My main point is:

Just why is an information technology startup with
explosive growth potential, early on with just a few
employees, as described so vividly in Altman's
lecture, usually so different, say, in level of
desperation, from most of millions of US small
businesses? That is, I'm not getting the solid
reason for so much desperation.

On your 1) and a startup being a small business:

As a side point, for 1) your $100 K per employee per
year might even be too small. I'd guess that in SV
Google spends $300+ K per year per employee.

In your 1), you are assuming a lot of burn rate.
Yes, I know; I know: Twitter long ran with rapid
growth in usage, i.e., traction, with low or no
revenue but recently, from some VC Fred Wilson
comments, worked on revenue and is doing well with
it. Maybe SnapChat and Instagram burned a lot of
cash with low or no revenue. And maybe Square,
Uber, and some others have high burn rates. And
recently VCs Bill Gurley and Fred Wilson, and, now,
A16Z, are complaining about high burn rates. I
know. Still, from nearly all I've seen, coast to
coast, "pre-revenue" usually means $0.00 equity
funding.

So, connecting with my point above, maybe the
offices of Square and Uber have some high level of
desperation as described in Altman's lecture, but
from all I can see for information technology
startups with explosive growth potential and
just a few employees, that such a high level of
desperation, so different from nearly all of
millions of US small businesses, is necessary or
usual seems difficult to believe. Instead, with
just a few employees, in nearly all respects the
level of desperation should be just ordinary for
small businesses.

Then there is the issue of burn rate and, thus,
usually, VC funding:

from what I've seen, for a startup writing software
and pre-revenue, about the best they can get from a
VC is either "it appears that you are still in heavy
development" (i.e., not a candidate for equity
funding) or "when you go live with your service we'd
like to 'play with it'" meaning that nothing prior
to that is worth equity funding.

That is, VCs want to see at least a product ready
for usage. That is, they don't want to pay for
software development. That is, we get reminded of
the Mother Goose story of The Little Red Hen who
got no help or interest from anyone until she had
hot, fragrant loaves of bread fresh from the oven
and lines of eager customers out front.

So, what is a founder of an information technology
startup to do about equity funding? A big point
here, at times also mentioned by VCs, is that now
the expenses, at least the capital expenses, for an
information technology startup can be so low that
really, by the time VCs are interested, the startup
should be within just some weeks of getting users,
ads, revenue, earnings, and enough in earnings to
have a nicely successful small business with plenty
of cash for organic growth and low to no need for
equity funding. So, from all I can see, usually by
the time VCs are willing to meet, there's a
profitable small business or nearly so.

E.g., Menlo Ventures told me that they want to see
at least 100,000 uniques per month. Okay, for my
Web site that would be, say, for each unique
visitor, an average of, say, 8 visits a month with
an average of 8 Web pages seen per visit, with an
average of 5 ads per page. So, if take the Mary
Meeker KPCB estimate of $2 revenue for each 1000 ads
displayed, then get monthly revenue of

100,000 * 8 * 8 * 5 * 2 / ( 1000 ) = 64,000

dollars for my solo startup. Moreover they want
that traction growing quickly. At that time I'm
looking for equity funding? I doubt it! Even if
the $64,000 is too high by a factor of 10, still I'm
not looking for equity funding; instead I'm
profitable with plenty of cash for organic growth.

So, for equity funding, here is my

Point: For information technology startups of just
a few people, nearly always, by the time the VCs are
ready to write a first check, the company doesn't
much need it. Then what's left for VC funding is
expansion stage or, maybe, some funding in pursuit
of the company being acquired. Or, again, I'm not
seeing as very common Altman's description of VC
funded startups with desperation.

For your

> Can you think of a software company that reached
$1.5 mil in year two?

I'm not sure what Microsoft, Plenty of Fish, etc.
did already in year two. Still I'm lost on your
point here: You seem to have an implicit assumption
that an information technology startup with
explosive growth potential must go at least two
years burning a lot of cash instead of making at
least a little in earnings, and I'm not seeing a
very good argument for that.

For 2), maybe the company is not in Silicon Valley?
Even if the company has only a few employees and
level of desperation like most small businesses, it
might still have explosive growth potential and a
corresponding "vision".

You seem to be suggesting that there is high
competition for good employees, say, in developing
software. I very much do not see that at all: From
all I can see, the US is just awash in highly
motivated, highly talented, Bachelor's degree and
higher graduates in STEM fields with some to a lot
of software development experience who can send 1000
resume copies and get back only silence or at best
some absurd questions about how many golf balls will
fit in a school bus, a question "What is your
favorite programming language?" with, apparently,
only one acceptable answer, C++, or a requirement
that the candidate have several years of experience
with just the combination of software tools and
infrastructure the company is using that day.
Nonsense. I've seen very highly qualified and
otherwise just excellent people in computer science
and practical software go for years looking for jobs
and be essentially totally unemployable.

E.g., there is the parody, too close to being true,
"If Carpenters Were Hired Like Programmers" at

http://www.jasonbock.net/jb/News/Item/7c334037d1a9437d9fa650...

Indeed, some famous companies have a personnel
policy for technical employees of promotion into
management by age 35 or fired. The US is awash in
people with 5-20 years of software development
experience essentially totally unemployable in
software. For such a person, they would have been
better off, literally, at age 20 starting a lawn
mowing service so that by age 35 they would have a
nice business with, say, 8 crews, be immune from
being fired, able to continue the business as long
as they were physically able, and also able to
involve their family members in the business -- make
it a family business. Software developers do not
have good careers, and the US is awash in highly
qualified people at relatively low wages, e.g., not
enough to buy a house and support a family.

The US is just awash with good universities with
good STEM and computer science programs with highly
talented, well educated, highly motivated students
ready, willing, able, and eager to get going in a
career in information technology and with no
significant offers for months or years.

For my startup, I have no question that I can hire
and, with minimal training, have people writing the
necessary Visual Basic .NET code using the .NET
Framework, ASP.NET, SQL Server, etc. E.g., they can
write what is needed for customer service. They can
also learn, especially with some good consulting,
how to plug together servers and get them into
standard racks, connect the cables, automate the
software installation and configuration, set up and
operate the server and network monitoring,
management, and administration, develop reports on
users, usage, errors, loads, etc. For the tricky,
unique, difficult to duplicate or equal crucial core
code, that's mine and already in good shape.