The findings are in from a business analysis project that models itself after genome research.
The first finding:
Most successful startups pivot at least once. Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52 percent less likely to scale prematurely than startups that pivot more than two times or not at all. A pivot is when a startup decides to change a major part of its business
Pivot? Sounds fancy. If I read that correctly a business that reacts to correct a mistake is more likely to be successful than one that does not correct its mistake. Likewise, a business that corrects fewer mistakes is going to be more successful than one with many mistakes. In other words there is going to be at least one major mistake in a startup plan, which will have to be corrected, but there should not be too many because the cost of correction is high.
Perhaps the same could be said of anything. Take rock climbing for example. A climber that can react quickly to a mistake will climb 2.5x times higher and have 3.6x better time to the summit, and be 52 percent less likely to burn out prematurely than climbers that make more than two mistakes or do not react to their mistake.
The third finding:
The major reason for failure of startups is premature scaling. About 70 percent of our dataset showed up as premature scaling or inconsistency. One driving factor for inconsistency is too much capital, teams that are too large, bad team compositions, too little testing, etc. – pretty much everything a large company does, anticipating high certainty in their planning.
I smell a tautology. What is failure? Premature scaling. What is premature scaling? Failure. So you can avoid failure by avoiding failure, which is like avoiding scaling too soon because of course it is too soon. But seriously, this conclusion equates bad with failure. I suspect some might have reached the same conclusions without the study. You should not need a “Genome” project to state that a bad team will give bad results.
Based on the above findings the solution to startup failures should be obvious — simply reverse the statements. Have just the right amount of capital, teams that are sized just right, teams that are composed just right, testing that is just right…it is starting to feel like they could have called it the Startup Goldilocks Project.
Oh, and I think this qualifies for the most non-humble statement award:
It has been extremely humbling for us to be able to touch the lives of thousands of entrepreneurs living around the globe.
How is that humbling? It’s like saying “it is extremely humbling for us to achieve more than we expected and to be really successful”. New definition?
The whole project appears to be anything but modest. By their name they affiliate themselves with a scientific effort to “complete mapping and understanding of all the genes of human beings“. Yet the findings on risk that they have published seem far from attempting the same kinds of analysis.
Understanding the human genome will have an enormous impact on the ability to assess risks posed to individuals by exposure to toxic agents. Scientists know that genetic differences make some people more susceptible and others more resistant to such agents. Far more work must be done to determine the genetic basis of such variability.
In other words will the Startup Genome Project explain the variability in startups that cause some to be more susceptible to risk — pressure by large companies? What external and internal factors cause one startup grow before it is able to sustain itself but another startup to hold back?
They could assess, for example, whether it helps reduce pressure from large companies to expand if the startup founder has X amount of personal/family wealth and at least one attorney in the family. I use that example because they mention Bill Gates as a successful entrepreneur. It makes me wonder if they collecting the kind of data and searching it for factors like those revealed by the WSJ about the very beginning of Microsoft?
The family support was one reason Mr. Gates decided to move Microsoft to Seattle, where he settled into a house not far from his parents. Mrs. Gates arranged to have a maid clean her son’s house, and made sure he had clean shirts for his big meetings. […] Mr. Gates Sr., drawing from his own experience as a lawyer guiding small companies, helped find Seattle businesspeople to serve on the Microsoft board. […] The father’s law firm would also end up representing Microsoft, which became the firm’s biggest client.
Clean shirts for his big meetings is the key phrase. Someone should decode it properly.
The Startup Genome Project, if it were directed at the human body, so far reads more like a study that concludes premature death is a leading cause of a short lifespan. It’s a new collection of information with some interesting synthesis, but it’s not exactly illuminating an unknown or unmapped world with clues to help us understand how to manage risk.