The instinct that built companies, and the money that changed it

I did not come to entrepreneurship empty-handed. I had run things before. Through my long career I had built products, services, and entire organisations. I knew the lean framework. I knew the advice I had given other people for years. Sell before you build. Go narrow. Get one thing working before you try to grow it.

People start companies for all sorts of reasons. Some are looking for meaning. Some are convinced they can do a better job than their employer. Some become obsessed with an idea and cannot let it go. Increasingly, many are drawn in by the stories they hear. How hard it is. How big it can become. How much you can win if you get it right.

The reasons are personal. For me it was the first one. Today it is often the last one. Most founders are probably driven by some combination of all three.

I have always loved the entrepreneurial spirit because I grew up around it. In India there is a word for it: Jugaad. It is often translated as frugal innovation. Researchers have written about it and business schools have studied it, but the idea itself is simple.

When you have very little and face a never-ending stream of problems, some of them tied directly to your survival, you do not stop at the obstacle. You find a way around it using whatever resources are available. The solution is rarely elegant. It only needs to work well enough to get you to the next step or next problem.

Paul Graham, the cofounder of Y Combinator, noticed the same sort of drive in founders and described it as being relentlessly resourceful.

It is an unusual quality. Most people do not have it. The people who do often find each other and end up building companies together.

What is often missed is that jugaad consists of two separate instincts.

The first is determination and drive. The refusal to give up when confronted with a problem.

The second is a frugality discipline buried inside the jugaad mindset. You try the thing first. You get it working once, in the smallest way you can manage. If it breaks you patch it, again with next to nothing. If it holds you keep it going and make it sturdier as you go. If it falls apart completely you start over, and starting over does not hurt, because you had hardly put anything in. The small-spending is part of it.

When you are wrong, and founders are wrong frequently, you discover it early and at low cost. You learn faster because mistakes remain affordable. That cycle of trying, learning, adjusting, and trying again is what allows resourceful people to make progress despite limited means.

Somewhere along the way, that second instinct began to disappear.

In the last twenty to twenty five years this instinct ran into a particular kind of money. Venture capital.

The venture model rests on a few things being true. A fund backs a lot of companies, expects most to come to nothing, and needs a few to pay for everyone. So the winners cannot just do well. They have to get huge, and get huge fast enough for the fund to cash out in time. For about twenty years the world cooperated. The internet meant you could reach everybody, so a winner could get bigger than winners used to get. Software models implied that once it worked, it worked at almost no extra cost and with significant margins. The VC model depended on exits, and there were plenty. And money was cheap, so you could throw it at a young company to grab the market early and sort out whether the business made sense afterwards. They even named it. Blitzscaling.

For a long period, the environment supported that approach. The internet made global distribution possible. Software businesses could scale at costs that traditional businesses could only dream of. Capital was abundant and interest rates were low. Investors could pour money into young companies in the hope of capturing markets first and figuring out the economics later.

The model produced some remarkable companies and generated enormous returns. Entrepreneurs studied those successes and were inspired by them. Investors searched for the next one. Books were written about them. Conferences celebrated them.

Gradually, venture-backed growth stopped being one way to build a company and became the dominant story about what building a company looked like. Other paths continued to exist, but they attracted less attention, less capital, and fewer headlines.

That shift had consequences.

The founders who came in lately did not learn this from doing it. They learned it from stories. And the stories were the big ones. Those relentlessly resourceful had applied themselves using money to reach scale, value and personal gains. Nobody was telling you about the relentlessly resourceful that stayed small and fine. Nobody told you about the ones that got huge amounts of money and still died, some fast and most slowly. Because who gives that kind of talk.

What reached new founders was therefore a highly curated sample. The lesson was drawn from survivors.

This is survivorship bias.

The stories kept the first part of what jugaad means and lost the second. Of course they did. The relentless drive is what sounds good and given success makes a good story. The frugal, slow, test-it-first part does not make anyone lean in. That just sounds slow and boring. So that part just fell out of the success story, and the founders who learned from the story never knew it was supposed to be there.

Over time, many founders amplified their inbuilt drive without learning the restraint that originally accompanied it.

Capital amplified the imbalance.

A resourceful founder with substantial funding still possesses the determination to move quickly. What disappears is the pressure to validate each assumption before making the next investment. Mistakes that would once have been exposed immediately can remain hidden for months or years. Money does not create bad decisions, but it can delay the feedback that would have revealed them.

I fell into the same trap.

The jugaad mindset shaped much of my life long before I became an entrepreneur. Yet I absorbed the same stories as everyone else. I moved faster than I should have. I forgot the part of the instinct that had made the rest of it work.

That experience is one reason I am writing this book.

The Avoidable Startup Failure will be published in August. If you would like to read it first, you can sign up at anjali.no/book.