What Does Early Success Really Mean?
I was recently catching up with the (excellent) New Scientist magazine, when I read a fascinating interview with the researcher John Ioannidis. He has pioneered work in the analysis of experiments and authored a landmark study from 2005 called “Why Most Published Research Findings Are False”. You can read the abstract and full report at the NIH here. While his work mostly deals with epidemiology and medical research, there are some findings and hypotheses that are super relevant to a startup as well.
Among other notes, Ioannidis observed that since researchers typically first conduct a small study, then seek grant money for a larger assay, it might be difficult to raise that capital if the initial results were negative or equivocal instead of hugely positive. So, as someone setting out to prove a hypothesis (and it’s always prove, never disprove), you’re incented to structure your first course of inquiry (and result) to maximize excitement right out of the gate.
It occured to me when I was reading the article that the valley’s tech startup model is entirely built on this premise. You take a small lug of cash and do something quick and exciting with it. If your first result is mind-blowingly awesome, people throw money and resources at you and you move forward. Anything less, and you find yourself reconsidering your vision, capital structure and partnerships (even friendships). Failure is spelled with a small ‘f’ in Web2.0 speak (or maybe just as failr) - and any business without immediate traction is in trouble.
As a general rule, it’s tough to argue with the success of the model, though it does make you wonder about the self-referential nature of the products that have risen to prominence on its back. For every Google - an unquestioned winner in the mass market - there are 10 tech industry “hypemachine” startups with a dense following in the 408,650 and 415. Witness Twitter or Mint - both of which are exciting companies, but with followings that barely scratch the surface of the markets they play in (messaging and finance). Ask 10 people in the valley what they think of those players, and you’ll find a ‘fait accompli’ attitude pervades; “Twitter has won the short messaging war”. Geez, I didn’t even know that we had gone to war in the first place. 
Like all other businesses, our success or failure is ultimately determined by consumer behavior: time, enthusiasm and money. The central premise of professional investment capital is the ability to predict the future outcomes of promising, young startups - but I wonder if we’re too enmeshed in our own sphere (drinking our own Kool Aid, as it were) to be able to distinguish things that average people like (Photobucket) vs things that tech nerds like (Flickr).
About 12-18 months from now we’ll be able to clearly distinguish the wheat from the chaff. I, for one, am excited to see what happens.
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