Does it feel like everyone is working very hard, all the time, and yet accomplishing 1/10th of what it seems they should? Maybe this is why.
Founders typically revert to whatever they’re already expert in, and decide they need more of that. So, a technical founder decides she needs another developer, or a sales-oriented founder decides she needs another sales person.
Let’s highlight the underlying justification you’ll use to rationalize this probably-erroneous decision, so we can see how to avoid the fallacy.
Not all acquisitions go well. Sometimes the product is ruined, sometimes the culture is annihilated, sometimes jobs are destroyed, sometimes it’s an unmitigated disaster.
Of course, that same thing happens to independent companies. People love quoting (presumably made-up) stats about how most acquisitions are failures, but they forget to mention that most independent startups also fail.
When you fire a gun you pull with one hand while pushing with another because in tension there is stability. A pull-up bar in a doorframe can hold 200 pounds because it’s in tension, not in balance. Ethernet contains a pair of wires twisted together, with electrons moving in opposing directions, because their opposing magnetic fields cancel either other but also act as a shield to foreign fields that would otherwise disrupt the electrons’ movements.
It’s often said that “extremes are bad” and thus you should “seek balance.” But balance is fragile; it’s the wrong thing to seek.
A big, profitable company seems like the hardest thing for a small company to compete against. They have everything: money, brand, momentum, existing customers, press, product teams, distribution channels, expertise, market insight, analysts, sales offices, product features, and, by definition, a working business model.
All the little startup has is a decent idea and extremely greasy elbows.
But David has a clear path to slaying Goliath.
You might conclude that it’s wise to try to win zero-sum games, because there’s “double” value. That is, not only do you get the sale, also all your competitors don’t. But, especially with auction-style zero-sum games, this means paying top-dollar. Even then, the available inventory is limited, e.g. the top few slots in AdWords or SEO.
Whereas if you invest in non-zero-sum channels like social media, or long-tail SEO, or brand-building, or content, or resellers, the limit of the channel is closer to the limit of the market itself, rather than the sliver of the market which might reach you via a single advertising channel.
We’re told not to judge, lest we be judged.
But we are judged, by our customers choosing between us and a competitor, by our employees choosing whether to entwine their careers with our fate, by our peers, allies, and passive-aggressive antagonists on social media.
Rather than avoid judgement as a sin, we should invest in it as a skill.
Young founders may fancy themselves wizards of coding, design, and salesmanship, because they’re individually excellent; I did! But it should be obvious that those skills don’t mean they can build a team of 75 engineers that balance quality with speed, or build an international sales team guided by principles other than overwhelming exuberance, or develop a consistent brand with a voice and adherents, or manage cash flows once the P&L becomes abbreviated “in millions,” or navigate HR and insurance and office leases and those various “industry-standard boilerplate” contracts that nevertheless all differ in ways that aren’t rounding off in your favor.
The usual solution to this is “delegation,” but that doesn’t scale, nor does it lead to greatness. Here’s how to think about it properly.
Early in a company’s life, you don’t know anything. Often your best estimate of any metric or market behavior or business model assumption is accurate only within a power of ten, for example “expected conversion rate between 0.5% and 5%” or “cost to acquire a customer between $50 and $500” or “average monthly revenue per customer between $20 and $200.”
Fortunately, being accurate only within a power-of-ten can be surprisingly useful. The method is called “Fermi Estimation.” It’s useful because it’s easy to get to a rough answer to an otherwise-unknowable question, but also ensures you don’t erroneously ascribe too much precision to that answer.
Do New Year’s resolutions work? Studies say “no.”
Maybe asking good questions of yourself is a better way to lift your eyes to the horizon of possibilities for 2015. What good questions have you not taken the time to ask?
Instagram had 13 employees when they sold for a billion dollars. Was there any working startup founder who didn’t feel depressed when that happened? Yes, depressed. All those years of toil and sacrifice, the pain of scaling a complex organization and a complex product, scratching and clawing for revenue growth month after month, and you’ll never have that sort of exit, and a 26-year-old founder did it in only 2 years, with 13 buddies, with $0 in revenue, never having had to worry about gross margins or hiring at scale or making sales calls or running out of money.
“It’s not fair,” we all said to ourselves.
That was before WhatsApp sold for 19 billion dollars, with 55 employees.
Spreading your precious money and even more precious time over many channels doesn’t get a company off the ground. Typically, successful companies find one channel that really works, and then plumb it to its maximum inventory before layering on additional channels.
How to pick the one channel? Especially since “spray and pray” isn’t a good way to find the answer?
When you’re exploring something new, where the terminus is unknown, you never know how far along the path you are. On average, however, you’re halfway there. This is due to the very definition of “average” — you’ll spend half your time before the half-way point, and half after.
The general rule is called the Lindy Effect: For certain non-perishable things (like technology, companies, and ideas), the expected lifespan increases according to the length of its current age.
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