Rube Goldberg Startups
It’s October in San Francisco. I’m at a backyard barbecue in that True-California nook of the Mission graced by the fog shadow of Twin Peaks, and it’s hot. I’ve just been handed a cheeseburger by a boisterous Swede. The burger comes with a startup pitch: he is cofounder and CFO of a company that 3d prints personalized dog toys. CFO, he states very literally, stands for “Chief Fun Officer”.
It’s a gathering put on for the fall’s batch of one of Silicon Valley’s many startup accelerators. I’m a new face in this crowd, so I’m treated to everyone’s right hand and pitch. Among other ideas, I hear:
- “Hand-held scanners that read wood grain like fingerprints.”
- “A hardware unit that you attach to your router that hinders malware.”
- “A website where farmers can upload videos to tell their stories to the people who buy their crops at market.”
- “The first game development company dedicated to VR.”
The energy with which these pitches are delivered is contagious. Many of these founders have been pursuing their ideas for years with a perseverance very few can muster. The optimism in the air is palpable.
Yet even in the midst of all this optimism, all these bright people, it remains difficult to suspend my disbelief.
Something about these ideas just feels off.
The Rube Goldberg Startup
Rube Goldberg Startup (n): a company that obscures a solved problem, by way of novelty and constraint, to create the illusion of an untapped market.
Days later, the reason the ideas felt so strange dawned on me: the pitches were characterized by a profound misalignment with the problems their founders were trying to address. In most cases, the founders I met are in fervent pursuit of problems that have already been solved, and solved directly. In an effort to appear innovative, however, they have twisted the problem, whittled away the potential market, and expended time and resources. The result is something new but ultimately worse for their customers than the current method.
These companies have effectively created Rube Goldberg Machines; the novelty is the product itself, not the solution it offers.
Rube Goldberg ideas are doomed to failure. No amount of growth hacking, technical prowess, acceleration, or perseverance will create strong adoption for products that provide indirect solutions to direct problems. Rube Goldberg ideas are not always, however, a direct sign that a company will fail outright. They merely indicate a lack of market comprehension and creativity for the company in its current form. The more introspective founders may be able to adapt in time to pursue a new line of thinking and a new product. Lesser founders will choose never to admit defeat, moving forward on hope alone, assuring their teams that everything is going according to plan, even as the payroll money dries up. It’s not your problem to wait around in either case.
Characteristics of Rube Goldberg Startups
RGSs often exhibit one or more of the following traits.
- Lots of conversations with investors over a long period of time (>6 weeks) with little or no money closed.
Investors are great to use as coal-mine canaries for early-stage startups. If no money is being deployed, there’s often insufficient or unclear opportunity. (Though NB that money does not imply definite opportunity.)
There are of course many examples of startups that had trouble raising money at an early stage only to pivot later and hit an inflection point in growth. Founders will often draw analogies between those companies and theirs in an effort to save face. The important thing to remember when evaluating this situation is that investors will never say “no” to a founder, as it’s in their best interest to keep the door open just in case. This is a bit like unrequited love and comes with all sorts of irrational rationalizations on the part of the founder. As a founder, you can either pray that you are the main character in a Gabriel Garcia Marquez novel, or accept that the investors are just not that into you. Oddly, most early-stage founders opt for the former, then go tweet Steve Jobs quotes and fantasize about TechCrunch comparing their courage to Airbnb.
2. The horizon is conditional.
- “If we build ___, we’ll close our partnership with ___.”
- “___ Ventures told us that if we can just do ___, they’ll invest.”
- “Once we raise our A round, we can give you ___.”
The company’s success, your success at the company, and the success of the company’s customers all hinge on tenuous conditions. Don’t hold your breath. The horizon retreats exactly as fast as you gain on it. A company whose actions depend on chance or on the whim of outsiders is on its way out.
3. The pitch is a niche intersection of multiple markets.
All founders want to be innovative, but very few are. In an effort to appear innovative, the ones who aren’t frequently design products that address an intersection of many crowded or dominated markets. The ground in one of these arbitrary new niche markets is untouched, and they describe their efforts as “a hidden opportunity.”
The truth is they are alienating the majority of their would-be market by addressing the intersection of many markets, instead of the union. It’s not a “hidden” opportunity, it’s just an insignificant one.
The corollary to this is if you come across a company that has discovered an untapped union of markets, get on, the rocketship is leaving.
(It’s easy to point these out in retrospect: e.g. Uber (people with cars OR people without cars), Airbnb (people with spare rooms OR people who need a room to stay in), etc.)
4. Insurmountable Decision Debt
Decision debt is usually the reason a company’s horizon becomes conditional (see #2 above). The company is 70% through what amounts to a Pickett’s Charge on a bad idea. As a result of a long run of careless decisions, they no longer have the time or resources to be adaptable. They must forge ahead. Secretly, the founders have begun trying to find an exit as acquihires.
But they’ll only be able to exit if you sign on and build ____.
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// Apologies to Mike Chen, whose company Magic I do not mean to implicate as a Rube Goldberg. They’re a good one.
