The 20 Percent Law: What Founders and Investors Don’t Know
This post originally appeared on blog.up.co
Every time, when I see a pre-launch company that raises a seed round, hires a team and then works six months towards the product launch, it breaks my heart. Typically it doesn’t work out. Then they spend three months to try and fix it, and it still doesn’t work. Then they have three months of runway left and then they reach out to me and ask me to fix their company.
But I can’t. And the reason is the 20% law:
“Whenever you launch a new product, you have a 20% chance of it working out.”
I learned this lesson the hard way at Forward Labs. We used to bring in founders and we would surround them with a team of experienced developers, marketers, designers, etc. Even when you have a team of proven people who are all very, very good at what they do and have done it for many years, your chances of success when you launch a new product is low.
That is the percentage of products that worked when we launched.
Founders, startups and their investors are ruled by the 20% law and they don’t know it.
So here is a solution that we tried and that worked out for us.
Launch, see whether it works, then change drastically very quickly when it doesn’t. And with drastically I mean no A/B testing. When you need a 10x change, no little tweaking will ever get you there.
So -- be bold and make drastic changes.
Do the math. When you relaunch your product or pivot your product ten times, you have a combined 90% chance of it working out.
How many rockets did SpaceX blow up to achieve a successful landing? Yes, quite a few…
So would you invest 75% of your cash in the first rocket with a 20% chance of success? Probably not, but many founders still do it with their companies.
It is thus no surprise that most of them blow up. But it still breaks my heart.