Part VI · Chapter 14 · Founding · lesson 7
Most of them fail
13 min
Builds on The sample you never see
Part VI · Chapter 14 · Founding · lesson 7
13 min
Builds on The sample you never see
Six lessons about how to do this well, and now the part that has to be said before anybody acts on them.
Most attempts do not work. Not most bad attempts — most attempts, including careful ones, run by capable people who did the customer conversations and computed the runway and made no obvious mistake.
This is not a warning. It is a base rate, and the difference between the two matters: a warning tells you not to do something, while a base rate tells you what to expect if you do.
The failure of a business is usually not a verdict on the person running it.
There is a small number of ways to end and most of them are only partly under anyone's control: the market was smaller than it looked, the cash ran out before the learning finished, the timing was wrong by two years in either direction, a larger competitor arrived, a co-founder relationship broke, or a customer who was a third of the revenue left.
Competence moves the odds. It does not move them to one.
Suppose, illustratively, that a business needs three things to hold at once: a market large enough, a route to reach it, and enough cash to survive learning both. Assume each has a fair chance of holding on its own — say two chances in three.
Multiply them and roughly three attempts in ten survive all three. Nothing in that arithmetic requires anybody to be bad at anything. It is what happens when several independent conditions all have to be true.
Real attempts have more than three conditions and they are not independent, which pushes the number around in both directions. The shape of the argument survives: the number of ways to fail is larger than the number of ways to succeed, and each attempt only gets one draw.
Predict
Case file
Composite, not a real person
Six years in logistics operations, savings of about 25,000, no funding and no outside profile.
Profitable in month fourteen with eleven customers, and still operating four years later at a size that supports three people.
Now the same shape, with the coin landing the other way.
Case file
Composite, not a real person
Seven years in logistics operations, savings of about 30,000, no funding and a similar contact list.
Closed in month sixteen with four customers and no route to covering costs. Returned to employment at a slightly higher salary than before.
Put the two side by side and the honest summary is uncomfortable. Similar people, similar preparation, similar decisions, opposite outcomes, and the largest single difference was what other companies happened to do in months eight and nine.
Only one of those two founders gets asked to speak about how they did it.
The cost is not the savings. The savings are the visible part.
Forgone income. Two years at a lower income than employment would have paid, compounding against everything in the arithmetic track. This is usually the largest line and it never appears on any plan.
Time, which is not recoverable. Two years at thirty and two years at fifty are different quantities, and only one of them is followed by thirty more.
Attention. Relationships, health and everything else that runs on the same scarce resource. This one is routinely dismissed and is the most commonly regretted.
Against that, three things survive a failure, and they are real:
Skills you cannot get any other way. Selling something you made, to a stranger, for money, is a skill with almost no substitute, and most people who have done it once find employment easier afterwards rather than harder.
A network built by doing rather than by attending. The eleven companies know who you are now.
Calibration. Having been wrong at your own expense changes how you evaluate other people's plans permanently, which is worth something in every job you take afterwards.
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