Should Your Startup Take a Moonshot?

The moonshot is the purported antidote to incrementalism. It is about great aspirations and what happens when smart people do not worry about what is possible today. To get to the moon you have to be bold, achieve major technology breakthroughs, and want to change the world. The thinking is to go big or go home.

And, it is a terrible idea for startups.

I have founded or been a very early employee of six cloud-based software companies and I can tell you that the moonshot is a total distraction for small companies. You would be better off taking your money, heading to Vegas, and betting on black in double-zero roulette. At least you would have a 47.37 percent chance of winning. That is better than the lottery-chance odds of hitting the moonshot with your startup.

The threat to entrepreneurs everywhere is that the moonshot concept has recently grown in popularity with Eric Schmidt’s project, Solve for X. The definition of a moonshot and the goals of the project are described on the Solve for X website:

“Moonshots live in the gray area between audacious projects and pure science fiction; instead of mere 10% gains, they aim for 10x improvements. The combination of a huge problem, a radical solution, and the breakthrough technology that might just make that solution possible is the essence of a Moonshot.

This combination of things — a Huge Problem to solve, a Radical Solution for solving it, and Breakthrough Technology to make it happen — is the essence of a technology moonshot.

Solve For X is intended to be a forum to encourage and amplify technology-based moonshot thinking and teamwork. The forum began in 2012 with a small face-to-face event co-created and co-hosted by Astro Teller, Megan Smith, and Eric Schmidt.”

Plenty of executive teams and boards are chasing the vaunted 10x gain in speed, efficiency, and cost savings rather than focusing on solving a real problem that matters to a meaningful group of customers. Even HP has recently jumped on the bandwagon with their new HP Moonshot web servers. They market them as break-through “low power servers that share management, power, cooling, networking, and storage. This architecture is key to achieving 8x efficiency at scale, and enabling 3x faster innovation cycle.”

Moonshot dreaming is definitely hot as companies struggle to innovate and reinvent themselves. It also aligns well with the reality of funding early-stage companies and looking for astronomical returns. However, it is particularly dangerous for startups for the following reasons:

You are not managing a portfolio You are not Eric Schmidt, Benchmark Capital, or GE. If you are building a company you are not managing a portfolio of big bets. Consider that most startups fail, so VCs are encouraged to make a series of high-risk, high-reward investments because only a handful of portfolio companies are going to drive the majority of their returns. It is a lot like baseball. If one out of every three companies is a winner at any level, VCs make the Hall of Fame. Being a founder or an employee of a small company is quite different. You are betting on one effort and each day you have the opportunity to incrementally increase your organization’s value.

Small wins lead to breakthroughs Moonshots take focus away from creating small wins that generate momentum and can lead to larger breakthroughs. Small wins are contagious for small companies and can be habit-forming when they are strung together. Constantly focusing on something huge inhibits growth and can damage team confidence. Waiting for a major breakthrough can also delay getting to market and seeking real customer feedback.

The whipsaw effect Almost all companies grow at a steady and fairly predictable rate. This is particularly true in cloud-based businesses where revenue is realized like an annuity stream month after month. When CEOs and management teams are convinced that they are on the wrong rocket they whipsaw the team from one “go big” idea to the next. There is no doubt that small companies need to change course at times, but the problem is usually that they change course too often, leaving one strategy for the next without really trying to focus and make it work.

Go ahead and be bold and think like a movement rather than a startup. But do not fall in love with the moonshot, because you are very unlikely to get there. Find focus, because as I like to say, “This one focus, that one free.” Solve one key problem for one type of customer who is willing and able to pay for your solution. If you do, the second comes for free.

Let’s admire the moon and the dreamers who took us there, but put our heads down and build something meaningful every day.