Great startups lean into chaos

Most managers in early-stage startups think that chaos is inversely correlated with results. That is, they think that chaos breeds bad results and an unhealthy environment, while order breeds good results and a more harmonious environment. This perception is wrong.

Order does not necessarily breed success

Some problems require structured problem solving while others require more chaotic creativity. Many problems can be solved with either approach. So, both order and chaos can lead to success.

Problems with one true answer, that is difficult to find, require a process to solve. For example: Will this very expensive technology solve our problem? Is a specific new technology likely to disrupt our current approach? These are problems where the cost of being wrong is massive compared with the cost of delay. Few problems are like this.

Problems with many good enough answers can be more quickly answered through chaos/creativity/decisiveness than process/order. For example: What is a good startup idea? Where should we locate our Australian office? What is the right price for our first product? These are problems where the cost of being wrong is minimal compared to the cost of delay. Most problems are like this.

A company that quickly answers many questions in a good enough fashion will almost always out perform a company that answers fewer questions, more slowly, in a more excellent or correct fashion.

Chaos need not create pain

Most people find chaotic work environments difficult. They want to know where they stand, what their goals will be next year, when they’ll get their next promotion, whether they’ll need to travel to the event next week. This is why chaos is perceived as correlated with having a bad time at work. But, these people are unsuited to work in most roles at an early-stage startup.

People who thrive on chaos are difficult, but possible, to find. These people will deliver the best results to most early-stage startups. They have a stoic response to setbacks and are comfortable taking risks in their decision making. They will enjoy themselves along the way, too.

This is why the people who get you from $0-20M are rarely the people who will get you from $20-100M — large companies legitimately do require more order and process to work¹², and this means having a very different employee base³.

Success breeds chaos

Success and chaos are in fact correlated, just in the opposite direction to what many people believe: success creates chaos.

This is actually pretty obvious when you think about it. Growing ARR by 5% each month does not create much pain. Growing ARR by 250% in a single month does. This will stretch your existing resources thin.

So, radical success guarantees radical chaos, another reason why your team needs to be built for chaos.

The cost of optimising for order

All early-stage startups are chaotic, so when a startup starts to fail, this is usually blamed on the chaos. This leads to a massive amount of energy being invested in creating order through process and scaling the team. This pivot to order is almost always a deadly distraction from the real reasons why the startup is failing.

This is why most startups stall somewhere between $1-10M ARR. A product with modest product-market fit can get to this level of revenue through brute force, but it will struggle to scale much beyond that. When growth stalls, these startups blame the chaos and focus on creating an orderly company instead. Two years later, they have successfully codified processes that do little to solve their true problem: they chose a market or problem that was too small, or their solution doesn’t adequately solve their problem. The quickest way to solve those problems is almost always perseverance through the chaos, rather than a one-to-two year pause on real progress to instead make what is, for early-stage companies, mostly superficial progress (specifically: the transition into an orderly organisation).

Footnotes