Startup Make-Believe

Remember playing Make-Believe as a kid?

We’re knights in King Arthur’s court, and we’re going to seek the Holy Grail. We’re astronauts on a mission to outer space, and the backyard is an alien planet. We’re building a pillow fort – it’s our castle for the afternoon. Make-Believe is a fun, harmless fantasy game for all the kids in the neighborhood to enjoy.

Just like young kids, young companies love to play Startup Make-Believe: Pretending to be something that they’re not, in particular a much larger and more mature business. Our enterprise SaaS competitor throws the best industry events, and sends 100 people to AWS’ annual conference – we need to send as many people as we can afford. I heard of a company have teams of 50+ engineers just to maintain their deployment infrastructure – we need at least 4 people to make sure that our deployments are world class. Internal alignment on velocity is vital – we should have a department just for internal training on how to be more efficient.

The problem is that:

  • Startup Make-Believe saps your most precious resources, in particular your time and attention.
  • Startup Make-Believe is just as fun as playing Make-Believe when you’re a kid – maybe even more fun. In Startup Make-Believe, you often get to go to cool events in Las Vegas or fancy dinners in Napa. If it’s fun to start, it’s hard to stop.
  • Worst of all, most Startup Make-Believe activities actually make a lot of sense – just not for startups, i.e. you. As a result, you’ll read many Imposter Syndrome-triggering blog posts that make you feel bad that you’re not copying the big kids.

If you catch yourself playing Startup Make-Believe, I recommend that you consider very heavily whether the behaviors you’re emulating actually make sense for you. In the earliest days of a startup, all that really matters is finding product-market fit (PMF); once you’ve found PMF, tightening it by building everything that your customers need (and finding more customers) is the next order of business. Startup Make-Believe activities won’t help you find or strengthen your product-market fit, because they come from companies that found PMF decades ago.

Don’t fake it if you haven’t made it. Let’s dive into the common temptations of Startup Make-Believe, why they exist, and why they don’t make sense for an early stage business.

Data Obsession

The Fantasy: All the best companies are data-driven, and we need to be data wizards so that we can make decisions “correctly” / “better.” Let’s invest heavily in data tracking and analytics to make sure that we have a best-in-class data program.

The company that gets emulated the most here is Meta. Meta has built an extremely strong data-driven culture over the years, and it’s truly inspiring to see how they’ve used it to align and scale their business. Everyone knows what matters to them, and how to prove that they’re making an impact (move the number, make more money).

But you’re not Meta. Meta’s business is complicated to operate but conceptually kind of simple – people open app, people see ad, we make money. More importantly, as a startup your data is small and probably incomplete, if not actively incorrect. This means that being doggedly data-driven will be useless in many cases and sometimes actively counter-productive.

This isn’t to say that data is useless to startups, but you need to use your judgment and focus on gaining high confidence on decisions for low effort. For example:

  • Tracking and trying to move retention rates (very important!). Both gross and net retention are critical in SaaS.
  • Tracking basic adoption statistics such as Monthly / Weekly / Daily Active Users, number of customers using a feature, and incremental revenue
  • Running simple surveys of your team on what’s working and what isn’t

Process Obsession

The Fantasy: Velocity wins, so we need to optimize all of our internal processes so that we’re the most efficient team out there. Let’s hire an internal communications lead as our 50th employee, and bring in experts (or consultants) to help optimize internal processes like sprints and program management. We’re going to run this place like a goddamn Toyota factory.

The temptation to fine-tune your internal processes is high. Messy internal processes feel bad, and more successful companies appear to have things optimized operationally, so it’s an easy factor to point at to explain why they’re thriving and you’re not. More importantly, having messy internal processes drives certain OCD personalities absolutely crazy, and the act of cleaning up messy processes makes some people feel less anxious because it feels like progress.

Some common areas that are common traps for premature optimization of internal processes:

  • Sprint processes, and more generally optimization of the software development lifecycle
  • Organization and grooming of product backlogs
  • Communication of the roadmap
  • Organization of information in systems like Notion, Coda, Confluence, or internal Wikis

The reality is that having a process for important tasks is important, but the specific system that you use rarely matters that much. Especially beware of expending effort on:

  • Pursuing a high degree of consistency, which is an inherently unstable goal when your team is growing and maturing rapidly.
  • Low-frequency processes, since most events that happen less than once a month or so can be handled via ad hoc conversations.

Hopping Onto Every Hype Cycle

The Fantasy: We’re going to take over the world, and as a startup we’re going to move fast. When a new technology shift arises, we need to hop on the train and make sure that we’re taking full advantage.

New tech trends arise all the time, and some (but critically not all or even most) end up reshaping industries or even the world. Many startups are born out of a major technology shift. But shifting with the winds of every new technology change kills startups due to distraction.

Large enterprises have the resources to pursue many ideas – Alphabet was once famously working on multiple chat apps simultaneously. Moreover, enterprise software companies in particular actually need to have many pokers in the fire. Buyers of enterprise software essentially outsource some of their innovation to their vendors, and as a result to maximize sales most enterprise SaaS companies position themselves as (effectively) doing everything.

One of the best examples of this is Salesforce. Every year at their conference Dreamforce, Salesforce is excited to announce that they provide every technology use case that any human has ever heard of. This works incredibly well for selling 8-figure software contracts, but doesn’t work for startups because:

  • Your CEO is not the greatest living tech product marketer, backed by his Praetorian Guard of marketers and legions of sales teams.
  • You don’t have the money to acquire any solution you need to once the wave it’s riding has been proven to work.

Instead, you need to follow the simple but boring advice of simply focusing. When you’re large (say, after $100M ARR), you can start to chase every shiny new object, but until then you should focus to ensure that you actually catch what you pursue.

Creating Weird Roles

The Fantasy: For this one, we can MadLib it out:

I heard that {some famous company} has a unique role for {internal / cross-team / industry / market segment}-specific {communication / operations / alignment / strategy / evangelism / excellence}.

We should hire that role, too!

No, you shouldn’t. Large companies with thousands of employees have all sorts of positions that match their business but not yours. Here are a few common reasons why:

  • In the best case, these companies are so large that very narrow roles can make sense, particularly if they add more focus or communication between large teams that don’t report to one another. For example, if you have a billion dollars of ARR, it might be worth hiring someone specifically to help your sales team squeeze 3% more out of a single big partnership.
  • They have an internal organizational structure that requires unique roles. For example, some large enterprises have operational roles such as a project management organization (PMO) or an ops guild suffused throughout their org chart – these companies can keep specialized ops hires busy with useful work. Or some large enterprises have sales and marketing motions that are organized around selling into specific industries; they can make industry-specific strategy arms work in ways that your 120 person startup can’t.
  • Finally, large organizations just have a lot of fat. That role you’re copying from Adobe might only exist because some SVP got their arm twisted into hiring their cousin’s roommate’s kid. You might be copycatting an arbitrary bad idea.

Don’t emulate large organizations’ org charts. Innovate on your technology and marketing, because product-market fit is unique and human nature is the same everywhere. As a rule of thumb, if a particular role doesn’t exist at any of your five closest competitors, you should begin your analysis from the default position that it won’t make sense for you.

Final Thoughts: Don’t Copy Google

By far the worst company to emulate in Startup Make-Believe is Google / Alphabet. Google has a number of structural advantages stemming from its Search monopoly that mean that it’s able to be almost completely divorced from reality, and that has allowed it to grow in strange and unique ways.

Google Search is so profitable that you literally could not stop that 1,000mph freight train if you tried. As a result, everything from Google’s hiring policies, HR customs, technical infrastructure, sales culture, and more are able to be completely divorced from your reality. Google has gourmet meals, perfect build systems, and pays at the 99th percentile – we need to do the same! Well, Google also has an all-powerful money printer, would you happen to have one of those too? Your startup probably literally has more in common with the Wendy’s down the street.

By contrast, as uncool as they are, Amazon is actually a company that you can copy as a startup. Amazon’s willingness to play in competitive, low-margin business lines has forced them to remain scrappy in ways that many other mega-cap companies have not, and as a result their pragmatic approach has more in common with startups. But of course, Startup Make-Believe isn’t nearly as fun when you’re pretending to be a competitive low-margin business.