- Learning without a prior hypothesis isn't valid learning;
- Reducing risk is the key to progress;
- Investors assess in part by looking at the amount of risk reduction you have done.
Busy, but not productive.
The founders we meet each month are always passionate, ambitious and determined. And they’re always working like mad. But too often, especially as of late, I find that they’re making little to no progress despite their endless work. This isn’t because their ideas are bad, their teams are weak or they’re capital constrained. It’s because they’ve fallen into the trap of being busy, but not productive. It’s so easy as a startup to spend your hours building, selling, recruiting, etc. You always want to be doing something. What startup founder doesn’t say that he or she is “really busy” when asked how they’re doing? Because if you’re doing something, you’re surely making progress, right?
Unfortunately, not really. Progress at a startup is ultimately measured not by hours but by risk. In the early days of a company, everything is uncertain and the risk is extraordinary. Progress is made by reducing risk. And the only way to reduce risk, is to learn. Being productive at a startup means focusing all of your activity on learning so that you can reduce risk in the business. Unfortunately, for lots of startups, learning takes the form of doing something and then seeing what happens. That’s not learning. That’s just being busy.
True learning requires asking a question and forming a hypothesis before taking action. That action (a test or an experiment) then helps you prove or disprove your hypothesis. In addition, most founders think about learning only in the context of their products. But being productive and focused on learning applies to every aspect of the business. Marketing, hiring, pricing, etc. all need to be hypothesis-driven so that you’re always learning about whether you’re targeting the right customer, hiring someone with the right experience or capturing the right value for your product. It’s only learning that helps you reduce the risk in your business. And ultimately, that’s what enables you to attract capital when the time comes.
During your next fundraise, any new potential investor is going to want to know what you’ve done since the last investment. That’s really his or her way of asking what risks have been reduced or eliminated in the business. They don’t want to pay a higher price for the same risk that earlier investors took. They only want to pay up for reduced risk. That comes from being productive instead of just busy.