Over the last couple of years, “doing a start up” has, for many, become the new “starting a band”. Companies like Facebook and Twitter and the film “The Social Network” have glamourised technology and internet based start ups, particularly consumer facing social networks. This has created a bubble in that, people are moving from other industries in order to join the start up movement. People with backgrounds in business, finance, law or other traditional industries are quitting their career to began their start up journey. Often these type of people view the creation of a start up and an idea very differently from someone with a technology based background. Knowing when to quit, restart or pivot is critical to the success of a technology based start up. Here are the dangers of not knowing when to quit.
The “start up” bubble
Technology based business is booming. Despite the global recession, there continues to be a huge injection of capital into Internet and technology based companies. Twitter recently raised another round of funding, taking total investment to close to $1.2 billion and Facebook is set to IPO with a valuation of $100 billion. Technology, and particularly consumer facing companies are the new hot prospect, and so the rise of the industry has created an influx of participants from a variety of different sectors. It is now easier than ever to start an Internet based business. With companies like PayPal and SendGrid and services like Amazon’s Web Services (AWS), the foundations for creating online business are already good to go. This means that the entry point for creating a new services is increadibly low. These low barrier of entry have become attractive to people in more traditional industries like Finance and Law who may see the start up path as a better way of realising their future wealth.
The “incubator” bubble
With the continued rise of technology investment, incubator type programs have been springing up all around the world. Technology incubator programs consist of teams of new companies going through an intesive program of mentoring, product and business creation with a small amount of cash investment. The aim of incubator programs is to create viable businesses by the end of the program that are ready for further investment. Incubator type programs like these are extremely attractive to a team of people with an idea for a business. Their mentorship and teaching routine allows a new idea to be nurtured and defined within a close community of like minded people. However, it also adds an increadibly amount of pressure on the teams not to fail.
What happens when you don’t know when to quit
Now I’m not saying that people who don’t come from a technology based background are going to fail. I believe that being an expert in an area, with an extensive background and understanding of how an industry can be disrupted is a huge indicator of future success. However I do believe that people who don’t come from a technical background are more likely to be unable to understand when to quit and try something else.
Technical based people are inherintly those that love to tweak or try new things. Programmers and Engineers can be classified loosly as people who like to experiment and push the boundaries of what can be achieved. I think that, without this mindset, as a start up founder, you are less likely to know when you need to try something else.
I think it’s very rare for someone to have an idea and have that idea become a huge success. More often than not, that idea will radically evolve as time goes by and as the idea is executed. I believe that, technical based people are better equipped than those without that background. And that someone who is looking to disrupt an industry they previously worked in, don’t recognise the same signs for knowing when to quit, pivot or restart.
The ability to pivot, restart or quit
I think knowing when to change is a critical componant of being successful as a technology based start up. If you are starting an online based company with a grand vision, you need to be able to accept that perhaps things aren’t working out and it’s time to try something else. Combining a passion with technical based company is a great way to start a company. There are many niches that are ready to be disrupted, and many new areas to explore. However, knowing when to evolve is critical, and knowing when to quit is equally as important. The dangers of not knowing when to quit are that you end up building a sofisticated product that nobody uses, or you build a service that is incapable of reaching the scale of your vision.
How to know when to quit
I think as a founder you need to know when you need to quit or change your vision. As a company you should be tracking the key metrics that validate your idea and not the vanity metrics that will get you featured on TechCrunch. I think you also need someone with a strong technical background who understands the rollercoaster ride of taking an idea and excuting on it. Founders often surround themselves with people who tell them what they want to hear. However, constant feedback and honest validation will save you a lot of time, money and heartache in the long run.