In astronomical terms, a Black Hole is an object where the “escape velocity exceeds the speed of light” which means the energy needed to leave the Black Hole is more than exists in the universe. The nerdier among you would call this book “avoiding the black hole” simply because there is no escape from a real black hole. But for our purposes, the metaphor holds: some places are like black holes and you can escape them, sometimes without ever leaving them.
Basically, if you slip into a real Black Hole you’re screwed. Scientists have only recently been able to tell that a Black Hole is a real and active astronomical phenomenon. To do this they pointed their telescope at M87, an elliptical galaxy containing a Black Hole 6 billion times heavier than our Sun. This dense object dragged a great deal of interstellar material into itself and, if this Black Hole didn’t exist, it would have begun emitting superhot gasses and exhibit other energetic phenomena. Instead, it simply sat inert and lifeless in the dark. The Black Hole was just that – a deep well into which everything fell and nothing escaped.
Pretty scary stuff.
An entrepreneurial Black Hole is equally scary. It is a place – real or imagined – that seems to eat all of your efforts. You could build a thousand great projects, contact a hundred VCs, and gain a million in revenue and the world does not seem to care. Black Holes prevent college kids from building dorm room businesses and they kill ecosystems in the cradle. They frustrates your efforts at expanding out of your local market and they create roadblocks where there should be none.
I’ve seen Black Holes in the US, in Asia, in Europe. They happen in cities like St. Louis, Chicago, Norfolk, Skopje, and Warsaw. They happen in communities inside New York and LA. They can happen in San Francisco. You can have the best product in the world, the best tools, the best talent, and no one cares. Why?
Because they don’t care.
I know I’m being flip here but please understand me. Outside of a few very specific places the world’s attention is very difficult to garner. Outside of New York, LA, San Francisco, Berlin, and London it is almost impossible to gain worldwide mention let alone notoriety. And I’m not talking about fandom or praise. I’m talking about accessing markets outside of your local area.
I’ve seen it again and again: a company builds something unique. Say it’s a way to manage invoices. They build and sell to their local market and become successful. Then they try to make the jump to a bigger market – Europe from the US, say – they are not ready. They have not laid the groundwork for expansion and, therefore, they are unable to generate the energy necessary to reach escape velocity.
Many entrepreneurs give up. They say they don’t need outside attention. I spoke to one group in Columbus who was, as a friend pointed out, both “snooty and defensive.” One of the entrepreneurs, someone who raised “$52 million before,” told me she didn’t care about attention. The product was B2B, all she had to do was make a few calls and she’d find new clients.
She was in a Black Hole but wouldn’t admit it. What if Amazon created something like her product? What if someone bigger made a similar tool? She was safe for a moment but like a small starcraft on the edge of the event horizon, she could have gone either way.
Then there were startups just starting out. They were so overworked that they decided outreach was too big a job, reaching out was too taxing. I’ve traveled to dozens of cities where small entrepreneurs have big ideas and they can’t get them out to the wider world. Maybe they don’t know how. Maybe they’re afraid to share. Maybe they don’t care.
But if you’re reading this book then you care. You know that being in a Black Hole is detrimental to your business and your own brain. To try and try and try and fail and fail and fail is damaging. There has to be a better way, even if it forces you to face the fact early on that your idea isn’t good enough to go global.
But you say you aren’t in a Black Hole. You probably are.
Most of us are trapped in one, especially those who feel that they aren’t, that they have been successful enough so far that that success will easily translate to global success.
I doubt I need to tell you that VC investment and business growth – particularly tech business growth – happens primarily in major cities. But in the US alone 40% of tech investment happens in San Francisco and the Valley. After that it’s New York and Boston at 9% each and Los Angeles at 5%. The stats in Europe are similar. London, Paris, and Cambridge see the most VC activity with Berlin trailing behind. Then there’s nearly every other city in Europe with a denuded, anemic VC community, a frustrated ecosystem, and a group of startups who ultimately have to leave to find any success.
So yes, you probably are in a Black Hole. Many of you already know this but some of you might not. There’s where we need to do a little soul searching.
Most Black Holes happen because of the Goldilocks Problem. This problem will be familiar to folks in smaller markets who launch and then find themselves crushed by larger startups just as they are taking off. The Goldilocks Problem is simple: the market is just right, neither too hot nor too cold, and this curses a startup to a modicum of success. However, once the startup tries to expand out of its market it finds itself in a Black Hole. In fact many founders find out they are in Black Holes when a startup begins in a large enough market to be successful locally but the market cannot sustain it for further growth. It is “just right” for its geographic location but won’t work elsewhere.
A Polish startup called Grono began as an early social media play and did quite well for a number of years. On the surface it looked like this startup was as popular as Facebook at a very local level and Polish users loved their homegrown social network – until they didn’t. Grono is gone now, replaced by English–language solutions. All it took was for Facebook to add a Polish translation and instantly it dwarfed all comers. This happens again and again. The problem is simple: the energy in your local ecosystem is strong enough to sustain a slow burn and a crash but not big enough to sustain long term growth or even survival. In astronomy the Goldilocks planets can sustain life. In entrepreneurship these ecosystems can only sustain life to a certain point.
Further some bigger countries are cursed by the Language Barrier. In some countries the educational system has cut a entrepreneurs off at the knees. While plenty of startups can survive by translating into French, Spanish, and English not many will survive with just Macedonian or Slovenian. Therefore local startups paint themselves into a corner by focusing on their local market and language and ignoring the wider world. This is being increasingly scarce but it still happens with younger entrepreneurs. This is an easy problem to fix – simply hire a translator – but by the time many founders get around to cutting the check they find out that they are too late. Many founders believe that a lean, local attitude is the best but remember what I said before: a startup is a small business with global ambitions. If this isn’t built into your DNA then you’re sunk.
We also have a number of cultural issues with which to contend. While I don’t want to call out any one country it’s clear that culture and natural resources can help or hinder an entrepreneur. In oil–rich countries, for example, there is little impetus for entrepreneurial efforts because, quite simply, the easiest way to get right is to go into the local business. Why learn to code when money flows from a hole in the ground? Further, you have some countries where one or two main industries dwarf all others. These Black Holes discourage entrepreneurism from the cradle simply because it is far easier to run a well–worn track towards success than blaze your own.
Next there’s the Meh or, in emoji, the ¯\_(ツ)_/¯ . The Meh happens in cities where there are a few major industries, a few state schools, and very little in the way of entrepreneurial drive. While there are plenty of people who are happy to work 9–to–5 in a cubicle there aren’t many who will venture out of that cubicle into the unknown. In fact there is no “unknown” in the lives of Meh citizens. They follow a set path from birth to career to death and don’t see much alternative. This happens in rich countries and poor countries and requires a specific set of attitudes and talents to prevent.
Finally we have good old Fear of Flying. This happens when an entrepreneur sees success as a potential failure. In some cultures, for example, if you’re successful then you’re a crook and if you’re not successful you’re a failure. This mentality hinders growth. Further, some cultures create closed silos of anger at successful competitors. If I can’t win, these cultures say, then no one else should. There is no cross–pollination, no growth, no discussion, only a close–minded bigotry and depth of gossip that is untenable.
Your mission in a Black Hole is to create an escape pod for everyone. If you fail to do this you doom everyone to death.
Why should you stay in your Black Hole? Maybe you’ve done business one way for decades and business used to be good. Maybe you don’t need a bigger market – you’re doing too much as it is! Maybe you don’t think your product is good enough to share with the world.
Or maybe you don’t know you’re in a Black Hole and it’s hopeless for you to try to to escape.
I remember one particularly jarring moment. About a year ago I drove by a vinyl pressing and CD factory in Warsaw, Poland. It was a small but active factory and Central Europe still uses enough optical media to keep a small place like that in business. They attached CDs to magazines and newspapers to keep people coming back and vinyl, as in the US, was still the hipster darling and thus lucrative.
I pulled over and pulled into the factory lot. A woman, not wanting to lose her job, came over and yelled at us. We weren’t allowed to just “come in off the street” to talk to the high priests of CD manufacturing! We needed an appointment.
She told me to wait inside the factory. The waiting room was a time capsule of past glory. Hairy old rockers held CDs next to beaming salespeople in pictures taken in the 1990s. A platinum record hung on the wall for a children’s album. There was no one at the front desk.
The parking lot guard ran around the office looking for something sufficiently protective while I poked my head into another office. Someone came out.
“I’d like to sell records in the US. Hipsters love vinyl,” I said.
“Our salesperson is out,” said the CD potentate.
“Ok. So maybe I can leave my email…”
A moment later we were surprised by the salesperson.
“Well you know it costs a lot to send to the US. Shipping and customs,” he said.
“Ok, well email me if you want to make money,” I said. I wrote down my email.
He never emailed me.
The sword of Damocles was dangling over their heads. The world was swiftly passing them by and I was offering a life raft. Maybe I was just some jerk from off of the street but if they gave me a bit of time and attention perhaps I’d have been able to get them more printing jobs in the US. Maybe, when newspapers and magazines shut down in Central Europe as they have further West, they’d have a backup plan. But because of a certain corporate culture – the desk guard who thought she was Delta Force, the frumpy front office, the doom-and-gloom salesperson, they’ll probably be out of business in half a decade. Enough for the founders to buy a few nice BMWs and kiss their employees goodbye.
This happens again and again in endless permutations. A friend of mine wanted to manufacture cardboard cameras in the Ukraine. The plant wouldn’t let him past the front door. He flew to Shenzhen and the factories practically fell over themselves bringing him samples and price lists. Another friend tried to build hardware in Brooklyn. The cost of doing business in the city became so prohibitive that he had to move.
The other side of the coin is equally tragic. I met a metalworker in Detroit a few years ago. He told us that he was looking for jobs. He said he could make anything, from secure computer enclosures to printers.
“Tell me what you need and I’ll build it. I’ll make the first one for free and show you we can do it. We just want to build,” he said.
He – and all of his potential customers – were stuck in the Black Hole.
The Internet was supposed to burn down the friction of business. We were supposed to email someone in Kansas City and have a part made in a few minutes and sent to us via FedEx. We were supposed to be able to send $2,000 to Poland and get a crate of vinyl records pressed. But that’s not how it ended up. The flood of information – the flood of spam, really – that modern businesses face makes it impossible to separate the good from the bad. Good luck may float in to us over the transom but the Internet has made it hard for anyone to trust anyone.
That’s why you have to make your own luck. Most companies in the Black Hole are convinced that they have enough, that they built and that’s all the need. Perhaps they’re right. Perhaps its good enough to have a good life in a small city and drive around in a nice car and go to Bali. That’s what they call a lifestyle business, a business that supports your life. But you’re not truly building with a lifestyle business. If you accept that then more power too you.
But remember our definition: a startup is a small business with the aim to scale globally. If your product – vinyl records, cardboard, quantum computers – is so important then why don’t you want to share it with the world. Again, there are plenty of excuses but only one right answer: you’re lazy.
In a fascinating article for YCombinator, Michael Seibel of Twitch.TV asked the simple question “Why should you build a startup?”
1. The vast majority of startups are not successful
2. For talented technical people, it’s relatively easy to get a job and make a large salary
3. Large companies offer opportunities to work on very difficult problems that often only occur at scale
Therefore it seems quite silly to even begin a startup, especially if you have a good–paying job in an industry that challenges your skills. His answer is quite important.
“My answer to why you should start a startup is simple: there is a certain type of person who only works at their peak capacity when there is no predictable path to follow, the odds of success are low, and they have to take personal responsibility for failure (the opposite of most jobs at a large company).”
Why should you escape a Black Hole? Primarily because you want to change the world. I’ve seen hundreds of ideas from around the world shrivel and die because they could not reach out of their local geographic locations. This happens for a few reason but primarily because the entrepreneur doesn’t know how to reach out or believes that the process of reaching out is somehow beneath them.
A startup is a business with global ambitions. And it’s become far easier than ever to become a global company. Therefore to avoid doing so, to leave everything on the table, is an insult to what you’re trying to accomplish.
One startup I spoke with had exactly this problem. His startup was profitable, hit 1 million Euro in revenue, and looked, for all the world, to be headed in the right direction. His client list was extensive and impressive. He had great traction. He was exactly where common sense told him to be.
You need to escape the Black Hole to gain more customers. You need to escape the Black Hole to gain data points in your research or to make your product better. You need to escape the Black Hole to perform something species–positive, something that will help the world become a better place.
Look, I don’t like all of this “fix the world” and “we’re passionate about changing the universe” hyperbole people use on stage at major startup events. I’ve heard it again and again: our startup will change the world by making it easier to buy banner ads on pornographic Tumblr sites. Our product will disrupt a $2 billion cattle ranching industry by putting milk DNA on the blockchain. I absolutely hate these attempts at relevance and they are, to be fair, only exhibited in first-time entrepreneurs who may not have been ground down by the gears of reality just yet.
What’s another reason to escape? Because entrepreneurs who aren’t thinking global suffer from the problem of the little room. I like to quote the noted entrepreneurial thinkers the White Stripes when it comes to what it means to be a success. They write (or, rather, sing):
Well you’re in your little room
And you’re working on something good
But if it’s really good
You’re gonna need a bigger room
And when you’re in the bigger room
You might not know what to do
You might have to think of
How you got started sitting in your little room
In short, even if you’re a noodling guitarist intent on never sharing any of your work, the only way you get good is to go global.
But, if you plan on enacting any sort of change, anywhere, you must think in those hippy–dippy terms. Keeping a diary is not the same as journalism, because you hide a diary. The same must be said of your project. If it is not seen, if it is not shared, and if no one knows about it, then you’re essentially masturbating. If you decide that you’re fine in your little corner of the pond, that your business is humming along just fine, then all is well. Read no further. But if you have the sneaking suspicion that there is more out there than just doing well then read on.
“Suppose you had the revolution you are talking and dreaming about. Suppose your side had won, and you had the kind of society that you wanted. How would you live, you personally, in that society? Start living that way now!” wrote philosopher Paul Goodman. That is what I’m exhorting you to do now. Think about how your work will affect others and how the world will change because of you. Not in some nebulous “make the world a better place” way, but in a very specific way. Your product isn’t going to solve hunger but it will help a certain subset of people live better lives. You can solve hunger when you make enough money to give it all away.
You need to escape the Black Hole in order to grow.
Every once in awhile a small company escapes from its small place. The company launches in a city that is disconnected from the seats of power and grows organically, a feat that was nearly impossible just a decade ago. But these companies had something in common.
The Estimote story I know personally. I’ve been in touch with the company since the team started 2013 in Krakow, Poland. The founder, Jakub Krzych, started out by looking at the then–nascent world of wireless Bluetooth beacons. These small devices stuck to your wall and could connect directly to your phone without pairing, a function that made them great for indoor location and (for some companies) ad serving. Imagine the Gap being able to send you coupons when you’re near their store in the mall and you get the idea.
The team got almost everything right. They were early in the beacon business, beating out a number of established players. They offered an artsy and fun package. The beacons looked like little stones in multifaceted, multicolored designs. They put them in cute cardboard boxes and the immediately reached out to developers who could get a package of beacons to try for a few dollars.
Further, they pitched everywhere they could. They visited San Francisco and showed their products to Valley visionaries. They held events in major cities to talk about beacon programming. They stuck their beacons in art museums and event halls. They were adamant about spreading the word. They got into Y Combinator and were one of the first Polish companies to get funded in the US.
They tried and tried and kept trying.
And it worked. They raised millions from all of the best VC firms. Instead of wasting millions on an SF headquarters they hired an American startup founder to be their C-Level co-founder in New York and he was in charge of business development in wider markets. With the money they saved, they built a huge office in an abandoned chocolate factory in Krakow where an international team of employees work together to sell beacons.
Finally, they gave back. The team now owns its own workshop in the basement of the factory where they offer free access to powerful prototyping devices like so-called pick-and-place machines and 3D printers. Instead of shutting the world out, this company opened up.
There are a number of keys to success that we can use
This is probably the most esoteric thing I’ll say in this book: you must expect great things. I’m not talking about taking on a winner-take-all, disrupt the world kind of attitude. I’m simply saying that in order to escape the Black Hole you need to see past yourself and your limitations and figure out ways to get things done. Is your network too small? Expand it. Is your English poor? Fix it. Is there no technical expertise nearby? Become a technical person.
A friend of mine who invested in my first startup told me something very important: he didn’t expect us to win. Instead, he expected us to become experts in our field, to improve it with our skills and experience, and when he needed us he would call on us to help him in the future. You don’t escape the Black Hole to win it all. You escape to Black Hole to simply get a chance to play the game.