Recently on Vulture Central I read an article by Matt Asay about how Venture Capitalism is both the boon and death of startups, based on some research by the Startup Genome project, and some analytical thinking by Asay.
Now, I won’t say whether or not I agree or disagree, specifically. There’s some interesting thought going on in his article. Maybe he’s even completely right. I certainly wouldn’t put any of my own money down on that though.
But I also feel that the conclusion pretty much misses the obvious, that it’s not Venture Capitalism that determines success or failure, but experience.
Frankly, I have absolutely no difficulty in believing that 90% of startups kick the bucket in six months or less. Why? Because not every idea is a good idea. But goodness knows how we all like to think that our brainchild is the best thing since sliced bread. Or we like to think that just because we thought of it, we must have been the first to have thought of it.
The sad truth is, most brilliant new ideas are neither new, nor brilliant.
And that’s not even counting legality, not to mention feasibility, which are often overlooked factors as well.
So yeah, I have absolutely no difficulty whatsoever believing that 90% of all startups are doomed to fail, and to do so quite quickly. Likely about as quickly as it takes to take an idea from a thought bubble into the dangerous realm of Reality, where we all know theories often fail to stand up on their own two feet.
More experienced people will be more likely to be familiar with things that have already been done. Or with concepts that actually have use, have value. More experienced people will also (hopefully) have learned life’s lessons about how to take criticism (constructive or not) and learn from it. How to adapt and change direction, even if it means your pet project’s base concept needs tweaking or a flat-out new destination. Because when you get Venture Capital, you’ve got have the perception of where the project is going, without getting swept up in someone else’s ideas. Likewise, your experience has to give you enough cojones to stand up to the Big Investor to do what’s right for the project even if the investor doesn’t necessarily agree. For your startup to work, you have to be The Expert. And by definition, that takes experience.
And we all know, there’s a big difference between thinking that you know it all, and actually knowing it all. Between having all the answers, and having the wisdom to know that you don’t know.
You can call it flexibility all that you like, but it plain comes down to having experience enough, being wise enough, to know that not every idea is brilliant, not every idea is new, and not every idea starts out fully thought through. For a startup to succeed, it needs an experienced head to first validate the merit of the idea, and then lead that idea through a full product lifecycle.
It’s the difference between a “computer programmer” and a “software engineer”. There’s a world of experience more in knowing how to engineer a product, through a full lifecycle no less, than there is in just scripting some vague idea together as a proof of concept. Experience matters. And experience is not something learned in a class. It’s something learned by doing. I’m not saying that every kid out of college (or still in it) is destined to fail with their brilliant idea-turned-startup. But I am saying that I have absolutely no difficulty believing that 90% failure rate. Generally speaking, every rule has an exception that proves it.
Or, there’s always blind dumb luck. One can never discount that. Having your baby bought out by a bigger fish because it sounded useful, or competitive, so that you have “success” long before having had the opportunity to fail, that’s the best kind of start-up luck there is for a lot of them.
But I do pretty much agree with Asay’s conclusion, that developers just need to focus on developing. Don’t focus on selling the idea so much that you forget to that it’s the product that you’re supposed to be selling.
Sell the steak, not the sizzle. In any industry.
And one major trip-up is how all too often the tech industry, and especially the social media hype on ye olde interwebs, focuses on what is shiny and new; completely to the neglect of what is tried and true. A stable business plan isn’t to jump onto the latest marketspeak bandwagon. (Or to try to beat it to the punch.) It isn’t to pretend to innovate. A stable business plan is to meet an actual need, often by refining an existing idea. There’s really not much new under the sun. Don’t re-invent the mousetrap. Just build a better one. And make sure that it’s significantly improved enough, and or cheap enough, that using the old one isn’t worth it. Facebook is just a Geocities webepage with an easy build interface and a built-in message board. Things people used to construct manually. Tweets are just micro-blogged emails. Something you could set up a server to do if you ever felt like it. These aren’t new ideas, they’re significant improvements on existing ones. Something that experience can recognize.
Just like how Venture Capital is always a good thing. It’s the strings that may come attached from the Venture Capitalist that can be bad. It’s not having the experience to wisely use that capital, to avoid those strings, to stand up when you need to, and sit down when you don’t, that kills your startup. Like any tool, the “good” or “bad” of it isn’t in the tool itself. The gun isn’t evil. It’s the person using it that’s the problem. A startup without experience is Russian Roulette. It may sound harsh, but 90% pretty much speaks for itself, no? Most revolvers only hold 6 rounds. Do the math.
I’d also be hesitant to be using the initialism “VC” as an abbreviation for Venture Capital in any discussion about software development, where Microsoft’s Visual C++ is commonly abbreviated as VC. Those literal-minded software engineers just might get confused.
That’s my two cents anyway. In that generally speaking nothing on this website has ever claimed to be a definitive “expert” guide to anything, make of my opinions what you will.