Blog Joyent

Fail Fast = Start-up Success

One of the things we are most proud of at Joyent is our history of helping fledging start-ups bootstrap themselves into a successful business.

A critical component of this is giving you the flexibility to “fail fast”. This means you can try a business plan, see if it catches on, adjust and react to market changes, and most importantly, gain traction and revenues before you ever need to seek funding. With a deal like the free Joyent Facebook Accelerators, we take care of the hosting infrastructure, Facebook provides you with a distribution channel and all you need to bring is the code.

Fred Wilson over at Union Square Ventures has an interesting post entitled Why Early Stage Venture Investments Fail which proves the value of this flexibility.

Fred puts it this way:

So it’s pretty clear to me that most venture backed investments don’t fail because the business plan was flawed. In my experience at least 2/3 of all business plans we back are flawed. Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.

And to prove it, he gives some nice statistics on companies that he has funded. He compares the performance of companies that were nimble enough to transform their business (aka the ones that failed fast) with the businesses that stuck to one plan and did not or could not ever adjust.

The lessons for this are simple:

• Keep all your costs variable
• Get traction before raising capital.

Using cloud computing as part of your infrastructure is one way to accomplish both of these goals.