The “but” decisions

Was talking to a really early stage startup recently. The founders have been building the product as a side-hustle, have a few initial users but are now facing a decision fork. They need to raise capital to be able to leave their full-time jobs and focus on the startup BUT investors typically want founders who are already full-time before they commit capital. How does one resolve this?

I have personally faced several such forks, especially since starting-up 2 years back. I call them “but” decisions – they are irritatingly hard because both sides of outcomes have similar chances of actually happening.

  • Despite many iterations, the product isn’t hitting the expected metrics. On one hand, you had decided that if the desired metrics aren’t achieved, you will seriously evaluate the company’s future. BUT, you also hear stories of perseverance where an extra 12 months ended up changing the growth trajectory of many startups.
  • You are close to hiring someone for a super-critical role but aren’t fully convinced yet on the candidate. On one hand, it could be just the person you were looking for, who ends up contributing really well. BUT, it could also blow up in your face, end up eating valuable runway and adversely impact the rest of the team.
  • You are feeling stressed about various challenges facing the company, and are contemplating discussing it with an investor in the company. On one hand, the investor’s interests are perfectly aligned with yours and advising founders is one of their core roles. BUT, you have seen/ heard of several cases where these interactions have blown up in the founder’s face in more ways than one.

“But” decisions also have other added complexities like not having prior experience to turn to & existential impact in case of an unfavorable outcome. A common advice would be to talk to people who have dealt with similar situations. Again, what I have seen is that you get very divided opinions wherein people in the past have ended up on either side of the equation.

I haven’t yet been able to figure out a perfect framework to make these “but” decisions. Typically, I try and go by first-principles, following a method very similar to what Annie Duke frequently talks about:

  1. Map out various outcome scenarios
  2. Do a macro-filtering based on a) values and b) goals I have set for the particular context
  3. Figure out the upside & downside quantums for each scenario (qualitative and/ or quantitative)
  4. In my head, assign some kind of (even qualitative) “probability” to each scenario, based on what I know at that time
  5. See what the expected payoff is looking like for each scenario

While speaking to relevant experts/ mentors, rather than accepting any binary advice on face value, I adjust the above variables based on their inputs. Also, I try and adjust for few specific biases I know I have been prone to in the past (eg. optimism bias in my case). My better half plays an awesome role in calling my biases out :).

I know these decisions can’t be taken mathematically but the above process at least makes sure I am thinking 3600 about the problem. But even with all this prep & analysis, frequent screw-ups happen 🙂 It’s part of the game – I believe the idea is to get a little bit better at these “but” decisions each time…and avoid risk of total ruin to be able to keep playing the game.

Author: Soumitra Sharma

Operator-Angel I Product Leader I US-India corridor I Believer in Power Laws I Love building & learning

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