February 2026
(Based on a talk for a NEXT Event)
“The best way to start a business is with as little money as possible. Preferably money that you saved up or with no money. You’re selling a skill you have and you start slowly. That’s what I’ve always done. Starting with nothing is where the big bucks are made for real.”
– Mark Cuban, Founder of Broadcast.com
“A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, take venture funding, or have some sort of ‘exit.’ The only essential thing is growth.”
– Paul Graham, Founder of Y Combinator
Irony in the Blood
I was given this topic to talk about by the organiser of NEXT. My background is I’ve built and scaled 2 companies and had 2 failures. The successes, one enriched me personally but has minimal impact and the other had GDP of a nation moving levels of impact but I made no money from. Your mileage may vary. I have also invested in a lot of venture backable companies so I have seen a lot of what does work but it’s worth pointing out I’ve never done this personally.
So I’m going to preface this talk by saying that I’ve built venture backable companies in the sense that they got really big very quickly but I’ve never actually raised venture capital. It wasn’t for lack of trying, it’s just that I didn’t really know many venture firms when I needed capital and the ones I spoke to rejected me and nobody would give me any money.
I have a joke actually that I’ve partnered with Australia’s oldest venture capital firm founded in the 1900s and it’s called a bank. They have a venture product which is a convertible note that allows you to buy back your own equity at the end of the note term at a fixed rate of return that the venture firm sets. It’s called a home loan and that is how I financed my companies.
In hindsight, it’s a good thing as it left me owning the companies outright without any investors. When you add to that I’m a sole founder too, getting rejected by everyone is the single most lucrative thing to ever happen to me. So even though I invest in a lot of venture funds and startups, there is an irony that the best thing that ever happened to me is to have founded a venture backable startup that never received any venture backing. With that irony out of the way, let’s start.
Venture Backed Startups
Let’s first define what is a Venture Backable Startup? To me that is a company that is able to grow rapidly from founding into a Unicorn worth $1 billion+ within 10 years. To be a unicorn worth $1b+ means that the business is generating $200 million in annual revenue and is worth 5X their annual revenue. So you need to grow rapidly from founding to earning $200m per year within 10 years. The very minimum growth that that looks like is doubling every year from about when you are making $200k per year. $200k per year in revenue doubling per year is $200m in revenue in year 10.
Why 10 years? Because that is the life of a venture fund partnership. A venture fund typically raises money from limited partner investors and deploys capital over 4 years then harvests them over 6 years. They have to invest in a startup, grow it quickly, exit or IPO the company then return the money to their investors within 10 years usually from when the fund started. In a perfect world they invest in year 1 and the company sells or IPO’s in year 10. The real world is far from perfect though.
If you are not growing at a minimum of this rate, doubling every year, by definition you are not building something venture fundable and don’t try and raise venture capital. So this is the easiest heuristic. Growth isn’t everything but it’s the most important thing. So when a venture firm is looking at a startup to invest in they are asking themselves at a minimum, can this startup consistently double every year for a decade?
What that secretly means is they’re asking themselves, is this the kind of founder who can pull this off? Is the market large enough that there is enough demand for a product like this to sell this much? How hungry for this product are the customers? $200 million dollars is a lot of software to sell per year. If we take your average $10 per month application, round it and say $100 per year, you literally need 2 million customers per year to make that math work.
What can you build that there are 2 million people in the world who need it right now and will pay $100 a year for? The venture capitalist is secretly always asking themselves this question. Are there 2 million people who need this product and will pay $100 a year for it and is this founder good enough to pull this off and do all the difficult things needed to build this company? If the answer is maybe yes to both then that company is probably getting funded.
This will take a reality warping Herculean effort to pull off from the founders, it will be fraught with pain and misery and heartache but your reward for doing it is becoming one of the wealthiest people on the planet, the satisfaction that you built something used by millions of people and all the worldly possessions that unfathomable wealth can bring you.
One of the things I’ve done is I really liked a TV show but it ended and was discontinued many decades ago. So I bought the rights for the TV show and brought it back so I could keep watching it. My wife funds and runs a charity that treats thousands of homeless pets for free and is one of the primary reasons Melbourne is not overrun with animals. That is one of the rewards of wealth, you can deploy it in a concentrated way to have impact in things you like and your own creativity with it is the only limiting factor.
It is pretty cool if you make it but most of you won’t make it. The numbers are not in your favour. Quoting from another of my essays, “from this article, Quartz’s June 2015 study on the biggest “unicorn makers” in the VC world listed the top 14 VCs who hunted down 93 unicorns which collectively represented just 2.6% of their deals. Aileen Lee herself estimated that only 0.07% or 1 in 1,538 tech startups reach unicorn status. Currently the average time it takes to build a unicorn company is 7 years. This produces an aggregate range of say between 1 years and 14 years from founding to becoming a unicorn.”
So you’ve got a 1 in 1,538 shot at building a unicorn from the moment you start. These odds are akin to trying to become a professional sporting athlete and I like this analogy because I think great startup founders are a type of elite athlete. So that’s what you’re trying to do here. You’re trying to become an elite athlete in both an endurance and a sprinting way. A business elite athlete. In the way that an elite athletes sport takes over their entire life, this startup is probably going to take over your entire life.
Also in the way that the sport a professional athlete plays injures them physically and psychologically, the startup is going to do a similar amount of damage to you over its lifetime in ways you don’t know yet. There will be several near death moments where the whole world is against you and you have to pull miracles out of thin air just to continue to survive. It is going to happen so you need to go in eyes wide open, danger lies here.
From Morgan Housel, within the richest 10 people in the world there are 13 divorces. This is why. If you think you are a damaged individual who enjoys the trauma, chaos and struggle of it all and doesn’t think they can do anything else then I think you will really enjoy startups. Life is not going to pause while you are building the startup, it will happen to you while you are doing it. So you are layering a whole extra layer of stress onto the stresses that life is already going to throw at you.
Let me tell you some bad things that have happened to me over the last 15 years so you get an indication. I’ve had cofounders dessert me and take all the companies money and run off to Latin America only to come back and sue me. I’ve nearly gone bankrupt twice. I’ve been sued by several billion dollar companies at the same time including the government. I’ve had laws changed in a targeted way specifically to bankrupt my company. I’ve been called a cyber terrorist front page of mainstream newspapers. I’ve never gotten into any accelerator I’ve ever applied for and I’ve applied to all of them.
I’ve done 100s of fundraising meetings and had every single one of them say no because my only investor at the time was accused of murdering his family and it was front page news at the most read newspaper in the country (he didn’t and he successfully sued the newspaper for defamation). I’ve lost friendships and relationships. I’ve had to fire 100s of people that were relying on my company for their income in the worst moment in their lives in the middle of a pandemic because we couldn’t construct anything and our revenue went to zero.
I’ve had 15 friends and family die in the same year that I had to pull the company out of near bankruptcy at the same time as I had a newborn baby who refused to sleep all night and I was doing every night shift with my daughter because my wife is a doctor and needs to sleep or else her patients die. I’ve had to manage all of this while having a terminal heart disease connective tissue disorder that gave me early onset arthritis that limits my hand productivity to 3 hours a day which is when my hands start seizing.
I’ve had many breakdowns along the way but I’m just not built for anything else and at this point in time, I absolutely love what I do and I wouldn’t trade it in for anything. The journey is long and brutal and not for the faint of heart. You will develop a superhuman resilience and resourcefulness and climb mountains that you can currently not even dream of. But at the same time there is no course or business school that can teach you how to deal with and solve the kinds of problems that will come at you.
An unfathomable amount of good and bad things are going to happen to you. Startups are an unknown unknown kind of problem because you are literally creating something new into the world. So you don’t know what you don’t know so there’s no way to prepare for the bad stuff as you are climbing the mountain and running the marathon. If I had known exactly what I would face going in I maybe wouldn’t have done it.
Society is not designed to have new products spring into existence at random and disrupt legacy industries that are tens if not hundreds of years old, legacy pushes back, the universe tries to crush you and bad things will happen. It is also not natural for a few young people to earn millions of dollars in a compressed timeframe. So you have to assume that however much you might earn, that’s how much pain you’re going to experience.
Because it is literally the compression of a lifetime of earnings into a short period of time that is the premise of the earning potential of a startup. If you try to run a marathon in an hour, that is going to hurt your body. But that’s sort of what a startup is. Taking 50 years of work and earnings and doing it in 10 years. You’re speed running your working life.
2 Phases – Starting and Growing
I mentally compartmentalise a startup into 2 separate phases. The starting phase and the growing phase. The starting phase is $0 revenue to $2m in revenue. I think that’s the hardest part of a startups life and is where most of the failure is, most startups will never achieve this. In fact most startups never even launch or make $1 of revenue so the failure happens often even before this.
The easiest fix for this is launch quickly and start earning money quickly. This is obviously not great advice if you’re trying to build Facebook. But if you’re not doing Facebook, something about the act of having the responsibility for customers and seeing money start coming in becomes the motivating factor to continue to build and work on the startup. It can also be surprising how little a functioning product needs to have for people to use it. People have this idea in their minds of a perfect product that can’t be released till it’s polished.
To that I say I launched a Worpress site with a Paypal link that was trying to be a public transport insurance company that I build over a weekend. We started getting users almost immediately and I scaled that website to being one of the biggest websites in the country in only a couple months before we got sued and acquired and that was the end of the startup. It turned into Melbourne’s free tram zone and is used by millions of people per week today. I’m the most surprised at just how big it got and I did the thing and it never would have happened if we didn’t just launch a half baked product into the market. I don’t think you can ever launch early enough.
This starting phase of time is where you have an idea for a product that you’re not sure is going to work in a market with customers that you don’t know whether or not they are going to pay for it. The worst enemy in the starting phase is your own demoralisation and likelihood of giving up when you launch a thing and the world doesn’t immediately start fighting with each other to use your app. Which is how a lot of founders think this is going to happen.
Your goal in this phase is to just keep developing whatever your product here is and doing exactly what your customers are asking you to do. If enough of your customers say build X feature, that means your product isn’t finished without X feature. If they say stop doing Y then you should get rid of Y. Your goal is just to make people happy and solve their problems and make your customers fall in love with it by providing as much value to them as you can.
At this point after launch I usually say to people that they need to start using their own product everyday so they get into the minds of their customers. You’ll see every bottleneck, every frustration point, every potential feature to add, every goddamn wrong button placement. You’ll see it all and start fixing it proactively. If you are not using your own product I almost guarantee you will fail eventually.
This is one of the biggest mistakes I see. Founders who don’t use their own product. It’s like a chef who doesn’t taste their own cooking. How does that chef know whether they’re making a Michelin star meal or a diner meal? It comes from tasting it regularly. So start using your product, that’s the only way to know if it’s both getting better and doing what it’s supposed to be doing.
Brian Chesky the founder of Airbnb lived full time in Airbnbs for years so he was intimately aware of the problems of his customers. Toby Lutke founder of Shopify runs dozens of Shopify stores. I’m not anywhere near the same category but I always live in a house that I built with my construction startup. Why? So I know everything that is wrong with the houses that I build.
Two concepts I think that are really important for the starting phase are 1,000 true fans and becoming default alive. 1,000 true fans was coined by Kevin Kelly the founder of Wired Magazine and is a concept in the art world whereby a publication or artist can survive off their work if you have 1,000 true fans in the world who love everything you write and will buy all of your works. That’s all you have to do to go full time as an artist, you have to find 1,000 true fans. I think this is easily transported to startups, focus on finding your first 1,000 customers who by paying you will allow you to go full time into the startup.
When you have 1,000 true fan customers buying from you, that’s when you move into the second concept which is you become Default Alive. That was coined by Paul Graham where he talks about a startup as a type of cockroach that is just trying to survive until it is successful. You want to get to the point in your company where there is more revenue than expenses and therefore the company is going to be default alive which by extension will almost guarantee a successful result eventually. If your expenses are greater than your revenue then actually your startup is default dead and eventually it will die.
Getting to 1,000 true fans and becoming default alive is the entire game in the starting phase. Everything is about getting to that milestone. Until you’re there, your startup is going to die you just haven’t realised it yet. It’s like a ghost walking around thinking they’re alive. If you’re not at this point, you just don’t realise you’re dead yet. When you have more revenue than expenses and are default alive, this is what people mean when they say their startup is profitable.
If you do this for long enough with a lot of trial and error this really weird things starts to happen where the company will start to grow independently without you trying. People will start telling other people to use your product and eventually it’ll take on a life of its own where the growth is happening without trying. Earning the revenue will start to feel easier. Customers will find you organically.
It’ll be like the market is pulling the company forward. Phones will ring too often. There will start to be backlogs of emails you need to get to. Everyone will feel like they don’t have enough time to do all the work that needs to be done. You’ll start to have so many meetings booked in that you run out of time for them all. Random investors will start spontaneously offering you money and so on and so on. You’ll need to start hiring quicker to fill the backlog of work that is building up inside the company.
This is when the startup is switching from starting mode to growing mode. The starting phase and the growing phase are two different skillsets. Great founders have to be good at both because at some point if this works you’re going to have to transition your skillset. It’s why a lot of product people who love building things suddenly struggle when the size of the company means that day to day they are doing people management. But eventually all companies become so large they mostly become about people management so this is a natural thing that will happen.
Growth is something that is going to break everything. It’ll probably even break you. Especially if you’re growing at the kind of rate you need to be growing at to provide venture returns. It is literally growing so fast that it will slam you every single day. If you’ve ever seen a McDonalds at peak lunch time and see how frantically all the staff are running around all day long because they’re literally getting more orders faster than they can physically make burgers. Lines dozens of people long are building up outside and the customers are getting upset because of how much they want their burger and how slow you are at giving it to them.
That’s what happens at your startup when it starts to grow rapidly except it isn’t just a McDonalds at lunch time, it’s your startup happening 24 hours a day. Because you’re probably selling into international time zones remember. It’s literally 24 hours. When this is happening to you, you have reached something called Product Market Fit. Before this moment you don’t have product market fit. I can usually tell if a startup has this or not because if they have time to say they have product market fit instead of being too busy answering emails and phone calls, then they probably don’t have it.
With Tram Insurance I used to be scared to wake up in the morning because I knew I would literally get hundreds of calls, it literally gave me anxiety from my own phone. My phone would literally just not stop ringing all day and I didn’t even have enough time between answering all the calls to hire and train someone to help me answer phones. Half the calls I couldn’t even answer because I was on the phone answering calls. We’d be paying tram fines without even checking because we didn’t even have enough time to verify them or build some sort of verification system. We had no idea how much money we were even making because money would come in and go out just as fast.
The faster you go from starting mode to growing mode, the easier it will be to raise money from investors. Because of that searching for growing thing that they are all doing. If you’re not growing and you’re trying to raise money, it just will be harder. It’s so much easier to raise money if you’re already growing that I actually think this should be the most common advice given but for some reason it isn’t. Grow first, raise money second. It’ll be a day and night experience. I made the mistake of trying to raise money with a non growing startup and it was a miserable experience. It is literally like trying to sail a sailboat that doesn’t have a tailwind. It’s not impossible but it is very difficult.
But alas Sohum you might say, how am I supposed to grow without any money? Here is where I think sometimes people get too intellectual about startups and they get too academic and theoretical with it but I think a really simple solution is available. Make stuff you want to use, tell all the people like you about it and ask them to use it also. Actually wake up and make 100 phone calls every day or send 1,000 emails every day. Not some AI spam emails, like handcrafted personal reach outs.
Call everyone you think would use your product. If you ask someone to use your product and they say no, ask them why not and what you’d need to change about it so that they will use it. Do all the boring stuff everyday and eventually your company will grow. I promise you it is very hard to fail if you make a decent product and then make 100 phone calls or send 1,000 emails every day. You will eventually find your 1,000 true fans.
I have this conversation all the time with founders where they’re like how do we get our startup to grow. Then I ask them if they’ve made 100 phone calls or sent 1,000 emails that day. The answer is always no. When they start doing that each day their company will start growing. I have yet to see a founder that started doing that and then their company didn’t grow. But many who found that process so boring that they gave up.
But that’s part of the trick isn’t it? Doing the boring stuff. Most of business is boring. Being prepared to do the boring stuff day in and day out is actually part of how you succeed. Starting to have fun with the boring stuff. I really enjoy the game of being super annoying and calling someone until they answer the phone. I once called a guy 500 times until he spoke to me. Just being resourceful and relentless is part of how you’re going to win.
This is the around the moment that you decide whether or not you want to ingest the rocket fuel that venture capital represents. As you raise money you remove outcome potential because your cap table is buried within a liquidation preference stack. That means the first money in a sale always goes to your investors. If you raise $100m dollars of funding and sell for $100m you actually make no money because it all goes to the investors. So you can’t sell for less than $100m if you raise this much. Every time you raise money you are removing optionality from your future.
This is how sometimes a company can raise hundreds of millions of dollars and then sell for billions of dollars and somehow still the founders actually make no money. A sort of rule of thumb is by the time you’re a mature Unicorn company the founders will own less than 10% of the company. This isn’t always the case but it is usually true. You can have a very happy wealthy 1% existence without ever doing any of this. And in fact you will probably be happier if you never raise venture capital.
There’s a natural friction between growth, capital and ownership. You sort of want to raise the least amount of money you can that allows you to grow as fast as this that allows you to maintain the highest degree of ownership. Obviously the more money you raise the faster you can grow but the more ownership you sacrifice. You have to balance these 3 dynamics calibrated to your own risk tolerance. The capital raising game is a bit like high school where it’s a self contained small ecosystem of people who all know each other and information flows freely between them. Everyone is trying to seem like the cool kids and create hype but the easiest way to have hype is just to be growing super fast.
At a certain point, the business will be growing and you’ll need to replace all the people who were great at getting the company off the ground with people who are great at making it grow faster. These are different skillsets. The starting phase is exploratory trial and error but the growing phase is an allocation game. Where to allocate your resources for the highest impact. Where to spend your dollars to grow fastest. Raising money to grow as fast as you can by doing more of all the things that you now know work really well.
I think the growing phase is characterised by performance and personnel. Finding the most talented people you can find and then giving them as many resources as you can to go grow the thing as fast as they can. And also to build and release additional products that are complementary to your main product. It’s about maintaining performance against a stream of competitors and not atrophying your own customer base.
Probably the biggest mistake I’ve seen here is when in the name of growth a startup does a bunch of things that pisses off their existing userbase and they leave to their competitors so they churn them. By this point a user might have been using the product for many years and be completely overlooked and taken for granted as a customer. It’s kind of where the organisation starts to change into a multi factorial hydra from what was previously a streamlined speeding bullet. But is also when all the organisational bloat and politics starts to enter.
The growing phase is not something I know a lot about and is not what I enjoy, I sort of lose touch with the startup once they cross $100m in revenue anyway. I think everyone figures it out in their own way and builds their own team of advisors and experts for it by the time you are here. Every company at scale sort of faces the same issues, the quasi transformation from being the upstart underdog to being the big dog in the space. By the time you are at this point, you’ll also be surrounded by people who know how to do it better than I can. So rather than talk about something I don’t know much about. It’s probably best if this is the end of the talk.