Successful Companies Iterate
What most people don’t understand about technology companies is that very few actually end up doing what they set out to do. And even fewer make money how they thought they would make money. Either because of market changes, technical obstacles, or a general lack of product-market fit, things hardly ever go according to plan.
In fact, the only thing you know for sure about an early-stage business plan is that particular plan will almost definitely not happen.
Which means almost all initial ideas for a high-tech company are bad ideas. In fact, it is really hard to see the great ideas unless you are in the thick of it working hard with your team.
Take PayPal for instance. Despite the company’s ubiquity today, PayPal only became successful after changing their business model five times and changing company name four times (the original company was called Fieldglass, which changed to Confinity, then PayPay, then X.com, before finally settling on PayPal).
If you really want to start a technology company, there is only one tried and true way: fake it until you make it.
The Three Things Needed to Start a High-Tech Company:
• Moderately good idea
First, you need to come up with an idea that is compelling enough to attract a strong team. Before pitching it to other people, make sure that you yourself actually believes in the idea (although there’s 99% chance it won’t work): it’s difficult to convince others unless you believe in it first
• Strong team
Next, you’ll need to build a strong founding team that not only believes in the idea, but can also execute and iterate around it.
• Money
After the first two requirements are in place, you raise money to start executing on the idea. Money will help you buy technical infrastructure and hire more great people, and will give you flexibility to iterate around an idea.
Then you iterate. And iterate some more.
“Stone Soup” Entrepeneurs
Starting a high-tech company shares many similarities with the stone soup fable. In this story, a hungry traveler visits a village with nothing but a large stone. The villagers ask him about the stone and he says it is the main ingredient for creating stone soup. He then convinced the villagers to create stone soup by first getting a large cauldron and inserting the stone. Then, he convinced them to fill the cauldron with water, then chicken, then vegetables, then spices and flavoring until the soup was complete and the entire village benefited from the stone soup.
As an entrepreneur, your goal is to – with only a stone for an idea – convince others around you to grow the company by faking it until you make it.
Special thanks to Michael Hsu for his edits.
Great post — it’s funny how startups with your 3 foundations naturally wind their way forward towards good ideas, from faking it to making it. Also funny how creating a successful startup can be, paradoxically, so simple, yet so hard.
Reminds me of Jurassic Park, instead of “life will find a way”, it’s “the team will find a way” — inevitable given the right foundation + time. And, if not this startup, the next.
Auren, great post! Thanks for sharing. I love the stone soup fable.
Eric Ries http://www.startuplessonslearned.com/ and Sean Ellis http://startup-marketing.com/ both provide great advice on iterative development to find product/market fit.
Nice post, Auren. Very true observations. Some entrepreneurs are better at selling stones than others! Personally, I believe that enthusiasm is something you can’t fake, and the right amount of enthusiasm (/belief) with the key points you mention are invaluable when growing your business.
Enjoyed the post, thanks!
Great post.
But…although iteration, and leveraging on help of different kinds, is all very good. But I’m not sure “fake it until you make it” is the right way of putting it. Integrity is completely indispensable. There are lots of “entrepreneurs” out there who eve take pride on their bullshit artistry. It is pathetic and it wastes everybody’s time, including their own.
It’s ok to sell a vision as long as you can meaningfully contribute to its realisation, and provide sufficient benefit to everyone involved in exchange for their help/investment.
CI — good comments. the ‘fake it till you make it’ was meant to be a catchy title. but you are definitely right: integrity and reputation is the most important long-term sustainable asset.