Avoiding Zombie Startups

Danielle Morrill created an awesome term a few weeks back – Zombie Startups – in a post about how to know if your own startup is a zombie. I’ve been using this highly-evocative term with candidates since I read this, and in doing so, realized I needed a way of helping a potential (or current) employee evaluate if the startup she’s looking at is a zombie.

Seattle has its share of zombie startups – companies that it just doesn’t seem like are going anywhere – and engineers should know what they might be getting into. Here’s a two-question way.

1. Is the metric that matters moving?

Let’s break this down.

  • (The) Metric: something objective and measurable – the one thing the company’s leadership is looking at. There should be one, and each person should be able to articulate clearly what it is.
  • Matters: the metric should be important and be recognizable to outsiders. I tend to be partial to a metric that’s directly connected to revenue (Average Revenue per User, Number of paying customers, etc.) or where revenue is a first-order derivative (like unique users for a consumer startup aiming for advertising revenue). I’m much more skeptical of metrics where you have to draw a flow chart to see how it turns into money (Facebook likes) or metrics that nobody in the outside world would care about.
  • Moving: a high-growth, consistent pattern. Danielle suggests 10% week over week, but not every week; the Hacker News thread quibbled with that value, but the overall goal is the same.

If you’re evaluating joining or staying at a startup, you need a very clear answer to every part of this question.

If the answer is no, you’re almost certainly at a zombie. You need to go to question 2.

2. If not, why do you believe that it will change?

Maybe the company just started, in which case there’s no metric to measure. Maybe the company tried one thing and it didn’t work, and they’re already on to their next thing: Groupon started to improve online fundraising. Maybe things aren’t working yet, but the leaders are hustling in every way they can think of to try to make something happen: Pinterest’s first year was crazy tough. Giant Thinkwell didn’t make it: I’m certainly hoping Haiku Deck does. All these things are possible, but the default answer is probably not.

So if you want to move the company you’re looking at into this group, find something that you can really attach to.

  • Be able to tell the “how we avoid zombie status” story as well as anyone else at the company, and want to tell your most-talented-they-should-work-here-too friends about it.
  • See “optimistic desperation” from the leaders – optimism rather than infighting to try to get it to work, desperation where you know they will do absolutely anything – and now! – to make it successful. “Another product planning offsite” does not count.

It’s my strong belief (read: not backed up by any data) that the longer a startup has been in this stage, and the more times it’s tried to maneuver, the lower the chances it will get there. A year isn’t that long; three years is.

That’s it: a simple, two-stage set of questions you need to ask to figure out if this startup is right for your investment (of time and opportunity). Good luck!

P.S. Another plug for Danielle Morrill’s blog – well-informed, strong opinions written clearly and concisely. I skip over the funding announcements, but the commentary is just killing it. Between her work, JCSV, and Stratechery, there’s a lot of new fun stuff to read again, and to add to my Newsblur – another piece of software with strong opinions, built with love and desperation.

3 thoughts on “Avoiding Zombie Startups”

  1. Decent post and a decent way to think about whether a startup is going to make it.

    But, the idea that there is some global growth pattern for all companies is just stupid. And 10% a week is even stupider. Thats 14,200% growth per year. At 10% growth a week, a startup that has a value of $1000 to start has a value of $3B in 3 years. You’re talking about Google-level growth and that is one startup in a million. If every startup that isn’t the next Google is a zombie, the startup landscape would be pretty barren.

    Also, Danielle didn’t make up this term. It’s at least ten or twenty years old, though it might seem newly in vogue with the rise of Walking Dead and company.

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