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By Thomas Baekdal - June 2015

Note to Startups: Learn How to Juggle

Here is something to think about: Why scale kills startups (and media companies).

One of the quickest ways to fail is to just try to aim for size, rather being good at something. This a particularly nasty problem these days in a world where every VC backed startup (or media company) is focusing on building scale at the expense of everything else.

It's like juggling. How do you learn how to juggle? Well, it's simple (and quick). You start small (at first with only one ball, then two), you learn the technique, and you stick to it. That is, you only move forward to the next step when you have enough confidence and skill to master the current step. In other words, you grow your skill organically.

And if you do this right, you can actually learn how to juggle in less than 20 minutes. But if you try to skip ahead, it's going to take a lot longer and most people never learn to juggle at all.

It's the same about startups, especially those backed by VCs. The VC comes along with a bag of 10 balls, and tells the startup to start juggling. The startup throws all 10 balls up into the air, having no real clue as to how to run a business. It looks amazing and makes a ton of noise, but since he hasn't actually learned how to juggle, they all come crashing down. So that startup goes out to the VCs and asks for another round of funding (another bag of balls). The VC being really impressed by all that noise the startup made, then gives the startup another bag of 20 balls, and the startup throws all those up into the air ... and the process repeats.

The problem, however, is that the startup never actually learned how to run a business. And in 97% of the cases, the startups go out of business when the VC gets bored and decides to not do another round of funding. In 2% of the cases, the startup is bought by another company, who either hasn't realized that it can't juggle, or have seen a piece that they could use. And in the rare 1% of the time, the startup actually do learn how to juggle... after several years of running at a staggering loss.

Facebook is one of those rare 1%. For years it had no idea how to juggle, but it finally learned how to do it. Twitter, on the other hand, still doesn't know how to juggle. It still doesn't know what Twitter is supposed to be, or how that can be realized as a business. It's the same over at Medium. They keep throwing new balls into the air, before their current ideas have had a chance to be turned into a sustainable business.

Media startups like Circa, well... they thought they knew how to juggle, but people clearly weren't convinced, and their VC backers got tired of watching them throw balls up into the air.

So, learn how to juggle. Learn how to make a profit with your growth.

BTW: Also read Fred Wilson's excellent post 'Profits vs Growth'

 
 
 

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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