I avoided commenting on this article, because I didn’t think I’d be able to respond appropriately, given the state of mind it put me in. Seeing where that’s gone, I’ve decided to try anyway.
The quickest version is that you underestimate the likelyhood of failure at several of your points:
Failure to understand customers.
I’m not sure the typical LWer who makes it through the sequences is necessarily good at this. We’ve had discussions on social skills and empathy and the trouble with inferential gaps. The population (rationalist | understands potential customers) appears to be worryingly small.
if you don’t have the skills, then get them.
This is probably easier for the typical LWer, since autodidacts appear to be a non-negligible population around here, but again, much more easily said than done.
if you don’t have willpower, it’ll be pretty tough to succeed.
We talk about willpower a lot. I think it’s safe to say it’s an issue among self-styled rationalists.
Finding a cofounder shouldn’t be too difficult though.
Could’ve fooled me.
Still though, I think not being able to find an investor is a legitimate risk.
Yes. Crowdfunding sites could help with this (unless you’re in the subset of people who can’t use them / your idea does not meet the requirements of any of the crowdfunding sites that get sufficient traffic).
I’ve never hired anyone before,
Well, in that case -
but it doesn’t seem that hard.
… This is when, the first time reading it, I decided I shouldn’t reply. At this point, the words “Naive, wide-eyed idealism” kept looping in my head until I went to do something else. Granted, if you get your starting capital, hiring shouldn’t be that hard, since you have something to pay people (including a potential HR person who might be better at managing applicants/hirees, or maybe a legal expert if you fail a comprehension roll with the laws and regulations and paperwork and such.). But by now, we have compounded multiple “I haven’t done this, but it doesn’t seem that hard”s.
Given all of this, I think that if you’re smart and hard working, you should have at least an 80-90% chance at succeeding at a startup.
Just focusing on a few issues, it seems incredibly optimistic to estimate a probability of 80-90% chance of success (where success is measured in millions of dollars). The probability of each must be above 96%:
Understanding customers well enough that your product or service is something they will want.
Finding a (useful) cofounder.
Raising starting capital.
No issues with hiring.
No legal issues.
Marketing goes well enough to draw in a decent customer base before the innitial investment runs out.
If you can, after doing lots of examination and updating, give each of those a probability above 96%, then of course you should start a startup. But it’s usually safe to say that we’re more likely to trip over more than one of those on the way to failure.
Having said all that, this article does serve a useful purpose of laying out the paths to success and failure with startups, and is a realistic exercise in Bayesian updating, so I’m kinda bothered by how its karma was at −9 before I started writing this response.
I’m not sure the typical LWer who makes it through the sequences is necessarily good at this. We’ve had discussions on social skills and empathy and the trouble with inferential gaps. The population (rationalist | understands potential customers) appears to be worryingly small.
I’m struggling to communicate this (let alone argue it), but I think the main problem is the inability to think specifically, not the inability to understand what it is people want. Ask yourself: once you break a demand down far enough into its components, is it still hard to say whether or not those components are things people want? Again, sorry for the poor communication; I wish I could do better. This is why I meant this article to be more of a starting point of discussion. Do you have an idea of what I mean? Could you word it better?
This is probably easier for the typical LWer, since autodidacts appear to be a non-negligible population around here, but again, much more easily said than done.
My conditions for my claim of high likelihood of success were 1) rational and 2) hardworking.
Regarding other things (hiring, cofounder, investors...) keep in mind that you just really need to satisfice, not optimize. I always try to be honest about my level of understanding, which is why I’m explicit in saying that I don’t have first hand experience. But that doesn’t mean I’m wrong, or naive, or idealistic. I’m judging by what I see from other first time startup founders. People who want cofounders and are hardworking and persistent usually find them. Same with investors, just keep peeling back those layers of risk. I’m talking about the chances you raise money given that you have a good idea and successfully built it. And same with hiring. Companies that have a good idea, hardworking founders, and funding rarely fail because the people they hired were so bad that they couldn’t sufficiently build the product.
Just focusing on a few issues, it seems incredibly optimistic to estimate a probability of 80-90% chance of success (where success is measured in millions of dollars). The probability of each must be above 96%:
Ask yourself: once you break a demand down far enough into its components, is it still hard to say whether or not those components are things people want?
The problem is people don’t want things independently of how they are presented and packaged. Design, UI, and marketing matter.
Regarding other things (hiring, cofounder, investors...) keep in mind that you just really need to satisfice, not optimize.
How do you know this? How do you know what level of optimization you need, and when satisficing is good enough?
It’s good that you acknowledge that you lack experience, and that you are trying to create the starting point for a discussion. Nevertheless, a lot of your claims and hypotheses sound inordinately confident given your current level of experience and evidence. Perhaps this explains the skepticism and cautioning you are facing here.
It’s possible for even rational and hardworking people to fail at execution, or to run out of money or time before they can get far enough. If you don’t see why that is, then I would say that your estimate of the risks is miscalibrated. See my previous posts in this thread for more discussion.
It’s also possible for rational people to be badly miscalibrated, or to start off with incorrect information, in which case their rationality is heavily bounded. As you note, there are significant cached thoughts on the subject of startups.
I’m talking about the chances you raise money given that you have a good idea and successfully built it.
OK, but how do you build your idea to a level of execution that someone will want to fund you? That’s the challenge. Here are just a couple examples:
You might need a site redesign before you want to show your project to a potential investor. This will entail you bringing in an outside designer. Do you know designers who want to work with you? Do you have any ability to evaluate designers and make a good choice? Have you worked with designers before? If the answer to those questions is “no,” then you have a risk of a roadblock or a subpar result. Also, you will need to spend programming time integrating with the redesign. This is time that you aren’t spending developing some other aspect of your business.
You will probably have a slide presentation to show your investors. Who is going help you make it? Let’s say that your designer works on it (more hours), and then you show it to a couple friends for feedback. That’s still a considerable outlay in resources, and it will take time.
Need photography on your site? You either need to work with a photographer, or acquire stock photos. This requires money, taste in photography (or an advisor who does), and time spent picking photos. That’s not super expensive, but it all adds up.
Merely getting a basically acceptable presentation and demo will cost a significant amount of your time. Either you need to make your designer a co-founder (which would be a tough sell since the project is so green and you have a lack of experience), or you need to pay them. You have a limited budget of time and money.
I’m sure you are motivated and enthusiastic to spend those things, but it is risky to throw money into a project that has significant team risks (since you have no team, no experience building teams, and you yourself are inexperienced at development), and market risks (just having a good idea doesn’t mean that your execution of it will appeal to a market: see edanm’s restaurant analogy).
Can you see why I say that it’s at least plausible that you will run out of resources before you can peel back enough layers of risk to sufficiently impress co-founders and investors? It’s possible for you to pull it off, sure, but the execution risks are much greater than you think, because execution is way more important than you have been led to believe. If you show that you underestimate the significant execution risks in a project like this, that itself would be a red flag to a potential investor, who can’t count on you to surmount risks that you don’t fully appreciate.
I would encourage you decide a point where you will cut your losses if you don’t succeed, put your site on your resume, and then go be a web developer at someone else’s startup until you have the skills, knowledge, and connections to try your own startup again. Your enthusiasm is a good quality, but realize that it’s very possible for you to run out of resources before you can satisfactorily execute on your project to get the next level of co-founders or investors.
I avoided commenting on this article, because I didn’t think I’d be able to respond appropriately, given the state of mind it put me in. Seeing where that’s gone, I’ve decided to try anyway.
The quickest version is that you underestimate the likelyhood of failure at several of your points:
I’m not sure the typical LWer who makes it through the sequences is necessarily good at this. We’ve had discussions on social skills and empathy and the trouble with inferential gaps. The population (rationalist | understands potential customers) appears to be worryingly small.
This is probably easier for the typical LWer, since autodidacts appear to be a non-negligible population around here, but again, much more easily said than done.
We talk about willpower a lot. I think it’s safe to say it’s an issue among self-styled rationalists.
Could’ve fooled me.
Yes. Crowdfunding sites could help with this (unless you’re in the subset of people who can’t use them / your idea does not meet the requirements of any of the crowdfunding sites that get sufficient traffic).
Well, in that case -
… This is when, the first time reading it, I decided I shouldn’t reply. At this point, the words “Naive, wide-eyed idealism” kept looping in my head until I went to do something else. Granted, if you get your starting capital, hiring shouldn’t be that hard, since you have something to pay people (including a potential HR person who might be better at managing applicants/hirees, or maybe a legal expert if you fail a comprehension roll with the laws and regulations and paperwork and such.). But by now, we have compounded multiple “I haven’t done this, but it doesn’t seem that hard”s.
Just focusing on a few issues, it seems incredibly optimistic to estimate a probability of 80-90% chance of success (where success is measured in millions of dollars). The probability of each must be above 96%:
Understanding customers well enough that your product or service is something they will want.
Finding a (useful) cofounder.
Raising starting capital.
No issues with hiring.
No legal issues.
Marketing goes well enough to draw in a decent customer base before the innitial investment runs out.
If you can, after doing lots of examination and updating, give each of those a probability above 96%, then of course you should start a startup. But it’s usually safe to say that we’re more likely to trip over more than one of those on the way to failure.
Having said all that, this article does serve a useful purpose of laying out the paths to success and failure with startups, and is a realistic exercise in Bayesian updating, so I’m kinda bothered by how its karma was at −9 before I started writing this response.
I’m struggling to communicate this (let alone argue it), but I think the main problem is the inability to think specifically, not the inability to understand what it is people want. Ask yourself: once you break a demand down far enough into its components, is it still hard to say whether or not those components are things people want? Again, sorry for the poor communication; I wish I could do better. This is why I meant this article to be more of a starting point of discussion. Do you have an idea of what I mean? Could you word it better?
My conditions for my claim of high likelihood of success were 1) rational and 2) hardworking.
Regarding other things (hiring, cofounder, investors...) keep in mind that you just really need to satisfice, not optimize. I always try to be honest about my level of understanding, which is why I’m explicit in saying that I don’t have first hand experience. But that doesn’t mean I’m wrong, or naive, or idealistic. I’m judging by what I see from other first time startup founders. People who want cofounders and are hardworking and persistent usually find them. Same with investors, just keep peeling back those layers of risk. I’m talking about the chances you raise money given that you have a good idea and successfully built it. And same with hiring. Companies that have a good idea, hardworking founders, and funding rarely fail because the people they hired were so bad that they couldn’t sufficiently build the product.
See Eliezer’s comment: http://lesswrong.com/lw/jj8/why_dont_more_rationalists_start_startups/aeza. And note that I’m taking a Weak Inside View (my level of understanding isn’t really strong enough to be making empirical predictions). But still, a lot of the bullet points I listed I think are >99% chance of success.
The problem is people don’t want things independently of how they are presented and packaged. Design, UI, and marketing matter.
How do you know this? How do you know what level of optimization you need, and when satisficing is good enough?
It’s good that you acknowledge that you lack experience, and that you are trying to create the starting point for a discussion. Nevertheless, a lot of your claims and hypotheses sound inordinately confident given your current level of experience and evidence. Perhaps this explains the skepticism and cautioning you are facing here.
It’s possible for even rational and hardworking people to fail at execution, or to run out of money or time before they can get far enough. If you don’t see why that is, then I would say that your estimate of the risks is miscalibrated. See my previous posts in this thread for more discussion.
It’s also possible for rational people to be badly miscalibrated, or to start off with incorrect information, in which case their rationality is heavily bounded. As you note, there are significant cached thoughts on the subject of startups.
OK, but how do you build your idea to a level of execution that someone will want to fund you? That’s the challenge. Here are just a couple examples:
You might need a site redesign before you want to show your project to a potential investor. This will entail you bringing in an outside designer. Do you know designers who want to work with you? Do you have any ability to evaluate designers and make a good choice? Have you worked with designers before? If the answer to those questions is “no,” then you have a risk of a roadblock or a subpar result. Also, you will need to spend programming time integrating with the redesign. This is time that you aren’t spending developing some other aspect of your business.
You will probably have a slide presentation to show your investors. Who is going help you make it? Let’s say that your designer works on it (more hours), and then you show it to a couple friends for feedback. That’s still a considerable outlay in resources, and it will take time.
Need photography on your site? You either need to work with a photographer, or acquire stock photos. This requires money, taste in photography (or an advisor who does), and time spent picking photos. That’s not super expensive, but it all adds up.
Merely getting a basically acceptable presentation and demo will cost a significant amount of your time. Either you need to make your designer a co-founder (which would be a tough sell since the project is so green and you have a lack of experience), or you need to pay them. You have a limited budget of time and money.
I’m sure you are motivated and enthusiastic to spend those things, but it is risky to throw money into a project that has significant team risks (since you have no team, no experience building teams, and you yourself are inexperienced at development), and market risks (just having a good idea doesn’t mean that your execution of it will appeal to a market: see edanm’s restaurant analogy).
Can you see why I say that it’s at least plausible that you will run out of resources before you can peel back enough layers of risk to sufficiently impress co-founders and investors? It’s possible for you to pull it off, sure, but the execution risks are much greater than you think, because execution is way more important than you have been led to believe. If you show that you underestimate the significant execution risks in a project like this, that itself would be a red flag to a potential investor, who can’t count on you to surmount risks that you don’t fully appreciate.
I would encourage you decide a point where you will cut your losses if you don’t succeed, put your site on your resume, and then go be a web developer at someone else’s startup until you have the skills, knowledge, and connections to try your own startup again. Your enthusiasm is a good quality, but realize that it’s very possible for you to run out of resources before you can satisfactorily execute on your project to get the next level of co-founders or investors.