The Startup Genome Project -- Dead on Arrival

Last Updated Feb 25, 2011 5:56 PM EST

One of my favorite sayings is, "Everybody complains about the weather but nobody does anything about it." I like it, first, because it's funny. When you first hear it, you think for a moment about how unlikely it is that anybody could really control the weather, and you laugh (a little at least).

The second reason I like that saying is that it's completely wrong. Everybody does all kinds of things about the weather, from flipping on the a/c in the dog days of summer to slipping on a sweater on the first day of fall. A sizable proportion of humanity's effort, perhaps the largest portion, is dedicated to doing things about the weather. Arguably, the whole housing and apparel industries are at least partly concerned with doing something about the weather.

In short, the saying presents a superficial and inaccurate portrayal of reality. The same sort of half-baked thinking seems to be behind the Startup Genome Project. This endeavor has been inspired by the way Pandora assigns characteristics to musical performances. The idea is to do the same thing for new businesses, with an eye to figuring out which ones will succeed. "We've created a taxonomy for startups, which allows us to classify them into different types," project visionary Max Marmer writes about the concept.

The idea labors under a few problems. The first is that Marmer is woefully misinformed about startups, entrepreneurs, and perhaps business in general. For instance, he says, "More than 90% of startups fail, due predominantly to self-destruction rather than competition." This ancient urban legend has been laid to rest repeatedly only to return, zombie-like and dripping cemetery ooze, from beyond the grave.

The reality, according to numerous well-supported studies of startup survival rates, is that something like half of all new businesses stick around for something like five years after their founding. Many of those that close sooner do so for non-financial reasons. Others merge or are acquired. In any event, if the premise for your new concept rests on the claim that 90 percent of new ventures fail, you're off to a bad start.

The Startup Genome seer next turns to big businesses, with no better result. "While large companies became extremely efficient executers at the turn of the 20th century with the advent of Taylorism, they haven't learned to adapt quickly, which is a death knell with today's pace of change as fast as it is," he writes.

To be sure, the conventional wisdom is that big companies aren't as nimble as small ones. There is almost certainly some truth to it. However, some very large companies must have their corporate ears stuffed with cotton and so be unable to respond fatally to this death knell. In the case of, just to pick one, General Electric, the toll of doom has been ringing futilely for 130 years. Perhaps in GE's case the stuffing consists of large wads of some of its $156 billion in 2009 revenues. As an example of how agile a large company can be, just check out the Olympics-worthy gyrations General Motors Corp. has gone through the last several years.

But the biggest issue with the Startup Genome Project is this: Been there, done that.

Freakishly talented, seriously over-educated, demoniacally committed gold-diggers have been applying sophisticated research techniques and wacko mystical divination alike in endless efforts to unlock the secret of business success at least since Joseph Schumpeter whipped up his gales of creative destruction in the mid-20th Century. A Google Scholar search for "entrepreneurial success" turns up more than 8,000 research papers, books, articles and other resources employing the phrase.

It's reasonable to conclude that these researchers, who range from life-long academics to experienced entrepreneurs, have examined nearly if not actually every conceivable source of the elixir of IPO billions -- from psychology and genetics to human capital and management styles and beyond. A glance at the citations of any of the scores of scholarly journal articles published on this topic in 2011 alone will provide reading to fill any number of transatlantic plane rides. And yet, researchers have still failed thus far to discover a definitive formula for entrepreneurial success.
Odds are good that the Startup Genome Project won't be able to "crack the innovation code" either. In fact, inescapable structural considerations mean nobody is ever going to come up with a definition of the innovation code, whatever that might be. That's because we are dealing with a phenomenon -- business success -- that takes place in the context of countless other humans striving to do the same thing. The success of another human in business causes the other humans to react. As a result, the system in which business success occurs is constantly shifting. So even if a Startup Genome were decoded and described, it would be obsolete approximately as soon as it was formulated.
Having now demolished Startup Genome root and branch, I want to wish them well. Whether or not they are able to do anything about the weather or entrepreneurial success, It's my utmost hope that there is a great deal more to be said on the topic. If not, I'll be out of a job.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.

Image courtesy of Flickr user ynse, CC2.0
  • Mark Henricks

    Mark Henricks' reporting on business and other topics has appeared in The Wall Street Journal, The New York Times, The Washington Post, Inc., Entrepreneur, and many other leading publications. He lives in Austin, Texas, where myth looms as large as it does anywhere.