The goal of a startup studio is to spin off multiple startups in parallel. As the CEO of a startup studio, one of the few things I lose sleep over is choosing the best possible set of opportunities for my studio. I agree with Bill Gross, CEO of IdeaLab, who showed that the most important factors for startup success include timing, team, idea, business model, and funding (from most important to least). The way I stay focused is by treating opportunities like balloons.
Ideas are fun. Without ideas, the wheel and plow would never have been invented. If an idea is truly inspiring, extraordinary entrepreneurs will be drawn to it, like a techie to the gentle glow of a mobile device. It is a blast to conceive of something that hasn’t ever existed. For those of us who can’t help but exercise our creative side, coming up with new ideas is like floating balloons. They are fun and they make us smile.
Too Many Balloons:
Unfortunately, if you have too many ideas (or balloons), they just get in the way. So, when I encounter an idea I think, “Can I let it go?” Some ideas just stick with you while others don’t. If the idea doesn’t nag at my brain, it probably isn’t an idea worth pursuing. If the idea doesn’t inspire me, I can’t expect it to inspire others. But this still leaves me with lots and lots of startup opportunities that can clutter my head. So I ask, “Can I pop it?”
Because I only want truly awesome opportunities for my studio, I need to get rid of the bad and the good ones. The bad ideas are often easy to destroy with a little validation. The good ideas are more dangerous because they can take much longer to distinguish from excellent ideas. So, it is my responsibility to quickly pop 95 out of each 100 ideas.
I view problem-solution validation as throwing darts at balloons. I just wrote about validation, so I won’t spend too much time on it here. As a studio, the key is to apply a rigorous testing to each opportunity and evaluating risk vs. potential quickly. If you can’t find an early adopter, your balloon pops. If you can’t test your lean hypotheses, the balloon pops. If the market isn’t big enough, the balloon pops. If you can’t inspire a team, your balloon pops.
Some people hate popping their own balloon-ideas. I love it. I get a great satisfaction out of freeing that space in my mind. Through a Darwinian process of elimination, only durable and inspiring ideas remain. All of the Hindenburgs explode in a spectacular ball of flame. I view the rest as armor coated, flame-retardant, jet-powered, AI-guided balloons that I just can’t pop with the darts in my arsenal.
Failing fast is a motto that most entrepreneurs latch onto in mind, but not in heart. It seems to me that 90% of startups fail to pop their own balloons. Instead of popping their idea when it was small and manageable, we build ourselves a Hindenburg. Many of us view our ideas as babies, we don’t want to kill them. We coddle them, and keep them safe for as long as possible. I’ve done this in the past, and learned an important lesson – pop the balloon early if you can.
So, clearly the idea must be spectacular. Otherwise, POP! If the opportunity is right, the other four key traits will line up as well:
Timing: As stated earlier, timing is the most important trait of a successful startup. Certain balloons aren’t always appropriate for all times. Just like you shouldn’t bring a giant “It’s a Boy!” balloon to a wedding, you shouldn’t start a tech company before the environment is right. Environment includes market, technology, economy, regulation and culture.
Team: If you have a world-class opportunity, it is easier to draw in top-notch talent. If you struggle to get the talent you need, it might mean your opportunity isn’t as inspiring to others as it is to you. Few people want to climb on a defunct balloon, even if you say, “Don’t worry. It’s perfectly safe.”
Business Model: The business model adapts as a company evolves. Every company adapts to the market place or dies. For me, the best opportunity is one that has some flexibility. Like a clown’s balloon, you can mold into whatever shape you need. If you need to change from sales to subscription model, great! But if you can’t adapt when needed, Hindenburg.
Funding: Both good and bad opportunities get funded. Just look at the percentage of angel or venture-backed startups that fail (25-75% depending on your definition of fail). But the burden of raising a round decreases as the opportunity increases and risk decreases. If you have an indestructible balloon that is taking off and will overshadow all the other balloons, you better believe investors will want their slice.
Imagining popping balloons all day long keeps me entertained, engaged and motivated towards the primary goal of my studio: identifying a handful of truly inspiring opportunities for spinning off startups.
- 9 out of 10 startups fail due to improper launching(timing), being underfunded(funding), inability to adapt (business model), and not learning from mistakes (team).
- The sunk cost effect: If your startup is failing don’t hesitate to pull the plug, it’s better to lose your ego and save money than to continue on and hit a dead end.
- When determining which balloons to pop, it’s important to ask yourself a series of questions to ensure your popping the right balloons and keeping only the best, one of the most important questions you should ask is, “What problem am I solving with this idea?”
The path for your startup will be different than you might have planned in the early stages. One important prediction is to know who your customer is, and what problem you solve for that market. Then validating your idea with minimal expectations for a specific outcome – be open to popping your own balloons.
To sum it up, there will always be strong opinions and expectations about who the right team is, when the right time is, which model is right for your startup, and how to access investors to raise capital. These topics will be discussed in our next series about what to expect from a startup studio, and how the perspectives of entrepreneurs, investors, and mentors differ.
Until then, we would love to hear your opinion on the topic.
Author: Jesse Lawrence
Founder and CEO of Boulder Bits. Sci-fi lover, game theory strategist, and idea generator.