For Startups, Is Friction Always Bad?

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when a bubble mentality takes over—which seems to happen here every decade or two—a lot of these ideas will start to look like they have legs. Pretty soon, investors will start handing over small fortunes to overconfident founders who, most often, will turn them into smaller fortunes.

When there are more funded entrepreneurs in circulation than good ideas, you start to hear some weirdly self-reinforcing logic, such as the idea that almost every startup will have to abandon its original product at least once before it finds a market, and that the best entrepreneurs are those who can “pivot” gracefully from one idea to the next. This thinking is enabled, in part, by the Bay Area’s sheer abundance—if your company needs a little more capital to test its second or third product idea, or if you decide your website should probably run on Ruby instead of Python or HTML5 instead of Flash, the money and talent will probably be there. It’s also fueled by the mythology that has grown up around foundational Silicon Valley companies like PayPal, which changed course twice before finding a market as eBay’s default payment processing system. But to my ears, “pivot” is often just a euphemism for “trying something else before we have to ask for more money.”

You can probably define a bubble as a shortage of friction. If the spreadsheet-obsessed venture partners in New England had been in charge of screening all Internet investments between 1995 and 2001, there probably wouldn’t have been a dot-com bust. But then, there wouldn’t have been a boom, either.

My point is just that zero friction isn’t really the goal to shoot for. Investors have to impose a moderate amount of it. If they set the level too high, entrepreneurs will probably go elsewhere—and that’s what seems to be happening in Boston. If they set it too low, things get out of hand, which may be what’s happening in the Bay Area. But perhaps it’s all good in the end. Maybe there’s just a big geographical sorting algorithm at work—with entrepreneurs and investors heading to the places that best suit their personalities.

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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