Startups Require A Lot Of Experiments To Find The Scalable Business

by | Apr 13, 2022

How many things did you try before you decided on this startup idea?

First-time entrepreneurs are surprised to hear this question. They just don’t know simple “innovation math” yet.

Experienced entrepreneurs know that for every 10 good ideas they think up, only 1 or 2 of them are worth pursuing.

And of the 10 startup ideas worth pursuing, only 1 or 2 will create a really interesting business that could grow big.

So that’s a few serious business opportunities out of a hundred good ideas that actually could turn into successful startups.

Remember “survivor bias?”

Survivor bias is when you only see the success stories–the survivors–and you think that they all are like that.

But you are seeing just the big winners. The 1% of 1% of the all the tries.

You are only seeing the “survivors” when you look at venture funding announcements and IPOs.

The survivors may have all done the same things to grow up, but that doesn’t mean that every startup that does those things will grow up.

And most startups don’t grow up.

Investors know this too.

Investors don’t want to hear “I have this idea and now I need funding to take it to market.”

Investors do want to hear this:

“We had a bunch of ideas in this area so we tried a bunch of things. Based on what we learned with our experiments with products and customers, we now know this works, and we are focused on it.”

That’s what product-market fit actually means. Focus + traction.

Investors don’t want to fund your earliest ideas and experiments.

They want to fund the things you see are starting to work well now after some experimentation.

And there is still massive risk in investing in startups that have tried a bunch of things and have narrowed it down to focus.

Show me a successful growing venture with laser focus and I will show you the time and money they spent trying many things before they found their focus.

It’s always there in success stories, but we don’t hear about their experiments when the founder tells the story in hindsight.

So the real game for early startups is this:

Survive long enough to find just one of your product-market experiments that should grow into a real business.

Simple innovation math means you need to run more experiments than you thought.

Greg Head posted this on LinkedIn on April 13, 2022.

Check out the comments and join the discussion on LinkedIn.

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