Which Edge of the Sword?: Rookie Start-Up Mistakes

Summary: One of the reasons I joined Digital StudyHall was to learn about social entrepreneurship. In the past seven months, I’ve seen DSH struggle with some important strategic and financial decisions, challenges that are common to start-ups.

Sandwiched between the Silicon Valley and the venture capitalists on Sand Hill Road, Stanford is plagued by the entrepreneurship bug and I, being an MS&E (i.e., business) student, was smack in the middle of it.

Now, I am a type-“A,” semi-OCD person who secretly derives pleasure from systematically named computer files and generally prefers events that are pre-planned, though you’ll never find “Spontaneous Activity” penciled into my calendar. However, I dislike cubicles and sterile environments even more than I like structure and organization; hence my decision to ride the entrepreneurship wave and give the “start-up experience” a try.

Based on my sample size of one, my first conclusion is that no two start-ups are the same. (I say this with no sense of irony, despite the fact that differentiation is the basic premise of any entrepreneurial venture.) There is a saying in philanthropy which I believe extends equally to entrepreneurships: “When you know one foundation, you know one foundation.” So much for seeing whether the start-up life is for me.

At the same time, however, I think there are some challenges and mistakes common to many start-ups. My time at Digital StudyHall has shown me the importance of both learning from your own mistakes and those of others.

Working at Digital StudyHall, therefore, has taught me a lot about struggles of start-up operations, whether they be traps people fall into or desperately try to avoid. Some of the most salient include:

1. Overspending on things of little value-add: What counts as “worthwhile” expenditures, of course, differs not only from person to person, but also over time. DSH decided that at this stage, office furniture is not an important expenditure (explaining the patio chairs); others may argue that a professional office environment can have a major effect on morale and productivity. Every organization will also have its own “spending” threshold; also, the more money an organization has, the higher its threshold is likely to be. It’s important to note that the disagreements and resulting discussions themselves are critical, for they heighten awareness and force deliberate decisions about the use of resources.


2. Being overly frugal: It’s easy to understand how a well-intentioned but resource-strapped organization can err on the side of over-frugality, to the point where it under-invests in people. It’s hard to argue with a diminishing banking account, but I believe that such underinvestment leads to mediocre performance at best and organizational death at worst. I haven’t yet been able to decide on which side of the scale DSH sits; my hunch says we err on the side of frugality, though I’m not sure if that’s because I migrated from the consulting culture (and its Herman Millers).


3. Develop a 5-year plan and follow it religiously: I admit, I like plans and goals. But I also recognize the impracticalities of 5-year plans (not to be confused with the vision) in the start-up environment. Things change. Ideas fail. Challenges arise. There aren’t enough contingency plans to cover all possible scenarios. If for nothing else, DSH embraces the idea of experimentation as a way to adapt and learn. In spite of our implicit prioritization criteria (e.g., is the idea scalable?), I think DSH places too high a premium on trying new ideas. The risks associated with over-experimentation are, (a) spreading already limited resources even thinner, thereby possibly compromising the quality of all programs, (b) developing a culture that lacks direction and supports the “flavor of the month,” and (c) creating a feeling of stagnation in the organization.


4. Resist all bureaucracy and organizational structure: Psychologically, humans have an inherent need to categorize and structure the world; without a sense of structure, we flounder. Start-ups tend to lack processes and structure for one of two reasons, often both: (a) they take pride in their independent, revolutionary spirit, which contrasts sharply with the corporate monsters they’re taking on (think: TPS reports), or (b) they think that building their offering is a better use of their time than putting processes in place. With respect to the latter, the truth probably lies somewhere in the middle; without sound structure and processes, the organization is ironically slowing itself down.


5. Scale too quickly: Something DSH adamantly wants to avoid is scaling before we’re “ready,” as many entrepreneurial organizations have died doing. On the other hand, there’s a sense of fear and paralysis regarding the challenges of scaling that can only be addressed when we cross that bridge; you often don’t know you’re ready until you do it. I’m not sure DSH is ready to scale, but status quo is certainly dissatisfying. I’ve only been here seven months and I’m getting restless! (Is this the impatience of youth?)

Even as I write this, I realize there are two sides to each “mistake” or challenge; nothing is ever as clear as it seems. As my former manager used to ask, “Clear as mud?”

Which brings me to my second major conclusion about start-ups and, in this case, life in general: the choices lining most decisions* are double-edged swords. The catch(-22) is that one side is sharper than the other; the sharp side will cause a quick death, and the dull side will cause a slower, prolonged death (with, of course, a potential future possibility to “stop the bleeding”).

Moderation is key. Perhaps the “best” decision involves the unspoken third edge of the sword – the flat edge.

* Every item in the list above boils down to a decision the leaders of the entrepreneurship must make.