Enduring Critical Devalidation (AKA How To Keep Your Startup From Dying)

So you get a great idea, and you decide to turn it into a company. You
get together with a few friends, and start hacking. But at some time,
you may encounter what I call a critical devalidation. Essentially,
this is the point where you realize that it just isn't going to work.
Maybe you don't have the right team, or people just don't want the
product, or it costs you too much to sell relative the revenue it will
bring in. For some reason, you cannot keep holding the current course
any longer. You need to abandon your current efforts and go back to
the drawing table.

The first thing I can say is that you want to encounter these points
as quickly as possible. It is much easier to cope with abandoning
something you have worked on for a few weeks than something you have
been doing for a few years. If you are talking to your customers and
validating your ideas, you should pretty quickly get an indicator that
something isn't right. However, regardless of when it happens, this is
always a crushing moment. You can literally see the spark in someone's
eyes fade as they have that realization.

So how do you deal with this? I'm going to confess that I haven't been
terribly good at dealing with it in the past, but I will give you a
bunch of options that don't work, and then I will recommend a few
options that seem reasonable.

What Doesn't Work
Here are some things I have tried in the past. None have worked well
for me, so I will tell you about the possible pitfalls of each.

Giving Up
If you give up, there is no way you will possibly succeed. Sure this
is hard, but that's why the potential rewards are high. Sure you could
go back to Corporate America and make a nice steady paycheck working
for some big corporation, but that isn't what you want to do. You want
to make this work. You have this stuff in your blood.

Doing Nothing
The first thing that doesn't work is doing nothing. You can sit around
moping, thinking about what could have happened if your idea made it
big. Sure, it's fine to take a little while to mourn. In fact, it is
better to mourn for a little while than it is to jump immediately into
something new. But don't take too long. Realize that the sooner you
get back to work, the sooner you will find the idea that makes you
successful.

Keep the Same Course
A second option is to ignore the critical devalidation, and to keep on
going. This actually could be a reasonable option in some cases. Maybe
you made some bad assumptions, which led you to unfairly conclude that
your product is the wrong one. Possibly there is a different market
for the same product, or you can figure out how to reach the actual
people who want your product. Remember that startups are outliers - I
would never immediately dismiss an idea because there isn't a $1
billion addressable market (I have seen people do this). Many of the
best companies start out small, and hit it big later on.

However, it is important to be realistic. If people don't want your
product, they don't want it. Don't keep beating a dead horse. If you
can figure out how to make them want it, do that, but it isn't going
to magically happen. Sure, Hail Mary shots hit the basket once in a
blue moon, but each Hail Mary shot will prevent you from getting back
to two-point attempts. Build something people want. You can build the
best product, but if no one wants it, then you won't make any money
(or make the world a better place).

Quickly Jump to Another Product in the Same Vertical
So you have spent a while understanding a vertical. You don't want to
abandon that and start again. So you tell your team, "why don't we
build Y instead of X?" The problem with this is that you may not be
passionate about product Y. My original startup killed our first idea
because of lack of addressable market. We quickly jumped to another
product that catered to the same industry. Honestly, we weren't as
passionate about the second product as we were about the first. So it
never quite felt the same. Plus, we pretty much failed for the same
reasons the second time around.

Leap Without Looking
It is easy to jump to the next reasonable sounding idea. After all, it
is better to be working on something than to sit around twiddling your
thumbs. However, if you jump too quickly, you may end up making the
same mistakes all over again. It took a lot of effort to get to the
point where you abandoned your last idea, so don't waste that. Look
around, and some time really thinking before you start working on
something new.

What to Try
Here are some things that I have tried. None of them have worked yet
because I haven't hit it big, but they all seem like reasonable
approaches. I'm probably going to focus more on them in the future.

Reevaluate Your Team
Do you have the right team? If you failed because of lack of sales
talent, find sales people. If you couldn't reach enough users, find
marketing people. If you don't have an engineer on your core team, get
one. This is not to say that you should spend your time pointing
fingers, but definitely think about what it takes to get the job done,
and figure out whether you have that. If not, this is a good time to
switch.

Find Something That Caters to Your Strengths
Everyone has certain talents. There are products that cater to those
talents, and products that don't. Maybe one of you is an experienced
Enterprise Salesperson. Well, if you are creating Consumer Internet
products, their talents probably aren't going to best use. Maybe you
love bikes but are spending your time trying to create a product that
sells bowling balls. It's easier to do something you know how to do
than something completely new. Starting a company is hard enough
without having to do things that you have no particular talent for or
interest in.

Build Something Exciting
This is easy. What are you passionate about? Build that. Build a
product that solves one of your major problems. In business school, I
learned a lot about Kaizen. Hold a Kaizen for your life. Keep a pen
and paper with you at all times. Every time something annoys you,
write it down. Every time you feel like it would be nice to have "X",
write it down. After a while, look at your list, and there are
probably a whole slew of new product ideas.

Start Testing Early
So you probably waited too long to test your last idea. After all, it
was your baby, and it wasn't ready to face the big bad world. But it
still got trampled by elephants as soon as you let it out there. So
accept that some ideas will fail, and write that off as the casualty
rate. Think up several ideas, and test all of them as quickly as
possible. Think up the tests before you build the product, so that you
can build a minimum implementation with the fewest possible features.
Then you can build, test, pick the best idea, and focus on making that
one successful. Or maybe none of them pass your tests. Then you have
saved yourself a lot of time and trouble.

Keep Going
Regardless of what you do, keep going. You will miss 100% of the shots
you don't take. A lot of people give up too early; it is easy to give
up. After all, you put your neck out there, worked your butt off for a
while building something, and got rejected hard. But the most
successful entrepreneurs keep going until they succeed. If your
product fails, build another one. If your team falls apart, build
another one. If you are out of money, figure out how you can get by
for a little longer (maybe some consulting work or a part-time gig).
If you are dejected, tap into your support network. Make sure that
they are people who will provide encouragement to the end - some
well-meaning people will prematurely tell you to quit.

This isn't easy, but you can succeed if you keep trying (and learning
from your mistakes).