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Start-ups: What’s working now

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in Leaders & Managers

New terms for business start-ups have sprung up a world away from the cash-burning dot-coms of yesteryear. “Ramen profitable” is one, “LILO” (a little in, a lot out) another.

They refer to new ventures that run on no more than the founder’s living expenses. Working best right now, venture capitalists say, are concepts that either make customers money or save them money.

“At this point, it would be hard for companies to get any cheaper,” says Paul Graham, a Silicon Valley investor who coined the term “ramen profitable” to describe an enterprise generating only enough cash to keep its founder alive on instant noodles.

In the olden days, start-ups needed a business plan and funding before they launched. Jeff Bezos had a $300,000 check from his parents to start Amazon. But that model presents at least three problems: (1) it’s slower; (2) there’s zero evidence that the idea will work; and (3) even if it does, the founders may own only a sliver of their companies.

It’s a different story today, in an environment where one more failed launch won’t faze anybody.

“The cost of failure is cheap,” says Joi Ito, another tech investor. “It’s so low, you can swing the bat way more times.”

Bottom line:
Run it or fund it, now is your moment to find a fixable problem, identify two people to solve it and launch a solution that’s ingenious, cheap and fast.

— Adapted from “Get Rich Slow,” Josh Quittner, Time.

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