Less Wrong
I’ve found that there is a certain stigma in entrepreneurship, specifically in tech start-up culture, that you are never really “right” or “wrong.” Success, which isn’t necessarily either, is typically a broad measure of market timing and supply / demand, rather than simply being “right” or “wrong.”
Josh Kopelman disagrees. In an excellent piece from Business Week he stated that:
“There’s one thing I’ve learned about entrepreneurs’ business plans,” he says, bringing the meeting to a close. “Every one is wrong.”
While this may be true from the perspective of the investor, I’ve found that there is an attainable grey area of being “less wrong” that entrepreneurs should strive for during their early stage development and strategy.
Brad Feld, in regards to building an early financial model, says in Ask The VC that:
I’ve never met a financial plan for an early stage company where the revenue side was correct. However, I’ve met plenty where the cost side was correct (or – at least – appropriate). The key here is simple – you want to have a cost structure that makes sense, covers all the bases, but doesn’t assume a big revenue ramp to be supportable.
I can guarantee – with 100% certainty – that this model will be wrong. As an investor, I don’t really care about this; rather I want to see how you are thinking about getting to “the next stage” of your business. You get to define the next stage, what it’ll cost you to get there, and what things will look like when you get there.
The thought process and active anticipation–getting to the next stage–isn’t necessarily going to make a company “right” or “wrong.” But, it’s moving in the better direction. While financial predictability can be a frustrating hurdle for early stage companies, taking the time to research your cost structure is a perfect example of how to strive for being “less wrong.”
The bottom line is that being obviously wrong or misinformed shows ignorance–and potential laziness from the entrepreneur. Being less wrong shows willingness, hustle and definite resourcefulness.
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