Dr. Eli Goldratt, founder of the Theory of Constraints life’s mission, was to teach the world to think, so let’s think!
Early-stage investors model a startup’s chances of success, by assigning a level of probability to each variable, as follows…
…and if just one of the variables drops to a 50% probability, the combined chance of success falls from 17% to 10%.
Fully cognisant that almost every early-stage investor holds this method to be true and binding, let’s challenge the logic on its first principles…
What if most, if not all, of the above-mentioned ‘variables’ are in fact only ‘effects‘, and not failure (or success) ‘causes‘.
A startup, has only one weakest link (what could it be?), and this weakest link, would by definition, become the ‘root cause‘ of its failure, should it fail. Conversely, it would also be the cornerstone (the ‘root cause‘) of its success.
Furthermore, if the startup has not yet achieved anything, how can it fail. It’s not yet a business until the market pulls, through a proven product-market fit, and profitability is in sight.
Before product-market fit, there is no business (there is nothing), and therefore all of the ‘reasons for failure’ don’t apply. They are simply the ‘effects‘ (not the ‘cause’) of not strengthening the weakest link, in other words, not reaching product-market fit.
Stop blaming all the other variables!
The ‘root cause’ of startup failure, is a lack of product-market fit. It is a startup’s weakest link.
Without product-market fit, its difficult to succeed.
With product-market fit, its difficult to fail.
“Common sense”, Dr. Goldratt would say, “is not common”, but thankfully we have it now, for the benefit of early-stage investors.
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