Startup childhood

Tiny startups are not Google-in-miniature-form

Early-stage founders often find themselves switching between two mental models of their companies:

1. The current unglamorous state of their startup.

2. The dream end-state of what their startup will be once it becomes hugely successful.

But the steps that lie between those two points can be a bit hazy. Often, those middle steps are conceptualized by the founders as consisting of them running their dream endstate company but in miniaturized form. This mental model can be very counterproductive.

Thinking of your startup as "Google-in-miniature" is a common form of startup dysmorphia due to intuition and familiarity: the successful companies that founders are familiar with are already huge and it’s easiest to conceptualize the famous company in its current, post-product market fit state. rather than think through the developmental states it took to get there.

I am reminded of the way that the concept of "childhood" is relatively new in human history. Before the concept of "childhood" was invented, children were considered "miniature adults".

Just as the concept of “childhood” makes it easier for us to understand young people through their developmental stages, a startup founder should understand that what to prioritize during the earliest stages of their company is different than what makes sense during "startup adulthood.” A few examples of things that could be questionable at a very early stage startup but you would expect at a late stage startup: hiring a full org chart with all functions a late stage company would have, shipping multiple products at the same time under different names, many tiers of management and job titles, etc.

What is the dividing line that separates the pre and post “childhood” stages of startups? I believe that the most helpful way to differentiate between pre and post "childhood" stages is by whether the startup has achieved product-market fit (PMF). Unfortunately, most startup milestones are communicated through fundraising announcements, where big numbers are often used as a proxy for success and maturity. The conflation of fundraising success, valuation, and PMF status can be value-destructive to all of the stakeholders involved.

In fact, the more money a company has raised, the trickier the pre/post-PMF delineation becomes. Raising large amounts of capital ahead of traction tends to create an awkward emperor-wears-no-clothes impasse because:

1. The founder doesn’t want to admit they don’t have PMF to their investors or employees.

2. Investors don’t want to admit they invested a great deal of money into a company without PMF.

3. The employees of the startup generally don’t want to admit they work at a pre-PMF startup.

Thus the key stakeholders are all willing participants in an elaborate fiction that the startup has PMF. Perhaps the stakeholders must get honest once the company starts to run low on money or fails to fundraise, but until then, everyone keeps pretending.

It would be great if admitting a startup is pre-PMF was not something those in the orbit of the startup felt a need to lie about. Dishonesty about facts is not particularly healthy or helpful.

Building a pre-PMF startup is hugely rewarding, and is the time when the most important insights and innovation occur. It’s just different than operating a startup post-PMF. Not to mention that being intellectually honest about where your startup is in its developmental lifecycle will increase the chances of it becoming a post-PMF company.

Children are great! But they need to be treated differently than adults. Pre-PMF companies are also great! But it’s best for all stakeholders to be intellectually rigorous and honest about the fact they are pre-PMF and act accordingly.