Is It Time to Give Up on Your Startup Dreams?

“I’m not sure what to do,” he said. A young founder was sitting across from me, tears welling in the corners of his eyes. He’d had some modest success. He’d raised $500k in seed funding. He had a handful of customers. He’d gotten some press coverage. But he was grappling with one of those moments of self-doubt every entrepreneur has dozens… hundreds… maybe thousands of times during their careers. “Things just keep getting harder. Sometimes I wonder if I’m even on the right track. How do I know when to quit?”

And there it was. The question about entrepreneurship I get asked more often than any other: “How do I know when to quit?”

For me, the answer was obvious: YES! His market was too small, his customer acquisition cost was too high, his runway was too short. In my mind, it was clear he’d spent too much time building a product and not enough time effectively addressing a compelling market opportunity. It’s one of the most common mistakes entrepreneurs make. But if I’d told him that, he wouldn’t have listened. Entrepreneurs never do. They’re too committed to their ideas.

Why do startups fail?

By some estimates, as many as 90% of all new businesses fail within the first five years of their existence. That’s not just Silicon-Valley-style tech companies. It also includes the local pizza place that opened down the street from your house, too. Have you ever wondered why so many startups fail?

Personally, I wonder if a big reason behind the high number of failures is the tendency of entrepreneurs to believe in the value of their own ideas regardless of whether or not they’re actually good ideas.

All entrepreneurs are guilty of this — myself included. We all believe the world needs our entrepreneurial ideas. Some people might describe this as arrogance or narcissism. I call it necessity. Strong belief in the value of our own ideas is part of what enables entrepreneurs to create new things.

But it’s also a big part of what makes entrepreneurship difficult. We become so passionate about our ideas that we have trouble recognizing when they aren’t good and shouldn’t be pursued. How can entrepreneurs maintain passion for their beliefs without being blind to bad ideas? Put more simply, how do we know when to quit?

Passion is necessary

Knowing when to quit is something every entrepreneur struggles with. That’s not surprising. After all, entrepreneurs are constantly told they need to be persistent and push through their failures. And, to be fair, that advice makes sense because entrepreneurs are trying to convince people to do things that are inherently against their nature.

Think about it this way: en masse, the general public tends to be suspicious of new things and hesitant to accept them into their lives. This resistance makes sense when you apply an evolutionary lens to the decision-making process. For example, when our hunter/gatherer ancestors saw a new animal appear at the edge of one of their camps, did they immediately run over to pet it? Of course not! First they needed to know whether or not the animal was going to treat the village like an all-you-can-eat human buffet.

To counter people’s biological resistance to new things, entrepreneurs develop passionate beliefs about the value of their ideas. These beliefs sometimes border on arrogance, and that’s OK. Entrepreneurs have to be passionate about the things they’re building in order to combat all the skepticism they’re sure to encounter. However, being passionate about an idea doesn’t automatically make it a good idea. So even though entrepreneurs have lots of confidence in their ideas, those beliefs — no matter how strongly held — are actually something entirely different. They’re assumptions.

The power of assumptions

Assumptions are so prevalent in the earliest days of building businesses that new startups are, in truth, little more than enormous collections of assumptions. For example, your target customer is an assumption. How to reach your target customers is an assumption. The best product to create for that customer is an assumption. How much those target customers will pay is an assumption. And so on. Most of the things founders think and believe to be true about their new ventures are, in reality, yet-to-be-validated assumptions.

I realize people rarely use the word “assumption” to describe something good, but that’s not true in the startup world. For entrepreneurs, assumptions are more useful than beliefs because beliefs create blindness.

People who are overly confident in their own beliefs usually struggle to adapt when they encounter contradictory evidence. They tend to ignore evidence that conflicts with their worldview and seek evidence that agrees with it. This phenomenon is so common, there’s even a name for it in clinical psychology. It’s called confirmation bias.

In contrast, while everyone struggles to accept evidence that contradicts their beliefs, evidence that contradicts our assumptions is often welcomed as a “pleasant surprise.” For example, think about the last time you dreaded going somewhere because you assumed it was going to be boring, only to be pleasantly surprised when you enjoyed yourself. Not only were you happy to be proven wrong, you might have even told your friends how much better the activity was than you’d initially assumed.

If leveraged properly, this natural human ability to embrace incorrect assumptions could become your entrepreneurial superpower.

How to validate assumptions

When entrepreneurs recognize that their startup ideas are nothing more than a bunch of assumptions, it changes the way they build their businesses. Why waste time, money, and other resources launching a company, they ask themselves, if my assumptions turn out to be wrong? So they start building their companies a different way. They start by trying to validate their assumptions.

The work you’ll need to do to validate your assumptions is just as challenging as the work you’d need to do to “launch a company.” But the concept of validating assumptions is, in my mind, more logical. Conceptually, validating assumptions is as simple as identifying all of your major assumptions — the ones that, if wrong, would cause the business to fail — and then running tests to determine whether your assumptions are true or false.

For example, to identify assumptions, you might ask questions like: Who is my customer? What does my customer want? How will I reach my customer? And so on. For that last question, let’s say you answered: “I’m going to reach potential customers using Google Ads.” That’s an assumption. To validate the assumption, you can literally launch fake ads for a fake product and see what kind of messaging works and how much it costs to get clicks. If you discover getting clicks via Google Ads is cheap and easy, congratulations! You’ve just validated an assumption. Conversely, if you struggle to get clicks, you’ve proven the market isn’t going to be as easy to access as you’d hoped. That’s great, too. Now you know to keep experimenting with customer acquisition strategies before doing any other work. If, ultimately, you can’t find a successful strategy, don’t be upset. It’s good news. You learned that, no matter how great your product is, you won’t be able to get customers, so you can stop working on the startup before wasting any resources developing a product. Save your time for something more valuable.

That’s just an example of why you should validate assumptions. As you hopefully see, identifying your assumptions creates a startup roadmap of sorts. Specifically, once you’ve identified all your core assumptions, you’ll be able to organize them according to which assumptions are most likely to be true, and which are least likely to be true. Begin your work by validating the most tenuous assumptions first because if they ultimately turn out to be false, you won’t have wasted any time addressing the more certain assumptions. As an example, the issue of whether or not it’s possible to build a product is usually a less tenuous assumption than whether or not you can acquire customers for a product in a cost-effective way. This is why successful entrepreneurs are obsessed with their customers rather than their products.

Building startups in this way — by validating assumptions in reverse order of certainty — helps you avoid the problem of having a fully developed product and wondering why it’s not working. Instead, you’ll be able to prioritize your work in a logical order that naturally builds on itself. It’s still not a quick process, but it’s less haphazard, less random, and less likely to waste your time, which is exactly what was happening to the young founder sitting across from me, struggling to figure out when to quit.

I knew his problem within minutes of meeting him because he never talked about his customers, their needs, or the market opportunity he was chasing. Instead, he told me about his product. That’s all he cared about, and that’s why he felt so trapped. He’d spent so much time, money, and energy developing his product before proving there was a market for it. As a result, he refused to see the evidence right in front of him contradicting his beliefs about customer demand. But instead of telling him whether I thought he should quit, I posed a question.

“What are the assumptions you’re making about your company?” I asked him.

“What do you mean?” he responded.

“Well, you’ve told me everything about your product,” I explained, “but you haven’t told me anything about your customers and why they would want it. That tells me you’re assuming lots of things about what they want from a product like yours. What are you assuming?”

He thought for a few moments. Then he leaned back in his chair and exhaled. “What am I assuming about them?” he asked. “Judging by how much I’m struggling to get customers, I guess I’m assuming a lot of things that aren’t necessarily true.”

“Exactly,” I said. “So let’s start there.”

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Aaron Dinin teaches entrepreneurship at Duke University. A version of this article originally appeared on Medium, where he frequently posts about startups, sales, and marketing. For more from Aaron, you can also follow him on Twitter or subscribe to his awesome podcast, Web Masters.