Startups should prioritize profitability over aggressive growth, fostering control, clarity, and long-term success through focused teams and strategic hiring, as exemplified by Linear's model.
Startups should redefine success by prioritizing profitability over aggressive growth, as it provides founders with control, vision clarity, and peace of mind, challenging the traditional "growth-at-all-costs" mindset. This approach allows companies like Linear to build superior products with small, focused teams, proving that early profitability is achievable and beneficial for long-term success and strategic decision-making.
Redefining Startup Profitability
- Traditional thinking flawed: profitability seen as unambitious, while growth was prioritized over everything.
- Profitability grants founders control over destiny, allows focus on unaltered vision, and dictates growth pace.
- Paul Graham's "ramen profitability" (2009) highlighted survival without external funding, making startups attractive to investors.
- The author argues it's now easier to be "traditionally profitable" while also growing fast.
Linear's Model: Accidental Profitability & Small Teams
- Linear achieved profitability by focusing on building a superior tool with a small, focused team.
- Almost all 100 beta users converted to paid customers upon launch.
- Hit profitability 12 months after launch and has remained profitable since.
- Experience suggests small teams deliver better quality and faster results, contrary to the norm of massive hiring.
Intentional Hiring and Team Size Philosophy
- "Understaffed compared to benchmarks" should be a source of pride, indicating efficiency.
- Team size rarely holds back progress; clarity of focus, skill, and execution are key.
- Larger teams lead to slower progress, more overhead, and dilution of vision.
- Linear's approach: doubling the team each year, hiring the "next great engineer" rather than just filling roles.
Strategic Benefits and Practical Advice
- Profitability provides peace of mind, allowing focus on building great products and optimizing for value creation.
- Measure "Revenue per employee," targeting $500k-$1M for startups, to ensure appropriate hiring.
- Hire intentionally and slower: aim for a ceiling of 10 people before product-market fit (PMF).
- Being profitable allows startups to raise capital on their own terms, maintaining choice and attracting interested investors.