Startups are not a game

Earlier this week, I attended an event in Chicago where startups gave brief presentations about their businesses and answered a few questions from the audience. On the whole, the event was very disappointing, for a variety of reasons. Of the eight startups that presented, one (or perhaps two) identified viable market opportunities that aren't 1) Irrelevant, 2) Already being served, 3) Impossible to scale, or 4) Vulnerable to immediately being taken over by a bigger company. In addition, many of the presentations were amateurish. You expect demos to crash--that's a given--but most of the presenters hadn't thought through what might happen if they couldn't access WiFi. (And, if they didn't think through a simple problem like not having access to a network, how likely are they to think through much more difficult problems like building a sustainable business?)

What's disconcerting to me is how many people see startups as a game. It's incredibly easy to start a company; the software and services necessary are available for free or at very low cost, at least while the business is in the development phase. Incubators, startup weekends and shared workspaces are popping up everywhere. Yet, the real process of starting and running a business is hard work. There's no glamour and very little fun involved with spending 12 to 14 hours a day raising money, staffing up, talking with customers, writing and testing code, and selling. However, creating a startup is far too often seen as a game that's won when the business raises funding.

Eric Ries has written an excellent post about the "startup winter" that will inevitably come. There's too much volatility in financial markets for venture funding to continue at its current pace. Today alone, five IPOs were delayed or withdrawn. Ries believes that "a shocking number of the current crop of incubators, accelerators, and other startup-support programs will suddenly disappear," especially second- and third-tier programs. Think about how few of the startups spawned from these programs actually mature into successful businesses, and how many of them pivot just in the few months that they're in incubators and accelerators.

Given the low success rate of most of these programs, they look a lot less like incubators for successful businesses and a lot more like post-graduate entrepreneurial education programs. They do have one big difference from conventional educational programs: Instead of charging tuition, these programs pay a stipend to participants. It's not a bad way to learn (depending on who's teaching), but it's not necessarily a good way to launch a business. Don't get me wrong--incubators like Y Combinator and TechStars have had a lot of success; it's the second- and third-tier programs that are much harder to justify based on their track records.

If the flood of capital that's been chasing startups dries up, running a startup will no longer seem like a game and will become what it always has been--hard, risky work. At that point, I expect many of today's startup entrepreneurs to go back to looking for full-time jobs.

A better way to do startup weekends

The TechWeek conference that I wrote about earlier this week included a startup weekend event. At a startup weekend, a group of aspiring entrepreneurs propose ideas to turn into businesses over a weekend (typically, 50 hours). The first step is to whittle the list of ideas down to 10 or so, and then the participants whose ideas weren't chosen join the teams whose ideas will be pursued. For the remaining time, the teams flesh out the ideas, talk to customers and write code. At the end of the weekend, the teams present their startups to a group of judges (typically, angel investors, venture capitalists and other entrepreneurs).

Startup weekends have a lot of problems, but the biggest one is that they turn startup creation into a game played over two days that can be won. That's not how startups work, and startup weekends trivialize the process while focusing on things that the team members already know how to do.

I sat in on the presentations at TechWeek's startup weekend. The demonstrations of working code were very basic, when there was any working code at all, and by and large, the "customer interviews" turned out to be nothing more than a collection of market size statistics gathered through Google. Jason Cohen, in his "A Smart Bear" blog, wrote some advice for startup weekend participants, and he pointed out that the goal should be figuring out whether or not you've identified a viable business opportunity, not demonstrating your ability to code:

You and I know you can code an app and produce a simple clean home page. Everyone here can. So the quality or quantity of that creation will not be why your company succeeds.

Cohen makes some excellent suggestions about what startup weekend participants should try to accomplish, but his key recommendation is to get out of your comfort zone. Developers are excellent at writing code, but they tend not to be as comfortable with talking to customers or identifying business models.

With that in mind, here are two suggestions for alternate startup weekends that could be more valuable in the long run for their participants:

• Customer Development Weekend: As with current startup weekends, participants propose product and service ideas and whittle them down to 10 or so. Each team then figures out how to present its concept, writes a questionnaire and starts interviewing potential customers. The team must interview at least five potential customers face-to-face. It then takes the customer feedback from the interviews and uses it to either modify the original concept, or discard it in favor of a new concept, which then has to be retested. Once the concept is solidified, the team considers and selects one or more business models, and develops arguments for why the model (or models) will work. Finally, the teams present their concepts, along with the interview research to substantiate them, and their business models.
• Building Strengths Weekend: It starts with the same process of coming up with a list of 10 or so product and service ideas, but then the team members work on the areas where they need the most help. The developers are responsible for getting out and talking with customers. The businesspeople with no programming experience learn how to program enough to build a skeleton of the concept. Everyone learns by doing. The final presentations show what the teams accomplished, and what they need to work on in the future.

The goal of starup weekends should be to learn what you don't know, rather than do the same thing on the weekend that you do during the week. If the objective is learning rather than winning a prize, the competitive aspect does more harm than good.