One question to determine a startup’s success?

Let us stop looking for a single predictor of success, be it a startup or an established enterprise. I saw a TechCrunch interview of Mr. Peter Thiel, of Clarium Capital.  The TechCrunch post is titled, “Best Predictor of Startup Success Is Low CEO Pay”, and Mr.Thiel was quoted as saying

In practice we have found that if you only ask one question, ask that.  (CEO Pay)

This is the classic single question trap. There cannot be single metric that can be “the best predictor”.  You should ask

  1. Does correlation mean causation?
  2. Is there cause-fusion – i.e., do successful startups pay low CEO salary?
  3. What about all other lurking variables? What if there is another variable that drives CEO’s low pay and success? (Omitted Variable Bias)
  4. If low salary is good, is lower salary better? (reductio ad absurdum)
  5. What about other startups that have CEOs with low pay and still fail?
  6. A startup, hamstrung by lack of resources and low cash flow may pay low or no salary, is that still a predictor of success?
  7. What about the congruence between the startup’s strategy and the needs of the market it serves?

Let us not forget  Predictive Analytics slippery slope. If you want to ask a startup questions, here is my list (not claiming predictability):

  1. What jobs will your customers hire your products for?
  2. Who do they hire now, i.e., who do they have to fire first?
  3. What are their alternatives?
  4. How much will they pay for it?
  5. What budget will that come from and how big is that budget?
  6. Where do they post the job opening?
  7. Where do they look for candidates and can you go there without considerable costs?
  8. What is their hiring process?
  9. What will they find compelling about your product’s candidacy?
  10. Will the job exist two years from now?

One thought on “One question to determine a startup’s success?

Comments are closed.