Vision/Founders-fit —Part I
The biggest waste in the startup ecosystem is impressive climbs of mid-range mountains. The biggest waste has its root cause in the wrong beginnings.
A new beginning for startups
Three and a half years ago my company, Iterate, made a sharp turn. For years, we had helped clients code and ship software into production. This was great. But we wanted to see what would happen if we set our entrepreneurial talents free. Hence, we set ourselves a new goal: Build and ship new, innovative companies to global markets.
These posts are about our creative expedition. Spoiler: We’re having a lot of fun doing this.
Part I — Creativity and myths
A new, creative idea has three main characteristics.
- It makes us flip: You don't like it at first. You get provoked, because it feels like you’re wasting brain power on something silly, that surely would never work. Until you one day flip around and realise its full potential.
- It solves a need you were unaware of: Otherwise, the idea would be an incremental step from what’s known today (which also means that more than a few are pursuing it already)
- It annoys your creativity: You keep coming back to it, because you can’t stop thinking about different ways you want to spin it, build it or run it (possibly making you even more annoyed, because after all, the idea is first and foremost silly)
A myth from the startup world is that we get more creative when we have our back against the wall. Quit your job, ignore life and work around the clock — or there will be no success. It's a survivor bias: There are many stories from successful entrepreneurs who faced impossible situations, but somehow came out of it better off. But what about entrepreneurs who had their back against the wall and did something stupid? We don’t hear from them. In Iterate, we'd rather not have our early stage startups make big decisions under any kind of pressure. Later on, in crazy scale-up and beyond, pressure may be unavoidable. But why should people make back against the wall decisions when they’ve just begun on an endeavour they easily could (and perhaps should) walk away from?
The mechanisms of early stage investments seem to amplify this premature “to the bitter end” work ethic. As an example, there’s an asymmetry between the value some accelerators provide, and the degree to which they narrow down the scope of the startups they help. “We helped you build your pitch, now go conquer the world.” True, we need perseverance to succeed as entrepreneurs, but perseverance in the wrong mission is just waste of time, energy and talent.
Another myth is that entrepreneurs who enter the deal flow of serious investors have gone through a selection process, where wannabes and dilettantes of “the startup scene” have fallen off from their lack of talent, stamina and execution power. This is true to some extent: Building a startup to something serious is an achievement in itself. But once again there’s a survivor bias: Entrepreneurs getting enough traction for serious funding have indeed gone through a selection process (some are truly talented, others have had a solid portion of pure luck), but they are no evidence that everyone who could stand a chance — who deserve a chance — will get there. Say for instance that Ms. or Mr. Creative Founder is in an ecosystem that’s immature, and is continually advised to “get back to reality” and focus here and now. If this “support” gets to her, she will easily be driven into an “Uber for X” path, where the visionary and creative have disappeared in favour of something anyone could understand today. If she despite all of this one day does come in front of an international investor? She will be discarded for lack of vision. It’s ironic, but it happens all the time.
From a methodology standpoint, early days of innovation are about validation (a very strong word, that correlates poorly with the disorder and ambiguity of early exploration). This is a third myth from the early stages: The belief that we can validate our product before we’ve built it. It makes us narrow minded: We pursue things we can validate, as opposed to the bigger, more defensible ideas that need time to mature. Big visions have to grow on the founding team, as well as the rest of the world. They come with great risk, but so do the “Uber for x” ideas: Pursue an obvious opportunity, and chances are high 10 other startups are doing the same right now (in which case winning the race easily boils down to getting better funding than the competition, something that in turn takes the startup’s attention away from what validation was supposed to be all about in the first place). Also Eric Ries, the author of The Lean Startup, stresses the importance of working towards a high level vision. But observe a few lean practitioners, and see how the quest for validation drives them straight into to that Uber for X path. They might argue back, and say that we discover our mission by exploring one idea, that leads us to another idea, and so on until we have something that works. The problem with this one-dimensional thinking is that we will never know if a much better, more visionary and potent idea was hiding behind that mid-range mountain we decided to climb. In the meantime, that mid-range mountain might solve important user needs, but from lack of defensibility, durability and other prerequisites for large scale value creation, it will never get you all the way.
We still believe startups should “do things that don't scale”, and experiment, learn and built insight from real customers from day one. However, even though this is a great way to learn, it only validates what you’re doing there and then. The fact that 10 users confirm they have this problem, and all 10 of them love your solution doesn't mean this is the product you should spend your next 5–10 years building. If we instead think about exploration as learning, we become more playful, and allow ourselves to tinker also with things that take longer to prove. We may not get instant validation gratification all the time. Nevertheless, and perhaps precisely for that reason, we get all the more innovative when build-measure-learn becomes a tool, rather than the definition of what we do.
Another thought on validation: We also see examples of how validation can pervert into a trust building mechanism between the visionary and his / her team. A startup where people hold back on their commitment until things have been validated, is a startup with its brakes on. Opportunism never makes us work to the best of our abilities, neither individually nor as a group. Becoming founder by validation sets you up for a chicken or egg problem: Your people don’t believe in what they’re trying to validate — and they’re not able to validate what they don’t believe in. This turns the startup into a group of order taking mercenaries, except a few visionaries (perhaps only one visionary), about to set themselves up for a series of premature back against the wall moments.
Most entrepreneurs fail: They team up with the wrong co-founders. They dive too early into the wrong idea. They take advice from the wrong accelerator. They take money from the wrong investor. They mess up their technology, UX, business model, cap table, business deals, marriages and health. And much more. Some are pure opportunists. Many are creative multi talents with the perseverance, integrity and ability to work long-term towards a bigger vision. These people are an immensely powerful innovation resource, that failed the “selection process” for one reason: So far, it's all about chance.
Seen from the point of view of an incumbent startup ecosystem, they are an overlooked resource.
Part II (4 min read) discusses how we can apply systems thinking to fix it.
