Startups

What startups and space rockets have in common

It's T-minus 10 minutes to launch. The first stage is ready to propel the rocket to the edge of space. The propellants - rocket grade kerosene and really cold liquid oxygen, are being loaded into the rocket. The 9 Merlin engines are healthy ahead of flight. It's looking like a beautiful day for an on-time lift off and range is green for launch. We are currently just over 5 minutes from lift off and the first and second stages are almost fully loaded with propellant. T-minus 1 minute, Falcon 9's flight computers are now in control of countdown. T-minus 30 seconds, T-minus 15 seconds, 10, 9. 8,...,3, 2, 1, 0, ignition, liftoff.

I've been fascinated with rockets and planes from a very young age. As a startup founder who is currently working on his third startup, I've come to see a lot of similarities between startups and rockets. It’s not surprising that most people in the startup world often describe fast-growing startups as rocket ships, but so far nobody seems to have offered an explanation about what makes this metaphor so apt. Let's dive into why startups and space rockets are so similar.

Liftoff

The 9 Merlin engines generate 1.7 million pounds of thrust in order to escape the earth's gravitational pull. The vehicle begins to accelerate towards the sky. In startup world, the team is excited, after a lot of hard work, their product is finally available to customers. This could be the Minimum Viable Product (MVP) or the first version of a hard tech startup's offering. Early adopters are now trickling in to use the product. The team iterates fast based on the user feedback to make the product better. Product-Market fit is the goal, as the team tracks important metrics such as user growth, retention and churn to ensure they are on the right trajectory.

Maximum Aerodynamic Pressure (Max-Q)

The rocket is now coming to Max-Q, the point at which it experiences the highest structural stresses as it ascends. In essence, this is the point in which the rocket is subjected to the highest physical pressure as it races towards space. In relation to startups, this is the point at which most companies fail as they run out of runway. They decide to either stay on course or pivot in order to find product-market fit. They have high cash burn rates as they strive to reach critical mass in order to gain market share. The startup is just crossing the chasm as the early majority of customers begin to try out their product. Competition becomes really fierce as new entrants come into the market and incumbents begin to take notice of the startup's progress. Also, startups might consider raising more capital in order to increase their runway. However, in order to raise on favorable terms, they must have significant traction. Meaning that they should have good retention rates, great user growth (about 5-7% week over week) and really low churn rates (< 1% monthly).

Main Engine Cutoff (MECO)

"Stage separation confirmed". The first stage and the second stage of the rocket are now disconnected from one another. The first stage falls back to earth (or in the case of SpaceX and Blue Origin, lands back on earth) while the Merlin Vacuum engine of the second stage starts up to accelerate the second stage towards space. The few startups that make it to this stage have a product or a line of products that have been widely adopted by the market. Their company and product is now becoming mature. They have a relatively large and stable base of customers who rely on their core product. Some startups begin to get acquisition offers from incumbents who seek to ingest the startups' product and resources. Others consider the possibility of going public. A large number of startups begin to look like an incumbent by mainly focusing on serving their most profitable customers better, which will eventually lead to them being disrupted by another startup in the future. Unless they are willing to do that to themselves by looking into the future with their stakeholders at the center of every decision. To be successful, they must be willing to let go of what has worked in favor of what will work in the future. The stakes are high and most companies delay making this decision until it's a bit too late.

To infinity and beyond

Great companies become part of our everyday lives. Some even become part of the dictionary. Very few companies are able to become lasting companies. Short term thinking eventually leads to a short company lifespan. Companies need to create a culture and a compensation structure that ensures that everyone is in it for the long run. Let's build for the future we'll all be proud of as we reach for the stars.

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