Startup general interest

Mixed strategies don’t work for startups

By February 26, 2016 2 Comments

The CEO of one of our portfolio companies asked me some time ago to write down why I believe that mixed strategies don’t work for startups.

Good examples of mixed strategies are combining direct and channel sales, focusing on product expansion and geographical expansion at the same time, or hedging bets by working on two products. Anytime there is significant effort applied to more than one method to achieve the company’s goal there is a mixed strategy.

Before I go any further, a couple of caveats. When a startup is in the exploration phase at the very beginning mixed strategies can make sense, but only as a method of rapidly exploring multiple options in the search for one that works. Additionally, once a company gets past the true startup stage it might have the scale and maturity to pursue multiple strategies at the same time. That might be when the company has 30-50 people or more.

Between these points it’s much better to focus on a single strategy. Here’s why:

  • To succeed startups need to do something really well. Doing one thing well is hard. Doing more than one thing well at the same time is exponentially harder.
  • Clarity and focus are what generate excellence. They bring the attention to detail, dedication and obsession which begets success. It’s impossible to be obsessed about more than one thing at the same time.
  • Mindspace amongst the senior team is one of the limiting factors.

Many startups opt for mixed strategies because choosing to focus means giving something up, running counter to all our instincts about loss aversion. The challenge of focus is made more difficult by the inherent uncertainty in small companies – what if the choice of focus is the wrong one?

If you believe, as I do, that excellence is the best path to success it’s best to take this challenge head on. Do the work to figure out which strategy has the best chance of success and then double down. You can always return to the other option later.

Update: The CEO in question just emailed saying “most people will probably learn this lesson only by trying to get mixed strategies work 🙁 It’s tempting.”