How To Tell If You’re Running A Zombie Startup And How to Revive It From The Dead 🧟♀️
Some say startups are like jumping out of a plane and making a parachute before you hit the ground. I think it’s more like a zombie survival game where you start in a pitch dark room unsure of the myriad dangers that surround you. You find resources and people to help you survive with the goal of navigating out.
Your startup may get killed abruptly, but sometimes, you also may find yourself doing the same thing over and over again. You’re not quite winning at the game — which is to grow. But you’re not quite losing either — you’re doing small variations on the same idea or effectively doing consulting for revenue. Sadly, if someone called this a lifestyle business, you’d get pissed because it’s still a struggle using up all your brainpower. Instead, you’ve become a zombie startup.
Regardless of the stage of your startup, here are some signs that you’re running a zombie startup:
- You’re not growing or growing too slowly: You have six to 12 months (usually two to four quarters) of flat to negative growth. Everyone experiences a bad quarter, but be truthful with yourself. Is your startup on track to 2X or 3X year-over-year growth or at the very least since your last funding round?
- You eat what you kill: Because you’re not growing, every dollar you spend does not yield to higher growth. For example, your margins may be terrible as evidenced by marketing expenses being equal to your revenue — the apocryphal 90 cents monthly spent to acquire every new dollar. If you’re an enterprise startup, every enterprise sale is a slog. If you’re a consumer startup, the changes you make to the product don’t help with either engagement, retention, or new customer acquisition.
- Nothing you do is really helping: There are small things you can do but they’re not really moving the needle. In many cases, your startup may not be responding to stimulus in the environment. Your company may be more akin to a crocodile that is just doing things that are behaviorally pre-programmed. If someone were to ask you what you were doing the past few months, you’d probably tell them it’s similar to what you’ve been doing this month. From the outside, it looks like you’ve been running in place — everything looks like motion, but no action.
Every startup risks being a zombie startup. Recognizing the problem is terribly hard if you’re already a zombie startup. Talk to people who you respect and will tell you hard truths. Also, take time away from your startup to get a disinterested take on how things are going.
I had to make this hard call on startup mortality myself and it may also require you to ask the hard questions on whether you or your team want to shut down.
How to Revive your Zombie Startup 🧟♀️
If you have determined that you may be running a zombie startup (which — to your credit — is a hard, emotional realization to come to), let’s talk about how to come back from the dead.
There are critical decisions that will keep you from undead obsolescence — choices that range from small course-corrections within your market to hard pivots out of your market.
Small course-corrections help companies with early zombie symptoms. These are helpful for subject matter experts who know the space. For these companies, speed and execution are the main limiters to exploring the space. If these course-corrections are done as early as possible, they’ll also have the most impact.
The hard pivot is best for everyone else. The further you are along in your necrosis, the harder you’ll have to pivot. Like most living dead situations, you’ll find your company’s leadership struggling with existential dread, the team coping with a loss of faith, and you might feel adrift without ideas. This requires drastic interventions. For example, Odeo pivoting into Twitter.
This framework will focus on the hard pivot for a zombie startup, but the below can be useful for anyone generating new ideas.
Before we dive into the framework we suggest for zombie startups, I suggest reading the following:
- Paul Graham’s timeless essays on ideas (Startup Ideas and Ideas) — these are worth reading and re-reading
- This idea generation guide on Quora from Dan Lewis of Convoy outlines a more exhaustive approach to thinking through choosing ideas and validation, including talking to customers and getting more information about a market
Navigating the Idea Maze
Create a document or spreadsheet to help organize your thoughts with the following criteria:
- What’s The Problem?
- Idea, Value Proposition and Solution
- Why Now?
- Market Size
- Notes and Next Steps
- Personal & Founding Team Excitement
- Customers With Hair on Fire
- Ramen Profitability
- Technologically Feasible
Start with Brainstorming Blue Sky Ideas
What’s The Problem?
- What’s not working with what you see today in society or business? This could be a shallow problem felt by many or a deep problem felt by a few. Usually, it’ll start with a problem that you have.
- To save your zombie startup, it’s important to not be too wedded to what you have done before. If you’re making a slight course-correction, approach the market with a beginner’s mind. If you’re doing a hard pivot, try to use your industry expertise to inform where you’d like to go and verify your previously held assumptions.
Idea, Value Proposition and Solution:
- What’s the potential solution to the problems you’ve identified? Don’t dismiss the solution if it initially seems small, trivial, or hacked together. Most great startups start small and build toward a grander solution. The best ideas or solutions aim to be uniquely obvious as opposed to being obviously unique. In hindsight, people should be saying how stupidly obvious your solution was. The elegance of simplicity is hard to capture here so, you’ll need to do the work to find inspiration:
- Take yourself out on a creativity date to put yourself into a mental zone where you’re receptive and open to new ways of thinking. Travel in a foreign country where you’re forced to question assumptions that come easily in a normal environment. During COVID, find ways to transport yourself by reading fiction, contacting friends in faraway places, or watching pangolins rolling in the mud — whatever breaks up the routine. Find that zone for yourself.
- Start journaling and observing. Start writing problems you see.
- Go check out a bunch of startups that you admire and understand why their users like them.
- Synthesis : Friedrich Hegel described that all ideas come from the interplay of thesis and anti-thesis, resulting in a new synthesis. Similarly, I think all great ideas descend from others. There are small inspirations, or 15-degree changes to an existing idea, that work to create a unique approach to a problem.
- If you’re stuck in a rut and cannot be creative, buy The Artist’s Way and do the morning pages every single day. Ignore the proselytizing from the former daytime TV producer author. By the end of it, you may not have a startup, but you might be more in tune with your inner child.
- Most problems worth solving have been attempted. Otherwise, they probably weren’t problems to begin with. Why does this particular solution or approach to the problem exist now? We usually attribute a wave to technology, but it’s just as possible that it’s a demographic shift, behavior change, regulatory change, or the most powerful kind of change — a new platform giving rise to unexploited free customer acquisition channels — emerges. For example, YouTube couldn’t have occurred without widespread high-speed internet adoption and Instagram wouldn’t have been as ubiquitous without growth in mobile smartphone adoption.
- The reason why you want to care about this particular question is that a growing wave gives you room to maneuver and be flexible.
- As is often said in the Bay Area, “You can’t be a great surfer without a great wave.” In many circumstances, these waves will happen regardless of whether you’re on them or not. Why not take advantage of it?
Size of Market:
- Perhaps one of the most important questions is determining how many people may have the problem. The key insight here isn’t to find the largest available market out there. What is more important is to determine that a small dedicated group of people have this problem and want this solution. From there, you can likely extrapolate the TAM, SAM, and SOM. (This is important if you specifically want to do a venture-backed business addressing a large market. It’s less important if want to create a self-funded company or lifestyle business — and there’s nothing wrong with that).
- A good rule of thumb is to do a fast calculation assuming only 10 percent of people could get your product — can you still get $100M in revenue? Would that be lots of people paying you small amounts, small amounts of people paying you large amounts, or some variation thereof?
- Instead of an exhaustive market sizing, you just need to compare the various market sizes of these ideas against each other. Give a T-shirt size to the market, e.g. small market gets a S, very large market gets an XL. You can do a quick analysis to help you prioritize this idea against the rest. Take this part seriously if you’re interested in further venture financing, a powerful wave in a reachable market is more powerful than an imaginary market with unproven suppositions. On the other hand, take caution when looking at market analyses using past data. You may miss out on the waves in the market that will change your market. For example, if you did a market analysis of ride-sharing, you would have concluded that Uber or Lyft were too small. Additionally, assumptions about the size of the total consumer Internet market after the first dot-com bubble would have been wrong given pessimism about Internet user growth.
Notes or Next Steps to Learn More —
- Now that you’ve done some quick brainstorming, founders should come up with notes and next steps. Regardless of a small correction or a hard pivot, you may not know the current wave, the depth of the problem, or the possible solutions. Take time now to talk to potential customers, companies who have failed, and validate your assumptions and approach.
After you’ve filled out the brainstorming criteria for each individual idea, examine the fit between your team and the concept:
Founder and Team Excitement:
- How excited are you and your founding team to be working on this idea?
- Is everyone excited enough to work on this idea for 10 years to get to success? Is the problem, solution, and space going to get you to wake up in the morning even though you’ll be punched in the face every day for years to make this happen?
- Is this one of the one or two startups that you’ll want to found in your lifetime? Realistically, founders only have a few companies in them at best given the lengths of our careers.
- What are your motivations for working on this? Are you doing it for money? Fame? If you do something that has personal meaning to you, it can help you get through the dark times that still lie ahead.
Does This Problem Have Potential Customers with Hair on Fire:
- A customer with their hair on fire does not care if you give them a bucket of water, a hose, or a smothering blanket. They will gladly take your solution.
- Look for circuitous behavior: a customer with a hair on fire problem is likely already solving the problem in a way that is painful. For example, sharing a large file was ridiculously tedious before Dropbox. People were e-mailing themselves, spinning up their own servers, or sneaker sharing (remember burning music CDs).
- How painful is the problem the customer is experiencing? If it’s a particularly painful problem, customers will be more receptive to solutions.
- Many solved problems in one market are unsolved in another market.
- Just because a problem has a solution does not mean that the problem is solved. In many ways, I don’t think a company truly has product-market fit, but just that it has a solution that is good enough at this point in time.
Can it be Ramen Profitable?
- Startups are a bunch of experiments, so being able to make money helps you run more experiments in your market.
- Is there a business model that will pay for the skeleton operations for the startup? This question is not nearly as important as the others, but if you care about maximizing your runway and being able to create a lot of freedom for your company — ramen profitability creates options. This is a great way to think through a solution’s business model and come up with the simplest and most efficient way to address a problem.
- Sometimes, ramen profitability is a great forcing function. For example, in the early days of Airbnb, Brian Chesky would wake up every single day to a pasted sign on his mirror asking whether his company could be profitable in the depths of the 2008 recession.
- Do you think you can create the solution that you described? Does it abide by the laws of physics or does it require a revolution in quantum mechanics?
- Perhaps start with Chris Dixon’s Strong and Weak Technologies framework and compare the strongest form of an idea (teleportation) and compare it to its weakest form (teleconferencing). It’s possible that there is a stronger solution that is technologically feasible or that the current idea can be scaled back to a more feasible form.
Who are the competitors?
- This question is really a variation of the customers with hair on fire problems. If your competitors are fairly strong, they will have good alternatives against your proposed solution.
- I would not worry about some gigantic company copying you. Most big companies are more interested in copying sure things and also have lots of bureaucratic and internal political problems in deploying anything new anyway.
- I’d be more worried about hearing that competitors attempted an idea and failed. It’d be great to get their insights and learn from their mistakes so that you don’t make the same ones.
The goal of this exercise is to come up with as many ideas as you can. Write down everything you have and give yourself a good two to three weeks to think through it and perhaps noodle on what it should look like.
Schedule talks with ten people you respect and admire to talk through these ideas. You’ll be amazed by how many people are excited to give you feedback on ideas and are thankful you aren’t selling them on your previous zombie startup.
From this list, you can create a composite score — I did 1–5 weights and multiplied them together. You are welcome to add specific criteria or place weights to come up with a composite score.
The score will help you prioritize ideas, but it is unlikely to magically give you the overall winner. Instead, you’ll likely come up with a top ten list of ideas that may revive your zombie startup.
I personally did this in my second startup. I was in Alaska, made this list, and I posted it in response to a startup ideas request posted on Hacker News in 2013. In hindsight, some of these ideas eventually became exceptional companies, including Easypost, Giphy, and Gusto. However, the idea I chose did not. After you generate your idea list, ultimately it will come down to execution.
One last and important note — no matter what happens to your zombie startup, please share your learnings. I know you think no one wants to hear it, but someone will learn from it. As with all problems of the undead, information is usually the key to all survival.
Good luck and may we all avoid all manner of living dead in 2020!