You don't need to be a unicorn. Seriously.
BEAM20 Aug, 2017
This post was first published by C. Custer on TechInAsia
Have you ever been tempted by a lie? If you’re a regular reader of Tech in Asia or any other site like us, the answer is probably yes.
The lie takes many forms. It can be an image, a mirage: you as the successful tech entrepreneur worth billions after a couple years of hard work. It can be a message – an exhortation – from VCs: scale fast or die out. It can be the peer pressure you feel from colleagues and fellow entrepreneurs at tech conferences.
The startup lie is that everyone ought to aim for a massively scalable, massively valuable business. Go unicorn or die trying. The startup lie is that anything less than Jack Ma or Mark Zuckerberg levels of success isn’t actually success at all. The startup lie is that you can have all of that if you just work hard enough.
The tech startup failure rate is ridiculous
There’s no denying that compared to other industries, new businesses in the tech sector do terribly. Most estimates put the tech startup failure rate above 90 percent. And that’s not just a cliche: a Startup Genome study of more than 3,200 startups from a few years ago found that more than 92 percent of startups failed within three years.
If you’ve been working in tech a long time, that probably seems normal to you, but it isn’t. The three-year failure rate in most other industries is less than 50 percent. If you do a tech startup, you’ve got a 90 percent chance you’ll be out of business within three years. If you choose do start a new retail business, by contrast, you’ve got a greater than 50 percent chance you’ll still be alive at the three year mark.
What’s killing tech startups?
So what makes starting a new tech company so much worse than starting (for example) a new mining company? Answers vary, but let’s return to that Startup Genome study. It found that the number one cause of death among failed startups was premature scaling: spending too much, expanding too fast, and hiring too many before you’ve found a workable business model.
So what causes premature scaling? A lot of things. But I believe that a major contributor is the general culture of the tech startup industry. We drool over unicorns. We worship at the altar of companies like Facebook, companies that expanded rapidly and aggressively with no real interest in generating revenue. And while that approach did work for Facebook, it has failed for countless, countless other companies.
We also idolize men like Steve Jobs, who have achieved tremendous financial success, but only at equally tremendous personal cost. He reportedly often worked 15 or more hours a day, was considered by many of his colleagues and employees to be a total jerk, and in the end was so dedicated to his work (and to his misguided belief in alternative medicine) that some medical professionals have suggested he basically killed himself. In fact, these kinds of sacrifices – working extraordinarily long hours, never taking vacations, destroying relationships with friends for the sake of shareholder value – are actually celebrated in our industry.
It’s all part of the big-picture startup lie: sacrifice everything, and you can have everything. Of course, that isn’t true. There are many founders who’ve made equally huge personal sacrifices, worked dangerously long hours, and destroyed relationships with friends and family all for startups that failed miserably. That is, after all, what happens to most startup founders.
What’s in a name?
None of that is totally tied to tech, of course. There’s plenty of money-worship and long-hours-equals-successful-role-model nonsense in other business sectors too. But I think the tech industry is the worst because our unicorn-obsessed culture sets its sights sky-high, and some of our most successful businesses have succeeded by pretending they weren’t businesses and ignoring revenue, sometimes for years at a time.
This is even reflected in our language. In most industries, a new business is just called a new business. As in: “My brother just started a new construction business, so I’m going to go work for him.” But in the tech industry, we don’t have new businesses, we have startups.
That might seem like a meaningless difference, but I think it really does lead to a difference in perception. Businesses need revenue and profits. Startups need users and scale. The end goal is always profitability, of course, but in the tech industry profit is often presented as something that will come inevitably at some point down the road. Don’t worry about profits. Just work hard, scale, and eventually you’ll be rolling in dough. Of course, most startups die long before they reach that point.
You don’t have to be a unicorn
Now, I’m not suggesting that there’s anything wrong with trying to be a unicorn. The tech industry, and the world at large, needs people with those kinds of big ideas making high-risk, high-reward plays. The industry lie is that you have to be one of those shoot-for-the-moon founders, or you’re an unambitious failure. The industry lie is that you have to sacrifice every other aspect of your life to build a successful tech firm.
The truth is that it’s possible to aim lower, and there’s nothing wrong with that at all. Your business doesn’t need to be globally scalable. It doesn’t need to be a potential unicorn. If you can create a startup that addresses some local need, and that lets you and your friends work on something you enjoy while earning a decent living, why shouldn’t you? Sure, you may have more trouble raising VC funding if you’re not shooting for the stars. But if you’re not trying to scale massively, it’s also more likely that you won’t need VC funding.
There’s no shame in being a successful tech founder who isn’t the next Steve Jobs. There’s no shame in not trying to change the world. There’s no shame in wanting to start your own tech business and still have a healthy work/home life separation. And there’s no law that says you can’t do exactly that.
Our industry often promotes a very singular vision of success, and a singular model of what a successful tech entrepreneur should look like. If you want to follow that path, more power to you, but do so knowing that for most people it will end up being just a lie, just a mirage. And if you don’t want to follow that path, you should know that it’s possible – and perfectly acceptable – to build a small tech business that doesn’t scale and still live a happy, healthy life.