Ratio thinking

Something I’ve found difficult to completely embrace, but which understanding has been super important, is the idea that there is a ratio for everything. I’ve started to call this Ratio Thinking, and I’ve found myself describing this to quite a number of people recently.

The law of averages

I think we all understand that we might not get a 100% success rate on everything we do. In fact, in most cases it is far lower. For myself, I think I have struggled to fully comprehend this.

I’ve heard the idea of a ratio for success many times. I think perhaps the best description I’ve come across what Jim Rohn describes as the “law of averages”:

If you do something often enough, you’ll get a ratio of results. Anyone can create this ratio.

Once I fully understood this, it made everything much easier. As soon as I accepted that the whole world works in ratios, that’s when it became easier. Knowing that success happens in ratios allowed me to go ahead and send that email, without worrying about not getting a response, about ‘failing’.

Here are a few examples where I think ratio thinking can help you as a startup founder:

Ratio thinking in marketing

Arguably some of our biggest success with Buffer has been the content marketing we did in the early days and are once again pushing hard recently. In fact, we are currently hiring our first content writer beyond my co-founder Leo, and plan to grow out a full team for our blogging efforts.

I can remember very well many of the conversations I had with Leo. What he did so well was to quickly realize the law of averages and know that to get a single reply, a large number of emails must be sent to bloggers for a potential guest post. This knowledge meant he rarely felt bad if he didn’t get a response. Instead he knew it’s just the way it works.

What is perhaps even more powerful than just knowing about ratio thinking, is that Leo used this knowledge to his advantage. If he wanted to get a single guest article published, he would sit down and send 5 emails. We had around a 20% success rate based on the emails Leo sent.

Once you’ve established the success rate, for example 20%, you can keep working and eventually the ratio will improve. Maybe you’ll eventually get 3/10 instead of 2. Once that happened, Leo was smart and moved on to bigger blogs and pulled that ratio back down to 20%. This technique led us to our first 100,000 users.

Ratio thinking in fundraising

When we finished AngelPad, we started trying to get meetings with and pitching investors. The law of averages really comes into play with raising investment, too.

Overall, we probably attempted to get in contact with somewhere around 200 investors. Of those, we perhaps had meetings with about 50. In the end, we closed a $450k seed round from 18 investors.

Perhaps the most important part of our success in closing that round was that Leo and I would sit down in coffee shops together and encourage each other to keep pushing forward, to send that next email asking for an intro or a meeting. In many ways, the law of averages is the perfect argument that persistence is a crucial trait of a founder.

Ratio thinking in hiring

The most recent area where I’ve found ratio thinking to be useful is hiring. It can take a large number of applicants to find the right person, someone who has the right skills and is also a great culture-fit.

There are so many factors at play here - so of course there won’t be a 100% success rate. Once you accept that, it can make your life a whole lot easier. That was the case for me - I conceded to the fact that I will need to work hard to publicize our positions, and then only a small fraction of the applications would make sense to follow up for interview.

And the ratio thinking applies in the same way for the hiring process as well as once somebody is on board. This stuff is hard, but once again it is simply how it works - the sooner you accept it, the sooner you can thrive.

Have you encountered the law of averages while working on your startup? I’d love to hear about where you’ve found ratio thinking useful.

Photo credit: Peter Renshaw

Why you should continue working on your bad idea

Broken Light Bulb

"The brick walls are there for a reason. The brick walls are not there to keep us out; the brick walls are there to give us a chance to show how badly we want something. The brick walls are there to stop the people who don’t want it badly enough. They are there to stop the other people!" - Randy Pausch

I’ve recently had a few email exchanges with startup founders struggling with an idea. Often they’ve been working on their idea for a while, and they have found some things haven’t played out as they imagined they would.

When we’re in the early stages of the startup, the valley of death, we will often find ourselves questioning our ideas many times. This is great, as we need to validate our assumptions, but it also means we can find the lizard brain kicking in and persuading us we should give up.

In addition to our own minds suggesting we should stop working on our idea, in the early stages a startup is so fragile that it is very easy for others to influence us. If someone remarks that our idea isn’t useful to them, or that we should do something else, or that we should get a “proper job”, it can easily make us stop and think.

3 reasons you should keep working on your startup

Whilst the many factors can make us feel like we should stop, I want to share some motives for continuing regardless.

Earn the required experience and learning

"Almost always, when you learn the backstory, you find that behind every overnight success is a story of entrepreneurs toiling away for years, with very few people except themselves and perhaps a few friends, users, and investors supporting them. Startups are hard, but they can also go from difficult to great incredibly quickly. You just need to survive long enough and keep going so you can create your 52nd game." - Chris Dixon

One thing I’ve found through personal experience as well as looking at the paths of founders I admire, is that a startup journey is a process which is best treated like a career (read: it takes a while). Unless you are extremely lucky (and there is luck involved in startups), the chances are that you won’t hit the jackpot first time around. It took me a few tries, and in the process I learned a massive amount. I often call my previous not so successful startup my “required learning” which led me to have more success with Buffer.

If you have the inclination to do a startup, then I suggest that you always have an idea you’re working on, because the learning tends to only happen through doing.

You want to have something you’re doing

I think it is very powerful to have something you’re actively working on which is your own. Maybe you call it a project, maybe a startup, but something beyond “work” means that you have something to drive you.

This “something” can be what causes you to reach out to someone key for your success, or attend an event, or even offer to speak at an event. All these kinds of activities create serendipity which can have a huge impact.

I’ve chatted with many successful founders who similarly took the plunge at some point and travelled to Silicon Valley. One thing which always seems to come up, is the power of having a purpose of being there, a reason to get meetings with smart people. For us, we got into AngelPad, raised a seed round and got a great group of investors and advisors on board for Buffer.

Jumping on a plane to the valley is an amazing thing to do, especially if you have something you want to achieve out of the trip.

Good ideas come through iteration

"real startups tend to discover the problem they’re solving by a process of evolution. Someone has an idea for something; they build it; and in doing so (and probably only by doing so) they realize the problem they should be solving is another one" - Paul Graham

In general, the startups which are most successful are vastly different today than the initial idea. I think that this is actually the norm rather than the exception. Here are three examples from a great article by Vinicius Vacanti:

  • Flickr started as a web-based massively multiplayer online game called Game Neverending
  • Instagram started as an HTML5 supported location-based service
  • Groupon started as a way to allow groups of people to band together to accomplish a goal called ThePoint

Sometimes through iteration you uncover learning which invalidates your idea or some key assumptions. At the same time, this means that further iteration can also lead to the exact opposite: uncovering an idea or features which people want and will gain traction.

Have you ever given up on something and feel in hindsight it would have been better to continue? Are you considering quitting your startup? Maybe you dropped an idea and it was actually a great move. I’d love to hear from you.

Photo credit: Sergio Alvarez