Beware Ten Queen Off Suit Startups
There was an article on Hacker News today about a startup putting a brave face on news of a bigger competitor beating them to the punch. I don't know any of the details of the startup - they're in sealth mode, which is another rant altogether - but the tone reminds me of an analogy.
In poker, drawing a bad hand like 7-3 off suit is not a big deal. The normal play is to fold before it becomes expensive, often before the flop. 98% of startup ideas are 7-3 off suit ideas after a cursory analysis of feasibility and business case. You spend a few days cautiously optimistic while you do some research and throw together a prototype until you learn about the conference in Bern they've had every year since 1979 to talk about the field you thought you invented, or you find a link to Google YourIdea Beta, or otherwise get your comeuppance.
As poker hands get better, the danger of losing your shirt increases. We have a tendency to ignore the odds and chase bad money with good. What might have been a winning hand "heads up" quickly diminishes in probability when several players re-raise. But the temptation to stay in the game kicks in, and we find ourselves losing much more on good-not-great hands than on bad ones.
Startup ideas operate much the same way, and it seems like every day you see some of the same rationalization process that keeps people in poker hands long after they should have folded. Often it's much better to pack it in and move the project in a different direction than to continue chasing a non-existent market. I can speak from personal experience when I say that it SUCKS to acknowledge failure and move on (start over) with the next idea, but it's much better than the alternative.
On the other hand (meaning I'm about to contradict myself) there is the maxim that every good business idea can be rationally argued against. You can come up with a feasible reason why any unproven business plan could fail. A huge corporation could always change direction and squash your startup. The market could fall out. There are always risks and everyone successful has had to take them. Sometimes pocket aces lose - sometimes even to 7-3 off suit. Obviously that doesn't mean you should fold pocket aces.
The trick is being able to take off your rose colored glasses as well as your "fail" tinted ones. I believe that the ability to provide a reality check is a significant reason why teams of two or more founders are successful so much more often than solo entrepreneurs. Being a good poker player means being able to take the size of the pot into account - while detaching oneself from the percentage of the pot that came from their own pile of chips. Being a good entrepreneur means being able to analyze the opportunity for your startup to succeed regardless of how much time and money you've already invested or your desire to hold onto that euphoric feeling of having "a good idea". I am not sure it's even possible to be completely objective ourselves, which is what makes cofounders and trusted advisers so important.
In poker, drawing a bad hand like 7-3 off suit is not a big deal. The normal play is to fold before it becomes expensive, often before the flop. 98% of startup ideas are 7-3 off suit ideas after a cursory analysis of feasibility and business case. You spend a few days cautiously optimistic while you do some research and throw together a prototype until you learn about the conference in Bern they've had every year since 1979 to talk about the field you thought you invented, or you find a link to Google YourIdea Beta, or otherwise get your comeuppance.
As poker hands get better, the danger of losing your shirt increases. We have a tendency to ignore the odds and chase bad money with good. What might have been a winning hand "heads up" quickly diminishes in probability when several players re-raise. But the temptation to stay in the game kicks in, and we find ourselves losing much more on good-not-great hands than on bad ones.
Startup ideas operate much the same way, and it seems like every day you see some of the same rationalization process that keeps people in poker hands long after they should have folded. Often it's much better to pack it in and move the project in a different direction than to continue chasing a non-existent market. I can speak from personal experience when I say that it SUCKS to acknowledge failure and move on (start over) with the next idea, but it's much better than the alternative.
On the other hand (meaning I'm about to contradict myself) there is the maxim that every good business idea can be rationally argued against. You can come up with a feasible reason why any unproven business plan could fail. A huge corporation could always change direction and squash your startup. The market could fall out. There are always risks and everyone successful has had to take them. Sometimes pocket aces lose - sometimes even to 7-3 off suit. Obviously that doesn't mean you should fold pocket aces.
The trick is being able to take off your rose colored glasses as well as your "fail" tinted ones. I believe that the ability to provide a reality check is a significant reason why teams of two or more founders are successful so much more often than solo entrepreneurs. Being a good poker player means being able to take the size of the pot into account - while detaching oneself from the percentage of the pot that came from their own pile of chips. Being a good entrepreneur means being able to analyze the opportunity for your startup to succeed regardless of how much time and money you've already invested or your desire to hold onto that euphoric feeling of having "a good idea". I am not sure it's even possible to be completely objective ourselves, which is what makes cofounders and trusted advisers so important.
posted by aseever at
3:48 PM
0 Comments:
Post a Comment
<< Home