29
Sep
2015
1

Ume vs Sakura – a Japanese take on startups

Both Plum Blossoms and Cherry Blossoms are very important in Japanese culture. Each for very specific reasons. Plum trees are called Ume and Cherry trees are called Sakura in Japanese.

Sakura Blossoms represent the extremely important concept of Mujo, which means the impermanence of all things in life. Cherry trees explode with color when they blossom. They burst with life and vitality in an incredible short period of time and while they are in full bloom fall away without even withering in an even shorter period of time. The exuberance of life to death, from plentiful to nothingness.

Ume Blossoms are much more discreet and subtle, even though they are more fragrant. They could be viewed as more unique, as opposed to the plentifulness Sakura exudes with. They are associated with success – with exams, studies – hope and as they are used for sustenance – plum juice, salted plums – convey a message of longevity and permanence in time.

Am I wrong in thinking Ume is associated more with Shinto and Sakura more with Buddhism? I will defer to experts on this one.

In any case, my purpose is to tie symbolism to startups. Arguably an exercise investors and entrepreneurs do not grapple with regularly.

I recently engaged in a heated conversation focused on startup growth rates and failure rates. The conversation boiled down to whether a higher growth rate leads to a higher probability of failure. Apply this concept on the aggregate to all startups and whether on a cohort basis, failure rates may be rising going forward based on the assumption that investors and entrepreneurs are pushing for faster growth compared to 10 years ago?

We do have historical data on survival rates of startups. ¬†Mortality rates are high, we all know this. We also know that the amount of capital needed to fund a startup in the early stages is a fraction of what it used to be – cheaper tech, better tech, more techies starting businesses, deeper and wider use of the internet, high speed internet, networks and marketplaces… the reasons are multiple. Additionally faced with winner take all market structures investors and stakeholders will push more capital at a faster clip onto promising startups in the hope of capturing network effects or to crowd competitors with the right tempo. Add to this volatile mix the era of easy and cheap money we have been bathing in of late and we end up with a potentially explosive cocktail that exacerbates the already binary VC investment philosophy of go big or go bust. In a way some of the nose bleed valuations and capital raise sizes of later stage startups is a good proxy for accelerated growth rates.

Now, to some fundamental questions I would love readers to weigh in:

1) Are we seeing an acceleration of growth rates for startups compared to previous eras?
2) In the early stages of a startup life, is there an optimal growth rate than ensures optimal outcomes to a private sale or an IPO?
3) Does pushing the boundaries of growth necessarily bring bad outcomes over time – short term, long term?
4) If I am correct in assuming startup growth rates are accelerating, is the root cause investor and entrepreneur driven or is it just a reflection of our world moving at a faster pace?

 

Back to Japan, think of startups as either Sakura or Ume:

Sakura Startups attract sizable amounts of capital, increase their valuations, hire employees, spend cash, grow their operations and grab market share at a dizzying pace. They burst with vitality and life.

Ume Startups grow in sustainable ways, over time, without necessarily going through high bursts of activity over short periods of time, develop and nourish their eco-systems. They uniquely weave their roots over time.

Which would one do you prefer?

 

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