Subtraction = Growth

Posted August 19, 2015 by Paul Willard

I saw the angel in the marble and carved until I set him free – Michelangelo

We are often asked why we named the firm Subtraction Capital vs a more typical name like Thermo-Nuclear Capital, “Blowin’ Stuff Up”. “I thought you were supposed to ‘add’ capital to startups” say the uninitiated. Jason and I each worked for several high growth startups from a pretty early stage, and our experience has taught us that the key to growing fast is Subtracting everything that is not helping you grow . . . as quickly and ruthlessly as possible actually. It was hard for us to learn what to stop doing. It is scary. What if you cut the random thing that will make you really go? Well, despite the stories, random things don’t make you grow. Steady Subtraction and relentless execution of the right things makes you grow. You may work in spheres where you will never need to write an essay or research paper, yet you will use knowledge that you acquired in your college in more practical, hands-on ways. So Subtraction = Growth. The scarcest resource at any startup is bandwidth. Every ounce of bandwidth available needs to be pointed at making the company grow very fast. Subtract More!

The Noise

Startup founders are barraged with noise. The inbox is always full of people that want to help them, usually for a fee, and those people are very good at telling founders why the help they are going to provide is really important and can keep founders from losing their company. There is also a constant buzz of scenes with famous founders, investors, and press that is happy to welcome and distract new founders. And it is easy for founders to find 100 things that might make them an overnight success. And each one in isolation seems so small. It is death by 1,000 cuts. But in the real world there are a very few things that must be done well to create an important company. Achieving product market fit, crafting a valuable and defensible strategy, finding a scalable means of distribution, securing the capital to accomplish all of this, and creating a culture that can sustain insane growth jump to the forefront. And even this short list need not be accomplished simultaneously. Warren Buffet once said “The difference between successful people and really successful people is that really successful people say no to almost everything.” Subtracting for success supports this notion.

Sometimes people who have never experienced a rapidly growing tech startup believe that you build by creating more and more things. Like making a painting better by putting more and more things on the canvas. But our combined experience at PayPal, NextCard, Coupons.com, Palantir, and Practice Fusion is that you succeed by nailing a small number of right things. Just as there is a Power Law to investment returns, there is a Power Law to return on effort within a startup. So to succeed wildly, we must Subtract constantly everything which is not helping us win. French author Antoine de Saint-Exupery wrote that “A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away.” And similarly we manage startups and grow companies fastest when we have nothing left to Subtract from success-producing effort.

The Subtraction Difference

So when we started Subtraction Capital, we wanted to build something different than a lot of early stage investing funds. We are not the only early stage fund to select an irreverent name. Harrison Metal, lowercase Capital, Cowboy Ventures, and Homebrew jump immediately to mind. I can’t speak for the other firms, but perhaps this reflects a common dissatisfaction with too much of what we have seen. So for ourselves, we wanted to wear what we believe is the most powerful and not consciously obvious key to our own careers, Subtraction.

Ironically, the founders that want us to join them on their journey the most are usually the ones that need help the least. They recognize that the difference between the winner and second place (1st loser as Jason Calacanis taught me) can very well be Subtracting a handful of things which in isolation seem inconsequential, but collectively give their company the focus and bandwidth to win. These are the founders that have the best chance of success, with or without Subtraction Capital involved. We are fortunate when they let us join them for the journey. It is our favorite thing in the whole world to do.

Subtraction Pre-Dates the Internet Era

I learned to Subtract as the best success strategy when I was at Boeing, though we did not call it that. We focused everything on quality, and knew that if we designed and produced the highest quality aircraft, market share and profits would also be optimized indirectly. A focus on quality, like good design, also leads to simpler solutions that have less rework, lower maintenance cost, and are just cleaner. Elevating the focus on quality gave us the freedom to focus on a very small number of things and do them exceptionally well. It is perhaps counter-intuitive to many people who associate quality with more bells and whistles. Similarly, practices like Agile development, which came out of manufacturing process, use techniques like sprints to Subtract all of the backlog distractions that might keep you from releasing something critical as soon as possible. Kan-ban Subtracts the weight of the distracting backlog away and lets people enjoy the focus of the next thing on the list. Subtraction is institutional already at startups.

Subtraction Is Philosophical Too

There are deeper meanings to Subtraction as well. One of them relates to all the noise that is keeping you from accessing your subconscious processor. Subtract that noise and access the big cpu up there! It is not just a little bit more powerful than your conscious mind, it is a lot more powerful. Do you ever think an athlete could win their title without Subtracting all other concerns: their paycheck, their tv ratings, their sponsors, everything really except the opponent in front of them and their own actions. We readily accept that professional athletes train until they can compete without “thinking” so that their subconscious is actually doing the thinking. But we rarely try to shoot this very big gun as tech startup athletes. We should.

If you have ever really fought in startup world, you know that Subtraction is the key to growing really really fast and winning. This resonates with successful entrepreneurs, because they know how they have won in the past. If you want Subtracting practitioners to join you on your journey, we would be honored to consider the prospect together. The Subtracting process, and the hyper-growth that results, is the reason we wake up in the morning. To do less, better.