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Why you should start a business in 2020

One reason promising new companies fail to launch is because it’s much easier to visualize the downside of a startup. There’s a way to overcome this and get started.

Why you should start a business in 2020
[Photo: Alexandre Godreau/Unsplash]

When was the last time you watched A Bronx Tale?

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It’d been at least 10 years for me, but I threw it on the other day while I was packing boxes to move uptown. It’s brilliant. If you haven’t seen it, it’s a coming-of-age movie about a kid growing up in the Bronx.

The kid, Colagero, has two options: the straight-and-narrow path his father (Robert De Niro), a bus driver, has taken, or a life in the mafia. His dad senses he’s going the wrong direction and delivers a line I haven’t been able to shake. “The saddest thing in life is wasted talent.”

You should start a company in 2020 for a lot of reasons, but Robert De Niro gives you the best one. You’ve got the talent and the opportunity to do something great. I’ll give you a framework and tactics to realize that potential.

But first, let’s talk about the mental side of starting something: the reasons you’re dragging your feet on your startup ideas in the first place.

It’s not just you. Last year, 30% fewer companies started than in 1970.

That number is shocking. Despite the “buzz” around startups and unprecedented access to cheap resources and global talent, new company creation is grinding to a halt.

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Fewer new companies is a micro problem and a macro problem. New businesses drive the economy, replacing old businesses when they fail, combating automation, etc. They’re a lagging indicator—we haven’t yet felt the full effect of declining new businesses over the past 10 years.

So why are these numbers decreasing?

I’ve worked closely with a few hundred super early-stage startups at Tacklebox the past five years that have founders deciding whether or not to leave their jobs and pursue their startup idea full-time. Two trends have emerged. One’s in our DNA. One’s new. You need to know about both.

Omission bias

Omission bias is the tendency to worry more about doing something than not doing something. At its core, it’s a fundamental misunderstanding of risk. This is how our brains think through omission bias:

  • If you start a startup and it goes badly, you imagine that lots of people will see that it went badly.
  • If you don’t try a startup, it can’t go badly, so no one will see that it went badly.

The potential downside is easy to visualize and dread, whereas the potential upside is harder to grasp. Humans overestimate the potential downside and underestimate the potential upside of most things, particularly ones that are uncomfortable.

Omission bias has been killing startups and creativity for decades, but in the past decade, it’s been supercharged as failure becomes more public.

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The point of a startup isn’t to build a product. The point of a startup, particularly in the earliest stages, is to get to transparency.”

In 1970, if you started a company that failed, a handful of friends and family might hear about it. Now, your 1,250 LinkedIn connections, everyone on Instagram, etc. will know. The social cost feels high. Access to networks is great for entrepreneurs but terrible for their psyches.

I used to just spout the David Foster Wallace quote: “You’ll stop worrying what others think of you when you realize how seldom they do,” but that’s a cop out. The reality is that promising new companies fail to launch is because it’s much easier to visualize the downside of a startup, and that downside has turned up to 11 in our brains.

We need a system for entrepreneurs to build startups without these constraints.

Building products and business models

I got pitched an idea the other day I’ve been pitched before: easier to access therapy for people in their 20s and 30s. This particular founder was building a platform that let customers and therapists each create a profile with a few parameters. The marketplace would match them up, or patients could search through the options.

When I asked why that particular customer hadn’t already found a therapist, I was met with answers like: “Millennials weren’t being spoken to with a brand they trusted; It was too personal to Google and hope; etc.” These aren’t necessarily bad answers, but they didn’t show a deep knowledge of the customer problem. Therapy is personal, and these answers were surface level.

When I asked about why a marketplace was the best solution, I was told it could scale. Thinking about the business model from day one is incredibly smart, but the business model should match the product, which stems from a need. Of course, a marketplace is a desirable product for an entrepreneur, but that won’t make customers want it.

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I hope this startup finds its way, but the founder has a tough road ahead.

The mistake this founder made is the one so many founders make and the one you should avoid in 2020. The point of a startup isn’t to build a product. The point of a startup, particularly in the earliest stages, is to get to transparency; to know, exactly, how your customer interacts with the problem you’re solving for them; to understand how much they actually care and gauge whether they will step out of their daily life to try something new.

The importance of transparency

Getting the level of transparency you need won’t happen by accident. You’ll do a few customer interviews then hire a dev shop to build you a marketplace because that feels more like progress. It’s not. To avoid this, you need to build an internal system that keeps you honest, which gets you more feedback so you can continue to segment and land on an initial customer that you can serve better than anyone.

At Tacklebox, we call this “test cycle time.” It’s the amount of time it takes for you to validate something you think is true to be true. It’s an invaluable process to internalize.

So, in the example above, the founder might start by saying “I think millennials want therapists.”

Start with the mindset that this probably isn’t true. Millennials who don’t already have a therapist probably don’t want a therapist. It’s their job to prove to you they do before you build anything.

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  1. Gather unbiased information from customer actions.
  2. Treat everything like an experiment where the actions of people who might be your customers are the only data points that matter.
  3. Make sure you minimize the distance from customers to ground your decisions in reality. Each decision should be the result of something you saw happen.
  4. Make a decision based on data points with as little anecdotal information as possible.
  5. Audit steps 1-3 and “invest in the scaffolding” to make the next round of tests cheaper.

The goal is to make these tests cheap, both cognitively and emotionally. You should be able to come up with a hypothesis about a customer and test it in a week or two.

Finally, I’d create weekly reports to track your test cycle time. Each Sunday, for example, audit the test you ran the previous week and report what you learned and how you can make subsequent tests “cheaper.” Then, pick what you’ll test the following week. You need to move towards truth and away from belief.

In 2020, we need you to start a company. The way to do it successfully and to lower the perceived risk is to focus on the process first.

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About the author

Brian Scordato is the founder of Tacklebox Accelerator, a four-week program in New York City for early-stage founders (many of whom have full-time jobs) to go from idea to validated product. He teaches at General Assembly, writes here, and loves Tar Heel basketball.

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