I just got two emails asking about JFDI’s ‘success rate’ with startups. They set me thinking about the patterns of success and failure we’ve seen looking at well over 2,000 startup teams in the last few years and why we can now pass on 96% of the applications to JFDI Accelerate with confidence, writes JFDI CEO Hugh Mason.
Happy families are all alike; every unhappy family is unhappy in its own way
Leo Tolstoy’s famous opening to Anna Karenina contains so much wisdom that it has become a shorthand for a statistical truth about all endeavors in which a deficiency in any one of a number of factors will doom it to failure. Success comes only where every possible deficiency has been avoided.
So it is with startups. They are like Tolstoy’s families. Looking behind the tears to understand the unhappinesss is what makes it possible to run anaccelerator like JFDI.
We don’t try to ‘pick winners’ because we are humble enough to recognize that we don’t have a crystal ball to predict if all the factors will line up in the future. With pre-market startups, much as William Goldman observed of feature films before their release:
Nobody Knows Anything
So instead of guaranteeing teams a pathway to success, our mentors act like sherpas supporting climbers tackling Mount Everest. Because we have ‘been there, done that’ before, we can help whoever wants to listen to avoid the hidden traps that have doomed ‘losing’ teams in the past . And we can suggest some alternative routes to the summit.
One of our mentors is giving a talk shortly and this morning he asked me for some concrete examples of patterns of success and failure. So I thought I would share an overview in this post.
Success is a poor teacher
Backing up Tolstoy’s opening line, I can’t say a lot about JFDI’s standout successes like Tradegecko or OurHealthMate. They are happy families, alike because they are great teams that did all the right stuff with focus. They understood a problem worth solving, quickly found a solution and hammered away until they got traction through market-solution fit.
They were lucky that they hit the right timing to launch but it certainly wasn’t easy. A key factor was that the CEOs of both teams were humble and wise enough to listen to advice from many people, even when they had strong intuitions of their own. Beyond that I can’t really tell you why they are winners.
If I spent the time, I am sure I could write a book documenting a thousand ‘hacks’ that worked along the way. People do write ‘secrets of Steve Jobs’ books just like that and suckers do buy them, just like mediocre golfers fall for the advertising and buy the same golf clubs as Tiger Woods. And students in China pay to attend universities cloned down to the exact building layout of successful universities in the west. It’s the same misplaced faith of the Cargo Cults of the South Pacific.
Learning from ‘losers’
A much better approach is to look openly and systematically at failures. Why did this break? If we can see a pattern, we can stop making that mistake again. This approach was pioneered in aviation in the 1940s, which is why flying is now so safe, and it’s now saving tens of thousands of lives each year in medicine. A big part of JFDI’s mission is to apply the same approach to entreprenuership and innovation.
Among JFDI’s ‘failures’, Remember was so instructive that we invited its CEO Adrian Tan to join us as a coach. He wears his ‘failures’ with pride because those are his credentials to teach.
Trafflers is another example. About three years ago, it was clear that group travel was one of the fastest growing segments of that market. So ‘social travel’ applications linked to social networks looked like a good bet. Trafflers tried to make it easy for groups of people to decide where they want to go and then to coordinate all the setting up of a trip.
But it turned out that, while this is a service that people like, they don’t use it often enough to remember it is there. The same is true for online wedding planning services: you use them at most once or twice in your life and then you forget about them. So applications like this aren’t usually ‘sticky’ enough in peoples’ minds and the cost of customer acquisition is disproportionately high compared to the lifetime value of that customer. Obvious now, but not before we gave it a go. Today this problem is well documented in the failure of many other non-JFDI startups like Plancast.
“So if you are so good at spotting these patterns”, a tech blogger once asked me, “Why do you only get 60% of your teams funded? Why do 40% fail?”
Try and Try Again
The thing is that we need to keep trying because sometimes somethning changes in the environment that makes yesteryear’s failure viable. For example, Steve Jobs failed once with a tablet: if you haven’t seen it, do watch the original promo for the Apple Newton. But then Jobs hit the jackpot a few years later with the iPad. Same idea, different timing.
In that case it was technology that changed the market but maybe also peoples’ changing patterns of use of computing and the widespread availability of mobile data, creating a much richer experience with the iPad. What economists might call ‘externalities’.
Startups are Complex
I studied Physics and so one way I like to make sense of all this is to say that startups operate in a ‘non linear’ domain. Like the predicting the weather, understanding the booms and busts in the economy and the plagues and famines of nature, startups are part of complex adaptive systems, the science of which we are only just beginning to understand.
What is becoming clear is that a different style of leadership and a new way of thinking is necessary to navigate a startup. That is what we try to learn and share at JFDI. Once we have finished recruiting for the JFDI 2015B Accelerate program I will write again analysing the hundreds of applications that came in, aiming to share the lessons from the selection process.