The Right Reasons For A Startup

I read an interesting blog post from Tom Allen, who quit an apparently awesome job to go out and do their own thing. The end result, after trying 3 different product ideas in rapid succession, was ultimately failure for Mr. Allen. He had 2 partners, but by the time it was over, both had left. The one product idea that had serious customer interest (he wasn’t specific on 2 out of the 3 ideas) apparently would have been too expensive to realize a profit. But part of the blog post included an interesting comment. The author said “I don’t care enough about money to run a startup business.”. If you’re creating a startup purely for the money, the chance of success is typically rather small.

Money And The Health Analogy

Way back, sometime in the mid- to late-1980’s, I remember hearing or reading a quote:

Money is like health. You need it, and the more you have of it, the better off you are. But it isn’t the reason why you exist.

Unfortunately, I don’t remember who originally said it, but it is something that has stuck with me through my career. I’ve worked at several startups now. In each case, money was a motivating factor, but it wasn’t the sole motivating factor, or even the primary motivation. If you’re going to start a business, at the very least, it should pay you enough to maintain a lifestyle that you are content with. If your startup can’t even manage that, then you have a problem. So for the author to say they don’t care enough about money is a bit misleading: they most certainly care about money. But the threshold for “acceptable” is actually a lot lower than most people would think.

There is another take, one I came up with myself:

If you don’t care about profit, you are either bored, stupid or rich.

Needless to say, profit is always at the back of everyone’s mind, whether starting a new business or negotiating your salary. You don’t take a job that pays less money than you need to live on if you have a choice. So why would you start a business without profit being at least part of the equation? It doesn’t necessarily mean you want huge, outsized profits. A little extra is sometimes enough, even if it’s just to build up a “rainy day fund” to carry you through lean periods. But to start a business that only breaks even, or worse loses money, isn’t a recipe for success.

Reasons For Going On Your Own

But if you are going create a startup where accumulating massive wealth is either the primary or sole goal of the venture, you are going to be disappointed with the results. Successful startups are largely created because of a few different motivating factors. For some, it is simply that they want to “be their own boss”. These people want to have a meaningful say in what work is and isn’t done. Sure, you sometimes have to make compromises to pay the bills, but you make them out of necessity, not because someone higher up on the org chart told you to do it. Creating a new company can sometimes be about having the right to say “No” without explaining it to anyone but yourself.

For other people, the goal of a startup is to be able to work with a team of like-minded people, and work on interesting projects with them. The most satisfying startup experiences I’ve had involved working with colleagues who were also friends. While we would argue (sometimes rather passionately) over some point or idea, ultimately we all had the same goal. We didn’t need to be “right”, we needed to succeed, and passionate disagreement was about making the idea better, not about winning the argument.

Then there is the Big Idea. The goal of making a difference, of making a vision into reality. Making your startup is about scratching an itch, about a desire to “put a ding in the universe”. Not everyone goes out on their own to try to change the world. But there has to be some kind of passion, even if the vision is (going back to the first point) to have a meaningful say about the work you do.

In all the ventures I’ve been with, the minimum goal on the financial side was to make a good living. Yes, we always wanted to make a lot more. I will admit that a shot at “the big payoff” was always part of the picture. But that wasn’t the primary goal. The first and important goal was to do something that made a difference, to put our own ding in the universe. It wasn’t that we would be willing to do these things for free. But the potential payout was just one motivator.

The Wrong Reasons

But if your overriding, or sole, goal is to get rich, then what you will generally find is that your potential investors will see through you rather quickly. Here’s the thing: anyone providing you with capital for your company (such as an angel investor or VC) expects that making money, and preferably lots of it, is on the agenda. That’s a given, much like breathing. But if that’s really all you want to accomplish, then it will be obvious from your product or business concept that this is all you have on the list of things to do. It becomes a thin skin on a hollow shell that will eventually collapse under its own weight.

Look at all of the great companies out there, the ones that had small beginnings and became hugely successful in their founder’s lifetime. Steve Jobs and Steve Wozniak started Apple to make cool computers. Ray Kroc bought out the McDonald brothers because he had a vision for fast food service. Bill Hewlett and Dave Packard wanted to make better electronic test gear and tools. Henry Ford wanted to build cars. Yes, every one of them went into their ventures with the expectation to make money. They all hoped to make a lot of money. But the profit wasn’t their first motivation. The product, the service, the business. That was what counted. The profit helped made the work worthwhile. But the work itself was a significant part of the reward.

Reading between the lines of Mr. Allen’s post, what I begin to see is someone who didn’t quite know what they wanted to accomplish, and that the “I want outsized profit” motive appeared to be a bigger part of the equation than he would openly admit. The fact that, in less than 2 months, he had pitched and abandoned 3 different product ideas tells me Mr. Allen didn’t start his new venture because he had a vision. He started it because he hoped to come up with a vision, and that the vision would be interesting but also make him a lot of money. What he found is that the money, by itself, wasn’t going to be enough.

Nothing Wrong With A Break

Okay, we don’t always go out on our own because we have a vision. I’ve spent the last couple of years wandering the wilderness a bit, trying different things, mainly because I wanted a change from my past ventures. Where I was working was (and is) a great organization, and they are doing very well. I could have stayed and been content. But I wanted a change. So yes, I started out without a specific plan in mind. But my first, overriding goal wasn’t “find something to make tons of money”. My goal was try something new, survey the land and smell the roses, and find the Next Big Thing. I wasn’t going to do that working where I was, because that job required my entire focus.

During this break, I did discover a few things. I found new technology areas I like a lot. And one of my partners and I have found something that is very, very interesting, and may allow us to put another ding in the universe. And, yes, there is a lot of potential profit in the venture. In fact, our first go-round on the product was motivated by a hope for a short-term turnaround, and that didn’t come to pass. We learned quickly that this was, in some ways, a mistake. We realized that a bigger vision is important, and that is what we have put together now. We have a specific goal, and a plan to achieve that goal. I can’t share details (yet), but it looks very interesting. The technology is cool, and it is completely different from anything I’ve done in the past. This is about as different as different gets in a career.

Focused Passion Is A Requirement

In the end, passion is what is needed, and passion focused on a specific idea or vision. If all you want is independence, then that is your passion. It doesn’t have to scale, and it doesn’t have to grow beyond just you. Independence is often enough for many people.

If you want to “do something bigger”, then the passion has to be about the product or service. It can’t be about the money first. Sure, your idea may not turn out to be a success. You may find you pivot, taking some piece of your original vision and repurposing it for something else that you are equally passionate about. But that isn’t something that happens after a few days of elapsed time. If you’re churning out product ideas with no real focus, that isn’t pivoting, that’s brainstorming. That’s not wrong. Its how you get things started. But an idea for something borne out of a brainstorming “let’s toss ideas around” session isn’t the avalanche that is a funded start up. It is just the first few pebbles that can become an avalanche. Or it could be nothing. But it takes time and effort, and you genuinely have to care about the thing you are working on. Investors can usually detect insincerity. You might be able to fool your customers, but you won’t typically fool the people you need to convince to invest in your idea.

In the end, you also won’t fool yourself. Yes, the money matters. Making more is always good. But your startup has to be about more than just the money.

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2 thoughts on “The Right Reasons For A Startup

  1. As someone who also left a stable job to start my own business, I can absolutely relate to the reasons and the passion it takes to start your own company and really work tirelessly to make it a success. There’s no easy path straight to the top either – it’s a roller coaster ride for sure!

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