Everything You Know About Launching a Unicorn is Wrong

Three lessons from two men who invested in companies like Twitter, Twitch, Okta, and Outreach

Mike Maples Jr. and Peter Ziebelman were confused. One of the start-up founders that they’d invested in had done everything right: He’d found an expansive target market, built a great team of engineers, and curated a high-performance work culture. But at the end of the day, despite years of sacrifice, waves of painful layoffs, and continuously re-pivoting, his backers lost faith and eventually pulled the plug. His company failed. 

Meanwhile, they watched as a company with a seemingly doomed idea rocketed into the stratosphere. After all, who would want to sit around and watch nobodys play video games — especially retro ones like Super Mario 64? And how could you possibly leverage their interest into a self-sustaining enterprise? Yet somehow, Twitch has become a company worth approximately $45 billion. 

These experiences rocked the foundations of the two men: Maples, an entrepreneur, venture capitalist, podcaster, and the co-founder of FLOODGATE, a leading seed stage fund in Silicon Valley; and Ziebelman, a lecturer at the Stanford University Graduate School of Business and an independent board member for start-up companies. In their latest book, Pattern Breakers: Why Some Start-Ups Change the Future, the two explain what they learned about the world of entrepreneurship and how some companies that appear destined for success end up pulling the plug. 

The fundamental lesson, they argue, is that founders don’t succeed by replicating what’s already worked. “Being extraordinarily different is a key aspect of the breakthrough founder’s job description,” they write. “It’s a different type of mindset, one that demands a talent for pattern breaking, an aptitude for breaking the mold.” Below, they share three lessons for would-be entrepreneurs. 

Lesson #1: Learn to recognize inflection points

An inflection point is an event with the potential to significantly alter how people think, feel, and act. For example, in 2011, Apple decided to embed a GPS locator chip in the iPhone 4s. In retrospect, this decision fundamentally changed how we use our cell phones. That wasn’t apparent to everyone at the time, but certain companies saw the potential, like Uber, which realized that these location capabilities could enable ridesharing between drivers and passengers — a fundamentally new type of transportation dynamic. 

Instead of identifying and leveraging inflection points that usher in revolutionary changes to customer behavior, many entrepreneurs instead focus on incremental changes, like the fact that solar energy costs are dropping by 7% each year. This is not enough. “Breakthrough start-ups use the power of inflections to create a new game with new rules that they define,” the authors write. “They force a choice and not a comparison. They can’t be reconciled with the offerings that came before. That’s how they change the future.” 

However, just because you identify an inflection point doesn’t mean that those around you will embrace its new capabilities. Obstacles like regulation, social stigma, and cost can inhibit widespread adoption. That’s been the case with nuclear energy, which has been dogged by various political battles and misperceptions. In that sense, you also need a realistic insight to go along with the inflection point. 

Lesson #2: Base your product on an insight.

An insight is a non obvious truth about how one or more inflections can be harnessed to change human capacities. Consider the example of Google. 

Before Google, search engines ranked results based on how often your search team occurred on each of the pages. This seems like a logical way to operate, but it was easily manipulated. For example, developers could write popular search terms, like “best fitness advice,” hundreds of times on their site in a color that was invisible to the viewer. That trick would give them a boost in the page rankings, but it would also fail to deliver what was actually being searched for. 

Then Google had its insight: that the pages most relevant to your search would be those with the most incoming links. Instead of relying just on the keyword, Google ranked pages based on their context within a larger system. This was a non obvious truth that revolutionized the way that websites are built and the way that the internet is structured. 

Thinking in terms of insights is crucial to success. “Many founders make the mistake of trying to think of a start-up idea and then let their optimism convince them it’s an idea worth pursuing,” write Ziebelman and Maples. “But trying to think of a start-up idea sets founders on a path that relies on the rules of the present.

It ends up moving them toward ideas with limited upside instead of opening them up to exploring a new, unbounded future.”

Lesson #3:  It takes courage to pursue an insight. 

The thing about entrepreneurship is that, even if you’re confident that you’ve identified a pivotal inflection point and developed an airtight insight based on it, you’ll never know for certain. Even more challenging, especially for first-time founders, is that your idea must be non-consensus in order to truly change the industry. The more consensus your idea is, the more likely that people already agree with it, which means the more likely it is to have competition, even if you do not yet know who the competition is. 

You have to be different — but you can’t be contrarian just to be contrarian. Ask yourself these questions: What is going to be different in a non obvious way? What does the consensus think, and how am I different? What do I know about the future that the consensus doesn’t know? Why is the imminent future the right time for my insight to hold true? Why hasn’t it already happened?

And at the end of the day, remember this: You aren’t thinking of a start-up. When you think of a start-up,

you can get trapped by the limitations imposed by people living in the present. Your advisers — and even your own instincts — may tell you to find a way that established companies aren’t currently serving their customers and then build a company around that. Ziebelman and Maples disagree. 

Given a choice between a seemingly bad or ambiguous idea powered by strong inflections and a plausibly good or seemingly straightforward idea without an inflection, they would go with the latter. 

“The first option is still risky, but it usually has better odds of success and certainly better odds of achieving outlier success.”