Think Big: Startups and Self-Fulfilling Prophecies

Posted on October 14, 2010
Filed Under Entrepreneurship |

In January of 2009, Backupify was a consumer SaaS backup company. The vision was small, yet I still found myself presenting to First Round Capital’s Philly office. When I was done, Josh Kopelman asked me a simple question.

Rob, if I invest in your company, and someone wants to buy it at the end of this year, what would you say is a good price?

Looking at a $2M post money valuation, I answered quickly with “$6 million dollars Josh.”

He frowned and said “$6 million? Rob, do you understand how venture capital works?” It was embarrassing. Josh took a couple of minutes to explain how most early stage companies go out of business and thus, to return anything to their investors, First Round needs big wins from the companies that make it. 3x doesn’t cut it.

I flew back to Louisville and met with one of my angel investors to explain how I blew a potential investment. He just laughed. “Rookie mistake,” he said. Then came the most important piece of advice I’ve been given throughout my entire startup life.

“Rob, you should write down on a piece of paper that this is going to be a $100 million dollar company, and make all your decisions as if that is true. It will become a self fulfilling prophecy.”

It sounds crazy to think of building something from scratch to $100M. But that day, everything changed for me. The vision got bigger, because a consumer SaaS backup company isn’t a $100M idea. The path got clearer, because I knew what we had to do to reach that kind of eventual valuation. And most importantly, the decisions got easier, because for the first time, I had a clear goal in mind. I threw out the ideas of early exits and decided to shoot for a homerun come hell or high water.

So if you find yourself in a similar situation… unsure what your company can be and thinking small… step back and make yourself think big for a change. The first step in building a big company is that the founder needs to have a big vision, so set out a big goal and go after it hard. It may become a self fulfilling prophecy.

Comments

4 Responses to “Think Big: Startups and Self-Fulfilling Prophecies”

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  3. laurence haughton on October 15th, 2010 1:11 pm

    I’m happy you arrived at the right answer but that’s a statement about you not the advice. That notion (make every decision as if you must create a $100 million dollar company) could just as easily lead someone else to ruin.

    And while there’s logic and science that show expectations can influence outcomes and that upping your expectations leads to greater achievement, “self-fulfilling prophecy” is superstitious thinking. Just test it for survivor bias.

    I have a great story on how useless roadmaps and great belief lead to success. But that doesn’t make me respect those useless roadmaps.

    Sorry to splash cold water… I agree about dreaming big especially when someone is as prepared as you are with other equally important decision making skills.

  4. bryanb@vacances thalasso on October 22nd, 2010 11:40 am

    Dreaming big is nice, but taking VC money has its bandwagon of issues, like losing control, having other people take YOUR decisions, having people with no interest whatsoever (except monetary) running YOUR business. $6 million projects deserve to stay under the VC radar. VCs invest in businesses worth $100 million and expect annual turnovers in the billions. Trust your instincts: stay under the radar.

  • About Rob

    Rob is co-founder of Backupify.com. He likes value investing, the Rolling Stones, college basketball, artificial intelligence, economic history and people who think independently.