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“Pioneers end up with arrows in their backs”

Startups are a high risk business

Pioneer’s home in Utah

I came across this saying “Pioneers end up with arrows in their backs” when reading about the risks of starting a new business and it got me thinking about the myths and reality surrounding startups and entrepreneurship.

Conventional wisdom

Conventional, often glamorised writing on startups is usually along the following lines:

  • Find a great new business idea, which you are passionate about
  • Be clear about your target audience
  • Build suitable customer “avatars” (i.e. your perfect customers) for your target audience
  • Get direct feedback from your avatars, to ensure your great business idea fulfils their needs
  • If all is positive – launch your business
  • Maintain your passion; work hard; huge financial success will surely follow!

Another view

In reply to the question “How should I start a new business in 2020?” from an obviously young enquirer, I was interested to read a rather more prosaic answer, which went as follows:

  • Don’t try to come up with a great business idea, or a hot new product
  • Remember, “Pioneers end up with arrows in their backs!
  • Rather … get a job first
  • Then become good at it
  • Then start a business selling to the clients from your old job
  • You don’t have to be passionate about your new business – you just have to provide a product or service people want
  • Ideas are not important; everyone has ideas; execution is what matters

What is a startup?

Before trying to decide which of the two startup scenario discussed above is the closer to reality, it is worthwhile trying to define what we mean by “a startup”. This will help us establish whether the writers with the apposed ideas are talking about the same thing. (We will call the two types discussed “big idea startups” and “ordinary startups”.)

One of the more famous entrepreneurs of our times is Peter Thiel, https://www.forbes.com/profile/peter-thiel/#30d1989a533a a joint founder of Paypal and now a writer and billionaire investor. Thiel’s best known book is Zero to One in which he says:

  • You must distinguish between new business ideas, which are a dime a dozen, and true startup ideas
  • True startup ideas are those that solve big, important problems by doing things in an entirely new way, instead of only making incremental changes (that is not just doing the same thing better or differently)
  • A true startup idea will lead to a business that will truly dominate the market and likely turn into a monopoly

Peter Thiel’s definition of a true startup falls clearly within our big idea type. He doesn’t say what he calls the other type.

Defining a big idea startup

To decide whether your business idea could become a true startup or not, Thiel suggests the you should ask yourself the following questions:

  1. What valuable company is nobody building?
  2. Can you create breakthrough technology instead of just incremental improvements?
  3. Is now the right time to start your particular business?
  4. Are you starting with a big share of a small market?
  5. Do you have a way to not just create but deliver your product?
  6. Will your dominant market position still be defensible in 10 and 20 years time?

New idea or same as?

The vast majority of new businesses arise not out of great new innovative ideas, but are merely “same as” entrants into existing industries: these are what we call the ordinary startup. It is clear that while they are not the big idea startups in Peter Thiel’s sense of the word, they are, of course, startups in the conventional sense of the word.

But is there a useful distinction to be made here or are we merely falling into semantics? To my mind an important distinction does exist and it is in trying to establish if there are different levels of financial risk between the two types.

Underestimating risk

The person who wrote “Pioneers end up with arrows in their backs!” suggested that there is more financial risk in big idea startups than in ordinary ones. But, is he correct?

A great deal of writing glamorises startups (especially on the internet) and highlights the financial reward while downplaying the risks. This writing usually does not overtly distinguish between ordinary and big idea startups but, by its tone and glamorisation of big idea entrepreneurship, it implies that failure is less likely with the big idea startup and that most entrepreneurs end up rich and famous – the rock stars of the business world.

Common sense, however, would suggest that the ordinary startup in existing, well-established, well-trodden industries would be the less risky proposition, while accepting that, unfortunately, its proponents are less likely to become rich, famous and involved in rock and roll!

The facts

There are no statistics I know that break down startup failure rates between the ordinary startups and the big idea ones. We only know that the overall rate of failure for all startups is an alarming 70% to 80%.

One problem in trying to distinguish risk between the type of startups is that failure rates will be influenced as much by the types of people that start up businesses as by the type of businesses that they are starting up. It is possible that less talented people start up ordinary start up businesses.

So, do all “Pioneers end up with arrows in their backs?”

Ultimately, it is probably more correct to say that all startup entrepreneurs are likely to get arrows in the back, than to say it is more risky for one type of startup than the other. What is certain is that entrepreneurship (whatever type of business you start) is not so much glamorous as hard work.

However, as successful entrepreneurs will tell you, it is all worthwhile in the end!

Free help

You can get your business idea analysed for free by going to:  https://www.freeforumofideas.com/free-help/business-analysis-form/

Further reading

See alsoFAQ 3.4 and https://www.freeforumofideas.com/blog/do-i-need-a-new-idea-to-start-a-business/

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