I see dead startups

My buddy, Dave Binetti of Votizen came down this last Monday to present on False Prophets at LeanLA.com’s last meetup (a meetup I co-organize).  In his talk, about the subject of False  Negatives and False Positives came up.

In the context of startups, a False Negative means that while your startup is not getting any traction or love with the market, investors and talent and doesn’t appear to be inching close to Product-Market Fit  —–  there is a high probability that it is actually a really, really super-duper idea and you could exit for $100m in 3 years.  You don’t want to give up because you, in your heart of hearts, know this — even though no one else believes it.  The fear of the False Negative is giving up too early and letting a good idea die or worse yet, seeing someone else take it and blow it up in a big way.   IMO this is a very legitimate fear.

In contrast, a False Positive is a lot like the living dead, a zombie (Dave’s analogy) or even better yet, Malcom Crowe of The Sixth Sense*.

Cole Sear: I see dead startups.
Malcolm Crowe: On TechCrunch?
[Cole shakes his head no]
Malcolm Crowe: At Coupa Cafe?
[Cole nods]
Malcolm Crowe: Dead startups like, in books about startups? In textbooks?
Cole Sear: Operating like regular startups. They don’t see each other. They only see what they want to see. They don’t know they’re dead.
Malcolm Crowe: How often do you see them?
Cole Sear: All the time. They’re everywhere.

Remember, neither Malcolm Crowe nor the audience know Malcolm is actually dead until the end of the movie.  And that is the danger of the False Positive; the high probability that your idea really doesn’t have any merit but you limp along and persevere because you a) ignore or eschew relevant negative feedback b)  listen to false prophets that look and feel like progress but are anything but —- all the while, hoping for a positive Black Swan to stumble over.  And then when your money runs out, it all comes back to you, in a scary montage, about how you had ignored all the creepy signs of being dead.

Every startup founder has to ask oneself is:  How do I avoid them?  Which is more likely?  The probability of a False Positive or that of a False Negative?  They’re both real fears — but which is materially worse?

As always, there are no easy answers to questions like these.

However, you might guess that I (and Dave btw) think that the False Positive is orders of magnitude more likely, more insidious and more evil — and that one reason why Customer Development and Lean Startups make sense to me.

*Thanks to Robin Ahn for suggesting this analogy.  Brilliant.

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