Startup Math

It’s been more than a year since my last blogpost… as I already knew back then – working in a startup, especially in its early days, is too much work to allow yourself to blog more than once a year

However, there are some important insights, based on my experience in Imagga, that I believe are important to share with anyone who is planning to start or has already started a startup… and I couldn’t wait more to share the idea that has been in my head for so long. Here it is:

If you’ve ever been involved in a startup, or at least if you’ve attended a startup pitch, there is always a question like this: “How will you beat or prevent Google/Facebook/Dropbox/whomever… doing the same thing“. Then the founders are either confused and/or answer something cocky like “they are too slow” or “we have a great vision that they lack“.

While these are not necessarily untrue, it often sounds too vague.

However, I think we can prove, even mathematically, that it’s possible to beat those “Goliaths”. Let’s see the actual components of the formula proving this:

• Dedication matters: 24h * 7d / w is way bigger than 8h * 5d / w. It’s actually more than 4 times bigger! And what this practically means… It means that you don’t have hobbies, other than your startup – it’s naturally both your day job and your hobby. When you go to bed you go asleep thinking about it, when you wake up – it’s the first thing you think about, right before jumping out of bed, excited to execute your ideas. You don’t have a real social live as well… No other than occasionally visiting a startup event or two, only if you don’t have something urgent to finish (and you always do). If you hear someone telling you that he runs a startup and has an active social life it means one of two things – she is either a blow-hard startup wannabe showing-off around as the new kid in the block, or there is an imbalance in the team, and someone else probably has to have neither social, nor family life to compensate this.
• Resourcefulness matters: the famous Pareto principle - 80% of the effects come from 20% of the causes. What this practically means for you? As a startup you always start with insignificant amount of any resource you may think of (money, people, network, leverage, whatever…) compared to the big guys. And this is one of the best and most romantic and revolutionary things about startups – you must be extremely resourceful! And Pareto is on your side here – with five times less resources you can still achieve 80% of the result, of course only if you are smart/intuitive/customer-oriented enough to figure out exactly which 20% to go after. And this is another factor of  4 for our formula!
• Passion and commitment matter: This is what actually nurture dedication and resourcefulness. And this is where the real magic happens – someone will call you unexpectedly exactly when you feel most desperate about what’s next, some new idea how to fix a long lasting issue will come to your head, your intuition will help you to identify what is the best thing to do among plethora of possible dead-ends… And these are what other people also feel and what makes them much more likely to help you – “if those guys are giving their best to achieve what they are aiming to do – I’m much more confident that my help/time/money won’t go wasted” they think. This alone can enormously increase your chances to succeed, but let’s approximate it with just a conservative factor of 2.

So let’s see, 4 * 4 * 2 = 32. Now you have a multiple of 32, which means that a dedicated, resourceful, passionate and committed team of 6 can be on par with team of 200 who are not that passionate about their job any more, and are not “hungry” (“stay hungry, stay foolish“, you know…) enough to be resourceful. And this is more than enough to beat almost anything. Yes… Google may work on something that you do, but it’s not all 46 421 people out of it, it’s just a team of 20 somewhere in a lab

Cheers! (And shivers!)

Bonus note: as we are on the maths topic today, I’ll borrow an important math lesson from Lyuben, who is a big fan (sometimes way too big fan) of numbers:

Think of the valuation you want to achieve for your startup and subtract your current valuation out of it. Then divide it by the number of days you think will be needed to achieve your goal. For example:

($1 000 000 000 (the goal) – $2 000 000 (current)) / 730 (2 years) = $ 1 367 123.28

Hmmm… let’s devide it by 6 people in a team:

$ 1 367 123.28 / 6 = $227 853.88 is the expected value creation per man per day in a startup aiming to go north of a billion in two years after its seed round

Now it’s up to you to decide do you want to waste that day in showing-off or ranting in the social networks, reading and being jealous or daydreaming of others success in the media, or shmoozing like a conference ho. Or… you better be giving the best out of you in creating that value you’ve promised your investors, your team, and yourself? It’s up to YOU!