In startups, speed is critical. Why?
You’ll often hear that the drive for speed is to beat the competition. Although this is certainly true sometimes, I think that the consistent, foundational reason is closer to home: burn.
When you’re running a venture-backed startup you’re burning cash, and the cost of anything is the time it takes. So, for example, if you’re testing a marketing tactic that costs $10,000, you’re likely to think that the cost is $10,000. It is not. Say you’re burning $100,000 a month and it takes you a week to decide and a week to run the test the cost is $60,000! That’s $10,000 for the spend plus 2 weeks of burn. You control the cost by shortening the time: decide over the weekend and run the test in a week and its cost is $35,000.
So how do you move fast? Almost always, you’re doing something that has never been done. That means that results are unpredictable–there’s no playbook. You have no idea if the way you’re approaching your problem will work. A natural reaction to the situation is to plan, to think hard about what your very best guess is, to try to beat the odds. But that’s exactly the wrong thing to do.
In 1996 I was running product at Infonautics, an early Internet company, working for successful serial entrepreneur and famous venture capitalist Josh Kopelman. It was very early days on the Internet and the extremely fast pace of unpredictable change made decisions especially hard. I walked into his office to brainstorm the right approach to a major partnership and he said:
Imagine we’re in an alley with only one way out and it’s pitch dark. Most people inch forward slowly, arms outstretched, to ensure that they don’t run into a wall, then feel around the edges to find the way out. The right thing to do is put your head down and run as fast as you can in any direction. When you hit the wall, you have learned one way that is not out. Pick yourself up and run just as fast in the opposite direction. You’ll find the opening before the careful person has found one wall.
This was decades before Lean Startup codified the approach - but the idea was the same: act and learn.
Another way to think about this is in purely in terms of time. In venture-backed startups we raise a round of financing to reach certain objectives that qualify us for the next round, at an increased valuation. So, for example, you might have achieved product market fit (people want what you have) but not yet go to market fit (they find you and buy.) Say you raise $3m, which should last you about 18 months burning about $150,000 a month. If every test takes a month, you can try 18 times. If every test takes you two months, you can try 9 times, and so on. I have seen startups blow an entire round on a single theory. The right answer is rarely obvious, so give yourself as many at-bats as possible.
It’s uncomfortable to knowingly run headlong into a wall, especially for people who have learned that careful planful behavior leads to success. It’s counter-intuitive. It’s also fun.
I blog in spurts, about all sorts of things.