Maples’ Law: A million ways your startup can die and only one unsatisfying way to make sure it lives
Lately I’ve begun to appreciate a hard truth of entrepreneurship: There are a million ways your company can die, and there are no right answers to most questions entrepreneurs ask.
For every company that tells you they only succeeded because they were lean and didn’t raise too much money, there is a company that tells you they only succeeded because they bulked up on money when they could and it lasted them through a nuclear winter.
For every company that tells you they only succeeded because they focused on revenues and getting to profitability immediately; there is a company that tells you they only succeeded because they didn’t focus at all on revenues, but prioritized only users and the product in the early years.
For every company that tells you outsourcing revenue saved them, a company will tell you outsourcing revenue killed them.
There are companies who swear by “party rounds” of funding, while most of the Valley argues against it. Ones who argue raising money too early from VCs is death, while others say not having someone with deep pockets in an early round is death.
Bringing in grown up management saved their company; and bringing in grown up management killed their company.
Young founders do best. Serial entrepreneurs do best.
You need cofounders, but on the other hand, dysfunctional partnerships can also kill a startup.
Growing a company is a bit like raising a baby. If you listened to all the advice people want to give you, you couldn’t even manage to put a diaper on the child.
This has hit home, in part, because I’m seeking a lot of advice from people I respect on my startup now, and in part because with every PandoMonthly we do, we get a different version of how someone found their way to massive success. The only attributes these stories ever share are that someone thought they were crazy and many people thought they would fail for a long time.
PandoMonthly has showcased a pretty broad mix of stories where unlikely entrepreneurs grabbed victory from the jaws of defeat, but none may be as extreme as the one Brian Chesky told last night. You’d be hard pressed to come up with more ways a company could have violated the typical Silicon Valley success playbook. And yet, just Airbnb and Dropbox make up almost the entire value of Y-Combinator’s entire multi-year portfolio.
If you are starting a company and don’t know the full story of Airbnb’s early days, watch the first hour of our talk when it posts later today. It’s a story that Chesky says he has mostly only told in closed Y-Combinator sessions, and it’s definitely one of those ones that’s funny…in hindsight.
This is what sucks about Silicon Valley. There’s a false sense of security buffeted by the hacker mentality here, that you can somehow engineer (read: shortcut) your way to success. People flock here because it’s easier to raise money, easier to get started, easier to get a lawyer who’ll work on spec, it’s easier to find technical talent and it’s easier to find a soft landing should things go south. And yet, even with decades of angels, VCs, incubators, demo days, sites like AngelList and blogs like ours trying to help make things easier for entrepreneurs– all of that can only de-risk this game so much.
Has the last few decades’ institutionalization of Silicon Valley made it easier to start a company? Absolutely. But by what percentage? 5 percent? 10 percent? 15 percent? I’m not sure, but it’s not enough to save you.
There’s a cold, hard fact that entrepreneurs face once you are knee-deep in the muck of it: There are at most a dozen great companies created every year, no matter how many resources, pitch decks, incubators, seed money, and hopes and dreams are poured into the funnel. That truth — let’s call it Maples Law since I hear Floodgate’s Mike Maples say it more than anyone — may be the most exacting unforgiving law this geography has seen since Moore’s law.
I spent a lot of the Holidays — when I wasn’t writing or editing — thinking about what I could have done differently in my first year as an entrepreneur. Where I made tactical errors that I should have known better than to make. But last night, listening to Chesky’s story of the early days of Airbnb last night put it all in perspective: You can do everything right and fail. You can know nothing of startup best practices and still have monster success. The difference is a great product people want to use.
That doesn’t mean you shouldn’t seek advice from people who’ve done it before, and it doesn’t mean you can’t still take risk out of the equation and make smart moves. But it seems, more often than not, following advice on fundraising or mentorship or how much equity to give advisors helps you live another day but doesn’t ultimately make or break you.
This is sort of a depressing reality or an incredibly freeing one, depending on how you look at it. If your product is great and the time is right, you can make a lot of mistakes and still succeed. If those elements aren’t aligned, the best execution in the world can’t change that. At most, you can get a good outcome that makes everyone whole, or maybe returns a bit of money.
We’re launching a series of posts, interviews, videos and profiles next week that will run throughout January called “The Art of Starting Up.” We’ll look at some conventional and unconventional paths and truisms to starting a company here and around the world in more detail over the next few weeks. I think it’ll be helpful to a lot of first timers. But remember as you read all of this: None of it matters if you don’t build something great.
For Chesky’s part, his takeaway from his journey is just as conflicting to other advice you hear as any of the examples I listed above. While almost everyone in Silicon Valley will tell you you growth is the single most important metric you can show — the only thing that can save you — Chesky argued you shouldn’t focus on growth. You should focus on how much your users love you. Even if you only have a hundred.
That worked for Airbnb, because they also got monster growth that has lead to monster funding that has allowed them to keep focusing on something he internally calls “the love index.” But there’s only so much you can follow that advice to the letter either. Try building a company on love without growth here and see how far you get in raising your next round.
Chesky admitted as much, saying he thinks the Valley in general — including the gatekeepers — is focused on the wrong metric. But, he added, while you may need growth and love to keep the doors open, if you don’t have love, you will most definitely fail.
Earlier this week I was talking to Nextdoor’s Nirav Tolia who referred to the same thing this way: If you went away tomorrow would your users gouge their eyes out?
Unfortunately for people looking for definitive answers and paths to success, all the venture capital in the world can’t buy you love.
There are a million ways you can die as a startup and only one way you live: Build something great people love.