Laws of startupdynamicsTags: laws of startups, startupdynamics, startups
The laws of startupdynamics define fundamental aspects (competition, resources, entropy, valuation zero gravity, value creation) that characterize startupdynamic systems. The laws describe how these quantities and qualities behave under various circumstances, and forbid certain phenomena (such as perpetual motion).
A startupdynamic system is an ecosystem comprised of a demand hub (startups), a supply hub (investors), a service provider hub (consultants, auditors, recruiters, lawyers, subject matter experts), a regulatory/compliance/governance hub, a stakeholder hub (government(s)), all the talent that powers these hubs, and finally a customer hub.
Zeroth law of startupdynamics: If two systems are in competitive equilibrium with one another and a third system enters in competition with the first two, competitive equilibrium will not be achieved until one of the three dominates the other two.
First law of startupdynamics: When resources (man hours, capital) pass as expenses or capital outlays into or out of a system, its internal resources pass in accord with the law of conservation of resources such as in the absence of creation of value, the probability of attracting additional marginal resources will be nil thereby proving perpetual motion systems are impossible.
Second law of startupdynamics: In a natural startupdynamic process, the sum of the entropies of a given set of systems in which a supply hub has invested increases in the absence of value creation at the individual system level. As such, perpetual motion supply hubs are also impossible.
Third law of startupdynamics: The entropy of a system in the absence of value creation approaches a constant value as the internal resources of the system approaches absolute zero. With the exception of lifestyle driven systems or self funded systems with minimal entropy characteristics, the entropy of a system at absolute zero is typically close to zero, and is equal to the log of the multiplicity of the quantum of a degenerate ground state otherwise known by its technical legal term “bankruptcy”.
Fourth law of startupdynamics: In an unnatural startupdynamic process where the suspension of disbelief has been achieved due to the excited states of the demand hub (technical term is “immature exuberance”) and the supply hub (technical term is “suspension of disbelief”) the valuation of a system will approach zero gravity. Zero gravity can be sustained for short periods of time regardless of the second and third law of startupdynamics.
Fifth law of startupdynamics: The longer the fourth law of startupdynamics violates the third and second laws, the more violent the force of the first three laws will be felt for any system, system of systems or a supply hub in particular.
Sixth law of startupdynamics: The more unstable (weak or strong form) the regulatory and stakeholders hub, the more volatile all laws of startupdynamics will be.
Seventh law of startupdynamics: The only value creation vector that will optimally mitigate all laws of startupdynamics is the one applied to aggregating, adding, servicing and retaining customers within the customer hub. Even if fully optimized this value creation vector will only mitigate all laws of startupdynamics for a certain period of time – certainly not forever.
Eight law of startupdynamics: Faster value creation does not necessarily mean optimal mitigation of all laws.
Ninth and final law of startupdynamics: A system actively plana transference dynamics strategies whereby the value created is exchanged for resources and the system is freed from the encumbrance of any of the laws of startupdynamics before excited states or ground states overrun it. These transference strategies are called mergers, acquisitions or initial public offerings.