So you think you can create companies, punk?
or, art and science in company building.
Since the beginning of Founders I have been thinking a lot about the role of science and art in creating companies. I have touched on this topic before when talking about principles of venture design, but a recent Product Tank meetup here at our offices gave me the chance to finally put my thoughts down in a more coherent way.
I named my talk “So you think you can create companies, punk?” and it is the story of our journey as a startup studio (far to be completed) to find the “scientific” formula for successful company building.
First a quick introduction. Founders is a startup studio. It basically means a company that creates companies. During the last 3 years we gave birth, together with our cofounders, to 11 companies. One has been shut down and one sold, the rest are still alive and kicking at different stages of their life.
We started with this idea or dream, probably very naive, that you can create a startup studio and demonstrate that great companies can be created at will. Naturally many people are skeptical about this. We have been as well, and still are at times. A lot of the skepticisms revolves around finding good ideas.
If we look at what other people are doing, one way is to disregard this aspect. Wait for some “proven” model to emerge and then focus on being the best at executing. Rocket Internet is the poster child of this approach, and despite some recent turmoil it has worked well for them so far.
I don’t see anything wrong with what they are doing. In all frankness, at least two of Founders’ companies have been clearly inspired by existing startups in the U.S. and at least two recent YC companies could be equally called “clones” of Founders companies. It doesn’t really matter. What matters is that we don’t believe in cloning as a viable approach to build products and companies today, for many reasons that I will explain another time.
A second approach to the ideation question would be to “just” be very smart. I call this the McKinsey approach, which basically involves analysing the shit out of a market and finding the perfect, previously unseen, opportunity. I must admit we toyed with this illusion, even with the idea of having a process around this. A magic formula to design great business ideas.
And I guess if such a formula existed you could easily see it in the great companies that emerged in the last few years. All a product of a beautifully designed idea, masterfully executed. Right?
Just like Facebook:
Or Netflix:
Or Paypal:
Or Airbnb:
This is not to claim there was no cleverness in the people behind these ideas, actually the opposite, as proven later on. And it is also not a way of repeating the old cliché “ideas don’t matter, it’s only about execution”. No, execution only matters on top of a good idea.
The point is: great companies are seldom (if ever) born “off the bat” with a great idea.
What then? Is it just luck?
Learning from founders
If we look at the stories of entrepreneurs (of which Founders at Work is a fantastic collection) we can see a pattern:
I think the hallmark of a really good entrepreneur is that you’re not really going to build one specific company. You have to start your own thing. It almost doesn’t matter what that thing is. We had six different business plan changes, and then the last one was PayPal. Max Levchin — Cofounder, Paypal
Over the years, I’ve learned that the first idea you have is irrelevant. It’s just a catalyst for you to get started. Then you figure out what’s wrong with it and you go through phases of denial, panic, regret. And then you finally have a better idea and the second idea is always the important one. Arthur van Hoff — Cofounder, Marimba
I think the process of idea-making relies on executing and failing or succeeding at the ideas, so that you can actually become better at coming up with ideas. It’s something you can learn. It’s a skill, like weightlifting. That failed; that worked; continue. You begin to learn how to make ideas . Joshua Schachter — Cofounder, Delicious.
Starting a company is not a random event.
It just doesn’t look like this:
It looks this this:
Not creation, but evolution.
The trial and error process that discovers the design fit between an idea and its environment
Not inventions, but discoveries.
We don’t come up with ideas, we discover them.
And so, back to the original question: what’s the formula for evolution and discovery?
Blockers
It starts by overcoming our typical blockers:
Fear.
Fear of failure. Regardless of how much we buy into the rhetoric of “failure is good”, we all hate it. It huts, it sucks. We don’t want to experience it. We don’t want to start working on something which we know, almost by definition, is not going to work out, at least not as we first envision it.
Fear of waisting time. We are rational beings, we want to validate the problem before taking the plunge. We want to wait to write a line of code before having paying customers. All sound ideas, that however deprive us from the invaluable learning that we get along the way. Even the wrong way.
But there is something even worst than fear.
Illusion.
The illusion of being able to avoid failure. Of somehow “mastering” a process and become better and better over time. As if that meant getting things right from the beginning.
That’s particularly dangerous for “studios” — even for the best one ever created:
You know, if you would just get the story right — just write the script and get it right the first time, before you make the film — it will be much easier and cheaper to make. Ed Catmull — Pixar
Tricks
Luckily we have some tricks for overcoming these blockers:
This comes from Paul Graham:
Treating a startup idea as a question changes what you’re looking for. If an idea is a blueprint, it has to be right. But if it’s a question, it can be wrong, so long as it’s wrong in a way that leads to more ideas.
At the end we all want to create large, successful companies. But it precisely that goal that can distract us at the beginning, inhibiting our ability to start.
the weight of the objectives can crush the seeds of thought necessary to begin down an adventurous path. Momentum is the most important aspect of starting, and rejecting and editing too soon has a tendency to stifle that movement. Frank Chimero
Where “project” is not the side-project, that’s actually great. Here project is intended as and “enterprise that is carefully planned to achieve a particular aim.”
A trajectory instead “includes the explorations, discoveries, numerous detours and unexpected surprises that occur while creating something.”
Woz vs Jony. Who at Apple would switch Jony for Woz today? But it is fair to say that Apple Computers probably exists because there was a guy on the team that could build the first computer with his own hands. Everything that happened afterwards, the investment, the Lisa, the Machintosh, everything starts with that first computer in a wooden box.
The artist mindset
This is the formula. A formula that can help you repeat the successful process of company building. A formula based on questions, momentum, trajectories and builders.
A formula that has nothing to do with science. Because at the end this is exactly what the artist does. Despite what we might think, the artist understands better that anyone else that it is about starting:
And it is not about cleaver inspiration, but about work:
Here we are at the conclusion of this talk. Is company building a science? No. If anything at all, it is art.
But maybe, even more that that. It is just process.
And this is why there is hope for a startup studio.
