advantages that could allow it to push the technological frontier

# Startup Constraints - essay
- [[Startups need to make a lot of money or have a lot of users]]
- [[Startups need to conform to investor timescales]]
- [[Startups need an exit strategy]]
- [[Startups need a great story]]
- [[Startups need to produce a scalable product]] 
- [[Startups need to break development into correctly sized stages]]
- [[Startups need specific growth curves]]
- 
### Published
10/2018
## Questions
## Thoughts
## Related
[[§Startup Constraints]]
## Authors
- [[Benjamin Reinhardt]]
## Link
[Startup Constraints](https://benjaminreinhardt.com/startup-constraints/)

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# Startups need a great story


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# Startups need an exit strategy


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Funding is path dependent and funding curves matter

Inverting the normal relationship between an R+D organization and is money factory may enable new classes of activities

# Startups need specific growth curves
* The Valley of Death must be small. Most VCs will not fund a company that spends too long with low revenue or few users. This is another manifestation of the timescale constraint.
* Growth must be monotonic (always going up and to the right.) In rare circumstances a startup can survive flat or declining growth for a period if its management had the foresight or luck to raise funds before the lackluster growth that last until the growth resumes up-and-to-the-rightness.


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# Startups need to break development into correctly sized stages
A startup needs the ability to hit progress/derisking milestones with the amount of money typically raised in each venture round. VC funding happens in fairly standard round sizes: The first round is almost always <$3m. If you need $8m or $30m before your first major milestone, it’s hard to fund the project with VC money.

![](../BearImages/E8BE953F-5BA8-46C3-BD7D-796F35625F15-621-0003D44334B93FF0/startup-growth-curve.png)

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In order to beat the stock market on average a 20 year project needs to return 4x

# Startups need to conform to investor timescales
[[Venture capitalists need to fund things that increase valuation in a few years and return in 5-7 years]]



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# Startups need to make a lot of money or have a lot of users


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One way to think about scalability is as the number of operations that happen without human intervention

# Startups need to produce a scalable product


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