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When you launch a startup, here’s a hard truth: you’re already losing.
That’s the way Reid Hoffman, co-founder of LinkedIn and one of the world’s top investors, sees it.
"When you start a company, you're a default dead, right? By default, the company is out of business."
In other words, the moment you start, your company is failing—unless you figure out how to change that.
Every founder’s first job is to move from “default dead” to “default alive.” But what does that mean?
Photo: Steven Bartlett/LinkedIn
The Game of Survival: Default Dead vs. Default Alive
To put it simply:
Default dead = If your company keeps running the way it is today, you’ll eventually run out of money and die.
Default alive = You’ve built a business that can sustain itself—you’re making enough progress to survive.
For early-stage startups, most are default dead.
It’s a race against time. You either:
✅ Secure funding before you run out of cash.
✅ Generate enough revenue to sustain yourself.
✅ Or—you shut down.
This is why fundraising matters so much. As Hoffman puts it:
"One is, well, can you go get the capital? How do you pitch the capital?"
But even raising money is just part of the game. A well-funded startup can still fail if it doesn’t execute fast.
Example: Stripe’s Early Funding Struggles
Stripe, the online payments giant, almost didn’t get funded. In 2010, founders Patrick and John Collison were building a simple way for developers to accept payments. But there was a problem: investors didn’t believe the market needed another payment processor.
They kept hearing “no.” But instead of giving up, they built a working prototype and convinced influential startups like Lyft and Shopify to use Stripe.
This early traction changed the game. When they went back to investors, they had proof—customers were already using their product. That’s when they secured funding from Y Combinator and later from Peter Thiel and Elon Musk.
Lesson: If you can show real progress, it’s easier to go from default dead to default alive.
Why Working at a Big Company Won’t Prepare You
A lot of new founders think working at a big company will help them build a startup. They’re wrong.
"I went and worked at a large company and I learned a bunch of things. Like, well, yeah, but you didn't learn how your default dead. You didn’t learn how to launch a new product."
At a big company, you don’t have to worry about:
Starting with nothing and turning it into something.
Figuring out how to fund your idea when no one believes in it.
Building a team from scratch, without brand recognition.
Big companies have systems in place. Startups don’t. You’re building the rocket ship as you’re flying it.
Example: Brian Chesky Had to Sell Cereal to Keep Airbnb Alive
In 2008, Airbnb was running out of cash. Investors weren’t interested. The company had no real revenue and no proof that renting strangers’ apartments would work.
So what did Brian Chesky and his team do? They sold cereal.
They designed custom cereal boxes—“Obama O’s” and “Cap’n McCain’s”—to capitalize on the 2008 election hype. It worked. They made $30,000, just enough to keep going.
But here’s the key: they weren’t just selling cereal. They were proving they could be scrappy, resourceful, and survive. That’s what convinced investors like Paul Graham to fund them.
Lesson: At a startup, you don’t have the safety net of a big company. You have to hustle and find creative ways to stay alive.
It’s All About People: Bringing the Right Players to the Table
So how do you win? By surrounding yourself with the right people.
"In addition to kind of risk-taking, you have to be good at bringing many resources from different vectors into your vision and working with you."
Hoffman breaks it down:
✔️ Investors – Fund your vision and give strategic advice.
✔️ Employees – The people who actually build the company.
✔️ Customers – The ones who validate your idea (or kill it).
✔️ Advisors – Mentors who help you avoid costly mistakes.
✔️ Partners – Businesses that give you leverage and distribution.
The best founders don’t try to do everything alone. They create a network of people who believe in their vision and help them execute it.
Example: How Mark Zuckerberg Surrounded Himself with the Right People
Mark Zuckerberg didn’t build Facebook alone. In the early days, he brought in:
Sheryl Sandberg – An expert at scaling businesses, who later became COO and helped Facebook grow into an ad empire.
Peter Thiel – The first major investor, whose $500,000 check gave Facebook the breathing room it needed.
Dustin Moskovitz – His co-founder, who helped build the product in the early days.
Zuckerberg wasn’t the best at everything, but he found people who were.
Lesson: The right team can mean the difference between success and failure.
The Ultimate Startup Skill: Learning Faster Than the Game Changes
Even if you have the right people, you won’t succeed if you don’t evolve.
"You have to be able to grow yourself and learn because the game changes."
A startup at 5 people is different from a startup at 50 people, which is different from a startup at 500. What worked in the beginning won’t work later.
Great founders are always:
Learning new skills.
Adapting to market changes.
Reinventing themselves as leaders.
Example: Netflix Reinvented Itself to Survive
Netflix started as a DVD rental company. But in the early 2000s, it saw that streaming was the future. Blockbuster didn’t.
Netflix pivoted before it was too late. They invested heavily in online streaming, even though DVD rentals were still their main revenue source.
Blockbuster, meanwhile, stayed stuck in the past. They believed people would always want to rent DVDs in stores. By the time they realized their mistake, it was too late.
Lesson: The game is always changing. The best founders change with it.
The Bottom Line: Can You Escape Default Dead?
Startups aren’t built in safe environments. They start on the edge of failure.
Most don’t make it. But the ones that do find a way to shift from default dead to default alive—before it’s too late.
They secure funding or generate revenue fast.
They surround themselves with the right people.
They keep learning and evolving as the company grows.
That’s how you beat the odds. That’s how you build something that lasts.
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