How do you know when it’s time to start a new venture and when to stay put? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
As context, some people are addicted to starting companies, and glamorize the process. Starting companies is hard work – most companies fail, for dozens of reasons that have nothing to do with the strength of the idea. And starting a company is a long-term commitment – employees can stay and go, but founders are generally committed. So choosing to start a company is a big decision.
Thinking about it from the other side ー would I invest in this venture? I have invested in dozens of companies (with pretty strong results) and I’ve gradually settled on looking for three things:
- A winning team. It’s cliché, but everything starts with the team. Entrepreneurs are all entirely different, so I don’t think there’s a single personality type. But more promising companies fall apart over inter-founder dynamics than just about anything else. So I would start by asking: does this look like a group of founders that will be happy working with each other for a decade+? And perhaps more importantly, when this group hits the unexpected (which always happens), is it clear that they know how to learn what they need to learn, adapt how they need to adapt, and do what it takes to persevere?
- A space where winning matters. I’ve seen many startups identify a need, but ignore the space. Especially if you’re aiming for a venture-backed company, choosing to be in a big market is critically important – can a big company be created here? Another important test is what some people call “founder market fit”. Think about your target customer – is that someone you’re excited to obsess over?
- A secret. Great companies and products generally start with a remarkably simple thesis. When Google was created, there were many search engines already, but Larry and Sergey were convinced that they could get to an order of magnitude better relevance and speed. Gmail was created on the observation that people hate to delete email. For our team at YouTube, we focused on the observation that “online video will do to cable what cable did to broadcast”ーthat we will go from three channels, to 300 channels, to 3 million channels. Coda was created with a thesis that “anyone can create a doc as powerful as an app”. It’s notable that most of those “secrets” were not well understood when those companies started, but they ended up being inevitable and forming a large tailwind.
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So as you think about starting a venture, it might be helpful to think like an investor and use these three tests. Pretend you were being pitched this same company ー would you invest? If it’s not worth your money, it’s probably not worth your time.
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