https://qz.com/1540608/the-problem-with-silicon-valleys-obsession-with-blitzscaling-growth/
Last time around I assigned some light reading, Tim O'Reilly's 9,000 words about blitzscaling. Hopefully you made it through the article over the last two weeks, but if not I'll do my best to cover the high level ideas behind blitzscaling, as well as O'Reilly's criticisms and my own thoughts.
Conveniently enough, I just finished reading
Reid Hoffman's Blitzscaling book at the beginning of February (come be my friend on
Goodreads) so the concepts were fresh in my mind.
I wore out my Kindle highlighting and writing down notes on this book (71 highlights, 19 notes). And that's not to say that it is an all timer for me. I gave the book 3 stars on Goodreads because it really could've been 100 pages shorter. Publishers, let people write really good 200 page books instead of forcing them into 300+. But I liked a lot of what Hoffman and Yeh wrote.
The concept of blitzscaling is basically that it is inherently better to throw caution to the wind when you have the opportunity and innovative solutions to scale quickly and dominate a market. By opportunity I mean a big market size, good distribution channels, high gross margins, and network effects that will protect your position as you grow. If those conditions are present then it may make sense to raise a lot of money, do things that that "don't make business sense," and try to build a billion dollar company.
That last piece ladders back to a key idea that Hoffman returns to repeatedly: "prioritizing speed over efficiency." During his time at PayPal, that meant letting fires that they didn't deem critical (like customer support) keep burning while they focused on growing the network. This, as well as the rule about "tolerating bad management," was a major turning point for me where I didn't think I wanted to buy in fully to Hoffman's worldview of growth.
And this is where we transition to Tim O'Reilly.
O'Reilly started a company called
O'Reilly Media that he bootstrapped to hundreds of millions of dollars in revenue, and is now also a venture capitalist at
OATV. One of OATV's side projects is a fund called
IndieVC, which focuses on an alternative funding structure from the standard VC "take a lot of money and try to 100x it" playbook. Their investing terms are publicly available so you should
check them out.
As I imagine you have gathered, O'Reilly has thoughts on blitzscaling. There are two quotes in particular that stuck out to me and made my point better than I could ever hope to.