Failing Fast It's a good thing

The only thing better than a "Yes" is a quick "NO". When you are raising money, selling a customer, or trying to get a deal done, it is the long drawn out process that never ends that will kill you. It is the same thing with startups. Being successful is always the goal, but if it is going to fail...Fail fast.

The traditional model - When I first got involved in the startup world the typical path was to raise several rounds of VC money, take two or three years to develop a product, then raise more money to hire an enterprise sales force and go to market. Sales cycles were typically 9 to 18 months. It could be 5 years before you really knew if the company had a good chance of success.

Today a product can be built in a few weeks or months. Development tools are powerful, easy to use, and cheap. Infrastructure for hosting, storage, and bandwidth are inexpensive, scalable, reliable, and secure. Ten or fifteen years ago each startup built their own infrastructure at a cost of millions of dollars. 

Who needs an enterprise sales force? Today you can get directly to your customers on the Internet. There are ready built e-commerce systems that can handle sales, credit cards, fulfillment, and shipping.

The advertising revenue model has created a whole new class of businesses that don't need a sales force. The product or service is free. No customer acquisition cost. The revenues come from advertising and sponsorships.

Double Down or Fold? - All of this amazing technology and infrastructure doesn't guarantee success. Far from it. As Paul Graham says  in his post "The Future of Web Startups"

If it gets easier to start a startup, it's easier for competitors too. That doesn't erase the advantage of increased cheapness, however. You're not all playing a zero-sum game. There's not some fixed number of startups that can succeed, regardless of how many are started.

There are more startups than ever before, and more competition. However, the good thing is you will know pretty quickly if your product idea is hot or not. You can get a beta product launched and start getting user feedback within a few months. To use a poker analogy, you can decide very early whether to "double down" or fold.

OK, I have 400,000 users, now what? You might remember a story I did about "Where I've Been", the Facebook App that grew incredibly fast. Lots of users but no business model or revenues. They actually figured it out and are now generating revenues.

Yes doesn't guarantee success, but No avoids wasting time. - So getting to a quick NO is good. Getting user feedback early and often allows you to dump bad ideas early and redeploy onto another better idea. Yes can mean lots of users, but you still need to solve the business/revenue model before declaring victory.

So, next time you get a quick NO, just say thank you, and move on to the next customer, the next deal, or the next idea.

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Comments

[Brian P Halligan]

I couldn't agree more. After sitting on the vc for a bit, I saw that there was very little incentive for a venture capitalist to say no. "Maybe" or "interesting" were a lot less likely to draw a violent reaction than "no." "Maybe" or "interesting" were also gave the potential the investor to bide his time to see if another investor or expert "got it" in a different way that would later come to light and which would motivate them to move.

Good points in this article.

[Gordon R. Vaughan]

Yeah, when you're given a "maybe" as an answer, or worse yet a shaky "yes", if you're not real careful you will have effectively given the other party an option, without any commitment on their part.

This is something that also applies to other sorts of deals, of course. The current real estate bubble immediately comes to mind.

Having been there before in the 80s Texas real estate bust, I can tell you that the best thing that could happen to a lot of sellers would be to get told a flat "no" several times. Then they'd probably figure out they need to lower their price.

Instead, many will probably find a buyer that'll just drag things out without being able to close. When they finally disappear, prices will likely have dropped some more.

[TanNg]

Yes, but this is very hard decision to say no

[Qian Wang]

Good points, Don. Failing fast is of course one of the key principles in programming and it's good to see it used in this context. It's also applicable in many other aspects of a startup, from planning new features to hiring employees. But I'm not sure that using it to evaluate an idea on a "hot" or "not" basis is always the right thing to do. Sometimes it takes quite a bit of time for a new product to be absorbed by the market. Not everything can be an overnight sensation and some overnight sensations are many years in the making.

[Kendall]

This is very practical advice. Any startup should have goals. There's nothing wrong with believing in an idea, but knowing when to quit is also extremely important, not only for investors but for yourself and for society. In my last two ventures, we kept things going as long as we achieved our goals. And since they were both self-funded, as we exceeded those goals, we continued to invest additional funds into the companies. If you continually miss goals, getting to no quickly is confirmation maybe you should try something else.

[Fred]

That is a great article an some great advice for new or small businesses.

[Tiendq]

It is really a great advice, I said NO too slow to my first startup in the past and wasted more time and effort than what it was. Thanks.