When you talk to seed-stage VC's, they'll tell you that investing in startups is a crapshoot and the distribution of returns varies widely. For every ten companies they invest in, their returns by company will look something like this:
- 3 will fail completely and go to zero,
- 3 will return something but less than the invested capital,
- 3 will tread water, return their invested capital, and maybe a little bit more, and
- 1 will be a home run
Unless you're like Mark Zuckerberg and want to change the world and are willing to go so far as to drop out of Harvard to do it, or you want to work for yourself and control your own destiny at any level of success, you're likely playing this game to be the home run. That's what defines success going in. You don't want to be one of the three that loses everything or one of the three that lose most everything, and treading water is the worst of all outcomes*.
In order to improve your odds, odds that resemble the odds of the VC's, you have to think about diversifying. Here's how.
VC's place bets in parallel by investing in a few dozen companies within a narrow time-window. You can't do that because you can only work on one company at a time. Your diversification must be serial: if you only try a startup once, your odds of success are poor, but if you try it multiple times over the span of your career, your odds increase dramatically. In fact, they get better over time as your experience grows and as your ability to surround yourself with more talented people grows, etc.
Chris Dixon says that the world doesn't really want to change and the default status of a startup is failure. I think he's right. But that's only for each startup. As a collection, as everyone knows from the world around us, startups develop new technologies that move the world forward. Yours can be one of them and if you try enough times, it becomes more likely it will.
You're most likely going to fail. Unless you plan to keep trying.
* I agree with Dharmash Shaw says about this stage: "This stage gets a startup “infinite runway”. This can be a very good thing, because the entrepreneur can than tweak, iterate, pivot to her heart's content. But, that's also the problem with Ramen Sustainable startups. The entrepreneur may keep going longer than would have been warranted, instead of moving on to their next big idea."