I went on a mini-rant on Twitter last week that I thought I’d synthesize / clarify here: The media is ridiculously obsessed with identifying trends, particularly when those trends relate to media.
So every time someone sneezes, there are a flurry of trend stories opining that everyone will sneeze soon, presumably with the same intensity and viscosity as the sneezer immediately prior.
In the market space in which I presumably operate, there were great examples at both ends of the spectrum last week. My pals at Everyblock sold their company to MSNBC, and instantly, Hyperlocal is a Business Now. Seemingly moments later, the Washington Post shuttered its “hyperlocal” site for Loudon County, VA — and voila, Hyperlocal is Dead. My friend, Greg Sterling, quickly saw the fallacies flying.
It’s not just in the hyperlocal media space, though: It can be music websites; search engines; sellers of 12th century Tahitian antiquities — if a start-up in the space is born, dies, sells or raises a nickel of capital, a trend is born.
As a start-up veteran and someone who doesn’t have to fill a blog with words every day to stay viable, I have sad new for the trend-seers: None of this means anything. If you look for trends in the fortunes of start-ups, you’ll miss the mark, at best. At worst, someone will listen to you.
Anyone who’s worked on or invested in a start-up will tell you that there are two parts to the business: the concept and the execution. While both are critically important, I’ll argue that a flawed concept with great execution has a better shot than the inverse.
Further, something anyone could intuit, but that is only in sharp relief if you’ve done a start-up, is that everything good and bad is magnified exponentially in a start-up enterprise:
- Are you a good fund-raiser?
- Is there undue drama with your team?
- Are your sellers effective? (This may be the most critical. Sellers can’t save a flawed business over the long haul, but they can save businesses good and bad in the short-term. And in some spaces, it may just be a war of attrition.)
- Do you have fans (users, customers, employees, family, investors) who are willing to behave irrationally in service of the business. Mistake #1 in many business situations is to assume rationality on the part of all players — and that’s trebly-true in a start-up.
- Are you lucky? Well, punk, are you?
It’s easy to laugh the above off as excuses, but I’m willing to bet there aren’t many seasoned entrepreneurs that will dispute that these are at least as, if not more, important than the business thesis.
I’ll take my own start-up, Pegasus News (which I no longer own, but still operate) as an example. If you boil down the business, our core theses were:
- Data is as important as news.
- Individual behavioral customization is the road to winning readers and delivering effective advertisers.
- What happens in your neighborhood or to people you know is as important, if not more so, than the three-alarm fire downtown.
Today, these sound laughably obvious, if not pedestrian. But in 2004, when I wrote the first draft of the business plan, they sounded revolutionary crazy. I feel pretty safe in saying that history (or at least present sentiment) are on our side there.
But we struggled mightily to survive, and while we managed to sell the business twice, it’s safe to say we didn’t hit the big payday. Our investors came out whole, but no one got rich. And it wasn’t like the second sale was for substantially more than the first. (Public info — look it up if you must know.) In the interim, other businesses in our “space” with similar theses and with half or less of our traffic (even while covering larger geographies) and with nominal revenues sold for much more.
Why is that so? A big part of it is that I was completely overmatched when it came to raising capital. I made every mistake in the book and probably invented a few along the way. (Only now, two years later, do I think that I’ve absorbed the lessons sufficiently that I’d be competent on a raise.) That led to distracting personal financial suffering for me and my team as we were in the critical launch phase of our business. Then, at two critical junctures, drama among our top managers caused discord, stalled progress and missed opportunities. (You can argue this was unavoidable because of our financial situation, but doesn’t change the impact.) Add to that the fact that we couldn’t attract strong sellers until we had achieved some stability, and you see why we found ourselves negotiating from a position of weakness, lucky to be alive at all.
One of our Angel Investors once called us “the cockroaches of local media,” because we should have died and didn’t. I often say that we’re here now, not because of any brilliance in the first draft of the business plan, but because we were too dumb to quit when we were beat. Does that mean our thesis was wrong? No. Does it mean it was right? No.
That’s why I scoff at those who try to trundle together trends from the trevails of start-ups. The best ones may die for lack of execution. And the worst ones may make it on strong sales for just long enough to get recognized by those who see a way to make a business out of them. And in reality, no one is at either of those poles, but somewhere on the spectrum in a position that is either, tenable or not — and whose fate may be determined by winds, tides, luck and happenstance.
I’m not reducing business to a lottery here — but I hearken to a point made by my friend and fellow local news entrepreneur, Howard Owens:
“Most people simply don’t understand statistics and the irrelevance of a small sample size. Can’t draw conclusions from one event.”
I don’t think Everyblock is necessarily a smarter business than Pegasus News. I don’t think Backfence or Bayosphere (now dead) were dumber. And God knows that we and Outside.in, AmericanTowns, San Diego News Network, New West, MinnPost, West Seattle Blog, Crosscut and a host of others are still fighting to find the right answers — as are a host of other “traditional” businesses. We all have, are and will keep fighting based on a thousand factors that have little to do with what was on our PowerPoint slides.
But I do know that it’s not good journalism to draw a picture of the Average Man based on the behaviors of a broke and horny teenager. That’s what many try to do to make sense of the topsy-turvy media world we inhabit. While I’ve now learned enough to never claim a lease on The Answers, I do know two things:
- You can’t extrapolate too much from the business model of a start-up.
- You can never extrapolate enough from the execution of a start-up.