Too Many Pivots, Too Little Passion?(hbr.org)
hbr.org
Too Many Pivots, Too Little Passion?
http://hbr.org/2012/09/too-many-pivots-too-little-passion/ar/1
7 comments
>I guess I'll never understand how, in this world, getting funded is some sort of end.
Most people have a goal of selling their company, no? I mean, our tax code is such that it makes far more sense to sell a company than to just take money out the usual way, even if you get the same amount of money total. If you sell the company, you pay a much lower capital gains rate, wheras if you take profit either as a distribution or as salary, you pay much more. (If you take profit as a dividend, you pay corp. income tax on it, then you pay capital gains on it; if you take it as salary/bonus, of course, you pay FICA and everything.)
You can sell a company based on it's current earnings, or you can sell a company based on it's anticipated future earnings. When you get investors, you are doing the latter.
Of course, then you need to figure out how to cash out; but certainly that's easier after getting funding than before.
Personally, I'd prefer to think of it as selling (perhaps only part of) the company rather than "taking funding" - I mean, I'd be okay saying I'd stick around and help out for a number of years (for enough money, of course,) but once you have investors, it's not really yours anymore anyhow; it's more clear to all involved, I think, if you think of it as a sale.
> Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor.
See, I don't understand how businesses that can't even bring in enough money to pay their founders get funding.
Most people have a goal of selling their company, no? I mean, our tax code is such that it makes far more sense to sell a company than to just take money out the usual way, even if you get the same amount of money total. If you sell the company, you pay a much lower capital gains rate, wheras if you take profit either as a distribution or as salary, you pay much more. (If you take profit as a dividend, you pay corp. income tax on it, then you pay capital gains on it; if you take it as salary/bonus, of course, you pay FICA and everything.)
You can sell a company based on it's current earnings, or you can sell a company based on it's anticipated future earnings. When you get investors, you are doing the latter.
Of course, then you need to figure out how to cash out; but certainly that's easier after getting funding than before.
Personally, I'd prefer to think of it as selling (perhaps only part of) the company rather than "taking funding" - I mean, I'd be okay saying I'd stick around and help out for a number of years (for enough money, of course,) but once you have investors, it's not really yours anymore anyhow; it's more clear to all involved, I think, if you think of it as a sale.
> Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor.
See, I don't understand how businesses that can't even bring in enough money to pay their founders get funding.
Investors are investing in the company, not buying it from you. That's why the company is worth more post-money. Taking money from the company and quitting is called embezzlement.
>Investors are investing in the company, not buying it from you.
well, they bring money, some of which you [usually] get to keep, and you lose [varying degrees of] control of the company. It sounds like selling [part of] the company to me.
>Taking money from the company and quitting is called embezzlement.
Hm. I'm pretty sure that if you take your salary/bonus, then quit, that's not embezzlement. I'm pretty sure the same goes for selling your share of the company. (there may be other agreements that go with the investment that prevent you from selling your share, or even that have penalties for you quitting, but it's not embezzlement.)
well, they bring money, some of which you [usually] get to keep, and you lose [varying degrees of] control of the company. It sounds like selling [part of] the company to me.
>Taking money from the company and quitting is called embezzlement.
Hm. I'm pretty sure that if you take your salary/bonus, then quit, that's not embezzlement. I'm pretty sure the same goes for selling your share of the company. (there may be other agreements that go with the investment that prevent you from selling your share, or even that have penalties for you quitting, but it's not embezzlement.)
And then.. wend to work on their business, built a product, and acquired customers. Of course, a book covering the period of time that wrapped up right after startups were raising their rounds wouldn't tell the whole story. But it is far more sensationalistic to portray "funding" as the goal.
Getting funded isn't the end, and you'll really, really be hard pressed to find anyone who will tell you that in SV, regardless of how much people want to tell you that's the case.
Getting funded isn't the end, and you'll really, really be hard pressed to find anyone who will tell you that in SV, regardless of how much people want to tell you that's the case.
I'd have to dig a little bit for a source to back this up, but I would guess that the odds of succeeding are much higher if you have funding than if you don't. I think the author is critiquing the fact that these companies get money at all, not just claiming that they are successful because of that fact.
I know it's not the main point of the article, but far too many articles these days seem to dwell on the number of jobs that can be supported by any given startup.
The most amazing thing, to me, about technology is how it enables such small groups of people to positively affect millions. Lamenting that this is possible without hiring thousands of people seems like a such a narrow and scared mindset to me. It completely ignores huge swaths of possibility and potential.
The most amazing thing, to me, about technology is how it enables such small groups of people to positively affect millions. Lamenting that this is possible without hiring thousands of people seems like a such a narrow and scared mindset to me. It completely ignores huge swaths of possibility and potential.
the number of jobs that can be supported is really just an easily understandable analogue for growth potential. any business, no matter how efficiently they use technology, will end up supporting a large number of jobs if they grow sufficiently large.
There's also stories like craigslist and reddit. It's an uncomfortable reality that the future of many industries are going to need far fewer people on the payroll.
i'm not familiar with craigslist's staffing, but reddit is a great example of why a website with 500k users can't survive on a staff of 4 people. It is amazing what they did with a small team, but it was very clear that they needed a larger team, both on the technical/engineering side of things and on the advertising/sales side of things. The amount of money they were making was shameful for a site with their traffic, and the site performance was (and continues to be) equally shameful.
They have like 11 happily employee people, and millions of happy users on that "shameful" site.
Actually, I think that many people value businesses based on how many jobs they create, not how much wealth they create. This is where you get misguided attempts to "create jobs" by the government by doing things analogous to employing people to dig holes and fill them in again.
Galbraith has an excellent explanation of why paying poor jobless to do anything is a good idea if unemployment is or threatens to run rampant -- basically, it is an inflation-proof way to keep money flowing into the economy by stimulating spending, because poor people don't hold on to their money, they spend it in their communities.. which helps to create jobs and keep demand up
If that's true then why not just give them the money? At least that way they could spend their time learning to do something productive.
You mean like welfare? We have that. Or TVA, CCC, and "shovel ready construction projects"? The rock thing was not a proposal, it was just an academic example to show that the value of stimulus is not only found in the government buying something from recipients, it is also found in the recipient's private spending.
Like "agile", "lean startup" can mean pretty much... anything the person using the phrase wants it to mean.
With agile, sometimes the word is used to justify a rigid excess of ceremony, or as a firewall for lazy developers to hide behind to avoid being responsive to non-engineering members of the organization, or as an unrealistic attempt to turn software development into an assembly line of a bunch of jack-of-all-trades "cross-functional" team members ("specialists? we don't need no stinkin' specialists!"). But the core observation of agile is that writing huge planning documents and spending weeks perfecting PRDs and GANTT charts at the outset of an engineering project and then using these to derive project timelines and costs is inefficient, and that "delivery to QA" 3 months over an arbitrary schedule and 70% over an arbitrary budget is a classic failure mode for this approach to planning. Instead, a focus on building self-organizing, trusted teams who are delivering working software frequently and iteratively, and gathering customer feedback and adjusting "the plan" after each delivered increment of software can result in both happier developers AND happier customers.
Similarly, "lean startup" CAN be synonymous with "changing my mind about what business I'm in and 'pivoting' every 3 weeks", but really the core observation could be summarized as "build things people want", with all these new-fangled buzzword-y tools like customer development interviews, business model canvases and even "pivoting" as a means to this end. While the Ries book is useful, Steve Blank's The Startup Owner's Manual (http://www.amazon.com/The-Startup-Owners-Manual-Step-By-Step...) is phenomenal and the ideas there certainly "transfer very well outside the world of tech start-ups."
Take what works, leave what doesn't, ignore the hype and think critically.
With agile, sometimes the word is used to justify a rigid excess of ceremony, or as a firewall for lazy developers to hide behind to avoid being responsive to non-engineering members of the organization, or as an unrealistic attempt to turn software development into an assembly line of a bunch of jack-of-all-trades "cross-functional" team members ("specialists? we don't need no stinkin' specialists!"). But the core observation of agile is that writing huge planning documents and spending weeks perfecting PRDs and GANTT charts at the outset of an engineering project and then using these to derive project timelines and costs is inefficient, and that "delivery to QA" 3 months over an arbitrary schedule and 70% over an arbitrary budget is a classic failure mode for this approach to planning. Instead, a focus on building self-organizing, trusted teams who are delivering working software frequently and iteratively, and gathering customer feedback and adjusting "the plan" after each delivered increment of software can result in both happier developers AND happier customers.
Similarly, "lean startup" CAN be synonymous with "changing my mind about what business I'm in and 'pivoting' every 3 weeks", but really the core observation could be summarized as "build things people want", with all these new-fangled buzzword-y tools like customer development interviews, business model canvases and even "pivoting" as a means to this end. While the Ries book is useful, Steve Blank's The Startup Owner's Manual (http://www.amazon.com/The-Startup-Owners-Manual-Step-By-Step...) is phenomenal and the ideas there certainly "transfer very well outside the world of tech start-ups."
Take what works, leave what doesn't, ignore the hype and think critically.
There's a lot of demand for a "surefire recipe for success", that may not be what Eric Ries is selling, but it's what a lot of people are buying when they purchase his books and attend his seminars.
Most entrepreneurs I've met want to "build a company, any company" rather than "follow their life-long vision". That might not be a bad thing.
Idea generation is a learnable skill, and once you can generate a bunch of viable ideas, you can select the best one. I think this is better than going with the first "brilliant insight" that pops into your head and deciding it's your lifelong passion.
Also, lean works outside of tech -- remember those infomercial products that took 6-8 weeks to order? That's because they didn't get the products built until they received enough orders. And while they might not change the world, AirBnB, Heroku, Dropbox, Reddit, GoCardless, Exec et al. seem set to leave pretty big craters in it.
Idea generation is a learnable skill, and once you can generate a bunch of viable ideas, you can select the best one. I think this is better than going with the first "brilliant insight" that pops into your head and deciding it's your lifelong passion.
Also, lean works outside of tech -- remember those infomercial products that took 6-8 weeks to order? That's because they didn't get the products built until they received enough orders. And while they might not change the world, AirBnB, Heroku, Dropbox, Reddit, GoCardless, Exec et al. seem set to leave pretty big craters in it.
Typically, it's not "build a company, any company" vs. "follow their life-long vision".
More common story is to build some successful project/company, then to build the real thing.
Elon Musk started with Zip2, Tony Hsieh started with LinkExchange.
More common story is to build some successful project/company, then to build the real thing.
Elon Musk started with Zip2, Tony Hsieh started with LinkExchange.
He and his partner debated “pivoting” from one nascent business to the next, even as the clock ticked toward the all-important “Demo Day,” when they were to present their ideas to investors.
A pivot is a change in strategy without a change in vision. You cannot have a pivot without vision (that's just wandering around).
https://twitter.com/ericries/status/221318901018017792
A pivot is a change in strategy without a change in vision. You cannot have a pivot without vision (that's just wandering around).
https://twitter.com/ericries/status/221318901018017792
wandering around can be ok too
Mark Zuckerberg expressed this view at a Y Combinator event, chiding the crowd: “You’ve decided you want to start a company, but you don’t know what you’re passionate about yet.”
Wasn't Facebook an MVP that he put up primarily on a whim? Seems like he derived his "passion" from the fact that it was blowing up.
In fact, weren't Apple, Google ... etc built in a similar fashion? Maybe big vision works best once you have lots of resources and experience.
Wasn't Facebook an MVP that he put up primarily on a whim? Seems like he derived his "passion" from the fact that it was blowing up.
In fact, weren't Apple, Google ... etc built in a similar fashion? Maybe big vision works best once you have lots of resources and experience.
Yeah but Zuck and Page and Brin all had working products and users, and most importantly, perhaps, a nearly perfect guarantee of success in a fallback career, before they got their startup ideas funded. They walked away from top schools and cushy jobs, not ramen.
Saw this post this evening: http://nickoneill.com/building-a-plane-on-the-runway/ - "pivoting" is a meaningful startup pattern when it means "variations on a theme", informed by data and quantitative customer discovery, rather than the the "am I building an iOS app to manage your pet rock collection, or Airbnb for dogs?" flailing which too often hides behind the label.
And then...what?
I guess I'll never understand how, in this world, getting funded is some sort of end. Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor. But it's still only the beginning. What proportion of funded startups end up failing? I'll fathom it's a lot. And if you get funded, then flame out, are you a success?