David Heinemeier Hansson

March 31, 2021

It's hard to draw lessons from your own failures

Andrew Wilkinson's tale of how he blew $10,000,000 building a to-do list app perfectly illustrates the danger of trying to analyze your own failures. It's so easy to fall in love with one of those infinite alternate universes where you just did that one thing differently and everything worked out. Like "if only we had raised venture capital, we would have made it". No, sorry, you probably wouldn't have.

But before we look at the folly of that central premise – that if only Flow had raised venture capital, it would have conquered Asana and the world – let's examine the inspiration Wilkinson claimed to have followed because, erhm, it was Basecamp.

Except it wasn't. Wilkinson was inspired by our funding model – bootstrapped from consulting – but didn't follow any of the principles that go with that model:

  1. Don't spend more than you make. If you're profitable, you're free. Even if the show one day ends, you made money every year along the way, so there won't be a black hole where your bank account once was, and you won't be roiled by regret.
  2. Growth is not the goal. Wilkinson seems obsessed with Asana and "winning" the market. If you define your success by whether you're beating a competitor or you're winning some arbitrarily-defined market, you'll be sucked into playing a game where they set the rules.
  3. Half, not half-assed. Flow spread itself thin thinking "the market" had set certain non-negotiable bars, so unless they had, say, an Android app RIGHT NOW, they'd be toast. This led to a me-too, low-quality product full of bugs. Instead of focusing on a smaller, more opinionated, more differentiated product.
  4. Under-do the competition. Wilkinson's tale of regret is steeped in war metaphors. Bringing bigger, badder weapons to this imaginary war with Asana. Locked into a Cold War one-upping game. Of course you're going to lose if you define your company and your product on the competition's terms, try to copy whatever they're doing, but don't have half the money to do so.
  5. Don't out-spend, out-teach. Wilkinson didn't have anything to say and neither did Flow once they started chasing a competitor's agenda. So instead of building an audience by being different and interesting they started losing customers by being a worse copy of a better funded competitor.

Wilkinson's chief regret seems to be that he spent millions of his own money chasing a dream to become a billionaire off a todo app. That's about as far as it could possibly be from our story and advocacy on entrepreneurship as you could get. It's the venture capital mission without other people's money.

If you run your company like it was VC funded without the venture capital, yeah, you're going to wish you had just taken other people's money.

But even if you do, that is absolutely no guarantee of success! The vast majority of startups fail. Especially those chasing unicorn dreams. Even if they take other people's money. This romantic dream that Flow would have beat Asana if only it had more money, more people, more ads, more clients, more everything is just that... a dream.

It also ignores the fact that there are about a million other todo list makers out there. And plenty of them did very well! Todoist is from the same era of Flow, and they look to be doing well by all accounts, and they didn't raise any venture capital either. And of course Basecamp itself is partly a todo list manager.

As long as we're playing with counterfactuals, why not imagine a universe where Wilkinson hadn't stared himself blind on a venture-funded competitor, and instead followed some of the principles listed above. One where he had kept developing a differentiated product, focused on smaller companies as Asana chased the enterprise, and most of all lived well within Flow's means while making $1-3 million dollars a year. That could have been a wonderful business!

But as Wilkinson says, that wasn't the ambition. Running a $1-3m/year company that might have employed 10 people and kicked off millions in profits over the years wasn't going to make him a billionaire. So if that was the binary definition of success, sure, it would have been a failure. Most people should be ever so grateful to have failures like that!

So that's where we end up with the analysis of Flow's failure. If you see yourself in that billionaire aspiration, that unicorn-or-bust mentality, do you know what? You probably should go the venture route. You'll almost certainly fail, because those are just the odds of the venture game, but at least you'll be spending other people's money to do so.

If you look at the idea of running a company of 10-20 people that would make you millions of dollars over the duration, then Wilkinson's conclusions are the exact opposite of what you should internalize.