The Best Leap Story

• I’d like to focus on only one: how Facebook was able to raise so much money when its actual usage was so small.
• More than half of the users came back to the site every single day. 2 This is an example of how a company can validate its value hypothesis that customers find the product valuable.
• The second impressive thing about Facebook’s early traction was the rate at which it had taken over its first few college campuses. In other words, Facebook also had validated its growth hypothesis.
• These two hypotheses represent two of the most important leap-of-faith questions any new startup faces.
• Facebook was different, because it employed a different engine of growth. It paid nothing for customer acquisition, and its high engagement meant that it was accumulating massive amounts of customer attention every day.
• Many entrepreneurs are attempting to build the next Facebook, yet when they try to apply the lessons of Facebook and other famous startup success stories, they quickly get confused. Is the lesson of Facebook that startups should not charge customers money in the early days ? Or is it that startups should never spend money on marketing?

Strategy is Based on Assumption

• Every business plan begins with a set of assumptions. It lays out a strategy that takes those assumptions as a given and proceeds to show how to achieve the company’s vision.
• The first challenge for an entrepreneur is to build an organization that can test these assumptions systematically. The second challenge, as in all entrepreneurial situations, is to perform that rigorous testing without losing sight of the company’s overall vision.
• Assumptions are called leaps of faith precisely because the success of the entire venture rests on them. If they are true, tremendous opportunity awaits. If they are false, the startup risks total failure.

Analogs and Antilogs

• There is nothing intrinsically wrong with basing strategy on comparisons to other companies and industries. In fact , that approach can help you discover assumptions that are not really leaps of faith.
• We can prove the analog-antilog concept by using the iPod as an example. If you were looking for analogs, you would have to look at the Walkman. It solved a critical question that Steve Jobs never had to ask himself: Will people listen to music in a public place using earphones? The answer is yes and in this case Sony Walkman is the Analog.
• Jobs then had to face the fact that although people were willing to download music, they were not willing to pay for it. Napster was an antilog. That antilog had to lead him to address his business in a particular way.
• One of those leaps of faith was that people would pay for music. Of course that leap of faith turned out to be correct.

Beyond "The Right Place at the Right Time"

• However, for every successful entrepreneur who was in the right place in the right time, there are many more who were there, too, in that right place at the right time but still managed to fail.
• What differentiates the success stories from the failures is that the successful entrepreneurs had the foresight, the ability, and the tools to discover which parts of their plans were working brilliantly and which were misguided, and adapt their strategies accordingly.

Value and Growth