Fail Sucks! A Seed Stage Mental Framework To Limit Failure As A Startup Founder
How can we improve our odds of success in building a startup? There are 3 things you can do to not fail spectacularly.
Everybody in startup land heard at least once in her life that in Silicon Valley, “failing is accepted, it’s part of the local culture and that you can fail and two weeks later you can raise money for a new venture.” That’s true, but be honest, failing with your startup dreams SUCKS!
When you launch a new company, you can’t say if it will be a major success or not. For sure, you work and fight to make it a hit. That said, founders live in a continuous state of uncertainty because they are creating something new, solving a problem that is still unsolved. Solutions might exist, but they don’t work for many people for a number of reasons: the solution exits but it’s outdated, the product is too complicated, or simply it doesn’t give users what they need.
Create a new startup is a lot of fun, but also a significant source of anxiety and panic for the founding team. Those emotional states have to be handled and channeled appropriately. A good antidote is a constant injection of positive thinking and problem-solving skills and most of the time you are not inborn with such skills. Those abilities are developed with knowledge and training.
A memorable quote by Ben Horowitz—co-founder of the Andreessen Horowitz investment firm—says:
As a startup CEO, I slept like a baby. I woke up every two hours and cried.
Fail sucks, we all know it, and like most of the people with 25 years of experience, I can say I’m a good expert in the field. In the last couple of decades, I experimented multiple times both success and failure. The former can enforce your ability to defeat new challenges, and the second threatens your self-esteem. Failure teaches you many valuable lessons, the most important of which is that is much more fun to succeed. It’s also true that without embracing the fact that your startup can fail there wouldn’t be companies like Airbnb, Uber, Slack, Tesla, and SpaceX. When Sysdig was founded in 2013 my co-founder Loris—the technical genius behind this idea—didn’t know if it was possible to use a Linux feature called “tracepoints” to create the product he envisioned. There were many technical challenges to address and overcome, but that never stopped us from putting all our energies to make it a massive success.
In the startup business failure is pretty common for multiple reasons:
Tackling the wrong problem
Unknown market dimension
Lack of capital
Inability to communicate with the user base
Bad timing—too early or too late
Lack of focus
Lack of skills
Not enough founders’ perseverance
Those are just a few of the possible causes of failure of a tech startup, but in my experience, there’s a mental model and a minimal set of rules that can decrease the odds for a startup to crash and burn—at least in a spectacular way. I want to leave you with just three of them.
What I describe in the following part of the article refers primarily to pure-software and SaaS companies.
1) Talk to users since day one
Most of the time when startups are in their earliest stages, spend at least three to nine months in an unconscious state of “stealth mode”. The company has been created, the team is working on building the product and nobody is taking care of talking to the world. “Go looking for your user base” is something that you need to do since day one when you start writing the first line of code. That assumes you have someone in your funding team that is passionate about this aspect as much as you are passionate about coding. Talking about the problem you are trying to tackle helps you in many different ways: to go deeper on the problem, to make researches about how others tried solved it, to understand if you can attract people that feel the same pain, and finally to create the first community of users passionate about your product. Your goal is to engage with people to understand what pain they have. Talk to people can be done in multiple ways other than in person. You can try with blogging, a newsletter, participating in vertical community discussions, attending meetups, helping users to solve pressing issues for free, phone and video calls, and chats.
2) The “Ship in 4-6 months” rule
One the golden rule that Y Combinator coined one month after they started is “make something people want”. The problem here is that people don’t know what they want until you create it for them. The tangible evidence that you built something people want is that they use it every day. For this reason, founders should always be focused on creating something as quickly as possible to understand if anyone is interested in using it. In my experience, the nature of the people tackling a new business opportunity is to envision solutions often too complicated for the small team they have. That’s why I think that in the startup business we should work in a constrained universe, and the very first constraint we should fix is “time.”
In this business, today is better than tomorrow and quickly is better than perfect, building better than planing. Think big and dream with the business you’re developing, but then settle down and ship something useful in no more than six months. That is a fair amount of time to get something in front of your users and see if they love it or not. I learned this lesson the hard way at least two times in my career. And the result in both cases was a spectacular failure of a promising product. I know that every founder will raise multiple objections to this rule, but even if what you are designing is damn complicated and you think it cannot be done in less than 24 months, please find something that can be released to the market in 6 months and let the user pay for it. The last part—pay for it—is crucial here. There are several cases where this rule it’s not applicable—like, for example, in open-source software. But in general, if you are making something for the enterprise or consumer market, make them pay already since release 0.1.
In the worst case, within 6-8 months, you’ll have the answers you need: am I making something people want? You invested a few months in building a new company and in exchange you’ve got some valuable answers.
3) Right location
Not every place on Earth is the right place to create your product community and launch your startup. So, choose wisely. As an investor, I see too many companies with a great team and a good product in the wrong place. Your company metrics are always important, but they are even more significant for your Seed stage fundraising. If can demonstrate that in the few weeks or months after launching the product people seems very interested, then you have better chances to raise capital. You should carefully choose the place where to establish your company because there are locations that can help your product take off, and others that leave you kissing the dust. Still, in a remote-first world like today, why is it so critical to choosing the right location?
In my experience, there are multiple good reasons to do that:
Early adopters. You need those kinds of people to move your company metrics up. You need to know where they are, who they are, and, more important, you have to get connected with them before you launch the product. Early adopters are people like you and me. Still, they a) have the urgent need for whatever your product is uniquely placed to solve, b) share a common addiction for technology-driven solutions, and c) are eager to give you feedback to help to improve your product. One of the things you can do to attract early adopters is to experiment on your company's unique message. Your value proposition needs to click with your early users instantly. Those are not typical users: you need to go deeper and develop a face-to-face social relationship with them. And that brings us to the next point.
Face-to-face meetings. Early adopters share a common profile. It might include different aspects like culture, habits, hobbies, beliefs, and social status. They can be anywhere in the world, but many of them will likely be in the same geographic area. Silicon Valley is for sure a place where many early adopters gather, primarily because a lot of successful startups are in the same place. Still, if the Bay Area is not where you meant to be, you better think seriously to move your HQ—and yourself—close to those people. As I said in other articles, you need to move fast in this business, and speeding up your feedback loop is essential to make your company grow. In the early days, word of mouth and organic growth is the way to go, and early adopters can help you with that.
That said, building a startup is a young and tough business where every case is different. Share experiences can help, but at the end of the day, everyone has to find her own way.
My personal story tells this: don’t waste to much time in a cave, hoping that a post on Hacker News can be your unique launch strategy.
Talk to people and socialize. You’ll learn a lot more about your product's straights and weaknesses.
There a good chance that, even in a remote-first world, Silicon Valley will keep its competitive advantage primarily thanks to the serendipitous effect of the area. That requires attending in-person to events and meetings. Remember that "not-remote" is intrinsically better than "remote" and that brings many advantages. A few days ago Paul Graham—co-founder at Y Combinator—tweeted this:
Think about it and choose wisely.