When should you give up on an idea?

Suppose you launch your new startup and don’t get the traction you were hoping for. How do you know whether to give up or keep going? This is a tough question. There are lots of examples that support seemingly contradictory theories. Instagram pivoted before launch, and Pinterest refused to pivot for years. Many other startups pivoted too early or kept working on dead-end ideas for too long.

If the pre-product/market-fit phase of a startup is about efficiently testing hypotheses, then continuing to test an idea only makes sense if you have a strong theory about what has gone wrong and how things will improve.

Specifically, you should have a theory about: 1) how to modify your product, 2) how to modify your marketing/distribution strategy, and/or 3) how external events (a new technology wave, cultural events, regulatory change, etc) might make your product take off. In other words, you need a plausible argument as to why the future will be different than the past.

Another way to think about this is using what Jeff Bezos calls the “regret-minimization framework.” Imagine you do give up on your idea. Have you explored most of its plausible implementations? Are you confident that another entrepreneur won’t come along and make it work? You’ll regret it more if you nearly created a big company than if you spent an extra six months iterating.

Finally, beware of the temptation to get distracted by new shiny ideas. When you are deep in the weeds, new ideas seem refreshing but this is usually the false signal of “uninformed optimism” that accompanies all new things.


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.

Blogging to learn

People blog for all sorts of reasons. For me, it is mostly about learning. This wasn’t my original intention – it evolved over time. Now I see blogging as part of a continuous learning process:

– Start every morning by skimming through news, blogs, articles, etc. Much of this is tech related. I used to get tech news in the newspaper, then in Google Reader, and now mostly from Twitter. If someone I meet mentions something interesting that was published that I didn’t read, I go back and figure out how I missed it and change who I follow on Twitter so it doesn’t happen again.

– Try to meet with interesting people during the week. The reason being up on tech news is important is so that we can get the most out of the meetings. Often we’ll talk about whatever each of us is working on at the time but it’s also good to have news or blog posts as shared reference points. This makes the meetings more interesting for everyone.

– Try to learn at least one interesting thing each week and then blog about it. Then see how people react in comments, on Twitter etc. I guess some bloggers don’t like comments but for me they are the crucial so that I can get feedback on new hypotheses. Blogging new hypotheses also means a decent portion of your blog posts need to be ignored or ridiculed. Otherwise you are playing it too safe.

Outsource things you don’t care about

A fundamental principle of business is that you do things in house that you think can give you a competitive advantage and outsource things that you don’t. At an early-stage technology company this means you do in house: product design, software and/or hardware development, PR, recruiting, and customer relations/community management. Ideally, most of these activities are led by founders. You should outsource legal, accounting, website hosting, website analytics etc. (Unless you are starting a company where one of those activities can give you a competitive advantage, e.g. a securities trading startup would need to have in-house legal).

A lot of startups over outsource. A few years ago, you’d sometimes hear tech startups say they were going to outsource software development. Thankfully, founders have gotten smart about this and it rarely ever happens except as a stopgap. It is still common for startups to hire outside PR firms. If you decide to hire an outside PR firm, that means you don’t care about PR. Just because you are willing to spend some of money on it doesn’t mean you think it’s important. You probably shouldn’t hire an investment banker during an acquisition unless your company is later stage. And you might occasionally use an outside recruiter but the core recruiting activity needs be done by founders.

The myth of the overnight success

Angry Birds was Rovio’s 52nd game. They spent eight years and almost went bankrupt before finally creating their massive hit. Pinterest is one of the fastest growing websites in history, but struggled for a long time. Pinterest’s CEO recently said that they had “catastrophically small numbers” in their first year after launch, and that if he had listened to popular startup advice he probably would have quit.

You tend to hear about startups when they are successful but not when they are struggling. This creates a systematically distorted perception that companies succeed overnight. Almost always, when you learn the backstory, you find that behind every “overnight success” is a story of entrepreneurs toiling away for years, with very few people except themselves and perhaps a few friends, users, and investors supporting them.

Startups are hard, but they can also go from difficult to great incredibly quickly. You just need to survive long enough and keep going so you can create your 52nd game.