Why You Should Start Small Before Going Big

Aim for the stars and you’ll land on the moon. Pull off a single big bet and you’ll be set for life. That’s the dream right?

The startup hype-cycle during the 2010’s made everyone think they could build an app like Facebook, reach millions of users and make billions of dollars.

I personally grew up with this vision. Right out of college, I co-founded a startup with friends, got accepted into a leading accelerator in LatAm and raised funding. We articulated a huge vision around changing the future of real estate investment. We had paying users and it felt like a matter of time with our growth rate.

Until it wasn’t. We stopped growing and our revenue wasn’t even close to being enough to cover costs. We ended up shutting down and selling our startup.

Paul Graham writes on an essay:

He’s right: a niche protects and defines you. It limits your potential and it will make sure your company won’t be a unicorn

But I’m not so sure if it’s a bad thing, especially if you’re starting out. Playing low stake games help you learn before taking the big swing.

Niche means focus

Having a niche means that you’re solving a problem for a limited number of users. You’re teaching Tibetan to Hungarians, a market that does not have a ton of demand.

What you do have is focus and it’s the most important thing: you’re solving a specific problem for a small group of people. This limitation breeds creativity and it’s what will actually make your product stand out.

Not having focus means you end up with a half-baked product that nobody wants.

Going back to the Tibetan example, imagine your goal was to teach any language to everyone - big dream and great potential. But where do you start? And how many resources will you spend trying to chase it?

You’ll probably start out with one language, move to another as soon as some user asks for it and leave all your courses halfway. At the end of the day you’re left with a mid product and something no one really wants.

A great example of focusing on a niche is Pieter Level’s RemoteOK. Starting a fight with Indeed or other job boards might seem enticing, but Pieter Level focused on a niche: remote jobs for digital nomads. RemoteOK generates millions in revenue focusing on a niche.

Business is a skill, you need to learn it

There are many parts of running a business that don’t include building a product/service: managing people, payroll and budgeting, crafting a strategy and more. You probably don’t know all of these things before starting out (at least I didn’t).

You’ll need time to pick these up and learn, but it’s hard when you’ve got investors down your throat pushing for more growth. You sold a grand vision and you’ve got to execute, but have no idea how.

How do you learn? Playing low stake games before your big swing. This means that you can learn about these things without having the pressure to perform from the start.

Start a small company before going the Silicon Valley route. Make sure you get the fundamentals right before your mismanagement leads to a failed venture of enormous proportions.

Don’t believe me? There are many successful founders who’ve started smaller companies before:

• Zeno Rocha from Resend had Dracula Theme before going the VC-route

• Ryan Petersen from Flexport co-founded ImportGenius

• DHH had an online gaming community called Daily Rush before joining 37signals and creating Basecamp

Not everything has to be a home run. There is value in starting small.

Personally, I’ll probably never swing big - I value my freedom more than anything and aiming for a big, global startup goes against it. You become a sort of slave to the game you’re playing. I’ll keep on playing low stake games with small payoffs.

But I really believe that, even if you’re planning on going big, making a small bet payoff heavily favor your odds. It gives you place to learn the skills of business without as much pressure, a place where you can learn from your mistakes without risking millions.

Best,

Clemente