Every company that gets really big is “lucky” in the sense that their growth is due mostly to some external wave they’re riding, so to make a convincing case for becoming huge, you have to identify some specific trend you’ll benefit from.” In fact, Google Ventures head and Stanford GSB guest lecturer Bill Maris measured that timing is six times more important than any other factor as a predictor of success in startups.
Paul Graham points out that “Microsoft for example was not going to grow huge selling Basic interpreters. But by starting with Basic they were perfectly poised to expand up the stack of microcomputer software as microcomputers grew powerful enough to support one. And microcomputers turned out to be a really huge wave, bigger than even the most optimistic observers would have predicted in 1975.”
On the other hand, many startups end up without enough investment or users to start and sustain themselves. An example of being too early for a wave is that of General Magic. The company had begun to develop the concept of the Cloud around 1994, but since there was no real support by cell phone companies and the general internet infrastructure was weak, this idea failed. Today, cloud-based computing is common practice. A startup just can’t disrupt an industry without using the energy of a big wave. So, the best reality check is to ask yourself “Why now? Why hasn’t someone else already tried to do this?”.
But It Looks Flat Today…
It is far too easy to say that a company needs to ride a wave to be successful, but much harder to provide insight into how one might look over the horizon for an incipient wave. While the unfortunate truth is that recognizing an actionable opportunity is far more of an art than a science, there are a number of indicators and techniques that can help:
- Waves are inherently built on disruptive innovation, so develop and test your “disruptive hypotheses.”
- Another critical factor to finding the next big thing is how well you understand the nuances of the current market, since “Chance favors the prepared mind.”
- Try to avoid being overwhelmed by the fear of failure. Try to think of your startup as an experiment, and not a business.
- A wave signifies a much more significant change than mere technological improvement. Don’t ask whether a technology could surpass an existing one, but ask whether a new technology will fundamentally alter market behavior.
- Be sure to look to foreign seas for good surf.
- A lot of times, your customers might prevent you from catching the wave, so be prepared to jettison them, if necessary.
- Manage your cash according to how close the wave is to breaking.
Startup Don’t Surf
Many challenge the idea that timing is the primary determinant of success or failure. A great deal of entrepreneurs that may have appeared to “miss” a wave, but found great success through persistence, creativity, risk management, and other means. Many of these same entrepreneurs stress that, while timing may not have been necessary, it sure would have been helpful to get right.
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