I was listening to the wonderful eposide of the Tajriba podcast with Mustafa Faiz about entrepreneurship and startup. It is a great introduction to anyone interested in the startups world.

It does however highlights some issues in the startups model. Here's the argument I would like to make:

The Hypothesis

The Startups entrepreneurship model is broken and there are better alternatives for entrepreneurs.

Context

What I mean by the startups model is the VC and investing route. You are an excited entrepreneur full of passion and energy. You look at the market, identify an opportunity, come up with a innovative idea, then build an MVP, test, improve, repeat, and then launch and succeed.

Well.. I neglected to mention that you need to approach your family and friends, angle investors, and then VCs to raise series A, B, C till you exit or collapse!

Here are my issues with this model:

Entrepreneurship != building a startup

The term "startup" is new but entrepreneurship is old. There are many definitions of startups but it is generally used to describe a business that a VC can invest in. This is basically a highly scalable business where the VC can get a 100x return on their investments.

See, while the concept of startups is new, entrepreneurship is as old as mankind. The first humans on earth who were bartering corns for animals were - in some sense - entrepreneurs. In this present day, any individual who create something of a value that can exchange for money is an entrepreneur. Whether you are a freelancer, designer, smith, carpenter, or anything where you control, build and then sell the value you create, then you are an entrepreneur.

Many contemporary entrepreneurs and philosophers believe that entrepreneurship is the most ethical way to live (see Alex Hormozi thoughts on this). Entrepreneurs create value, jobs, autonomy and freedom. And while I won't go this far, I believe entrepreneurship allows individuals to unlock something within them that regular jobs do not. That's all to say that you don't need to build a startup and get investors to be an entrepreneur.

So what's really bad about startups. Here is the first thing.

Building a startup is basically gambling!

I am sure you aware about the statistics that most small businesses fail. It is much worse for startups. Why? Because what makes a startup successful is different that what makes a small business successful. In addition to having all the traits that a typical small business have (like providing value, product market fit, etc), a startup needs to have other traits. Mainly that it can scale and scale fast.

Many authors have written about what can predict a startup success. For example, Peter Thiel says that a startup must provide a solution that's 10x better than existing solutions. Not 10% improvement, not twice as good and cheaper! But 10x better! Of course there is no way to quantify this "10x" improvement, but that does not matter; because there is no evidence to back up this claim. The best research-backed analysis I found is this TED talk, The single biggest reason why start-ups succeed. The TLDR is that the following are NOT a good predictor for startups success; these are Ideas, Team, Business model, and Funding. So what then? It is timing! Have the right solution at the right time. So basically you can have a perfectly good product, amazing team, great business model, and you will just need to pray that you don't run out of cash before the perfect timing comes. Also keep in mind that you do need a good product, team, business model and enough funding! Screw up any of these and the startup won't succeed. They are necessary but not sufficient. So why do many people glamorize the startup world? What's so good about it that fuels so many dreams?

Startups are good for VCs, not entrepreneurs

VCs only need 1 startup to succeed in every 100 startups to make back their money and then some. While it can be a good deal for the VC, what about the other 99 startups? They don't "scale" fast enough so they get shut down! Some of them can be profitable, mind you. But VCs will - and have - shut down successful startup for "slow growth". You see, VCs are not interested in slow steady profit. They need an "exist". A big event. A pay day. That's either an IPO, or an acquisition to get their money back (with some sweet profit) and then onto the next round. VCs risk their money. They can win big or loose. Founders however risk years of their lives. They are playing a game where the odds are against them. Given these issues, I think there is a simple explanation why startup founders still play this game; "Survival bias". Media only report on successful startup. Those 1 in a million that hit it big! Over and over you are told that this is the only way to build a successful company, and you too can do it! You never hear about the other 99 startups that fails, that spent time and money building something good but did not grow fast enough.

There is a better way of building a business

Here are the main takeaway I want you to leave with:

• Building a startup is not the only way to be an entrepreneur. As long as you are providing value, you can exchange it for money, then you can be an entrepreneur.
• When building a company, build for sustainability, not exit! Think long term instead of acquisition. Build a business that can last for 20 years. When you start thinking this way, your priorities will change. You can spend more time building a good foundation for the business, optimize operation, get expenses in order and build a healthy business overall.
• Prioritize profitability vs growth. This is probably a topic for future blog. But the TLDR is that you can a profitable business that creates jobs and provide value without having "rapid growth" as the main priority.
• Devalue innovation. Not to say that you don't need to be innovative, but you don't need to create a product that is 10x better. Build a better product than existing solutions. Execute better. Create a better customer experience. Ensure clients are happier. Even if just a little bit, you can still create a good business. Also probably a topic for another time.

Disclaimer: I am still grinding at Narbase.com and balsammedico.com. I haven't reached the level of glamour that the media loves to report on. But I like to believe that we are providing good service, building great products, and creating jobs. So take what I am saying with a grain of salt.