“Doing a startup” isn’t easy. Reading tech blogs makes it looks easy. People with obscure ideas seem to raise inordinate amounts of funding with no actual product. Look at Color for pity’s sake (http://gigaom.com/2011/03/24/is-colors-team-really-worth-41m-idea-be-damned/) and they can’t even spell! You hear about how one day an app is blocked by Facebook and then the next week they have a million users (http://thenextweb.com/insider/2013/03/19/one-week-live-messageme-crests-1-million-users-lands-1-9-million-in-seed-fundingfrom-a17z-others/), you read about how children in college dropout to become CEOs and run a huge company effortlessly. You read about how farm management software is the next big thing (actually Farmeron is a damned good company). Must be easy…
Let me tell you, this is not how the real world works for most people. For some exceptional cases, ok it does happen but it is usually for people who have done it already and have a ton of experience, influence and millions of dollars of their own money to put into a project. Occasionally there are people who have an AMAZING idea or are just damned lucky. For me and you, this almost certainly won’t happen. Sorry to break that to you, but that’s just the way it is. There are literally thousands of companies founded every year and only a small fraction will go on to get either revenue or funding. This is of course despite the fact that there are a monumentally huge number of startup incubators begging to give you money if you just live and code on a boat for 3 months or have a specific focus on business to whales as a service. Even then, you probably won’t get into one of these. And that is probably a good thing.
“Good you say? GOOD?!”
Yes, good. Life isn’t meant to be easy. Charles Darwin introduced to us the concept of evolution. Its been a little while since and most people seem to have caught on to the idea but the basic process is that the environment exerts pressure and the weak die leaving the strong to have strong offspring. Next time around the weakest die and so on. The key to all this is the environmental pressure. Without a selecting force everything can survive – sounds great! Unfortunately, even for us fantastically sophisticated humans there are not enough resources all of the time. This is why we are inherently lazy – we are conserving our resources for when we might need them. This is why rich countries generally have longer average life spans. This is why politicians tend to be total scum-bags. The strong and most able survive most easily. What has this to do with startups? Well environmental pressure exists in any ecosystem, even business or international ecosystems. Think about how strong, organised, rich nations control much smaller, weaker ones. For businesses the pressure is the competition for the things it needs. This is ultimately money but can be staff, investment, media attention, system users, credibility or anything else that makes a difference to a company. But, as I said this is good – partly because it is the same for everyone.
The first thing this gives us is a means to measure our likelihood of survival. For example, if we are an unfunded minnow in a large competitive space dominated by a number of big players you may as well give up. Facebook, Google, Amazon & Ebay won, suck it up. Sure, every so often a scalp gets taken but it’s very very very rare.
The next good thing about this is that we can identify what it is we are competing for and the value of the things we already have. For the finance bods reading this there is a concept of an internal rate of return or IRR which is the measure of return on an investment. The IRR is worked out from the net present value of an investment which is a wonderfully simple concept, although actually pretty complicated to calculate. The idea of net present value can be thought of as a mathematical formula for the value of the bird you have in your hand in terms of an equivalent number of birds in a bush; the net present value of one bird in your hand may well be that of two in a bush. Or, a pound today might be worth fifty pence tomorrow (or whatever currency you want to work in). Or the value might be more or less depending on the risk. The maths gives us a decay curve that lets us see the change in value as the return becomes further away. This principle can be applied excellently to our scarce resources – I have £100 in the bank, if I spend it this way I may get £1000 back in two months or if I spend it that way I will get £200 back in a week – which should I do? Dunno, depends on the risk.
This whole calculated evolutionary approach to running a business actually has a name and is getting to be pretty popular, purely because it works if nothing else (shocking I know). This is the Lean Startup. The idea of the lean startup is that you accept that you don’t know all the answers treat everything as a series of experiments and evolve quickly by finding the pitfalls sooner rather than later. They say you “fail fast” but you don’t, you evolve.
“BUT HOW IS THIS GOOD????” you scream at me…
Ok, its hard work but it’s good because by having scarce resources and by having to cull the weak ideas a strong business can evolve purely by the fact that it has to survive all the competition and pressure of business. You might not even end up in the same line of business as you started (a pivot dontchaknow) but that’s good because finally, after squeezing and stretching and gasping for breath a strong, honed, capable business will emerge birthed from the need the founders have to eat.
It’s also good because like a nice virulent strain of influenza or ebola the evolution of a startup occasionally allows a potent, deadly strain to evolve as the infection of “Necrotising Facebookiitis” that MySpace Tom contracted well shows. Startups can evolve because they have to and because they have a short generational cycle. Big bohemoth companies can’t evolve because they don’t feel the same pressure as startups, so they conserve resources, they value the business they have in their hand over the one in the bush and stay put. Perhaps this is the bigger insight from Zuck – the hacker’s way is like a vaccination against some of the deadlier strains of startupitis but no-one can be totally immune. By maintaining a culture that puts pressure on a smaller than average set of developers and encouraging creative “mutations” Facebook continues to evolve and Zuck hopes this can sustain Facebook where more corporate companies would eventually fail. This is why hack-a-months and signs saying “move fast and break things” and hot tub conference rooms are important to Facebook even if they are a bit nobby.
“Ok, very clever but how does this actually help me?”
So, first of all don’t be surprised that things are hard if you are “doing a startup”. If you aren’t ready to work 26 hours a day, 9 days a week you are in the wrong job.
Secondly, remember that evolution is how your shoddy half baked idea will end up being a thorough-bred business. Test things. Measure things. Figure out what your god-damn metrics are and keep track of them. Then test and measure things again. Then change things. Then check your metrics… You get the idea
Finally, take your opportunities and don’t be afraid to think a bit laterally. I have a skint startup and I need to get some users so I’m trying to create some buzz by rewarding users with chocolate (http://blog.karmr.co/2013/04/free-chocolate/) . It might fail dismally but with a $10 / user CPA for iAd it seems a pretty cheap way of gaining a hundred or so users even at a few pounds international shipping. “Think outside the box”, “There are no rules” and all that stuff.