Why Building a Startup Is Like Compound Interest
The real magic isn't in your first win. It's in staying alive long enough for small wins to snowball.
Einstein called compound interest the "eighth wonder of the world." Warren Buffett says his wealth comes from "a combination of living in America, lucky genes, and compound interest." Both were talking about money, but the same idea quietly drives every successful startup I've been part of or observed closely.
Money compounds at a steady percentage. Startups compound in many directions at once, product, brand, talent, distribution - and each one makes the others stronger.
In my first startup, the early days felt like I was pushing a truck with the brakes on. A customer signed up after weeks of follow-up. An investor replied with "Interesting, let's keep in touch." My first engineer fixed a bug before I'd even had breakfast. Small things. Easy to miss. But now I can look back and see they were the interest payments that kept adding up.
Year 1 to 2: The Quiet Years
Just like with money, the first few years barely move the needle.
Early hires set the culture. A rough first version of your product gets people used to having you in their lives. One small win in distribution tells you where to focus. It's planting season, but the field still looks empty.
When I built CarInfo, most of the first year's traffic came from scrappy SEO experiments and WhatsApp forwards. No one thought much of it then - but those early backlinks and user habits still paid dividends years later.
Most people quit here because progress feels slow and the wins are too small to brag about.
Year 3 to 5: The Flywheel Starts Moving
If you make it through, the compounding starts to show.
Your brand begins attracting talent without job postings. Loyal customers bring you more customers. Your codebase is cleaner, so you can ship faster. Investors who once said no start calling you.
Jeff Bezos calls this the flywheel - small reinforcing actions that make each spin faster than the last. I've felt it. At Hawk Martech, one small campaign win with a client brought another referral, bigger than the last. That momentum didn't happen overnight, it was built on two years of showing up.
And maybe the biggest change is in you. Your judgement improves. You stop chasing distractions because you've seen patterns before. That maturity speeds up everything else.
Year 7+: The "Overnight Success" Myth
From the outside, it now looks like you're winning all at once.
What people don't see are the years of tiny moves that built this. Old blog posts still bring in leads. That short experiment with a new channel still drives sales. The engineer you hired early is now a leader training others.
It's like looking at Netflix today and forgetting it started by mailing DVDs in 1997.
In my case, people now see CarInfo’s massive user base and think it was instant. They don’t know the months we spent debugging with data providers, figuring out how to parse messy RTO databases, and building features that kept people coming back. That boring, unglamorous work made the growth look “sudden” years later.
The boulder is rolling without you pushing every inch.
How Compounding Breaks
Compounding only works if you let it run. In startups, you can break it by pivoting too often, burning out your best people, or chasing hype instead of what works.
I've made the mistake of chasing shiny ideas mid-cycle, only to realise it resets the clock. Most failures aren't because the idea was bad - they happen because the compounding got interrupted.
The Founder's Real Job
Your job isn't to force exponential growth every month. It's to stay alive long enough for compounding to do its work.
If you last long enough, you hit the unfair part of the curve, where small actions create huge results.
Building a startup really is like compound interest. The trick is to keep playing - and protect the compounding at all costs.
