My 3 Part Series On Mental Health

Due to length considerations, I’ve separated my posts into a 3 part series.

You can find part 1 here: Medicating Ourselves Into Lives Not Worth Living, part 2 here: Psychiatric Discontents & A Movement Towards A Better Model Of Mental Health and part 3 here: Towards A New Paradigm of Mental Health And An Enlightened Society.

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The Paradox of the Self-Improvement Industry

The self-improvement industry is full of contradiction. Perhaps the most obvious, is that most of the people who buy self-improvement products don’t seem to improve.

This leads to the perception by most effective and intelligent people that something is off. The industry must be either a cult or a scam.

My close friend Bjoern Herrmann perceives one of the leading self-improvement “gurus”, Tony Robbins, as such:

Tony Robbins implicates a short cut to personal success and happiness. I’d compare him to a pill of ecstasy – he makes a certain type of people temporarily feel better. This delays them from practicing continuous introspection and prevents them from maturing as healthy human beings. Instead they are being misled by false excitement. Go on his website and read these titles “The path to permanent weight loss’ or the ‘the money masters’ … the absolute wording in his messaging sounds to me like a scam to exploit people who lost their internal compass. Those people need thoughtful and ongoing support of their family and friends.  If I think about it there is not much difference between Tony Robbins business and a secte or a radical political movement. In fact many abusive and criminal sects/political movements started off as self help movements.

There is no doubt that the self help industry attracts people who are looking for a quick fix. Most of the people attracted to the movement are undoubtedly struggling and a bit broken. It does appear that most fail to make significant changes in their life because they have trouble following through and are unable to establish a work ethic of continual practice after the emotional high of the weekend or program wears off. (This problem is much wider spread than the self-improvement industry. People everywhere get excited by peak experiences and performances but fail to find sufficient motivation to endure the daily grind of building anything worthwhile. Many kids like playing sports, but few get up before school to practice everyday. Conferences generate many business ideas and partnerships, but few follow through and implement them.)

However, it is important to note that struggling souls looking for answers in a self-help guru may not be living admirably, the intention of buying a self-improvement product is more admirable than simply doing nothing and wallowing in self-despair. At least these people are trying to improve their situation. The majority of people with problems have resigned from trying to fix them.

Because the quality of the audience of the self-improvement industry is low, the quality of the content unjustifiably gets a bad rap. I’ve looked at enough of the industries’ material to know that there are many high quality products and techniques, do have the potential to create lasting change in people’s lives, if practiced regularly. I can say this from personal experience, having adopted many habits and techniques into my own life. But it does require a discerning eye though to separate the wheat from the chaff. For business reasons, I will discuss below, a lot of the gold is surrounded by crap as a result of a corrupting allure of profits.

I must agree with Bjoern that many info-marketers do have scammy marketing tactics. It is sad that many have adopted these tactics, especially when many of them have important ideas to share. I know this industry is particularly fond of the A/B test, so the messaging must have evolved this way because it is more effective and drives more sales. Even so, the moral judgment on scammy marketing tactics, isn’t so cut and dry. If the product is really good, how different is a scammy marketing tactic from a parent trying to get a child to eat their vegetables by singing “hear comes the choo choo train” and shoveling a spoonful of peas into their child’s previously clenched mouth.

On the other hand it is quite deplorable if it’s not just the marketing tactics that change, but the core content also morphs to pander to the quick fix mentality of the desperate consumer, as it has with the best selling book The Secret, which teaches people that the secret to life is positive imagery. All you need to do is want something bad enough, and if you just focus your intentions strongly enough on what you want, you will get it. (Watching Dave Chappele’s satirical take on The Secret is a must). Positive thinking is a necessary but not sufficient condition for goal achievement. But it sure would be convenient if that was all that was needed!

If it’s true that scammy marketing tactics get broken individuals in the market majority to open up their hearts, minds and wallets, then that means there is a serious void for the people who are really making waves in the world, who are scared away by these marketing tactics. Because I do think there is real value in many of the top-tier self-improvement products, that could help many effective people reach a greater percentage of their potential.

This is the paradox of the self-improvement industry. It starts out with well intentioned high quality content but because greater profits are found with the mindless majority, it inevitably evolves to cater to them, shunning the world’s more effective, independent thinkers, who are the ones who actually have the inter-personal foundation to apply these techniques to radically improve themselves. But the marketing causes the healthy to turn a blind eye, and the sick to buy a remedy they cannot absorb.

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Medicating Ourselves Into Lives Not Worth Living

This blog post is part 1 in my 3 part series on Mental Health. You can find part 2 here: Psychiatric Discontents & A Movement Towards A Better Model Of Mental Health, and part 3 here: Towards A New Paradigm of Mental Health And An Enlightened Society.


The world has way too many people on medication. It is destroying their potential to create a life they love. And it is destroying the world.

We medicate to treat real, serious symptoms, but from my own experience, I don’t believe our medication practices are treating the true cause. And we won’t treat the true cause until we stop attributing mental health problems to something out of our conscious control, such as genetics and biochemical imbalances.

The cause for most mental health problems is that straight up most people just lose the battle against themselves. 

People may be in bad environments. They may have the deck stacked against them but true health will only be found when people confront their internal reality honestly and valiantly.

It is no easy task, but most mental illness can be solved if people learned to control their thoughts and were able to successfully navigate their way to healthy environments that helped them achieve their goals.

Instead of helping people engage in that fight, we numb them into submission with medication.

In my own personal journey I had dark days as a teenager starting around 15, as I dealt with my dissatisfaction with life. I had thrown away belief in god and was dealing with existential angst. I had sports injuries that prevented from competing, stripping my personal identity bare, which at the time was tied to my athletic competence. I had trouble adjusting to the high school social scene. I found my classmates unfriendly and actively mean. I couldn’t find anyone who would have the conversations I wanted to have. I was asking big questions that nobody I knew I found relevant. I felt misunderstood, alone and arrogant. I felt my high school was wasting my time, trying to give me an elite education for a world that no longer existed.

While my particular form of malady may be rare, in experiencing deep pain as a result of dissatisfaction with the world, I’m sure I’m not alone. I could have let my pain consume me. Instead, I used the pain as fuel to find greener pastures. I searched for ideas I was passionate about, and people I could relate to who could support me in creating the life I wanted.

I think if I talked to a doctor about my depression they would have given me medication. I believe this would have destroyed my life.

My acute pain might be gone, but its absence would delude me into believing nothing was wrong and prevent me figuring out how to create a life I love. My life would be pervaded by a permanent background noise, whispering, “Something is missing.”

It is not pain we should seek to avoid. It is settling for a life anything short of our dreams. Ideals may not be achievable but we should never stop trying to get closer to them. 

In some circumstances it is probably beneficial to dull our senses to give our traumas time to heal and the mind a chance to reset. But anything more than a few weeks or months is a resignation of your life.

The reality is that, it is fucking hard to get life where you want it to be. Right now, my life is almost everything I have wanted it to be. But boy has it taken a long time. I think this journey probably started for me at 15. That means it was a fight that lasted more than 6 years. The first time I really felt the tide turn was two years ago when I went to a spa with my friends at the end of a six week experience at an innovation camp in Berlin called Palomar5. I remember lying on my back in a heated pool, with my eyes closed, feeling for the first time that my life was finally on track.

But on track did not mean I had arrived. It was a month before Palomar5 that I decided I was going to figure out how to increase the success rate of startups and try to do my part to accelerate the global pace of innovation. It would take nearly two more years of hard work and persistence, and ignoring lot of people who told me I was too young, too inexperienced and too naive to accomplish what I set out to do, before my ideas would finally gain traction in the form of the Startup Genome.

I now have excellent mental health, excellent physical health, a close-knit circle of friends and a thriving startup. But getting here has felt like climbing a monumental mountain, requiring a tremendous amount of mental toughness and interpersonal work. It’s maybe been only in the last 10 days since the successful launch of the Startup Genome Compass that I have felt I truly reached the mountaintop. If this is true, then it was a 6 year journey. But every end has a new beginning and I am now setting my sights on a new much larger mountain.

I worry that most people haven’t built up the mental toughness to complete this journey. They don’t have the fortitude to stare darkness in the face and keep fighting until they create the life they want. At the same time I believe this inner strength is inside everyone. All people are connected to a long lineage of descendants who have overcome incredible adversity on the journey from Early Primate to Modern Man.

Six years felt like s tremendously long time, and at times I doubted I would ever make it. But I never gave up. If I had to, I would have kept going for 20 years, 30 years, my entire life, because anything less isn’t a life worth living.

My hope is that more people find it in themselves to embark on this journey and battle themselves and their environment until they carve out a life they love. At this point, I don’t have a systemic solution, but I wanted to point out in this post that most of the world’s 6.77 billion people are not achieving their full potential, and until we acknowledge our society’s overzealous prescription of medication as a growing part of the problem, society will be continuing to dig its own grave.


This blog post is part 1 in my 3 part series on Mental Health. You can find part 2 here: Psychiatric Discontents & A Movement Towards A Better Model Of Mental Health, and part 3 here: Towards A New Paradigm of Mental Health And An Enlightened Society.

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21 Years Of Making Sense Of The World

Today I turn 21 years old.

I feel fortunate to have been given the necessary conditions and opportunities to get where I am today. I want to thank my parents Peggeth and Jeff, my twin sister Zoe, my brother and golden retriever Casey (who passed away late last year), and my many friends who have supported me on this journey and have brought so much to my life. I hope I have brought as much to yours.

We are living in a special time in human history. Never have we possessed greater opportunities and greater challenges.

The next few decades are shaping up to be pretty decisive for humanity, but I think we’re up to the challenge.

In fact, I’m excited as hell about the future.

My heart pounds and my blood rushes as I think about the increasing role my friends and I will play in shaping this bright future of ours.

For many reasons, society seems to have taken a step backwards or sideways the last few decades. Society’s richest and powerful have not been doing a good job. While the intensity of their pursuit of wealth and progress is commendable, things clearly are not working. Markets are collapsing, democratic governments are dysfunctional, too many authoritarian regimes still have not been overthrown, leaving billions in a stagnating despair, and our ecological system is on the brink of disaster.

As best as I can tell, somehow our (previously adaptive) worldview has failed to evolve and is still directed at a world that no longer exists.

While the future looks like bleak to many, I remain optimistic simply for the fact that we have so much potential to get it right if we can direct our time on energy on the right goals, and pursue them in the right way.

Technology and Capitalism together have created an economic engine so powerful that we can now accomplish in a decade what would have taken hundreds, if not thousands of years in the past.

My work so far, has been characterized by trying to comprehend the bigger picture, and learning the inter-personal and extra-personal skills necessary to play a role in creating the future scenarios that seem brightest.

After many years of intellectual exploration, the last year I’ve been fairly single-mindedly laying the foundation for the Startup Genome Project to transform the way startups are built in order to accelerate the pace of innovation all over the world.

With the successful launch of the Startup Genome Compass 10 days ago, the future of the company is incredibly bright and I believe it is the most important thing I could be working on right now. But that means it will probably be many years before it’s time for me to shift my daily work to the even bigger picture I’ve been discussing in this post.

But in the meantime I’d still like to contribute to the transformation of our worldview, which desperately needs evolving. So, yesterday I compiled a list of the patterns, principles and values I’ve discovered in my first 21 years of life that I believe encircle many of the truths we need to adopt, both individually and communally, for our society to evolve. It is not an exhaustive list, but it is pretty comprehensive. (Though, admittedly mostly focused on systems, goal achievement, inter-personal effectiveness and self-awareness)

You can find that list below. And hopefully updated semi-regularly on this page, which will live in the menu bar.

Let me know in the comments a few of the patterns, principles and values you believe are most important for our individual and societal evolution.

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The Entrepreneurial Enlightenment

What makes startups succeed or fail? This is a question we are intent on answering. We believe increasing the success rate of startups has the potential to dramatically increase economic growth all around the world. On May 28th, we released our first report at startupgenome.cc. On August 29th we released our first benchmark application, the Startup Genome Compass to help startups reduce premature scaling.

The role of technology startups in our global economy has never been more important. Startups may seem insignificant compared to large multinational companies that have trillions of dollars of wealth sloshing around in public markets, but a recent Kauffman Foundation study found that the majority of job growth in the United States is driven by technology startups.

The power of information technology has been steadily increasing for the last three decades and has recently reached a level of maturity that has started to trigger a reorganization of the global economy. It has never been easier or cheaper to create a startup thanks to infrastructure like open source software, software as a service, cloud hosting, globally ubiquitous payment processing, viral distribution channels, real-time collaboration, on demand logistic services and hyper-targeted advertising.

As a result, the pace of change is speeding up and the implications of this are immense. Billion dollar startups are emerging faster and faster. The quick ascent of startups like Google, LinkedIn, Facebook, Twitter, Zynga and Groupon are harbingers of a major structural economic change on the horizon. The service sector has dominated the global economy for the last few decades but its sun will set. Just as machinery replaced most manual labor, software will replace repetitive intellectual tasks. Turbo Tax eliminated many accountants, Amazon eliminated many retail jobs and E-Trade eliminated the majority of stockbrokers. In the near future jobs that are more complex yet still methodical will also be replaced by software. Creative Commons is reducing the need for lawyers, Khan Academy shows how one good teacher can replace many bad teachers and the profession of doctors will be disrupted by startups like Halcyon Molecular that turn healthcare from emergency care into a preventative self-care. Balancing out that massive decrease in jobs will be what Richard Florida calls the rise of the creative class.

As the waves of disruption come ever faster, the only way for a company to be competitive will be to behave like a startup. In the landmark book the Innovator’s Dilemma, Clayton Christensen found large companies are excellent at sustaining innovation but by and large fail at disruptive innovation. Startups thrive on creating disruptive innovations. Recently, thought leaders in entrepreneurship have come to the conclusion that in order for large companies to be effective at disruptive innovation they need to make structural changes that make them behave nearly identically to startups.

The increasing economic importance of startups, along with decreased barriers to entry has caused interest in entrepreneurship to explode around the globe. New startup ecosystems are being built up all over the world with the hopes of replicating the success of Silicon Valley. Spearheading this movement are startup accelerators like Seedcamp, Techstars, Opinno, Founders Institute, 500 Startups, and Sandbox, but they are accompanied by hundreds of others. On an individual level, the brightest people worldwide, are increasingly seeing entrepreneurship as the career path of choice. The release of The Social Network has captured the imagination of today’s young people, and catapulted Mark Zuckerberg to the same status as Gordon Gekko in Wall Street almost 25 years ago.

But despite the increasing economic importance of scalable startups, we still don’t understand the patterns of successful creation. More than 90% of startups fail, due primarily to self-destruction rather than competition. For the less than 10% of startups that do succeed, most encounter several near death experiences along the way. Simply put, we just are not very good at creating startups yet.

Eight months ago we launched the Startup Genome Project, with the goal of increasing the success rate of startups and accelerating the pace of innovation around the world by turning entrepreneurship into a science. If successful, it’s hard to imagine the type of impact this could have.

Some of the world’s biggest transformations occurred when arts were turned into sciences. The scientific revolution in the 16th century triggered the age of enlightenment. The development of scientific management, which peaked in the early 1910’s, made large companies dramatically more efficient and arguably was one of the biggest causes of the explosion of wealth the world saw in the last century.

We believe the effects of cracking the code of innovation by turning entrepreneurship into a science will trigger a new era, that we are calling the Entrepreneurial Enlightenment. In the midst of the largest global depression in almost a century, a revolution in entrepreneurship could propel the world to a level of wealth never seen before by enabling scientific discoveries and technological breakthroughs to be integrated into the fabric of society faster than ever before. Offering hope that we may finally be able to master some of the most pressing challenges, including water, energy, food, health, security, poverty and education.

No revolution is triggered alone. In the quest to make entrepreneurship a science, we are standing on the shoulders of giants. In just the last 2-3 years the number of people extracting and codifying the informal learning of entrepreneurs has hit a point of critical mass. Steve Blank kicked off the move towards a science of entrepreneurship with his seminal book The Four Steps to the Epiphany. In the book, he introduced the concept of Customer Development. A few years later Eric Ries combined Customer Development with Agile Development and Lean Manufacturing principles to create the Lean Startup methodology. Interest in the Lean Startup has morphed into a global movement. Other major contributors to the science of entrepreneurship include Dave Mcclure on Metrics, Sean Ellis on Marketing, Alex Osterwalder on Business Models and Paul Graham with his essays.

Yet despite this huge knowledge base emerging about how startups work, startups have been able to absorb little more than the basic patterns of how to build a startup. Most founders don’t know what they should be focusing on and consequently dilute their focus or run in the wrong direction. They are regularly bombarded with advice that seems contradictory, which is often paralyzing. And while startups are now gathering way more qualitative and quantitative feedback than they were just a few years ago, their ability to interpret this data and use it to make better product and business decisions is sorely lacking. The primary cause of these problems is that we lack the necessary structure to synthesize our accumulated knowledge on the nature of startups. We are missing a common language and framework to describe and measure entrepreneurship and innovation.

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A Deep Dive Into The Anatomy Of Premature Scaling [New Infographic]

(Reposted from the Startup Genome Blog)

Three days ago we launched the Startup Genome Compass, a benchmarking tool for startups and our new research on the primary cause of failure for startups: premature scaling.

There’s been some confusion about exactly what we mean by premature scaling and we wanted to respond to the feedback we’ve received and elaborate on the findings from our research. To make it clearer, we need to go a little bit deeper into the theory and methodology.

Since February we’ve amassed a dataset of over 3200 high growth technology startups. Our latest research found that the primary cause of failure is premature scaling, an affliction that 70% of startups in our dataset possess.

The difference in performance between startups that scale prematurely and startups that  scale properly is pretty striking. We found that:

 - No startup that scaled prematurely passed the 100,000 user mark.
 - 93% of startups that scale prematurely never break the $100k revenue per month threshold.
 - Startups that scale properly grow about 20 times faster than startups that scale prematurely.

What Is A Startup?

Definition:

Startups are temporary organizations that are designed to evolve into large companies. They move through 6 stages of development throughout their lifecycle: Discovery, Validation, Efficiency, Scale, Sustain & Conservation. Early stage startups are designed to search for product/market fit under conditions of extreme uncertainty. Late stage startups are designed to search for a repeatable and scalable business model and then scale into large companies designed to execute under conditions of high certainty. 

Every startup has an actual stage and a behavioral stage. Actual stage is measured by customer response to a product. We measure it by looking at metrics like numbers of users, user growth, activation rate, retention rate and revenue. The behavioral stage is made up 5 top level dimensions that the startup can control. The 5 dimensions are Customer, Product, Team, Financials and Business Model. Each dimension, both the actual and the 5 behavioral dimensions are always classified into one of the 6 developmental stages.

A startup is classified as inconsistent when any behavioral dimension is at a stage that is different than the actual stage. When a behavioral dimension is at a stage larger than the actual stage we call this premature scaling. Its lesser known sibling, dysfunctional scaling, occurs when the stage of a behavioral dimenion is smaller than the actual stage.

A clear example of premature scaling would be a web startup that rapidly scales up its team to 30-40 people before it has any customers. In this example, the actual stage of the startup would be in Validation (Stage 2) but the behavioral stage of the team would be in Scale (Stage 4).

Let’s go through some more examples and stats for how each dimension can be scaled prematurely.

Customer:

How to scale customer dimension prematurely: Spending too much on customer acquisition before product/ market fit
Overcompensating missing product/market fit with marketing and press
Spending money in poor performing acquisition channels.
Stats: Inconsistent startups are 2.3 times more likely to spend more than one standard deviation above the average on customer acquisition.
Examples of startups that prematurely scaled on the customer dimension: Color, Webvan, Pets.com

Product:
How to scale product dimension prematurely: Building a product without having validated problem/solution fit, Investing into scalability of the product before product/
market fit,  Adding lots of “nice to have” features
Stats: Inconsistent startups write 3.4 times more lines of code in the discovery phase and 2.25 times more code in efficiency stage. Inconsistent startup outsource 4-5 times as much of their product development than consistent startups.
In discovery phase 60% of inconsistent startups focus on validating a product and 80% of consistent startups focus on discovering a problem space. In the validation phase, where startups should be testing demand for a functional product, inconsistent startups are 2.2 times more likely to be focused on streamlining the product and making their customer acquisition process more efficient than consistent startups. It’s widely believed amongst startup thought leaders, that successful startups succeed because they are good searchers and failed startups achieve failure by efficiently executing the irrelevant.
Examples of startups that prematurely scaled the product dimension: Cuil, Webvan, Joost, Google Wave, Slide, 6Apart, most startups that don’t find product market fit or “build something nobody wants”.

Team:
How to scale team dimension prematurely: Hiring too many people too early, Hiring specialists before they are critical: CFO’s, Customer Service Reps, Specialized Network/System Adminstrators or Database specialists, etc., Adopting multilevel management hierarchy, hiring managers (VPs, product managers, etc.) instead of doers, Having more than 1 level of hierarchy,
Stats: The team size of startups that scale prematurely is 3 times bigger than the consistent startups at the same stage. However startups that scale properly end up having a team size that is 38% bigger at the initial scale stage than prematurely scaled startups, and almost surely continue to grow. Startups that scale properly take 76% longer to scale to their team size than startups that scale prematurely.
Examples of startups that prematurely scaled the the fundraising dimension: Webvan, Pets.com, VOX.com.

Financials:
How to scale fundraising dimension prematurely: Raising too much money, thereby making the startup undisciplined, giving lots of breathing room for other dimensions to scale prematurely, and eliminating exit optionality.
Stats: Before scaling, funded inconsistent startups are on average valued twice as much as consistent startup and raise about three times as much money.
Examples of startups that prematurely scaled the the fundraising dimension: Cuil, Webvan, Color.

Business Model:
How to scale business model prematurely: Focusing too much on profit maximization too early, Over-planning, executing without a regular feedback loop, Not adapting business model to a changing market, Failing to focus on the business model and finding out that you can’t get costs lower than revenue at scale.
Stats: Inconsistent startups monetize 0.5 to 3 times as many of their customers early on.
Examples of startups that prematurely scaled the business model dimension: Myspace,  Groupon (time shall tell), 6Apart, Lala.

The focus of this post is on premature scaling, but for context, here are a few example of dysfunctional scaling: Tokbox, Friendster, Orkut, Wesabe, Digg, SixApart, Myspace (on product), and ChatRoulette.

In our research we also found that the following attributes have no influence on whether a company is more likely to scale prematurely: market size, product release cycles, education levels, gender, time that cofounders knew each other, entrepreneurial experience, age, number of products, type of tools to track metrics and location.

Now to further illustrate how we describe startups let’s look at an example mapped onto the Startup Lifecycle Canvas.

Below we have an infographic where we plot Color, today’s most talked about inconsistent startup, against Rally, a startup we worked closely with while building out the model, that was consistently in the Efficiency stage 2 months ago when they made this announcement. Although now I’m happy to say they’re starting to scale.

To view the infographic in full, scroll to the bottom of the image and select “download full size”. If you’re having trouble reading the infographic you can download it here.

You can read more about premature scaling in our full report here. And you can also assess your own startup for premature scaling with our tool the Startup Genome Compass, which we released on Monday.

This post doesn’t discuss how different types of startups vary thru the developmental stages. That’s for another time.
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Navigate Your Startup To Success With The Startup Genome Compass

(Reposted from the Startup Genome Blog)

Today we are releasing the first benchmarking application for startups based on the Startup Genome framework. Founders can now assess their type and stage, diagnose themselves for premature scaling and compare themselves to other startups across more than 25 key performance indicators. Try it here.

Entrepreneurs are the consummate explorers of our generation. Every inch of land has been claimed by one of the world’s 204 countries but the world of ideas is expanding ever rapidly into the realm of the unknown. The future of the world was forever altered when Christopher Columbus and the Western World discovered The Americas. Today, societal transformations are triggered by the commercialization of new technology. The world of technology startups is our era’s Great Frontier. Search Engines, Social Networks and Microblogs were delivered to the massed because brave entrepreneurs ventured into the unknown. But as we’ve written before, despite the enormous societal and economic importance of startups the failure rate is still at more than 90% primarily because of self-destruction rather than competition.
The reason the self-destruction rate is so high is fairly simple; the tools and knowledge of entrepreneurship are still very primitive.

Three months ago the Startup Genome team released a groundbreaking research report that spread like wildfire through the startup ecosystem, far surpassing our expectations. To date we’ve had more than 15k downloads, 100k unique visitors, 100+ publications, and entrepreneurs and VC’s all over considering it a must read. Honestly, we didn’t think content would have such an impact on a startup community that is so characterized by its preference for experiential learning over theory. But it turned out entrepreneurs were hungry for a map to make sense of the territory they’d been exploring. The Startup Genome Report was one of the first detailed maps of the entrepreneurial journey, describing the different types of startups and the stages startups move through as they grow from an idea into a large company generating big profits. Little pieces of the map had been floating around Silicon Valley in the form of war stories from serial entrepreneurs and grizzled investors. But the stories illustrated lessons that lacked a structure to unite them and put them in proper context. The first Startup Genome Report was a big first step towards creating a coherent picture of the territory startups explore.

But in order for entrepreneurs to improve their odds of success they are going to need to change their behavior. While maps are an excellent tool to develop a general intuition of a space, it is difficult to change behavior if you can’t orient yourself on the map and receive regular feedback on your movement.

Which is why today we are releasing the Startup Genome Compass.

Many startups have trouble figuring out the right priorities to set and measuring their effectiveness once they do, almost always landing in the proverbial grey zone. “Is a 5% increase in retention good? Do I have enough users to declare product/market fit? Is now the right time to step on the gas pedal and scale?” We attempt to help entrepreneurs answer these questions by putting their metrics into the right context.

The Startup Genome Compass is a benchmarking tool for entrepreneurs to reduce this grey zone and make better product and business decisions by automatically classifying them by type and stage and comparing them against startups in the same type and stage across more than 25 key performance indicators

Possible Use Cases of the Startup Genome Compass

1. Measure progress by seeing your key performance indicators in comparison to startups that are similar to you.

2. Avoid premature scaling by identifying whether the 5 dimensions of your startup are aligned within and with each other. The 5 dimensions are customer, product, team, business model, financials and market.

3. Set the right priorities and align your team based on the benchmark your type and stage.

4. Find your weaknesses.  See if your user growth or conversion funnels are good enough to move to the next stage.

5. Explore resources and tips that are relevant for your type and stage

6. Share your report with Mentors and Investors so they can support you better

7. Use the benchmark as a supplement for your monthly board meeting.

Tell us how you end up using the Startup Genome Compass, how you it was helpful for you and where you’d like to see us take the product in the future. startupgenome@blackbox.vc.

Premature Scaling

In addition to the benchmark, the Startup Genome Compass also diagnoses startups for what our research team has found is the dominant cause of failure: premature scaling.

We have found that startups progress along 5 core interdependent dimensions: Customers, Product, Team, Business Model and Financials. In a startup many of these dimensions are highly uncertain, in many cases, all of them. The art of high growth entrepreneurship is to master the chaos of getting each of these 5 dimensions to move in time and concert with one another. Most startup failures can be explained by one or more of these dimensions falling out of tune with the others. If a startup shows signs of premature scaling on any of the five dimensions we refer to it as inconsistent.

In our current dataset we have detected inconsistency – indicators of premature scaling – in 70% of startups. The difference in performance numbers are pretty astonishing.

1. No startup that scaled prematurely passed the 100,000 user mark.

2. Startups that scale properly grow about 20 times faster than startups that scale prematurely.

3. 93% of startups that scale prematurely never break the $100k revenue per month threshold.

If you want to learn more about Premature Scaling and how it manifests you download our new mini report Startup Genome Report Extra: Premature Scaling. It contains 25 graphs and contributions from Brad Feld, Fred Destin, Michael Jackson, Bill Liao, Saad Khan and many more.

Dimension Examples for inconsistency (= indicators of premature scaling)
Customer
  • Spending too much on customer acquisition before product/market fit and a repeatable scalable business model
  • Overcompensating missing product/market fit with marketing and press
Product
  • Building a product without problem/solution fit
  • Investing into scalability of the product before product/market fit
  • Adding “nice to have” features
Team
  • Hiring too many people too early
  • Hiring specialists before they are critical: CFO’s, Customer Service Reps, Database specialists, etc.
  • Hiring managers (VPs, product managers, etc.) instead of doers
  • Having more than 1 level of hierarchy
Financials
  • Raising too little money to get thru the valley of death
  • Raising too much money. It isn’t necessarily bad, but usually makes entrepreneurs undisciplined and gives them the freedom to prematurely scale other dimensions. I.e. over-hiring and over-building. Raising too much is also more risky for investors than if they give startups how much they actually needed and waited to see how they progressed.
Business Model
  • Focusing too much on profit maximization too early
  • Over-planning, executing without regular feedback loop
  • Not adapting business model to a changing market
  • Failing to focus on the business model and finding out that you can’t get costs lower than revenue at scale.

 

 

Sign up for the Startup Genome Compass

If you a part of an Internet startup you can sign up for the Startup Genome Compass here. Every startup helps us get closer to cracking the code of innovation and spreading the magic of Silicon Valley with the rest of the world. All your data is anonymized, treated absolutely confidential and will not be shared.

Finally, we’d like to share a little bit of our roadmap with you. We’d love to get your feedback on where you think we should take the product and what we can do to help you be more successful in making your world-changing ideas come to life.

Our Roadmap for the Product

1. We will give you more relevant content based on an extended typology and substages we have identified, but haven’t implemented yet.

2. We will add tools for more areas of your startup: founder & employee salaries, founder personality types, team composition & culture, how much money to raise and when, estimated valuations for your startup and cloud forensics.

3. We will automate the data collection to make your life easier.

4. We will make it easier to make decisions for you by visualizing and augmenting the data more effectively.

5. We will be able to detect progress over bi-weekly and weekly intervals to give a shorter feedback loop.

6. We will integrate your data with other applications such as fundraising tools, and dealflow management solutions.

- Our Methodology

Further reading:

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Quick Thoughts on Wealth Distribution

I’m seeing a lot of writing on wealth inequality lately. Theoretically I think the natural distribution of our complex system should be something close to a power law. And we aren’t THAT far from it now. But it seems as if the bigger reason the global economy is STAGNATING right now is not because of unequal wealth distribution but rather because most of the world’s wealth is being wasted on INEFFICIENCY and FRIVOLITY. Whether its 100M Car Collections, Bloated Government Payrolls or “Dipshit Companies”. Why are CAPITAL and LONG TERM VALUE CREATION so far apart?

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The Celebritization of Entrepreneurship Continues

Earlier today I saw the announcement of a TV show about entrepreneurs.

I have mixed feelings about this reality show, with it’s American idol-esque presentation of startups and startup life. The more I think about it the more I realize how seriously double edged this blade of popularity is for the startup ecosystem. On one hand it will do wonders for the attraction of talent and we may someday surpass Wallstreet and Hollywood in desirability and sex appeal. But we must not become corrupted and forget why we do this. It’s not about the fame, glory or money. It’s about building products that transform the world and drive the human race forward.
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On Modesty

In wake of the press the Startup Genome Project has received over the last week, a friend complimented me on my modesty and hoped I would continue to retain it. He was confident I would.

My philosophical tendencies urged me to understand what caused this disposition of mine.

Here are three thoughts:

1) As the circle of what I know expands, what I know I don’t know expands faster (the circumference of that circle).

2) I don’t gain satisfaction by looking behind me to see peers I have passed. But I do gain inspiration by looking forward to see the peers, mentors and role models I can learn from. I measure my accomplishments against it’s impact on the world, not other people’s contributions. And I went through a long exploration to make sure I was working on the most important thing I could, so jealousy is not an option. I have my path, others have theirs.

3) What I’ve done is minuscule compared to what I will do. I know continued progress will require overcoming many humbling challenges.

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