Web start-ups almost always fail. So why are these guys launching one?

The story of America's greatest idea.
April 21 2010 7:05 AM

Risky Business

Web start-ups almost always fail. So why are these guys launching one?

(Continued from Page 3)

The downside to moving forward so precisely is that the TechCrunch buzz is gone. Now they have to make the buzz all over again, with their numbers. How many San Franciscans are using their services? How often are they using them? How much are they spending? How satisfied are they? These data will make or break them. What if venture capital firms are underwhelmed by the data? The data might look impressive for the sandbox they've been working in, but there's no certainty the results can be duplicated when the company tries to get bigger.

The three men also know that you can iterate yourself to death. You can fix little neat problems and get lost in your technology until one day you wake up and someone has done your job better than you. "In Silicon Valley you know if you're not doing something, there are five other people in an apartment or garage who are doing it," says Anderson.

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Since launch they have tried to build their customer base by expanding into social networks and partnered with local mothers clubs—working moms tend to book a lot of household services. They now think they are ready to take on the accelerant. At the end of April they will return to the venture capital firms and ask for money.

Nobody Is Going To Die

Anderson, Binur, and Lee have taken a huge professional risk, but it is not a life-threatening, or even career-threatening, one. The three co-founders could fail and step back into good jobs at Google or find some other company that would welcome them. Their experiences over the last year and a half only make them more marketable. Companies are always eager to hire entrepreneurs. "Although we lose our companies with alarming frequency," writes Geoffrey Moore in Crossing the Chasm, perhaps the most quoted book on starting a company, "we keep the people along with the ideas, and so the industry as a whole goes forward vibrantly, even as the names on our paychecks slide into another seamlessly."

None of the Redbeacon founders supports a family, and because only their own money is at stake, they would leave behind no angry investors if they failed. Since they have shown such prudence, future investors might look favorably on future ventures because they know their money won't be thrown after crazy risks.

Binur has an extra measure of perspective from his military career, in which he led reconnaissance missions into Lebanon. "I survived things that were much more risky," he says. "When I have to make a decision about the company going in this direction or that direction, yes, the company may fail, but nobody is going to die."

Fear of taking risks is influenced by two things: the gravity of potential failure and its probability. Though failure would not be that devastating for the co-founders of Redbeacon, they work as if it would be. They average 16-hour days and obsess about the placement of the smallest radio button on their site. That makes sense, given the way they view the probability half of the risk equation. "The statistics of being able to start a successful new company are so low, but when it's your own company you think, of course it will succeed," says Anderson. "You think secretly, these other people must have been idiots."

In some sense, Silicon Valley is the most perfect risk-taking environment ever devised. It demands performance and rewards the best insanely well, but it allows—even encourages—the losers to try again. Failure actually is an option.

Read the other profiles in this series, on  rock climbers Eli Simon and Pete Fasoldt, the band Girlyman,  and Marine Gen. James Mattis.

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