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It seems the value of survivor bias awareness is realizing the need to compare crashed planes to the survivors.
There's clearly potential for mismatched incentives when VCs are talking to potential founders, just like there's a mismatched incentive for armchair analysts to justify their inaction.
So, founders who went for it and failed enough to quit, what happened?
What was the actual point of failure?
I cut bait but after a few years because I was building it for me, and just succumbed to using News360. They made something similar to what I wanted but not exactly what I wanted.
The next time, it will be something that makes money on its own right away. Ideally just a basic POC and a landing page to get the first customer.
I tried to build a Google Reader alternative when Google Reader was first about to die, well a bit prior to it because it was missing the idea of grouping similar articles. I started investing in the product but kept building instead of launching. By the time I had it all built and ready to run it was extremely slow, untested adequately at scale and I didn't have a way to make money on it. Also, I didn't have enough…
How much time do you think you would be willing to invest in a POC before getting your first customer?
Yesterday I was thinking about the idea of automatically rejecting projects when the time spent surpasses revenue/users by x.
Basically, if I can't prove that people want something after x hours of working on it, reject the work and move to the next project.
It seems like automated rejection points may prevent spending too much time solving problems nobody has or is willing to pay to solve.
Do you have an x in mind?
1. A lack of a product people will pay for, reliably delivered in a way they're willing to accept. If people won't buy your thing, you don't have a business, you have a hobby.
2. Poor financial acumen leading to costs being higher than turnover. Unless a business actually turns a net profit, it's not a business. It's a subsidised organisation waiting to collapse.
There's a whole pile of ways both of those can go wrong, but it's always one of those two. Bad product &| marketing, or poor financials.
The may valuable piece of advice I can give is, work out a proper strategy (start with a model like Roger Martin's strategy cascade), and then for every thing you plan to do at any point in the business, right down a list of assumptions which would have to be true for the idea to be good. Then try and knock those down with evidence, starting with the most fragile, least likely, most important ones first. Always try and prove your ideas are bad, not that they're good. At least then you've robustly tried to kick the shit out of them before the market does.
For most people, the point is having a chance at being wealthy. Most founders believe they have a 90-100% chance of success, even though it's more like 0.01%.
Some others may start companies in order to get out of a painful career track or because they want to understand the process or some other ancillary reason, and they'll get more value out of the process than others would
I tried a pivot to a SaaS model but missed my window of opportunity as Shopify and a few others started out as SaaS only and had more traction. Also, Magento commerce popped out of nowhere as a really good free, open source cart that made it difficult to continue to sell higher priced stand alone licenses.
Two actual points of failure: 1) had to start letting employees go because not enough income and 2) had to fire myself because not enough income.
In the end, I was able to license the technology to a few companies in a royalty deal and sell some other parts. Not a complete failure and I learned tons from the experience.
Business lessons learned:
* My sales/revenue strategy was weak, i was depending on my channel to sell but they were only getting me a one time license purchase while they got the recurring hosting revenue. * Selling to small and medium sized businesses is almost as much work as selling into Enterprises and the pay off is much smaller. I'd recommend targeting enterprises or consumes rather than mid-market. Consumer has scale, Enterprises have cash. * The better mousetrap doesn't always win. I had much better quality software than some competitors but they had momentum and staff that was already familiar with their product. If you're going to be the "better" option, be 10x better. * Timing is critical. Some opportunities are about being in the right place at the right time. A few years too early or too late can sink an idea. Be prepared to scale as fast as possible when you see things working.
There is no way to prove founders are more talented or wise than failed founders because it's impossible to disentangle luck and chance from their talent, though they would tell you luck favors the well prepared.
One great source of data would be serial entrepreneurs. It's one thing to look at Elon who was luckily in the right place and right time for his companies. But what about a similar individual who had luck on their side and failed multiple times? Even Steve Jobs had multiple failures, but bounced back time and again with new funding and a new vision.
I tried to build a Google Reader alternative when Google Reader was first about to die, well a bit prior to it because it was missing the idea of grouping similar articles. I started investing in the product but kept building instead of launching. By the time I had it all built and ready to run it was extremely slow, untested adequately at scale and I didn't have a way to make money on it. Also, I didn't have enough…
As someone who is both a pilot and a "survivor" of three failed startups (and a coattail-rider at one successful one), this is the wrong analogy. The reason it's the wrong analogy is that most airplanes don't crash, but most startups do. This makes a big difference.
The reason that it is possible to make reliable aircraft but not reliable startups is that the success of a startup changes the dynamics of the environment to make that success non-reproducible. This is not the case when designing aircraft. If you replicate a reliable aircraft design, chances are the result will be another reliable aircraft. If you replicate a successful startup, almost certainly the result will be an also-ran rather than another successful startup.
Every successful startup must necessarily distinguish itself from its predecessors (i.e. from its competition) somehow. But there cannot possibly be any reliable way to produce such distinguishing factors because every one is necessarily different from all such distinguishing factors that have come before. Anything that can be easily and reliably reproduced will already be reproduced by someone and so cannot be used as the distinguishing factor that differentiates the next successful startup.
This is the reason that looking to the past is of limited value. All of the stories of, "Here is what I did to succeed" are useless because none of those can possibly be a model for future success. This is not to say that you should not study the past. You should, because that can help you avoid repeating someone else's mistakes. But in the startup world, you can make zero mistakes and still fail to succeed. In aviation, making zero mistakes is pretty much the definition of success.
Building a successful startup is much more akin to making a new scientific discovery than designing a good airplane.