The default state of a startup is failure

If you are starting a company and wondering why nothing good seems to happen unless you force it to happen, that’s because the world wants to stay the way it is. Customers, partners, and most of all incumbents don’t want to think hard, try new things, or change in any way. The world is lazy and just wants to keep doing what it’s doing.

A friend of mine got a job at a big company and was shocked to see his colleagues worked just a few productive hours a day. They didn’t seem to care about their work or have relevant expertise. My friend said: “Wow, this company is going under.” Then the company released its quarterly reports and profits rose to an all-time high. The momentum of the company’s brand and relationships was sufficient to propel it forward.

On the flip side, first-time entrepreneurs often fail to realize that when you build something new, no one will care. People won’t use your product, won’t tell people about it, and almost certainly won’t pay for it. (There are exceptions – but these are as rare as winning the lottery). This doesn’t mean you’ll fail. It means you need to be smarter and harder working, and surround yourself with extraordinary people.

The default state of the world is to stay the way it is, which means the default state of a startup is failure.

http://bombtune.com Wells Baum

I’ve always taken Coach Wooden’s words to heart: “The road is better than the end.”

I’d rather make continued progress with some victories along the way.
http://www.facebook.com/rita.grohowski Rita Grohowski

Yup, you also need an unfair advantage if you want to shine.

http://www.cdixon.org/ chris dixon

I agree. The status quo is an unfair advantage so you need to match it with an unfair advantage of a great team, concept, execution etc.
http://twitter.com/lazyuniverse Lazy Universe

Yep its all about “unfair advantage” product/team/business/partnerships

http://twitter.com/elicolner Eli Colner

Agreed. But, to me failure is just another form of success. It’s not the goal, but it’s not the alternative either.
http://www.gpapps.com Dave Lee

I also think it depends how broad of a market you’re initially shooting for. If you go for a small niche in the beginning, it’s a lot easier but nevertheless not easy.

People’s habits are difficult to change, thus it’s difficult to introduce new behavior and new ways to do things… unless you’re simplifying an already difficult process that they are already doing.

http://www.cdixon.org/ chris dixon

I agree that there are ways to make the value of your product clearer, the switching costs lower etc. As you say, starting with a niche and/or taking an existing use case and providing a simpler/cheaper solution is one way. I guess I would categorize these as things where you need to work harder, be smarter, and have better people in order to figure out the right strategy, product, marketing tactics etc.

http://www.gpapps.com Dave Lee

Another perspective I’ve been thinking about a lot is with new products, you really need clearly communicate the core function. Oftentimes, it’s really messy or users just don’t get it. But that’s understandable because as a startup sometimes you’re mashing up a few things together for a new product/approach. But how does that get communicated? In a simple, clear manner… or as three or four products in one that’s confusing? I would think that maybe the best product innovators are amazing communicators.

http://www.cdixon.org/ chris dixon

I agree. I think of that as “white hat” marketing (as opposed to black hat which is about doing tricks to boost your visibility or manipulate people into wanting your product).

http://faramarzhashemi.com faramarz

Since that’s the default, we need not be audacious thinking up ideas to pursuit.

Unfortunately, often times, even when the default is not a clear winner, certain forces join hands and inflate the value and make a buck anyway. this seems to be the norm. So long as everyone in the 15mile radius made an ROI, it’s a win. Am I out of line?

http://www.cdixon.org/ chris dixon

Not sure what you mean by “certain forces join hands.”

http://faramarzhashemi.com faramarz

The artificial push that is made to create a favourable outcome for the stakeholders. Putting lipstick on a pig so-to-say.

http://www.cdixon.org/ chris dixon

In my experience there is a push but not sure what an “artificial” push is. There is a lot more that happens behind the scenes than most people know about, and usually that means some super strong willed and hard working entrepreneurs bending the world to make something happen.

http://twitter.com/YairR Yair Riemer

Surrounding yourself with the ‘extraordinary’ people is the absolute key. The most important decisions for a startup are almost always around hiring and retaining the best talent – equally as important or even more important than product, marketing tactics, etc.

http://www.cdixon.org/ chris dixon

Totally agree. It’s a cliche but true: surround yourself with people who are better than you (founder) are.

Thomas Lukasik

>> “surround yourself with people who are better than you (founder) are”

A “superpower” that not everyone has.
http://twitter.com/timarmandpour timarmandpour

To add here, you’ll also (as the founder) want to instill this mode of team building to all that have authority to hire under them. Get people 10x smarter/better than you and you’ll open your mind to a wonderful world full of people that are passionate, have conviction, and ability to help change the world with you

http://twitter.com/elicolner Eli Colner

I’d say leadership counts a lot also. There’s a magnificent void of leadership in the bigcos. I don’t think we as startups survive without the true believers leading with integrity.

http://twitter.com/YairR Yair Riemer

Can’t disagree w/ this. cc Scott Thompson

http://jasoncrawford.org/ jasoncrawford

Agree. Because of this, startups are born into wartime: http://jasoncrawford.org/2011/04/startups-are-born-into-wartime/

http://www.cdixon.org/ chris dixon

Great post, thanks.

http://twitter.com/ColterBergh Colter Bergh

Is this true for the “solving problems” / “pain relieving” ideas as well?

http://www.cdixon.org/ chris dixon

I think so. Unless your product is just so obviously 10x better it sells itself – but in that case the “startup” probably started years before when you designed the product.

Irving Fain

Unfortunate that complacency tends to define large / established organizations. Gives you that much more appreciation for those that can truly innovate (i.e. Apple). In fact, trying to think of a good list of large companies that embody innovation?

http://twitter.com/YairR Yair Riemer

Amazon, Salesforce, Starbucks, GE, to name a few.

Irving Fain

Starbucks is a good one. I was thinking about Amazon, but not sure how much they’ve really innovated after they picked up critical mass. Agree on salesforce also, but GE is hard to argue.

http://twitter.com/YairR Yair Riemer

I think they’ve really innovated. They picked up critical mass as world’s largest retailer. Pure ecommerce play but still tons of innovation since: Cloud computing w/ AWS, Tablets with Kindle, competing against Netflix w/ live streaming through Prime, etc. Book publishing marketplace, etc. Diversified & innovative. What a company.

Irving Fain

Good points. I guess I was thinking purely ecomm, but even there they evolved when you consider that they just started selling books…And to your point, once they owned eCommerce they’ve done a good job branching out. I stand corrected on Amazon.

Anonymous

Also, I hear there is an an innovative large company in Mountain View that rhymes with noogle.

http://www.optimizeandprophesize.com/ jonathanmendez

I always say the best chance you have is to align your startup/product with the selfish motivations of others.

http://www.cdixon.org/ chris dixon

I agree. But it’s often hard to initially figure out all those motivations and fit your product/marketing accordingly.

John William Gordon

It’s the same
http://twitter.com/MarioCaropreso Mario Caropreso

I agree. Every system endeavours to preserve its present state, so our best bet is on tenacity, or, as Thomas Carlyle said, “an infinity capacity for taking pains”.
But how can we reconcile this with the advice “Fail fast, fail often”? I mean, if the default state of a startup is failure, how can you understand when it’s a true failure or you need just more perseverance?

http://www.cdixon.org/ chris dixon

It’s a tough question. There is some component for truth to “fail fast” (*assuming* an idea is going to fail, better to learn that fast) but deciding when an idea is fully tested and what “fast” means here is the hard part. In biotech “fast” might be 5 years.

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http://www.victusspiritus.com/ Mark Essel

An untethered sail may flap in the wind, but harnessed and aligned it can carry you across an ocean.
http://twitter.com/mekalav mekalav

Awesome post agree with yair ,extraordinary team is important but to be honest struggling myself to build one as have outsourced development of my idea ,may be its a mistake not sure…But will learn from it.
http://twitter.com/ESAYASG Esayas

It’s not only because people don’t like to get out of their comfort zone. It’s also because people lack imagination skills. Ordinary people see only what’s in-front of their face. But all creative and innovative people who’ve been confronted with our startup would start celebrating what we are doing immediately, because they can see it’s dimension in many “what if” scenarios.
http://www.iphoneil.net/?author=2583 Ronen Mendezitsky

So true, but companies don’t always hold back on innovation because people aren’t ready for it, it is also because companies need to extract as much as they can from a current level of product before moving on. For example, cell phones – I don’t believe for a second that the iPhone I own is the peak of technology or even as best as it could be. It’s obvious that features both software and hardware related are held back and flow slowly to the customers. The real change in innovation happens every now and then when start-ups manage to push through innovation. If it weren’t for startups, I don’t believe we would have been in the same place we are with technology, the internet and innovation as we are now.

Anonymous

….before my startup, I too worked for a large corporate co. The mentality always was and still is, get the most revenue out of the least amount of effort! This has always bothered me. From what I gethdred, within the post and comments the author and readers also feel strongly about giving more, working hard and the experience will pay off in some shape or form over time; if not monitary, then something else perhaps. I will say I have felt like Zucks success with FB is in fact very close to these core values many of us have expressed. Now that FB is public you can follow the last 8 years of dedication, hard work and integrating new tech ideas ‘some borrowed and some stolen’ in any event still innovating and successful. With the core group of individuals in this chat, I think together we could assimilate to form a powerful referral network for each of our core businesses. Reach out if anyone wants to connect and innovate. @biztag

http://www.iphoneil.net/?author=2583 Ronen Mendezitsky

I’m wondering what made you give up working for a large corporation and pursue your own path. Obviously it makes sense to follow your passion, but most people can’t afford to leave it all behind and go do something else that can be risky. Speaking from my own experience, I have chosen several years back to pursue a passion of mine for finance and shifted from programming to investments and I can say I’m happy with my choice, but there are plenty more things I want to accomplish and am not sure how much more shiftings I have left in me. Are you happy with your decisions of choosing a different path?

Anonymous

A Great idea pushed me to explore a disruptive application that will revolutionize the way smartphones interact with the internet and the way consumers interact with.businesses. @biztag

http://www.iphoneil.net/?author=2583 Ronen Mendezitsky

This just explains your business, question is… If you have another great idea you lose sleep over, will you leave the current one in order to pursue it?

Anonymous

An idea, being as great as it may, can not consist of only one application. An idea is a business strategy with functionality that can be applied and sync within current technology as well as forward thinking applications that will be incorporated at a later time. When your exposed to many different applications and ideas, as you research, test and development, your original business model will grow and the small seed you started with will end up a giant Oak. The internet enables huge success and anyone thinking of creating a new application, think global and most of all realize, success is possible. Dont focus only on your own idea, but realize how others ideas can sync with your platform to create a better industry. Cheers!

Anonymous

Chris, you keep talking about start-ups, entrepreneurship, investments, etc…. from a consumer product perspective. If you are not thinking, investing and resolving pain points in the consumerization of enterprise software today, you are missing the XX exit multiples of the next 5 years.

Note: I haven’t read all your posts. So if I missed it. My apologies in advance.

http://www.cdixon.org/ chris dixon

I invest in b2b as much or perhaps more than b2c. It’s just the b2c stuff that tend to get attention on blogs/press etc.

Anonymous

Agree. When are you going to invest in the next SalesForce.com, VMware, Palantir, etc?

Thanks for the links. I liked “Selling to Enterprises”.

http://www.cdixon.org/ chris dixon

I also blog about topics that are about startups in general http://cdixon.org/contents/

And specificly b2b
http://cdixon.org/2011/12/03/the-enterprise-buyers-versus-users/
http://cdixon.org/2011/11/28/business-development-the-goldilocks-principle/
http://cdixon.org/2010/02/06/selling-to-enterprises/
etc

http://twitter.com/shayneforsyth Shayne Forsyth

Great post. My experience in large corporations is that status quo is ok until a new c-level exec comes in and wants to make a difference. I saw an entire IT dept shipped overseas; complacency and entitlement by some were just as big a part of the decision as the cheaper wages for outsourced labor.

For startups, that’s why marketing and communications is so important. Sure coding, testing and optimizing is important; but the real challenge is messaging and positioning the product correctly so consumers know about it, understand it and it solves their problems.
http://engag.io/ William Mougayar

That is so true, it hurts to read it. Startups must find that stinging or nagging thing that users have, and address it head on. If I’m stung or buggered & you offer me that remedy, I will care.
http://www.justanentrepreneur.com Philip Sugar

Great post.

Its why I always preach at a startup nothing happens inside your office, you have to be out there hustling all of the time. Nobody calls you, you have to call everybody.

Its also the hardest thing for former big employee companies to adjust to at a startup. Its why you get so many pedigreed VPs from BigCo’s that fail miserably. They are so used to having everything incoming that they don’t know what to do.

http://www.cdixon.org/ chris dixon

I agree. I’ve become increasingly skeptical that big company experience has anything but a negative impact on a person’s ability to function within a startup.

Anonymous

If the default state of a baby is crawling before it can walk…and then run, is the child a failure? I dunno about your title, Chris. I hear you on the core of your message, but I will say that the default state of nascent companies and technologies is “greenfield”. You either execute like a motherfucker or then take your other option: fail. So the bit-setting on your new company should not be construed as failure by its very existence, only what you and your leadership can do to execute and change perspectives of the mopes who ‘want it the way it is and/or was.’

#tiredoffailuremessages

http://www.cdixon.org/ chris dixon

I’m not trying to be negative or depressing. Just describe the way I see & have experienced the world.

http://blog.inkaudio.com/ David O.

This hypothesis can also be applied to established (and wealthy) companies building a new product in markets they have no established presence in.

a.) Microsoft is finding it very difficult to compete with Google search.

b.) Google is finding it difficult to compete with Paypal payments, and Facebook’s social networking.

Facebook will find it difficult to compete in other areas if and when it branches out. Any future Facebook payment processing business will be challenged by incumbents like Paypal.

http://www.cdixon.org/ chris dixon

I agree. Big companies have the advantages of massive resources and the ability to build on top of existing assets. But the default state of new projects is still failure.

http://twitter.com/andyidsinga andyidsinga

totally agree …especially at successful bigcos that have highly tuned resource allocation processes
http://twitter.com/tom_semantic Tom Marsh

Their strength and weakness is their size and inertia. To Andy’s point, Innovator’s Dilemma, RPV framework is a guide to where they can be beat. Draft on their ecosystem then use your speed to execute your big idea.

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http://twitter.com/sardire Steve Ardire

The Most Valuable Startup Asset: Your Meta-Tribe – Forbes http://onforb.es/Mv7BBlSo the core lesson for entrepreneurs: you don’t just belong to your own tribe anymore. You belong to the meta-tribe now.
http://www.repeatablesale.com/ Scott Barnett

I could (and probably should) write a blog post about this. I’ve worked at several startups over the past 15 years, and recently took a job at a large company (albeit a group launching a brand new product). I’m working with hard-working, dedicated and talented people. Probably the biggest issue I see is that we rely way too much on our corporate lineage as a reason why we will succeed. Like success is a foregone conclusion. Having been through all sorts of failures, I obviously look at it just the opposite and it’s interesting to look at all the different business and technology decisions that will be made just based on this one point of view.

One thing I’ve been surprised with – I used to think that big corporate types couldn’t handle the pace and “hands-on” requirements of a startup – and in many cases that is indeed the case. But I have seen many examples of big company people here rolling up their sleeves and getting in the mud, so it can be done. At least for me, I’m holding back that bias going forward…
http://www.facebook.com/mcarena.sae Marc-Anthony Arena

Great article. You’re welcome to post this on my blog or be a guest blogger sometime! -Marc (Teknosophy.com blog)
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http://www.DomainRegistry.com LE

“The momentum of the company’s brand and relationships was sufficient to propel it forward.”

That momentum is one of the reasons people buy companies instead of starting from scratch. Both the workforce and the customer base has been vetted and is known. Flying an airplane is easy. What’s difficult is taking off and landing.
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http://mojaam.com mojaam

Very well put and true. Although perhaps you should be a bit more specific as the default state of a startup by unknown or 1st time founders (who are the majority) is failure.
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Anonymous

People don’t know what they want, until you show it to them.., Steve Jobs http://en.wikiquote.org/wiki/Steve_Jobs
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http://www.stealthmode.com hardaway

Amazing post, Chris! I tell this to people every day as I coach them,and thank goodness they don’t believe me or they would never go forward:-)
http://twitter.com/JM_thatswassup Jared Mermey

“People won’t use your product, won’t tell people about it, and almost certainly won’t pay for it.” + “ The momentum of the company’s brand and relationships was sufficient to propel it forward.”Getting off the ground is all about building leverage/inertia for your business. Few potential customers are willing to try something new (especially in b2b) therefore you have to minimize the barrier to “NO” to zero. This often means taking on tasks/risks/liabilities/costs that you’d rather not have (perhaps extending yourself into the state of short term failure in the hopes of long term success). If you are successful, you develop the brand + relationships to succeed and grow (i.e., you gain momentum). The key is to not running out of cash when trying to get there.
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http://twitter.com/Ovurmind Viktor Ovurmind

I don’t think the world has got lazier, I think that the gap between those who understand continuous life learning is the new way and those who remain in yesterday’s education mindset is the growing gap.

It is not that there is more to distract us today but that the super-smart are getting smarter and the not-so-smarter are becoming even more not-so.

If startups can latch onto or connect with the DNA of people who are life learners AND who also are comfortable with above average risk – I think in that particular dynamic exists an opportunity to sort wheat from chaff – and get the right people on the bus (as Jim Collins would say).

We can of course focus on the abundant not-so’s, but this world is beginning to gravitate away from laziness and the future of abundance is encouraging and focusing on those who see the new way of education.

$M.
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olaru ionut robert

triple like…i spotted a quote from Picasso last day that sounded like this:
“Inspiration exists, but it has to find you working” .I guess it fits whit your opinion here.
http://twitter.com/abrahamw abraham williams

It’s amazing what happens when you work 10 times harder than everyone else. You get completely engaged. You ride the roller coaster and meet people you never would otherwise. I’ve been helped more by people I’ve met in the last month than I could ever have done on my own. These connections are huge and accelerate things.

However, I’ve been thinking that being fantastic enough for people starting new ventures to want to work with you may be a better option than starting the venture yourself. Many get success that way. I think like that when I get tired.
http://kareemahmed.com Kareem Ahmed

I really enjoyed reading this little nugget of motivation.

Chris Dixon