Lifestyle Businesses

Yesterday in the comments Elia said:

I sure wish we wouldn’t call non-VC fundable opportunities lifestyle businesses. It sounds like the person working on that business spends his days on a beach somewhere in the sun and collects the checks that come in. Just because it makes less money than a VC invested business doesn’t mean it isn’t still a business that takes lots of work.

We don’t have a good term for these types of businesses yet. Independent or indie is the best I’ve heard so far. Maybe, Fred, a post here and this community can come up with a great name we can all use?

I had never thought that the using the word “lifestyle” to describe a business that was too small to be interesting to an investor was derogatory. But I can see Elia’s point.

There is, however, a difference between what we’ve been calling “lifestyle” businesses, and “indie” businesses. My friend Bryce has launched an effort to fund “indie” businesses. As I’ve understood it, an “indie” business is one that might be large enough to support a significant investment but the founder wants to remain independent and therefore has no desire to exit and thus taking VC investment doesn’t work.

I touched on all of this is my ten ways to be an entrepreneur presentation (video, deck). Most of the entrepreneurial ventures I describe in that presentation are not backable by VCs. Only the last three (the startup, the breakout, and the company) are.

So I would define things this way:

Lifestyle – too small for VC, but will generate enough annual cashflow to be a great business to own and operate

Indie – might be large enough to justify and provide a return on a VC investment, but the desire to retain control and remain independent makes VC untenable for the entrepreneur

VC Fundable – large enough to justify and provide a return on a VC investment and the founder is willing to exit at some point and provide a capital gain to the investors

So with all of that in mind, I would like to ask a final question and then take this discussion into the comments. Is the term “lifestyle business” derogatory or dismissive in any way and do we need to find a better term for that kind of business? And if so, what should we call them instead?

#entrepreneurship

Comments (Archived):

  1. Anne Libby

    As I head off to my first meeting of the week, I call it “work.”

    1. Donna Brewington White

      Work is my lifestyle, so in that regard it is a lifestyle business.About a year ago I was challenged by the question of whether, as an entrepreneur, I was working a job or running a business which has begun a new series of actions.

      1. Anne Libby

        I would love to hear more about what’s different for you. May we one day have time to sit down and discuss! (Or, maybe you’ll blog about it.)In the meantime, I once told @fredwilson:disqus that I was like a tugboat for my clients’ businesses — and I see both of our businesses like this. Small entities that can help move the bigger “boats” along. Along with a whole range of other service providers, necessary parts of a healthy startup ecosystem.(I love this video, which sparked the metaphor.)https://vimeo.com/50619799

        1. Donna Brewington White

          Next time I come to NYC we are due! As this new phase of my business unfolds there will be much to share because the story may be helpful to others and possibly inspiring.I get the tugboat analogy but have to think about whether I relate to it. Although hearing the “accents” in the video made me homesick for the East Coast. Will get a small fix next week through a quick trip to Boston but still not the same as NYC. 🙂

          1. Anne Libby

            Yes!

  2. David Semeria

    I don’t believe ‘lifestyle’ is a belittling term for a business, but who am I to question people’s constitutional right to be offended?So, for businesses that are scalability-challenged, can I suggest the term ‘sustainable’?

    1. fredwilson

      i like that but Google is also sustainable

    2. JimHirshfield

      Sustainable sounds like they’re in the renewable energy biz.

  3. Guest

    i think its a decent name, because i don’t think VC backed businesses are very good for a persons lifestyle. 🙂

  4. bfeld

    I don’t think lifestyle is pejorative in any way. My first company, Feld Technologies, would have been classified as a lifestyle business.I think the problem is that VCs often use it in the following context:”That’s not something we’d be interested in funding because it’s a lifestyle business.”If I was on the receiving end of that (which I have been), that would feel like a derogatory perspective for me.Also, for many years that US government has struggled with the difference between “VC Fundable businesses” and everything else. The SBA (Small Business Administration) was the biggest to struggle with this – everything was classified as a “small business.”Finally in 2010 the word “entrepreneurship” was introduced into the mix which generated “small business” and “high growth business.” I’ve been working hard to segment this into “local business” and “high growth business” with modest success.But that doesn’t really solve the broad definition problem. It does, hopefully, give a few more phrases to play around with.

    1. fredwilson

      high growth business is a good word for “VC fundable”local is a subset of “lifestyle” but certainly a big part of the cohort

      1. Joe Cardillo

        I think the term “venture business” or something close to it is accurate…the qualities of being fundable by venture money are varied, and probably change over time (other than being capable of bringing large returns, but how that works looks a lot different than it did 30 years ago).As Brad noted, the problem is when you posit venture businesses as the way, and everything else as The Other, which is something that’s usually negative whether intended that way or not.

      2. Donna Brewington White

        So what happens when the business goes from fundable to funded? Does the category change? Or all of these pre-funded categories?

    2. Jc_mellinger

      It’s a catchphrase VC’s use in the exact context you describe. An easier way of saying “…we don’t believe the market your attacking is large enough or your company can grow fast enough so we can achieve an adequate return.”

    3. Guy Gamzu

      Is there a real reason to ‘brand’ an activity that is not relevant to the perceived scope of a VC? It’s sort of like asking a bachelor “What’s your wife’s favourite shoe brand?”

      1. bfeld

        It’s less about what is relevant to the VC. I think this is about defining the landscape generally.

        1. Rob Millis
    4. Ronan Perceval

      I’ve been told more than a few times that I was building a lifestyle business because we were trying to grow it through cash flow rather than raising VC. And it always felt patronising, whether they meant it or not. The implication or presumption is that you haven’t the ambition to build a big company. That just isn’t true. https://www.medium.com/@ron

    5. Tereza

      ‘Lifestyle’ can rub a little raw for women founders who, fundable or not, have trouble being taken seriously. Especially if they are married or come from a family with some money.People tend to presume it’s a hobby disguised as a business.Women spend a LOT of time elbowing out of this perception.

      1. Susan Rubinsky

        I could not agree more!

      2. LizScott

        Tereza, yes — if you look at how else “lifestyle” is used in our culture, it’s typically used to describe things that are “women’s interest” — lifestyle blogs, lifestyle retail concepts, lifestyle media. Coupling with, as Brad noted above, it can feel dismissed by the VC community, the phrase itself suggests what is being dismissed is not a specific type of business, but a specific type of business that has feminine qualities.

      3. sfrancis

        I agree completely. not just a gender issue, but it can be even more annoying when it is combined with gender.

    6. Kalen Jordan

      Agreed. The term itself is not pejorative – in fact, it’s kind of the opposite. If I run a lifestyle business and you run a non-lifestyle business, that’s basically saying I have a better lifestyle than you.As a founder of a lifestyle business, I think the problem is the way in which many people tend to *view* lifestyle businesses. It’s people’s perspectives that are kind of twisted. Anyone who sees a lifestyle business as a bad thing kind of has some issues.I think that we, as lifestyle founders, need to own the term and be proud of it.

      1. Vasudev Ram

        Correct on all counts.There are a bazillion times (*) more so-called “lifestyle businesses” than VC-funded businesses. Note: (*) “times”, not “percent” – “times” implies a higher multiple. IMO the more appropriate terms are: just “business” (or at most, “regular business”) for so-called “lifestyle businesses”, and “wannabe businesses” for (VC-funded) startups. Because that’s what they are, as Steve Blank says: “a startup is an organization formed to search for a repeatable and scalable business model” – implying it is not there yet:http://steveblank.com/2010/

    7. Twain Twain

      “Lifestyle” is pejorative because the connotations are that it’s style over the substance of scalability and ROI.The subtle differences in the way it gets applied and communicated to male and female founders is like so:* Investor to male founder: “Oh so your technology enables people to enjoy their lifestyles — shop online, book flights & hotels, order cabs on the fly…You’re solving their problems based on your own lifestyle experiences.”* Investor to female founder, “Your startup’s a lifestyle business” whilst thinking “We don’t use beauty products, understand the way mothers decide which educational resources to encourage their kids towards or need to source babysitters.”Amazon, Etsy and Pinterest are examples of “lifestyle” businesses and the male founders credit their wives / girlfriends with coming up with the idea.In years to come, women will not only generate those $billion ideas they will also be able to code and build it.

    8. PrometheeFeu

      Part of the problem is that they can easily be one and the same depending how you run the business. I’ve met people who run lifestyle businesses with a product that could become huge is they scaled up. But they don’t want to do that. They’re happy enough with $X in exchange for Y hours of work.

    9. sfrancis

      The statement you made above doesn’t necessarily come across pejorative – “because it is a lifestyle business” – but you know it is intended as a pejorative when you here the more common usage “That’s not something we’d be interested in funding because it is JUST a lifestyle business” (emphasis added). “oh, nice that you have a little lifestyle business” or “well, i know you just want to run a lifestyle business”… or when someone tells you you don’t have a startup, just a lifestyle business, etc.It’s the use of just, or the implication of lesser status that is always a little annoying to those of us running great businesses that aren’t “investable” in the minds of VCs (which really just means, doesn’t fit the VC’s thesis, not that the companies aren’t investable”)..Another canard is the “not scalable” tagline. “oh, we can’t invest because your business isn’t scalable” (you point out $20B example of a business kind of like yours, that implies that such businesses can scale), “oh well, you know what i mean, it takes lots of people/years/work to scale” …. :)When you have a great business and someone tells you it is lifestyle or doesn’t scale or isn’t investable, you’re just talking to the wrong investor. In my book, anyone who puts all their financial assets on the line to start a business is in a startup. Our business has grown faster and longer than most “startups” in the Austin area, and we took over the space of a bankrupt former startup that got lots of “investable” dollars… So I don’t let it bother me too much, but I totally get why people get ticked off – but my advice would be, use that energy to motivate you to achieve even more!

    10. Food. Fashion. Wine.

      I agree. It irks me that SMEs and startups are used interchangeably. In this last wave of startup-mania, since 2008 to now, they have been used so. SMEs are defined by 5M turnover, and startups are tech/digital companies that have scalable revenue models with potential of 100M+ revenues.

  5. gline

    By this “trichotomy,” would you say USV or other VC firms are Lifestyle businesses? I guess it’s that or indie, but in most cases I don’t think of the GP entity at a VC firm as a good candidate for growth capital…

    1. fredwilson

      oh hell yes, we are the definition of a lifestyle business

      1. JimHirshfield

        “… spends his days on a beach somewhere in the sun and collects the checks that come in.”#SorryNotSorry You walked right into that one.

        1. Mario Cantin

          Ha ha ha!

        2. fredwilson

          Happily

        3. kenberger

          “That’s the way you do it. You play your gih-tar on the MTV. Oh that ain’t workin'”.

          1. Vasudev Ram

            Ah, Dire Straits. While not relevant to this thread, I had posted about another video of theirs a while ago, that I really liked. Had first heard it when in school or a bit later, only saw the video recently, so shared it. The video makes it even better, IMO:Music video: Dire Straits – Walk of Lifehttp://jugad2.blogspot.in/2…

      2. LE

        As I had “argued” in the comments yesterday you are the quintessential “small” business. Which is why despite the profits and prestige that you have you are still constrained by the size of the organization and the fact that you and/or the partners really have to ride over all decision making within the “small business”.That is really the limiting factor of a small business, not the money that they have available.If you were not a “small business” you could have easily changed from Typepad to WordPress by “having your people take care of it”.

  6. vruz

    Yes, it is borderline derogatory because it seems to imply the idea that it’s not a serious endeavour.My favoured, and more dignified term is “unipersonal enterprise”.

    1. Mario Cantin

      Sorry to call it what it is, but it’s a stupid-sounding name. If it works for you, great, but it won’t get universally adopted.I agree with you on the borderline point, but it’ll be hard to get passed calling it “lifestyle”

      1. vruz

        That’s fine, you have a right to think something I said is stupid. Likewise, I also have the same right.

        1. Mario Cantin

          Be my guest, you may not be the first one 🙂

          1. vruz

            Have a nice day 🙂

    2. fredwilson

      In like where you are going with this but now where you landed

      1. vruz

        I know, not as fashionable.

    3. LE

      Back in the day “enterprise”, as in “Johnson Enterprises” was the word (same with “associates”) that was tacked onto business names to make them appear larger and more important than they actually were. That is no longer as necessary in the web age for several reasons, one being it’s so easy to appear larger and more important than you really are with a good website.

      1. vruz

        Well, unipersonal company could do just the same, although an enterprise is a broader term which could encompass other types of organisation.I’m just going by the dictionary, not by 80s fashion, but duly noted.

  7. JimHirshfield

    There are very few contexts where this comes up, I think. When asked what type of business you own or work for, the first thing that comes to mind is not whether it’s VC-backed or not.Gus: “What do you do for a living? Who do you work for?”Lou: “I’m in the propane and propane accessories business”.

  8. ZekeV

    There’s a certain type of service business that exists in highly fragmented, mature markets. The general contractor, the lawn guys, the local diner, the corner bodega, the solo practice attorney. If you listen to Peter Thiel, these are highly competitive opportunities and should not be pursued. But within some micro geography (physical or otherwise), there’s always an opening for one of each, and someone does fill the niche successfully.

  9. awaldstein

    Pejorative or not, is the term helpful? And to whom?There are classes of businesses which can be successful in both local and national markets for example.You can start out to build Chipotle with an idea towards national expansion and funding to go after it. Of in today’s world, Suga, for example.Or you can start out to build a brand locally–like Starbucks back when. Or in NYC, BluePrint Cleanse. Or one restaurant like the first Danny Meyer’s place.And then take it larger and raise against it.Where this breaks is of course capitalization for hard goods–be it warehousing or think a restaurant–15 year commercial lease, $2M to build out and 6 months to cover customer build? What will the investor think of this when they fund?From a VC perspective, it makes sense as you have your model.From a brand based perspective, tech or not, I just don’t think it works as a category for the entrepreneur.

    1. Mario Cantin

      It transitions at that point from calling one to the other. Also in the mind of the one starting it, it might be different than what is perceived externally. When Ray Kroc started McDonals’s, in his mind he was building a prototype to be scaled. For everyone else, he was just another restaurant.

      1. awaldstein

        You said it better than I.What you call it is not as important as how you fund it.There are lots of business types that could be successful at a local level but are beyond the pale of bootstrapping because of the capital.That’s where it starts to matter.

  10. Jon Michael Miles

    I’ve always interpreted lifestyle businesses as the independent entrepreneur, like a blogger, who makes enough money to fund their lifestyle. Not sure I get the difference between a small business owner and a lifestyle business. This conversation is enlightening though.

    1. fredwilson

      I used Matt Drudge to personify that type in the presentation I linked to

    2. Mario Cantin

      I own a small business restoring Historic masonry. We run it from March to October. In those months, I can work 7 days a week dealing with all aspects of the business. I’ll get off this blog in a few minutes and go put in at least 12 hours. In the winter, I’m off working on technology, writing music, travelling, reading, really connecting with my wife, etc. I have no boss, other than my clients, and no investors. That’s both a small business and a lifestyle business

  11. Pranay Srinivasan

    This is something I’ve lived my whole life. I’ve run 6 businesses and this is my 7th. I have never raised any external equity capital for any of those businesses. Each of those started with a customer’s deposit.None of them were any less stressful than my current Investor-backed / VC-backed startup that I run. They all have the same ulcers, the same midnight stress, the same delivery issues and the same client pains. They can grow big over a longer time period with investment into operations, headcount and infrastructure over 10-20 years.The only difference between then and now is that I can use technology to compress 5-7 years of that stress into 12-18 months and scale this business to a large one without increasing headcount or adding linear operating expenses. Thats why Investors funded this business.IMHO, All those businesses I did were “Cashflow Businesses” where the cashflow funds salaries, rent, operating expenses and my living expenses. I didnt take “salary” but lead a comfortable life until I had to either shut down, or lost money or went out of business.Sometimes Cashflow businesses turn into Venture fundable ones simply because the market knowledge, the domain expertise and the ability to sustain long periods of stress conditions those founders to find ways to exponentially grow those businesses.Thats why you sometimes see large growth rounds in companies that started 5-7 years ago and took no external funding. (Github, Tanium, etc).I feel that a “lifestyle” business is that which supports a lifestyle – One that helps you maintain a “work life balance”, and can let you live decently / comfortably without ever becoming something big. There are in my thought 2 reasons why these are not fundable:1. By the sheer nature of the business, it is a one person or two person show – These key people cannot scale beyond themselves and are quite content within their skills to run and manage this business. Hence there is key man risk.2. By the volume / latency of the business, it is assumed that this business will fade out or reduce in relevance, thereby causing the founder to choose between a pivot a few years down the line or move to a completely new venture.Thanks,Pranay

    1. fredwilson

      This is a fantastic comment. I really like the term cash flow business. It takes out the pejorative and replaces it with fact.

      1. JimHirshfield

        Depends which way the cash is flowing. A cash flow negative business with a small addressable market is neither a VC backable venture nor a “lifestyle” business.

      2. JamesHRH

        CF is not the same group though – it’s a mindset / philosophy.I know someone that started a CF business that is worth $500M – $750M.

        1. Pranay Srinivasan

          Exactly! 3 kinds of businesses!Cashflow: supports large teams, net positive businesses, grows slowly (years)Lifestyle: supports less than 3-5 member team,net positive biz, stays at a limited size.Venture-backed: supports large teams, not net positive for long, grows quickly (months)

          1. awaldstein

            Great stuff.Where does hard goods and service brands like restaurants fit into this?

          2. Pranay Srinivasan

            always cashflow biz – not reliant on 1 person to succeed but too slow to grow and is time intensive micro management. same with brick and mortar retail. thats why walmart took 12-15 years to achieve escape velocity.

          3. Pranay Srinivasan

            But a food truck is a lifestyle business :-)until they open a few more

          4. mikenolan99

            The manufacturing category is an interesting one – we helped move a generator company out of a garage (doing re-builds) to become a $20M company in five years. These are rare stories, but do exist.What do we call them?

          5. Pranay Srinivasan

            Congrats! We’d call them “exceptions”:-)

          6. JamesHRH

            I would only make one edit – ‘Owner Operated’ over ‘lifestyle’ with no limit on size other than only one person on the leadership team (the owner).

          7. PrometheeFeu

            I don’t think Owner-Operated is the same thing as lifestyle though. Lifestyle is when you decide that your business netting you $X per year is good enough and that further growth is not something you’ll seek. I think of lifestyle businesses as being what you do when you are happy with the income of a normal job but don’t want a supervisor.

      3. LE

        I really like the term cash flow business. It takes out the pejorativeI don’t like it, that reminded me of “cash cow” businesses which are described this way:http://en.wikipedia.org/wik…(Note: To wit: “boring….slow growing…staid…mature…milked…wasted…low growth…)Cash cows is where a company has high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a “mature” market, yet corporations value owning them due to their cash generating qualities. They are to be “milked” continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.

        1. Pranay Srinivasan

          Google Ad words is a CashCow.A brick and mortar Breakfast place is a Cashflow.

      4. J franta

        only in venture capital do you need a separate category for cash flow businesses. 🙂

      5. gregory

        Love the term Cashflow Business.Funny enough, Josh Kopleman asked this question in 2009 http://redeye.firstround.co… — Now we have a good answer.Inversely “lifestyle business” can be derogatory towards VC backed businesses, since it implies funded companies lack or have a bad lifestyle. While running a VC business is hard work (as is running a cashflow business), there are many VC-backed CEOs and employees that enjoy the lifestyle a fast growing funded company provides.

      6. Food. Fashion. Wine.

        Yes to cashflow businesses. 😉

    2. Mario Cantin

      Dude, you’ve found it: a “lifestyle” business is that which supports a lifestyle.A “cash flow” business is when it has some of the characteristics and challenges of a VC-backed company but is not fundable for the reasons given in this post.

      1. bfeld

        @mario_cantin:disqus – thx for pointing me back at this definition. “Cash flow business” is a great term. FYI – that’s what defined Feld Technologies – we were cash flow positive every month from the very beginning.

        1. Mario Cantin

          Always a pleasure.

        2. fredwilson

          that’s what happens (cash flow) when you suck less than your competitors 🙂

          1. bfeld

            Indeed. I will continue to do my best to always suck less (for those that don’t know this, it’s the well-worn motto of Feld Technologies: “We Suck Less”)

        3. Pranay Srinivasan

          Yea no greater liberated feeling than feeding your team with customer dollars.The one thing I feel uneasy running a startup is the reliance on investor cash.Cant wait to get cashflow positive soon and be back in control 🙂

          1. bfeld

            And – the best VC-backed companies quickly become cash flow positive. I’ve been involved in several that had this happen early and it is just awesome.

          2. PhilipSugar

            Great comments and great way to put it. When you are reliant on investor cash they are in control when you are reliant on your own cash you are in control. Not a bad thing. Is what it is.

    3. Matt Kruza

      Damn! Was hoping for the credit of using the term 🙂 I was literally writing this exact comment when I saw you wrote it! So yes, 100% on board. Great comment!!!

      1. Mario Cantin

        LOL! That’s what happened to the poor f#%^er who also invented the telephone when Graham Bell got the credit for it 🙂

      2. LE

        Next time you should just hit “post”. Disqus shows hours not minutes and seconds!

    4. Jon Michael Miles

      So Lifestyle is defined by the owner as something that supports their lifestyle, a cash flow business, but perhaps in some VC circles it’s code to infer that it’s small potatoes and not an exit opportunity. I can live with that.

    5. Tereza

      I love the emphasis on real revenue that ‘cash flow business’ provides. Way, WAY better than ‘lifestyle’, which evokes munching bon bons.One element that is not captured in ‘Lifestyle’ or ‘Cash Flow’ is whether there are employees involved. Once there are there is a different level of complexity, responsibility and scale. The founder is leveraging him/herself and has enough revenue to cover that. That’s a big step.

      1. Pranay Srinivasan

        Tereza,Typically “Cashflow” supports a team – small at first but larger later – maybe even 100s or 1000s – like retailers.A “Lifestyle” business by definition is the lifestyle or 1 or 2 highly skilled founders and maybe an assistant or two.Necessarily a lifestyle business is solely reliant on its founder’s skill – like a lawyer or a doctor.

        1. Donna Brewington White

          Does taking out a small business loan influence the definition of cashflow business?

          1. Pranay Srinivasan

            Yes it can. positively and. negatively. No recourse if the money you take as a loan is lost. Great growth if the money you take as a loan is done right.

        2. Tereza

          So VC is a Lifestyle Business. Same as consultants, hedge funds.

          1. LE

            My head is spinning from hearing various people trying to find a word to describe what is a wide and vast amount of different business models that simply can’t be categorized by one word!

          2. Pranay Srinivasan

            Yes 🙂

    6. Donna Brewington White

      I think your definition of lifestyle business is a good one and valid. But the type of lifestyle varies! Finding myself suddenly unemployed (by choice based on a principled decision) I initially started my business because with two toddlers and pregnant, the idea of going out and getting a new job was untenable. So the business I started that caused me to take my laptop to the hospital when I gave birth (twice) was for sure a lifestyle business. I work almost every day including vacations. But, with four kids I’ve rarely missed one of their events due to work. Yep, a lifestyle business.

    7. Jeremiwithaneye

      Pranay, I appreciate the insight of your comments. Currently I’m starting a career change as a VC and found the information around “cash flow business” and the relevant timeline during all stages of a start up very helpful. Thank you

    8. Lilia Tovbin

      >> I didn’t take “salary” but lead a comfortable lifeIRS considers taking most of income as profit instead of salary as avoiding paying payroll taxes, so it’s not a norm for a founder/owner to not pay themselves a salary.#2 is probably true for many VC-fundable companies as wellI like the term “self-funded” over “cashflow” because while many small businesses are cash positive, few founders are paid fair market value for their time at the start, so they effectively fund their businesses with at least their efforts at first.I like the term “lifestyle business” myself but refer to mine as either “small business” or “software business” when I talk to folks outside startup circles.

      1. Pranay Srinivasan

        Most of my businesses were run outside USA so far more relaxed ways of assessing taxes on the income. I wrote off most of what I did as work expenses (another perk of self owned and operated businesses) except of maybe food and entertainment – Until I sold my house after my 3rd business, didnt have to pay rent either.

    9. Salient Voice

      “Cash flow business” is perfect. I built such a business over sixteen years and ultimately exited to a NASDAQ firm. Financing opportunities were always posed as a “lifestyle” (some form of hobby) versus “success” (some form of career achievement) decision. But the question always was: did my market opportunity really change by accelerated financing? I always viewed the lifestyle comment as a condescension litmus test.

  12. LIAD

    100% pejorative. Small businesses are the bedrock of western economies and should be labeled something which doesn’t imply or have connotations of leisire or ease.All businesses are actually lifestyle businesses it just depends how many lifestyles they can support.Differentiating factor is whether they are scalable and can be done so through leverage.Scalable is a nice terminology.

  13. Val Tsanev

    Agree with Brad, lifestyle business itself has nothing wrong with it, however the way it is presented in the startup community is as if it is of lesser value than a VC fundable business. I have heard the point from other people that why create a lifestyle business and do all the work and get a paycheck that will be equivalent to if not less than if you go and work for a corporation and have to dedicate half the effort and the time. This argument holds true assuming that lifestyle entrepreneurs care only about the monetary aspect of their businesses, from what I have learned though, most lifestyle entrepreneurs care the least about the money and the most about the lifestyle and the control of it that they have with their businesses. I have almost never heard of anyone talk of their business as an “indie” business although I can see the distinction.

  14. secretarycleary

    “Self-sustaining” or “organically grown” business” are my terms of choice.If you assume VC is needed for either sustenance (survival) or growth, then these terms make sense to describe businesses that don’t.I find the term “lifestyle business” to be dismissive and offensive. VC-backed entrepreneurs aren’t somehow superior to the rest of us. If anything, it takes bigger balls to play with your own money than someone else’s.

    1. fredwilson

      this is my big takeaway. i am banning the words “lifestyle business” from my vernacular. i am going to replace them with something.neither of the ones you suggest nail it for me, but they are great words and directionally correct for sure

      1. LE

        While the word is undesirable the message it conveys is really what irks people.Essentially whatever word you use will roughly translate to “you don’t cut the mustard”. After all if someone is coming to you for funding then they have already decided they want to be “in the game” and you are telling them then that “you are not in the major leagues”.

        1. fredwilson

          for sure. but making the message sting less is worth the effort.

          1. Chris R

            Agreed. Nothing about the word lifestyle makes me think the person is working their ass off and/or running a successful venture. While not all are doing those things, it’s not fair to label those that are w the word lifestyle.

      2. John Coghlan

        I’ve always wanted to see the term “grassroots startups” and “grassroots entrepreneurs” used to describe companies that are grassroots in their approach: values-driven, hard working and built organically through the support of their customers/communities.

      3. mikenolan99

        Remember the book “The Millionaire Next Door”? Some of the strongest balance sheets I see are the Mom and Pop shops.I heard a statistic recently that 1/3 of Americans work for companies with fewer than 100 employees.”employer firms with fewer than 500 workers employed 48.5 percent of private sector payrolls in 2011, and employer firms with fewer than 100 workers employed 34.5 percent, and those with less than 20 workers employed 17.9 percent.” http://www.sbecouncil.org/a

      4. Anne Libby

        Thank you. (And as one who is midwestern-born, I’m still trying to learn not to say “you guys.”)

      5. Rob Millis

        I have huge respect for you and very much appreciate your effort to improve the terminology, but ultimately I think you have to define companies as either meeting VC criteria or not. There simply is no way to define a singular non-VC category because it includes far too many business models, intentions and funding options.

  15. KJM

    Lifestyle business has the negative and incorrect connotation that there is a lack of desire to grow the business beyond ones personal financial needs. I like the term ‘income producing’ business…or ‘lifetime business’, where there is no plan for any exit.

    1. fredwilson

      those are both great phrases

  16. Jordan Thaeler

    The VC model is totally changing and funds that generate a 2-4x return cash on cash are going to be enough, so I would really caution how the term “lifestyle” business is thrown around because those founders will increasingly be the proprietors you need to convince to give you equity ownership. You’ve gotta be living in a hole if you haven’t noticed that VC is no longer investing in startups but rather mature companies with proven business models and unit economics. As “venture” moves downstream and competes with traditional growth equity, you’re not looking for 10x+ returns (would be nice, but harder to generate “venture” multiples with relatively riskless investments) but the steady base hits growth equity is usually looking at.

  17. Celso

    The issue I, and a large number of other people, see is that it implies the problem is in the business/owner/team when in fact it’s a problem related to how VCs operate. So perhaps instead of calling it a lifestyle business – a term that does carry a pejorative connotation – call it a “low VC returns” business.

  18. Wade Garrett

    I find the term to be somewhat pejorative, but more of a misnomer. In the context of how you used it yesterday, I’m not sure it even makes sense — if someone built what you described who’s to say it couldn’t be applied to 50 other areas in which crawling for highly-targeted, niche info provides significant value? Seems like many of your investments have been in companies that started out as experiments of this sort and morphed into something huge and quite different than the way they were initially conceived. As far as the “lifestyle” label, as someone who went from Internet startups to operating bars and restaurants, one’s lifestyle throughout these transitions changes much less than you’d imagine. I’ve found that lifestyle and approach have much more to do with who you are as a person than the endeavor you’re currently tackling.(Have enjoyed reading this blog first thing in the morning via email for the past ~11 years but have never commented.)

    1. LE

      if someone built what you described who’s to say it couldn’t be applied to 50 other areas in which crawling for highly-targeted, niche info provides significant value?Really important point that was overlooked in the discussion.There are untold cases where “getting in the game” (in a small way) has led to other viable larger businesses. I’ve had a few businesses morph in exactly that way and I’ve observed obviously a large number as well.

      1. Wade Garrett

        Thanks. Pranay Srinivasan articulated both of the points I was trying to make much more effectively.

  19. Phil Hayes-St Clair

    Context means a lot here. If ‘lifestyle business’ is used as part of a rhetoric question as someone tries to evaluate a venture (…’so it’s a lifestyle venture?’), then it’s dismissive. It’s less dismissive if alternatives (i.e. Hindie, VC Fundable) are tabled. That said, @pranay:disqus nailed it. Go with ‘Cashflow businesses’.

  20. KJ

    Coming from blue collar roots I always laughed at the label “lifestyle business.”Its not offensive but does demonstrate how disconnected VCs are from the working class.Lifestyle businesses include fun stuff like covering payroll with personal assets, forgoing retirement accounts, refinancing + mortgaging your home, frequent withdrawals from savings, years of packed lunches and forgone luxuries, arguments with family and…well you get the idea.

    1. PrometheeFeu

      I think we call those lifestyle businesses that aren’t working very well. You can certainly build a self-sustaining machinery that hums along with some amount of work on your part and spits out reasonable amounts of cash for your family to live comfortably.

      1. KJ

        I totally agree.After re-reading my comment I understand how this could be misinterpreted. I was trying to (dramatically) contrast the reality of many small businesses with the culture + mindset of VCs / VC funded startups. Nothing wrong with that per se, but an interesting idea to explore.

  21. The Gotham Gal seems to be pretty much in the Lifestyle category for her ‘investments’

    1. fredwilson

      sometimes. angels can do that. getting a return via dividends or stock repurchase can work at $2mm pre-money

    2. LE

      Why the quotes around “investments”?

      1. Rob Millis

        Yeah, I’m not getting this either. She’s f’ing sharp and is a very engaged angel. I’m not familiar with all of her investments, but with enough to know that they shouldn’t be put in quotations.

  22. Steven

    The distinction would be when the IRS would consider your business a hobby. For some, it is a lifestyle.

  23. Andrew Stein

    I think you’re missing a key point which is that a “lifestyle business” can be by choice — and is not necessarily dictated by the industry or business model.For instance, say I started and owned an IT staffing company and I’ve had about 10-15% YoY growth over the last 10 years (~$20-$40M in gross revenue). In this case, I could most likely raise outside capital (VC probably wouldn’t be my target market, but traditional PE might be). Just because I can raise capital doesn’t mean I necessarily will. I may decide that I like being the only partner and that I don’t want to have to answer to any outside investors.I don’t think this example doesn’t necessarily negates your definition of a lifestyle business, but I do think examples like this one are often overlooked and are wrongly classified.

  24. Charlie Petty

    This has to be *’d with the caveat that we’re mostly talking about startups/new businesses here. Right? The vast majority of operating businesses are both not VC-fundable and not lifestyle/cashflow businesses. PE invests in businesses with the expectation that they grow significantly (but not 100x/Uber/Unicorn growth) and most couldn’t be farther from cashflow/lifestyle.Even on the startup side of the house, think about the number of new hardware/manufacturing/heavy-industry businesses that aren’t traditional VC bets but do great with debt/founder/pe/strategic financing.For me, “lifestyle” invokes the image of the absentee owner collecting checks from the sleepy travel agency they set up 15 years ago.

  25. markslater

    i dont think it is at all, but I agree with Brad as to how its misused in context….But i have many friends who made the conscious decision to make their lifestyle their unicorn and run businesses that support that.”we are not taking anything with us right? and what took 5 generations to make – one will lose it all in the future anyway……”

  26. Sean Myers

    The term “lifestyle business” does not bother me until local economic development officials starting using it as a way to ignore certain kinds of businesses (naively in my opinion). By doing this they are not realizing the hiring potential of small business including those those that focus on technology.

  27. Terry O

    I think of the smaller of these as “Owner/Operator” businesses, as they are often not large or profitable enough to support a “fully fed” management team AND an investor group. These businesses can often provide a really nice “lifestyle” for the owner (after a lot of work), but the incomes are tough to monetize except in a sale to another Owner Operator.

  28. kenberger

    “Cash flow business” is true and useful, but misses a key point. Yes they are profitable, albeit with a ceiling, and hopefully a floor. But also:These businesses feature a self-determined destiny.They sow “F-You money’, since they don’t need any outside help.”Independent” doesn’t nail it, they are autocratic, sovereign, and emancipated.Thinking out loud to nail a better name.

  29. nick l

    Proprietorship seems apt. Small business works too.

  30. Emil Sotirov

    Self(un)employment.

  31. pointsnfigures

    one thing is for sure; VCs don’t have to fund lifestyle/cash flow businesses but certainly should offer moral support for them. Lots of cash flow businesses spawn successful scalable entrepreneurial businesses. Or, the kid working the cash register at the Mom and Pop business learns, and becomes the next great CEO of a break out business.

    1. LE

      VCs don’t have to fund lifestyle/cash flow businesses but certainly should offer moral support for themWhat do you mean by “moral support”? What exactly are you expecting the VC to do? Give a long lecture on how the entrepreneur, rejected for “not being able to piss in the weeds like the big dogs”, will be able to have a nice lifestyle and “the game” is not what it’s all cracked up to be?

      1. pointsnfigures

        No, but they can certainly persuade local government officials to regulate these kinds of businesses with a light hand, and support groups like local chamber of commerce etc. Speaking out in favor of making it easy to business facilitates all business.In Chicago, it takes months to get a business license. In NYC it takes 8 days. In other cities, it’s hours. It should be automatic on the internet.

        1. LE

          Part of being an entrepreneur is knowing if it even matters to wait to get some license, permit whatever or just start to sell.More important than the “8 Days” this NYC web wizard allows someone to see that essentially if they start a business on the web or, say if they are a painter (as only one example) they can start selling tomorrow and nothing is going to happen if they don’t get a license upfront.Click on NYC Business Wizard:http://www.nyc.gov/portal/s…It’s important to know what friction actually matters and what doesn’t. I guess that’s a bit difficult for someone that is starting out.

          1. EL

            Why are you always so negative and critical? Why don’t you try to contribute something positive or just abstain from commenting?

          2. LE

            I find it helpful to be critical and I have no reason to apologize for it either. It helps me in many ways. One being I make money by doing so. I am actually paid to be critical by others, not that that should matter. Someone can write a blog and be critical and make no money and find it rewarding. If it makes them (or me happy) why should they stop? To be a crowd pleaser?I’m not running a popularity contest. I am not a politician. At the end of the day while I would like people to like what I say, that is not the reason that I comment on AVC.http://en.wikipedia.org/wik

          3. ELE

            Ironic, because this particular post is discussing how to make critical advice ‘sting less’, especially because what you and a lot of experts consider ‘critical advice’ could turn out to be completely wrong and hurt someone. Be critical but be nice.

    2. Donna Brewington White

      Exactly. Whether founder or employee, experience in some of these businesses is the best education for future endeavors — or getting the entrepreneurial drive into your blood.

  32. William Mougayar

    All these 3 definitions describe a desired state at the beginning of the venture, but it can get murky if things don’t work as planned. A lifestyle business could grow to be large and rival VC-backed ones without outside investment. An indie one could hit a wall, and then need VC investment. A VC-backed one that doesn’t work out can sure look like a lifestyle business in its final days. And investors could be friends or a bank who just want their money back.I’m not sure that re-labelling would provide more clarity. The main thing that changes is risk and control. VC-backed: risk & control are shared, as long as things grow fast.Indie-backed: risk is shared, but not control.Lifestyle: risk & control are retained.

    1. awaldstein

      Nicely said.But you are implying that what you refer to as lifestyle doesn’t have outside investment.Not necessarily so.

      1. William Mougayar

        I said “Could”, but it could be just one investment, or less than a continuous stream of investments.

    2. Rob Millis

      This is a key point. It’s also worth noting that many VC-backed ventures have been dismissed as “lifestyle” businesses by several VCs who did not grasp the potential, or for whom the venture didn’t meet their criteria.

  33. JamesHRH

    O2 business (owner / operator ) is better name.Lifestyle isn’t derogatory.

  34. DJL

    I absolutely DESPISE the term “lifestyle” business. Because to me it implies “intent” – that the owner chooses to maintain a business that is just large enough to support his/her family. I personally know many people (me included) that are solo owners with great, money-making businesses who very much want to expand. But finding either (1) money or (2) co-founders you can work with is extremely difficult. And who has time when you are running the business? Mine is a “lifesaving” business – it is how I care for my family. And while I have worked on a beach, it was during Spring Break with my kids – not by choice. I don’t care what term you use – but please find another one.

  35. Erin

    I agree with a lot of the people who say it depends who’s using the term and coming from a vc could be patronizing. It harkens to mind an image of white tourists going to a foreign country and admiring the natives who fish all day, and sighing, “wouldn’t it be nice to have a simple life like that honey?” And the native is like “f*** you, we live and die by what we catch”. They probably enjoy to an extent what they do, don’t think of their hustling as a “lifestyle”, but given the opportunity to transcend the day to day and “scale” like their western counterparts, many of them would. Sentimentalizing those with simpler structures with a phrase like “lifestyle” could be hurtful if the owner isn’t using the word him/herself.

    1. Mario Cantin

      Very thoughtful way to put it.

      1. Erin

        I knew my liberal arts degree would come in handy one day!

        1. Mario Cantin

          🙂

  36. Mario

    I propose two terminology changes:1) VC funded company should be called ‘lottery company’2) founders of VC funded company should be called ‘VC Employees’+1 for the term ‘cashflow business’.

  37. J. Nicolás Alvariño

    Doesn’t this mean that Kickstarter is an indie venture?

    1. fredwilson

      yes

  38. Wil Schroter

    I can think of a half dozen friends I know who have never taken outside capital but have businesses that net north of $30 million per year. The first company I worked at (before we sold) netted $27 million in our final year with no outside investment.At no point were we saying “Boy we wish we were venture funded”.The association between “not venture fundable” and “not substantially viable” really bothers me. Among VC’s it implies that if it’s not backed by a venture partner then it’s upside must be limited.In fact VC’s fund thousands of lifestyle businesses. It’s otherwise known as 80% of their portfolio.Does every VC act this way? Of course not. But we see 15,000 startups per month and have thousands of conversations around this topic. Time and time again I talk to founders who say “VC’s don’t like my startup because they say this is just a lifestyle business.” I’ve yet to hear that retort in a positive way.I believe that starting a “business” is the default state. The anomaly is a “venture funded business” and the absolute anomaly is a “venture funded business that doesn’t die”.

  39. Matt Zagaja

    My first job was being an entrepreneur. I did IT work for small businesses in a nearby suburb. I did not have bosses, I had clients. I was really embarrassed by this at the time. I remember my mother taking me to the local credit union to open a checking account so I can start depositing my money and not wanting to tell the person at the bank what I did. My peers in high school were starting to get “real jobs” working in retail at Subway or going into some kind of office and I was not getting real experience, or so I thought at the time.The reality is that businesses and work come in a huge variety of flavors. I like the “cash flow” business term because it is true that as long as you’re generating cash flow then you’re probably doing ok. For better or worse Lifestyle feels derogatory towards someone’s ambitions (or implying the lack thereof). It sounds like you’re suggesting this person is having too much fun while the “real businesses” are working hard and being miserable. There are and always will be tough parts about working either for yourself or someone else, but I think the most important thing I learned as I got older is that there are as many people who are miserable that fail at what they do as are successful. The world does not give you a prize for being the most stressed out person.

  40. Elia Freedman

    I always thought of the distinction as binary. Interesting to think of it as three parts. Most of the mobile space calls itself indie even though most of those businesses are really cash flow/lifestyle businesses. I prefer to think of what I do as indie/pre-VC, but that makes sense given the definition above.Thanks for posting the topic, Fred! I hope we collectively can come up with something that becomes as ubiquitously understood as “freemium.”

  41. Bob Harris

    We can borrow a term from The United Kingdom, “bespoke” entrepreneur. Meaning an individual or custom made product or service.

    1. fredwilson

      that’s a great word but maybe too erudite for use in my every day communications with entrepreneurswhat do you think about that concern?

      1. LE

        Part of not sounding like a tool is not speaking the queens english. So I agree with you.

  42. Sam

    One of the challenges is that most VCs focus on narrow slices of the business universe where technology has the potential to create 10x returns. Setting aside those very special niches, the rest of the economy is an extremely large place. Difficult to put one word to that.And “lifestyle” is absolutely the wrong word. You can’t get around the connotations of leisure — where leisure may be the last thing that those owners are experiencing.

  43. Richard

    Bankable

  44. Greg

    I’ve worked in both VC-funded startup environments (though not as a founder) as well as now in running my own independent startup that many have told me is a “lifestyle” business. The problem with the label is there is nothing about my lifestyle that can be discerned from the type of business I am working in or running. I work constantly and am stressed out. Lifestyle implies that I am making a conscious choice to have a more relaxed life, and if only I were more dedicated and driven I would abandon this simple endeavor and do something serious.All this is to say +1 for finding the term offensive. Hope this discussion can foster some good ideas on a different description.

  45. Bob Harris

    I peg the word “bespoke” to getting ourselves accustomed to thinking and acting globally, no mater what business size. Also, I have a vested interest. The name of my business concept is Foreign Intelligence Communicators.

    1. Susan Rubinsky

      I think bespoke sounds pretentious. If I told my Mom, for example, that I run a “Bespoke Business,” I think she’d stare blankly at me wondering what the hell I was talking about. I like to think about terms in regards to what my Mom or Dad would think. My Dad was a mechanic and my Mom was a nurse. If I can describe something in a way that my parents would understand, then I would have a term that was understandable to all.

  46. Joe Yevoli

    I’m not sure if you remember, but while we were in Techstars you advised our company (HomeField) to think bigger because while HomeField was a great “lifestyle” business, it’s not VC fundable.Ultimately, it was our decision, and as I recall you were very upfront that this was just your opinion and we need to make the final call. However, I remember very vividly being turned off by the description of our business as “lifestyle”. I can only speak for myself, but being 26 years old and hearing Fred Wilson describe your business as “lifestyle” was impossible to ignore. We ultimately decided to “pivot” our business to what we thought was a bigger idea.Looking back on this decision I deeply regret it. I wish we had the experience and frankly, the guts to stick to our guns and be OK with a lifestyle business. I’d give anything to be successfully running that “lifestyle business” today.I believe that term is perceived as derogatory and it shouldn’t be. Lifestyle businesses are tremendous opportunities and should be viewed as such. Especially to young entrepreneurs who will have plenty of opportunities to start a “VC fundable” business later in life – even more so if their first “lifestyle business” has any measure of success.I hope this comment isn’t perceived as derogatory towards you in anyway. It was not intended to be. Your advice and guidance during Techstars was incredibly valuable and enormously appreciated. However, I often think back to that time in my life and wish that the idea of a lifestyle business has been looked at as a golden opportunity, rather than a lack of ambition (my perception of it at the time, not how you presented it to us). Since those days I’ve often wished for the opportunity to talk to you more about it. I couldn’t pass up this opp.

    1. fredwilson

      do you think HomeField could have supported all four of you and the incomes you would need to be happy doing it?regardless of how you answer that, i think your point is just because a lifestyle business doesn’t work for a VC doesn’t mean it won’t work for the foundersand that is an important point

      1. Joe Yevoli

        I have no doubt that it could have. In fact, one of our competitors (which we were on equal ground with at the time) successfully employs over 120 people. They grew to this size without raising any outside capital other than a small seed round. They recently raised a $75MM venture round. Which, I suppose means the opportunity is no longer “lifestyle”.Their success and our lack thereof falls squarely on my shoulders. They saw the opportunity, believed in it, and remained resolute. Our lack of focus cost us.A lesson I’ll remember for my next business.

      2. LE

        do you think HomeField could have supported all four of you and the incomes you would need to be happy doing it?I don’t know anything about the HomeField idea at all however I do know that if you have 4 partners working on all cylinders they can easily morph in a direction that they can earn a good living from (as a generality).It goes back to my “thing that leads to the thing” concept as well as “getting in the game” that I’ve mentioned elsewhere.Often the key to success in business is merely going down a path that leads to the thing that actually ends up working (In VC terms “the pivot”).

    2. Vasudev Ram

      One thing I’ve found that helps is to take into consideration various viewpoints, partticularly those of people you respect, but at the end, make your own well-thought-out decision, and take the responsibility for it (towards yourself and others), whichever way it goes, good or bad. Ultimately, no matter much others may advise you, they are not going to do the work or get the gains or losses.

  47. heuristocrat

    I don’t think we’re quite there yet. I’ve been building my own business for a decade now and the term “lifestyle” leaves most people with the wrong impression. “Cash flow” doesn’t quite do it either because it fails to capture the innovation, fun and growth nature of what we do. I often fall back on the generic “I run a small business of my own” which is pretty basic but doesn’t bring much baggage. Sometimes I add “internet or technology” to the description but that seems to confuse more than help in most cases. Maybe it’s a “private venture” which sounds a little more intriguing.Still need some new words…

    1. Donna Brewington White

      I’ve never liked that “venture” implies an outside investment.For me it is not only a venture, but an adventure, whether “funded” or not. I want that word back!

  48. Bernard Desarnauts

    Maybe a good alternate is “owned and operated” business

    1. fredwilson

      that’s goodbut does it work in this context?”hi Bernard. i think you are on to something great with your new company. that said, it appears like it is more of an “owned and operated” business than a high growth venture scale opportunity so its not a great fit for USV and I’m wondering if you should finance it with other sources than venture capital for that reason”

      1. Bernard Desarnauts

        I actually think that it does work. By amplifying the “owned” part it clearly evokes the very “personal” part of it leading to the “lifestyle” as “in control”? btw O&O has been used in media for ages… O&O TV channels etc,

      2. Brian Downer

        Having run a number of different businesses over the years, I think “Self-funded business” (close to hahnfeld’s definition above) says what it does on the tin without being unnecessarily wordy or belittling the massive effort that goes into setting up and running a non venture backed businesses.

        1. fredwilson

          that may be where i end up

          1. Rob Millis

            I completely disagree. This presumes that businesses are either funded by VCs or by founders themselves. I actually find that either/or distinction much more offensive than anything else. For almost every viable business, VC money is only one option of many. Most new startup founders may not understand that yet, but they will with a little experience.

  49. William Mougayar

    2 options:1) “Non-continuous investment” business. VCs don’t invest just for the a seed/Series A round. They want to keep investing until the company exits somehow. A lifestyle business doesn’t need continuous investments.2) “Non-exitable” business.VCs want to make sure you can exit at multiples of the original investment. A lifestyle business (or Indie for that matter) doesn’t see the Exit as a goal being pursued.

  50. Andy Gadiel

    I co-founded and ran a company for 15 years that was started because we wanted to know when our favorite bands were coming to town and promote underserved artists.I thought it was being called a “lifestyle business” because it was there to serve our lifestyle of going to concerts, and in turn the business supported the community of other concert-goers and bands. A virtuous circle.Since we didn’t raise money early on we of course had to be profitable out of necessity. So we were also a “cash flow” business.”Bootstrapped”, “Indie”, “Organic”, “Grassroots”…were all terms we threw around to describe ourselves. We didn’t spend too much time trying to name it against conventional ideas and just did the work we knew we had to do to support, sustain and grow what we were creating.Eventually we raised some Angel money, got a bit ahead of revenue, and the real pressures to grow began.Still “Cash Flow” oriented and “Lifestyle” centric from a operational and cultural standpoint, but more-so working from a real business plan…still never big enough for VC.

  51. Mike Kijewski

    I’m not someone who is overly sensitive, or easily offended, but I definitely find “lifestyle business” derogatory. I heard this repeatedly when raising money for my company (which I then sold for 7 figures after raising $300k). Giving scuba lessons in the Bahamas might be a lifestyle business. A tech company that can generate millions for the founders with only a few hundred k invested has very little to do with that “lifestyle business”.Not sure on a better term. Maybe these companies are looking for “micro-funding” rather than VC funding.

  52. Max, Ionic CEO

    I think it is derogatory, mainly because it’s often used to dismiss startups based on the values of the founders rather than the investability of the company.I’m a bootstrapped turned VC-backed CEO. The VC industry definitely gave me the dismissive vibe when I talked about our growing bootstrapped startup. (Which makes total sense! A closely held startup will never let them have their name on the cap table)The thing is, with SaaS, you can make some serious $ never raising any money. What would you call Mailchimp? Before, they were a “lifestyle” business to many, but today they are bigger and faster growing than most startups out there.Things have changed. I am starting to gravitate towards “indie” since it clearly labels the values of the founder and moves away from the derogatory “lifestyle” label.

    1. Donna Brewington White

      Indie is good but it seems like a category of businesses that still need descriptors of the type of indie business since these businesses take different forms. A lifestyle business for instance might be one type of indie business.

  53. Gustavo

    For me, lifestyle conjures up a different image – I start thinking health apps that help me manage my bad habits or encourage good ones. I also think of products that help people define their image ( like an iwatch or something like that ).

  54. OurielOhayon

    here is a simple definition: you re a “non funded business” until you get funded. Many funded companies started with no intention to be funded, But they realized one day they had to. So you either have investors or you don’t. Whether they are VCs, Angels, Friends and family.Once you have investors you enter in a logic of capital ROI and management style which is very different from fully owned and controlled.In a way it s the same with art: you can be a kubrick and never rely on hollywood, or start as an “indie” and become a super hit (eg Blair witch project) or just play by hollywood rules.Lifestyle or not is not a debate i believe.

  55. thinkdisruptive

    Whether it’s derogatory or not depends who’s saying it and why they are describing it that way. If I describe my own business as a lifestyle business, then I would clearly mean it to be positive: it allows me to sustain a lifestyle, and I don’t really care what anyone else thinks about how I spend my time or when or how much I work. And, because it’s my lifestyle, I can work 20 hrs/week, or 120 hrs/week — as much as I need or want, and I don’t need to be concerned about growth if that doesn’t interest me.Usually if somebody else besides the owner(s) says it, they mean it to be derogatory. That’s why the adjective is “lifestyle” — they intend to say that it isn’t serious, that it’s too small to be interesting, that the owner cares more about his lifestyle than his clients or operating a business, that it doesn’t have growth potential. Even if someone doesn’t mean it that way, that’s what it sounds like. If they meant to say “small business”, or “no-growth business”, or “non-vc fundable business”, or “cash flow business” or any other descriptor without value judgment, they would. “Lifestyle” carries with it a lot of baggage that connotes “non-work”.

  56. Dan Bowen

    To borrow from Hillary, “What difference does it make?” – One of the hardest things I ever did was let go of my ‘lifestyle’ business…it was like putting a beloved pet down. It was time to let it go but heart breaking at the same time. VC’s are building moonshots, but the US economy is founded and supported by the ‘lifestyle’ business…thankfully. We can all dream and shoot for the next VC wonderchild, but there is something incredibly rewarding about being responsible to yourself, not a board, not a group of investors…it is an amazing thing and I wish more people in tech would realize that a billion dollar plus valuation comes with a whole different set of rules and responsibilities that aren’t taught in your first year business class.A lifestyle business is personal success, defined by the individual, born from sweat and determination and beloved like a proud parent.

  57. Throwaway value

    The term should reflect what the these businesses are **not** trying to do: They don’t try to overtake a complete market, to be the 80% market share first, or the 20% second. They don’t try to wipe out all alternatives. They don’t try to throw huge amount of money in order to gain a near monopoly position and insane returns for very few people, with the cost of driving a monopoly oriented economy. They don’t rush for exits and public money. They don’t try to make a few millionaires. Their added value is more equally shared in the market.

  58. itekube

    It does feel derogatory. As a 45-year old, I value my freedom more than my absolute wealth and would rather take a shot at building a $10M net worth with a 20% probability over 10/20 years while sustaining myself through my company cash flows, than a $100M one with a 2% probability. However I still aim at creating net worth through Equity, so that differentiates me from the mom and pop shop around the corner. I’m not certain I will want to or be able to sell down the road, but I still hope to provide a great return to the few friends and family whom I have raised seed from (and yes, I raised some seed money with no intention of raising a series A anytime soon). “Cash flow business” doesn’t capture the equity building side of my business, but it’s way better than “lifestyle”.

  59. Charlie Graham

    I’ll add a few more which emphasize some of the positives. Something like “Owner-funded”, “Owner-Sustained”, “Owner-controlled” makes it feel like the owner made the choice but has to do hard work. “Bootstrapped” has also been a pretty common and pretty positive term. You could also come up with a mythical corollary to the “Unicorn” for people who end up building great businesses outside of the VC model.

  60. Eric Satz

    context is key here. if you are pitching VCs and your rejection states “lifestyle business,” the term is derogatory. if you own and run a $10-30m annual rev business with 5-10% EBITDA margins that allows you to take vacations and pursue other interests as you wish, you have a lifestyle business that most anyone would want!in the former context, i think you can replace “lifestyle business” with any other words and they too will become derogatory when associated with rejections. so, if i believe in the entrepreneurs, and they are entrepreneurs whether i invest with them or not, i tend to say “i think you can build a great business, it just isn’t one that i can invest in.” i’m not convinced a label is helpful or necessary.

  61. Salt Shaker

    “Lifestyle” is a sociological term, not a biz term. While it may be an apt or common descriptor within the VC community, it hardly translates into other industries or is used mainstream in that context. I’m also not sure what “cashflow biz” means. It’s a non-defining descriptor cause every biz has cashflow, either positive or negative.For the life of me I don’t know what’s wrong w/ “small biz,” an admittedly relative term that nonetheless can easily be defined/interpreted based on type/size of industry. “Owner-operator,” “small cap” or even “bootstrapping” also seem more appropriate.Anywho, I’m not a fan of labels that frequently and inherently come w/ bias. Sometimes they can be good, often they are not.

  62. thewallace

    The problem with the word “lifestyle” is that it implies that the person running the business has their lifestyle primarily in mind. I’m sure there are plenty of “lifestyle” business in which the founders (and everyone else, for that matter) work 60-, 70-, or 80-hour weeks, where their lifestyle suffers as much as that of the people running a VC-funded business. To me, though I’ve never run a “lifestyle” business, the problem is not so much that it’s pejorative, as that it’s just wildly inaccurate.

    1. Donna Brewington White

      As a solo practioner (for now) with part-time assistants I fit that description in terms of hours worked. But where lifestyle fits in for me is that my life and work are fairly integrated. Personal life typically suffers for the sake of the business but I also arrange the business around what I am able to give it. The business is inextricably linked to my day-to-day life and capacity/capabilities. Which is part of the reason I am working to change how the business is configured to make it less dependent on me but still reflective of the genius that I bring to it.Is the problem with the word “lifestyle” or the connotation we give to it?

  63. Donna Brewington White

    Owner-centered business might be the right term to replace lifestyle business.

    1. William Mougayar

      I personally like that, or “owner-centric business”.

      1. Donna Brewington White

        Owner-centric. That might be better.

        1. Vasudev Ram

          As opposed to VC-centric?

  64. David Miller

    In the context of raising capital, “lifestyle” seems to me to always imply a business in a market that isn’t big enough for VC. I like the term “niche business” much better.

  65. Pamela Gustava - Cool 70'sTeen

    Hi, I realized that I am excited about this community because I will do almost anything to distract myself from preparing the meticulous and painstaking Business Process ( my attorney has been asking for for a week now ) needed to file my Provisional Patent for my new startup. So, let me see OI totally agree with Elia and I agree with Fred, here’s why; Lifestyle is a great name in a way because it gives the business owner a sexy-edge in the market place. So what if we are slaving over the computer night and day, we are Lifestyle Business Owners, we put the Life in the Style of the Industry we represent, we are Lifestyle Leaders, we are the proverbial Shit as in, we know our Shit, Right. Can I get an Amen from some of you Lifestyle Merchants, Lifestyle Proprietors, Lifestyle Gurus’s? So Let’s create a Lifestyle Top 10 in various industries. This title is great and makes all of the hard work that Elia spoke of relevant in a society that thinks everything has to be cool!!

  66. J franta

    There’s def a change from 10-20yrs ago. Not sure about derogatory, but less sexy/trendy to have a non-VC business since average folks know about “funding” and “startups” now via press and ‘the social network’. So it’s a change but shouldn’t matter… what hasn’t changed is the vast majority of successful companies big or small never take VC… what the uninformed think about your company shouldn’t matter. Focus on your customers and value prop, that is why we’re here. As an example for first 7-8yrs of spacex elon musk funded it entirely with his own $ and many called it his ‘hobby’. If you know why you’re doing something, you’ll win others over eventually.

  67. hectic

    I’ve always said a lifestyle business is a SMB which does not contribute to a VC’s lifestyle. 😉

    1. fredwilson

      nice!

  68. Salar Salahshoor

    Is “family business” too limiting? It seems to accurately classify businesses that are owner-operated, but does not limit them by size or long-term growth potential (think J&J). I think it does a good job of disqualifying companies like Google. I wonder if people find it more or less derogatory in the same way as “lifestyle business” may come across?Fred used this example: “hi Bernard. i think you are on to something great with your new company. that said, it appears like it is more of a “cash flow” business than a high growth venture scale opportunity so its not a great fit for USV and I’m wondering if you should finance it withother sources than venture capital for that reason”I think simply saying that you don’t see a large exit in the company’s future is more honest and direct than trying to label and categorize the person’s business as “cash flow”. One problem I see with using “cash flow” in this context of the message to Bernard, is that the entrepreneur will probably think, “what the hell does Fred mean? Why wouldn’t he be interested in a company that has positive cash flow, isn’t that the point?”The only other idea I could think of was to simply call it a “slow/low growth venture”.

  69. David Anderson

    Entrepreneurship is my lifestyle, and I see a cash flow business as a platform.I’ve spent the last two years starting and running a business that is cash flow positive in a stable though finite market. Proving that I could execute the plan was my primary personal goal. I don’t see accomplishing this as altering my lifestyle as an entrepreneur, but rather providing me with a platform for continued development.I’ve been a first/early hire for the most recent phase of my career, and now that I have found success I am using the stable platform to move on to launching my own ideas (something to which I have aspired for a long time).

  70. Will Charnock

    I always viewed a “lifestyle” business as one that is usually held privately by a single (or small group) of private investors, and is operated to generated enough cashflow to allow the owners to extract enough for a good living. Generally – these owners are not interested in employee equity, etc, because they don’t intend to grow the business in a meaningful way beyond the organic trajectory they are on, and have no plans to monetize their investment through a sale.

  71. kenberger

    Funemployed.Emphasis on the “F.u.” prefix, as in “F.U. Money”.

    1. William Mougayar

      badass you.

  72. andrewwicklander

    The problem with calling a business a Lifestyle Business is that it demonstrates that most people fail to understand that every business is a lifestyle business. Every. Single. One.Richard Branson wants a certain lifestyle, and he built businesses to support it. You have a business that supports the lifestyle you want to live – otherwise it would be different.I’m the founder of a SaaS product that serves independent yoga studios, which we started when my wife opened a yoga studio. We’re the epitome of ‘lifestyle businesses’ .Yet, every single day we go toe to toe with a $500 million dollar company about to IPO. The CEO of that company has built no less of a lifestyle business than I have. We just have different lifestyles.The real issue here in my opinion is that it’s the VC backed businesses that should have a special name. Most VC backed businesses really haven’t proven that they’re viable businesses, so we should call them “Experiments”.Once they become sustainable, then they can be promoted to being called businesses.But in all cases, all businesses are lifestyle businesses. The difference is that only some of us know this, and so we set our intentions accordingly.Love that this conversation is taking place – and heres a small post I wrote about this a few years back: http://projectidealism.com/

    1. ShanaC

      this is also true

  73. PrometheeFeu

    First, I think it’s weird to want a name for growth-oriented businesses without VC investors. It seems to me that’s just a specific capital structure: debt instead of issuing equity. (Or maybe it’s just bootstrapped) It’s also weird to name it given that it’s likely the most common capital structure out there. If someone says “a business” statistically, that is what they are talking about.Second, I think “lifestyle business” is not derogatory at all. It’s a business where the owner’s goal is to maintain a particular lifestyle as opposed to maximizing growth or some other metric. It might be a lifestyle that involves significant work, or not much work. But growing the business beyond a certain threshold is not the goal.

  74. Zach Grannis

    The other issue with using the term “lifestyle business” to describe a company that is too small for VC is that it could be misconstrued with the term “lifestyle brand” which we use in branded consumer/retail investing (and in a far different / more positive context).Generally speaking, a brand is considered “lifestyle” oriented when it demonstrates the ability to cross sell into tangential categories. Perhaps the foremost example of this lifestyle positioning is Nike which began as a running shoe company and is now able to successfully put its logo on an ever growing universe of sports, fitness and fashion products.I like the proposed term cash flow business, but I don’t think it’s universally applicable to companies which might be great to own and operate, but are too small for venture capital. The risk vs. return profile associated with the beverage category for example may (typically) not be appropriate for VC, but a consumer focused angel investor could earn 2-3x their investment in a brand that remains unprofitable until exit which is likely an acquisition by a strategic. This is common in many sub-verticals of consumer packaged goods.I guess this would open a separate argument around how you define venture capital and what is an appropriate VC investment though, so perhaps you could define “cash flow business” as a company that is too small for “external financial investors” but will generate enough annual cash flow to be a great business to own and operate.

  75. Lee Blaylock

    They’ve generally been called a “Family Owned Business” for a long, long time. This is nothing new and generally what the large dynastic family fortunes, and oligarchies, are built on. E.G. Cargill is a $140b business owned 90% by the family. Tata is a $100b business majority owned by the Tata family. Ford and Marriott are basically family owned business due to family voting control (similar to Zuck and FB). I think of Lifestyle businesses as solid cash flowing businesses but ones that don’t really have scale….say <$100mm + in revenue.RE: “Cash flow businesses” I’m not sure why that would be a category. B/C if it doesn’t cash flow then it is “Out Of Business” at some point in time!

    1. Vasudev Ram

      >RE: “Cash flow businesses” I’m not sure why that would be a category. B/C if it doesn’t cash flow then it is “Out Of Business” at some point in time!I agree. But that does not seem to be the general perception – in the startup community. IMO the reality is more like this: Both kinds are cash flow businesses – in so-called “lifestyle” businesses, the cash flows INTO the business (i.e. sales and profits), while in VC-funded startups, the cash flows out of the business (i.e. expenses) …Said only partly tongue-in-cheek. having been there, seen that.

  76. Ciaran

    I’d agree that lifestyle business is a derogatory term, albeit unwittingly so. Ask the guy who works six days a week in your local grocery store whether he considers his small business to be a lifestyle choice, or something that his livelihood depends on.What’s wrong with the good old fashioned term small business?

  77. Jeff Epstein

    My grandfather started a business in 1929; my father started working there when he was 18 and ran it after my grandfather died until it was sold in 1986. It supported my grandfather’s 7 siblings and all their children and grandchildren for over 50 years. We called it the “family business”.

  78. ShanaC

    I feel like the term refers to a business that doesn’t exist: aka a business that allows you to make cash doing nothing, and therefore allows you to jet off to somewhere whenever you want.I think we should kill the term as a esult, because no business is a lifestyle business

  79. Richard Kain

    If “Lifestyle” is derogatory prefix it mostly has its most voluble practitioners to blame. I think it was popularized by the Four Hour Workweek and fairly or not, the implication is four hours, then hit the beach. There are too many “sell vitamin supplements online” types of businesses in the category.The obverse of a Venture-Funded business in the startup world is a “bootstrapped” business, the connotations of which are overwhelmingly positive. If you want some mystique to go along with it “closely held” will do. Other compliments can include phrases like “capital-light.”The rub of hearing “lifestyle business” is usually when the entrepreneur feels the VC thinks they’ve chosen an _uninteresting_ market, not just one too small for venture capital.

  80. Mark Watkins

    Having done both VC-backed and the so-called “lifestyle” businesses (currently doing the latter), I don’t care for “lifestyle”. It suggests a lack of passion, ambition or growth desires. Whereas in my case I simply don’t want to have to “exit” unless I want to.Even if the company isn’t “VC-scale”, those ambitions are usually there. I like “indie”, as a few others have suggested – it suggests all the good aspects of indie bookstores, indie coffee shops, indie movies and micro-breweries. Small, Unique, and taste good.

  81. Ryan

    It seems silly to categorize businesses by the type of financing they’ve taken. It’d be like introducing two friends, “Cathy, this is Bob. He has a mortgage. Bob, this is Cathy, she’s still paying off her student loans.”It would make slightly more sense to categorize businesses based on their own performance profiles (e.g., rapid-growth, organic growth, casual).

  82. Brett Bringardner

    ALL businesses and entrepreneurs WILL change over time as the unknown hits us. Lifestyle-indie now, can morph into Unicorns later as an individuals life “happens”. @kaffegeek

  83. Kenny Fraser

    Good thinking. I would add that all three require an entrepreneurial mindset and a real passion to make them succeed.

  84. John

    I’d be interested what you’d call your investment in Kickstarter. In a recent interview the founder said he was very clear that he didn’t ever plan to sell and they still felt that way today. That would seem to make them an indie business in your description, but you invested as a VC just the same. He said he made this fact clear to you when you invested. Did you not realize this or do have a different take on how to get the returns on your investment in kickstarter?

    1. kenberger

      Review the comment thread here and you’ll see Fred say this a couple times.

    2. fredwilson

      it’s an indie business

  85. Steven Hess

    In some of these posts I’ve noticed a discussion around the distinction between the terms ‘life-style’, indie, cash-flow etc. Some of the sentiment suggests that the business [insert term here] achieves a certain scale and then the owner can take his or her foot off the gas. In reality, unless you have a royalty based business (and even then that is not guaranteed) I guess that is very difficult to do. If the business is not growing, someone else is and if you are not defending your position then someone will be attacking you. A model of market in balance is just not true. I wonder if it is impossible to consider the type of business in isolation to the competitive environment. Maybe the differences lie in why the founder founded and what purpose the founder expects from the business. More about purpose, less about ownership and exit? Many successful businesses, that have stayed the course, were founded for a purpose beyond an exit.

  86. Michael Chou

    I always thought the restraint of being VC-fundable is the VC, not the startup. VC can only invest in a small subset of successful startups, hence the distinction. VC expects (let’s say) 100x growth. They need that return to make up for the other 99 startups that they funded but failed.Theoretically, one could setup a VC that invests in a group of startups with lower return and lower risk. For example, a “lifestyle VC” only needs to expect 3X growth if 1 out of 3 startups can break out. In that case a “lifestyle” business would also be VC-fundable.But, it turns out that screening a 3x startup is not much easier than screening a 100x startup. So VCs had to bet on 100 startups, and needed the huge capital to support such wide net.But that is probably changing, with the help of angels network, information technology, and earlier public market. Yet any good business is still a business worth investing. The real distinction between VC-fundable and VC-not-fundable is VC’s capacity.

  87. Adrijus Guscia

    As someone who has a ‘lifestyle’ business you can sometimes sense that it gets a bit disrespected (or more dismissed as ”ahh.. it’s just small..”). So it’s not super derogatory but people do judge things by numbers (revenue in this case). Smaller the numbers the less respect it gets.You can also see some disrespect from the ‘lifestyle business’ side about VC funded business – taking a shot at the fact that startups are not able to make money faster. It is not really a business etc etcBoth sides have good points. Real entrepreneurs will do or consider both and do what is best to get to the goal. Sometimes it’s VC, sometimes it isn’t.

  88. stefano zorzi

    Hi Fred, the question of how to finance businesses that are not willing or not good for exits is a very important one, especially at a time where our banking system as failed us as a meaningful source of funding for business building.  I look very much forward to seeing what will come out of the indie.vc experiment (as Bryce calls it ) and in general I think it is great to see more innovation in this field.  My fear today is that too many entrepreneurs go straight to vc when in need for capital, not understanding that vc is good only for some businesses. This is also true for VCs who are today funding businesses which might not be a fit for them. Historically this has only lead to poor returns. I wrote something recently about this and I wonder if you have an opinion on whether VCs are venturing into businesses that are not really meant for them.  My post here https://medium.com/@stefano…p.s. My suggestion for the name is simply “independent businesses” without differentiating much about size of ambition 

  89. iliya rybchin

    If the business has a management team that’s straight out of college and never had any real jobs… it’s a lifestyle business. Kids avoiding “real work”. Additionally, any company that prominently features foosball tables, organic yogurts, yoga classes, and celebrity chefs as key differentiators for employees is also a lifestyle business. 🙂

    1. Ryan

      So… that would make most of the tech startups that VCs like to fund “lifestyle” businesses.

  90. Jordan Elpern-Waxman

    Words are born neutral; it’s the way they are used by their speakers that give them positive or negative connotation. From my [limited] experience in the VC business, “lifestyle business” is definitely a slur. I prefer the term “cash flow businesses”, to contrast with businesses that have as their goal the capital gain to investors upon exit that you refer to.This also emphasizes the contrasting financial strategy of a VC-financed company with a “traditional” company in a way that presents the two as different but equally valid options.

  91. DonRyan

    I am not a big fan of the “lifestyle” business moniker. We have a business started seven years ago that has multiple millions in revenue and is profitable and cash flow positive. It is not nearly scalable enough to be considered for a VC investment but it has required an incredible amount of time and sweat from the founders (I am one) to bring it to where it is. It’s not a hobby (lifestyle make me think hobby) it is a company with 14 well paid and productive employees. Having said that, I have no idea how I’d classify it. Work seems to be most fitting.

  92. Dave

    I like the term below of cash flow business or simply small business. Most businesses in the world, including most technology businesses, are not appropriate for VC backing. Even many of the businesses backed by VCs and certainly many of the businesses backed by angels are not appropriate for VC backing, but that is a separate point…:)Lifestyle business strongly implies a business where someone generates some cash and sits on the beach watching the money roll in.

    1. Vasudev Ram

      >Lifestyle business strongly implies a business where someone generates some cash and sits on the beach watching the money roll in.I don’t agree. I think that kind of business is more accurately described as “passive income”.

  93. Sam

    While we’re at it – can we please come up with another name for ‘Customer Success Representative’ (or worse ‘Customer Happiness . . .’).

  94. Sean Mathews

    I am surprised to learn that many people find the term “lifestylebusiness” derogatory. I’ve always thought of it as a business that is designed tofit the lifestyle of the founder as opposed to the founder adapting their lifestyleto the business. It’s in the priorities: lifestyle first, business second. Ithas nothing to do with how hard one works and everything to do with how one prioritizescommitments and responsibilities. And yes, in our post-scarcity economy, thereis perpetuated the myth of starting a lifestyle business to enjoy the rest ofyour days on the beach. Sounds great, until you’re dead from boredom or yourbusiness has failed, whichever comes first.The problem is that the term lifestyle business is a label conflated by the worldviewsof two different communities: the “funding” community and the community of everyoneelse. A possible solution is to use the label that is broadest in context. In this case, that would be “business” or “company” or similar universally accepted term. Once one starts adding adjectives to the front, it can get dicey.

  95. sfrancis

    I think it isn’t the words that bother people – it is the intent behind the words. When the intent is to put you in your place or in a box, it is irritating. On the other hand, that is just motivation to build a better business and a better mousetrap and move on.

  96. Mark Stansbury

    Bah! There’s only one kind of business. We’re just talking about financing models. Even the models are imaginary groupings. Plenty of funds are happy to do VC capital, bridge financing, junk debt, or anything else that offers a return. (Not a strategy I’d advocate, fwiw.)

  97. COMRADITY

    Been to busy to hang out with you all for a long time . . . but this is my sweet spot.Lifestyle businesses are run by people who have the freedom to choose what they work on. They love what they do. Their work has integrity. They are respected and trusted by their peers and customers. They care more about quality than quantity.”lifestyle business” is a compliment!Aren’t you looking for a name for a business that is neither a “lifestyle business” or “venture ready”?How about “Big Hat No Cattle?””/

  98. Ryan Borker

    “Evergreen” is a good term that I’ve heard that describes businesses that generate great returns for shareholders, as long as those shareholders aren’t looking for rocketships (like VC’s).Chris Alden and Dave Whorton at Tugboat coined the term and I like it; it suggests a perennially good business that weathers all storms and stays healthy. I’d choose Evergreen over ‘indie’ or ‘lifestyle’ any day.Often entrepreneurs are pressured into doing VC investments even if it’s not right because they don’t see another way. To be sure, search funds and other forms of supporting entrepreneurship are not as public / easy as venture investing. Many ventures, however, would benefit from a bit longer consideration of what to do.http://tugboatinstitute.com

  99. Shola Abidoye

    Fred, having played in both sandboxes, I can tell you that part of the problem is that most of the influencers in the lifestyle community don’t understand capital leverage – or long term strategic planning. So there’s this perception for say indie’s that OPM is bad and that exit = failure or a pipe dream. Here are the facts: every, I repeat, every business owner WILL exit a business – whether it’s an IPO, an acquisition or….A COFFIN. Besides the fact that working with investors is not just about capital. It’s about gaining access to expertise that the typical indie couldn’t afford to pay. I like Jason Cohen’s term “boutique startup” (he did a great talk at Microconf which is arguably the best put together conference for self funded startups). The term indie/self-funded/boutique is really just those of us who have grown tired of the whole laying on the beach stigma looking for better nomenclature. I won’t lie though, laying on the beach without the hassle of anxious boards is great. Or, hearing your old classmates who did the HBS/Stanford/Wharton/Columbia to Silicon Valley/Alley route complain about a lack of balance – makes you happy you discovered there’s another script to live out. As more and more people in the lifestyle design community achieve the elusive 4 hour work week though , get to pot at the end of the rainbow then experience the “is that it?” moment, you’ll see more of these types of entrepreneurs wanted to go for bigger impact plays and realize that even if you retained every last drop of your earnings that won’t take you as far as the leverage of OPM. Just a thought….

  100. Michael Zaro

    +1 for Pranay’s term “Cash Flow Businesses”. Descriptive Word > Charged/Loaded WordThere can definitely be a holier-than-thou feeling given off by VC-backable startups towards not obviously VC backable ones. It’s a different thought, but I feel like this bias tends to go hand in hand with the idea that raising money = success in it’s own right (the end) instead of means to an end (profitable exit).IMHO the more we can support entrepreneurship of all kinds, the more innovation we’ll see and better outcomes for founders, employees, and the economy overall.

  101. Kimberly Weisul

    What’s wrong with the term “bootstrapped”? It gets at the two recurrent themes of this discussion: There is no VC money in a bootstrapped business, and building a business is hard. And it gets away from the derogatory aspects of “lifestyle.”

  102. Gordon Allott

    Just to point out all 3 operate with the VC as the center of the universe. Understandable in your position. But in the real world there are: 1. companies: business engaged in a product or service to generate revenue and profits. 2. venture backed companies: business engaged in a product or service using outside capital to drive revenue growth at the expense of profit.

  103. Farhan Abbasi

    Huge assumption here. Can you back it up? Most of the small business owners I know that are not BC fundable work seven days a week. I run a coworking space that has a community of all kinds of companies. A couple groups that work the hardest are not VC funded, and there is one particular VC funded company where the founder/CEO takes fun trips (non business) often. No knock on this person, but just pointing out that your viewpoint seems skewed my friend. You’re forgetting about the convenience store owners or Dunkin Donuts operators that work to provide for 2 families etc etc.

  104. Mario Cantin

    You’ve nailed it. I work hard as a mother#%*+er at times in my own business, but I believe I would have much added challenges in a VC-backed high growth company.

  105. LE

    but the majority of people starting/running businesses in this category do not work as hard as founders/early employees at VC backed startups, so I tend to think the label fits the vast majority of the companies.Where in the world are you getting that from exactly?

  106. fredwilson

    You write so well Carl. Have you ever written as a profession?

  107. William Mougayar

    Great essay. I love this:”Even if you don’t become ‘successful’, you’ll probably earn a decent living. This is good.”

  108. TJRoberts

    Carl – You have a book inside just waiting to get out. Let it. I’ll preorder now.There’s great educational — and entertainment — value accumulated when an observant mind lives an entrepreneurial adventure like you describe.

  109. Donna Brewington White

    Wow, Carl. Shared this on Twitter as “a really great but sobering read.”I make my “grand plans” and begin my work each day and with a sense of humility. Every thing I am trying to do some really talented person has attempted to do …and failed.I rarely advise someone to give up their day job… or in your case… night job (or day and night?) job but you seem to have a rare talent. Any way to monetize this — even part-time?

  110. Anne Libby

    Carl, memoir, please!!!

  111. bfeld

    That’s definitely, in my book, a high growth enterprise.

  112. pointsnfigures

    Consumer products businesses often start as lifestyle businesses.

  113. Eric Satz

    hat world was a private equity backed business run by former mckinsey consultants who sold the business to genesco, big public company.

  114. richardbrevig

    Good point. I’ve always viewed startups as the “startup = growth” definition of Paul Graham [1]. Though, I went back and read his definition and he includes intent as a criteria. So, if Hat World didn’t intend to grow extremely fast, it wouldn’t have been a startup. That may be impossible to identify from the outside looking at a company.Reminds me of Geoffrey Moore’s “Crossing the Chasm” [2] example of VMWare, where it may appear that VMWare was pivoting and trying to figure out a business model, but Moore asserts they were following the same go-to-market strategy the entire time.[1] http://www.paulgraham.com/g…[2] http://www.amazon.com/Cross

  115. fredwilson

    Indie in every possible way

  116. Mario Cantin

    We work very hard in a small business, but we don’t have to face 350 employees on a Monday morning to tell them the bad news that we might have to lay them all off, which happens to be the lesser problem of the day

  117. LE

    VC funded company where the founder/CEO takes fun trips (non business) often.Exactly. Nor are they “conference whores”.

  118. awaldstein

    I’m a fan as well.Bit of Bukowski to it.

  119. Farhan Abbasi

    That would be complicated whether or not it is a VC fundable business. Of course VC funding adds complexities. So does immigration issues, that many “lifestyle” entrepreneurs face. Having to educate their children and the children of their cousins in a different country, from the proceeds of the small business, for example. I just found out a family member who runs her own daycare company hasn’t traveled beyond Canada since she started it 5 years ago. This is not an exception – it’s the usual small business experience everywhere in the world including the US and Canada. The blanket statement that VC funded founders/employees work harder than “lifestyle” (ie small business) operators is merely us living in our VC-oriented bubble.

  120. LE

    So what? Like there is a difference between going in and laying off “350 employees” which is essentially a one day occurrence (like root canal) and having to deal with shit each and every day as a business owner? [1] Being a business owner does amount to dealing with different undesirable things everyday. That is what it’s all about.Have you ever starred down and tried to collect $50,000 from a deadbeat account that is jerking you around? Have you ever been extorted by someone? Have you ever had a key employee quit while a large and important customer that you had worked so long and hard to obtain was expecting something that you needed that employee for? Small business people do for sure deal with plenty of shit. At least if you are around long enough.By the way laying off of even a small amount of people is not a fun thing to do obviously. But more importantly losing your own money is way worse and has a far greater impact than losing other people’s money.[1] Separate thought though. Perhaps it would be less of a trauma to layoff 350 people if the founder hadn’t bullshitted them about how they were joining the next Facebook and thinking they may have oversold the dream a bit.

  121. Farhan Abbasi

    Fair enough, I was just presenting an opportunity to change my mind on it. I just think painting a broad brush stroke that 80-90% of small business operators don’t work as hard as a VC funded company is overlooking the majority of small business owners, who work 6-7 days/nights a week to make it. You might be taking a subset of small business owners and comparing it to VC funded business, and that’s ok. But the idea you are reinforcing that small business owners are “lifestyle” entrepreneurs highlights the need for “lifestyle” businesses to be clarified – there is a real misconception among the VC-funded circles that non-VC businesses are somehow less capable / successful / hard working.

  122. JamesHRH

    Couldn’t agree less.Most small busiensses are horrible – all the stress, all of the time commitment with none of the security or monetary rewards of a high growth business.Lifestyle says ” it runs itself (almost) & pumps cash @ me “. Owners of lifestyle busiensses look @ VC backed founders & shake their heads.I knew a 2nd Gen restaurant owner who put in a good manager & then became the largest local owner of Golden Tee video games.He was unstressed & flush w cash & time. Lifestyle label looked pretty good on his operation.

  123. fredwilson

    neither. i am asking the community to help me come up with a replacement i have already vowed not to use lifestyle in my communications again

  124. fredwilson

    that is not entirely true because you find time to write lovely stuff regularly

  125. JamesHRH

    I think that is the issue – there are great businesses of all sizes & execution is the key.To me, lifestyle is the ultimate small biz execution compliment.It’s one of those how do you define success arguments that is endless.

  126. fredwilson

    the vow was with myself. the statement of it was in my reply to you. one came before the other by about two hours

  127. LE

    Most small busiensses are horrible – all the stress, all of the time commitment with none of the security or monetary rewards of a high growth business.Seriously where are you getting that from exactly?

  128. Elia Freedman

    “i have already vowed not to use lifestyle in my communications again”Then I will chalk my comment yesterday up as a win. Changing minds, one at a time. 🙂

  129. JamesHRH

    The major TV netoworks used to call their local market affiliates their ‘O&O’ – owned & operated – stations.That’s your new handle – its an O&O or O2 biz.

  130. Chris R

    I think we’re overthinking this. Since the overwhelming number of businesses are cash flow/lifestyle/indie/small businesses shouldn’t the VC funded/fundable businesses be the only ones that are necessary to self-identify? Can we call everything else a ‘business’?

  131. fredwilson

    as JLM would say “well played”

  132. LE

    What you are seeing most likely is the artifact of people who pitch you who aren’t fully engaged or serious. What Mark Cuban I believe calls “wantrapreneurs”.As an aside, If you operated in the actual small business world over a period of time (in my case over 30 years) you would have observed plenty of people who put the business 100% first ahead of their family and have arguably way more dedication than people who want to be able to attend and make time for their kids sporting events or other “such nonsense”.

  133. Mario Cantin

    I have had my fair share of hardships in the several companies I’ve owned, and therefore I’m am talking from experience actually.It’s a well-known fact that startups are super-hard, and that’s my point.You work hard, you play hard.Take your small to medium size company and try to sell it for a billion dollars — not gonna happen.Correspondingly, there are risks and pains associated with the reward that dwarf those in cashflow businesses.

  134. William Mougayar

    I like that 🙂

  135. JamesHRH

    selling media to small businesses, knowing people who run small businesses…[email protected]:disqus has it right – its about execution. Most businesses do not execute very well.

  136. LE

    Nope. See my reply to Fred where I said it reminded me of “cash cows”.http://en.wikipedia.org/wik…Cash cows is where a company has high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a “mature” market, yet corporations value owning them due to their cash generating qualities. They are to be “milked” continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.

  137. LE

    Look if something like this is “heat” all the stress, all of the time commitment with none of the security or monetary rewards of a high growth business then it’s a good thing you are not in the kitchen.I wouldn’t want to be a Navy Seal but others gladly welcome that career.Likewise I wouldn’t assume that what you call “time commitment” and “none of the security or monetary rewards” either exists or is a negative for those who go down this path. Of course there are failures and there are whiners… <— “whine” not “win”

  138. fredwilson

    do you have a book in you?a novel, something else?take an advance on kickstarter and devote yourself to writing iti am not sure that’s going to work but it could

  139. Donna Brewington White

    Kickstarter!!!

  140. Donna Brewington White

    Keep me posted.

  141. Anne Libby

    I’m serious.

  142. fredwilson

    here’s a business planhow much does one/two less day(s) of work cost you?how much would it cost you over the course of a year?could you write a book if you had one/two day(s) a week of free time?raise that much on Kickstarter from the AVC community to take a shot at that

  143. Chris R

    HiGroCashPrise is the word we are all looking for. You’re welcome.

  144. Rob Millis

    This is spot on. Everything we are considering here is a business. VC-fundable doesn’t even define a particular type anymore. The criteria and lines between angels, VCs, institutions are blurring in the current market to such a degree that even VC vs non-VC is difficult to really pin down.