A General Approach To Web Startups

It used to be the case that if you wanted to start a business, you’d spend a lot of time writing and researching a detailed business plan, in-depth financials, and doing all sorts of analyses of risks and possible scenarios. I naively tried starting an education business like this in 2005 and wasted a whole lot of time in the process.

It’s self-evident that the higher your cost of failing, the less times you can afford to fail. It used to be the case that starting a business was a costly enterprise – you’d have to build a factory, invest in machinery, and embark on a costly sales process. There was a lot of upfront capital expenditure required before the first product was purchased. In that scenario, if you failed it was unlikely that you’d have the capital to restart and give it a second try. Hence, minimizing your chance of failure was key.

Today, startup costs are minimal and hence the cost of failure is way down. This means that the value of the time required to write and research extensive business plans is higher than the cost of executing on a loosely formed idea and iterating on it a few times as you learn what isn’t working.

This build-learn-repeat approach is old news for web startups, but one that is a key starting point for any new web business. Steve Blank’s “Four Steps to the Epiphany” is an oft-quoted treatise for this approach (note, Steve is an investor in my current company) and a great starting point.