The Startup as Insurgent — Reflections of a Former Founder

I had the privilege of delivering the opening talk at Battery’s and FirstMark Capital’s CloudNY event this May to an audience of around 150 CEOs, almost all founders, reflecting on my own entrepreneurial journey as the former CEO and co-founder of Guidewire Software.*

I chose to speak from the heart about an emotional topic for every founder: coping with a startup’s position of weakness and embarking on a journey with a high chance of failure. Rather than seeing the overcoming of this daunting situation as purely a matter of inner resolve, I argue that founders must maximize their intrinsic endowment of “insurgent strengths.”

It was gratifying to have fellow entrepreneurs enthusiastically receive the talk, which I re-recorded in a more video-friendly format, linked below. An abridged transcript of my remarks is included below, as well.

In starting a company, every founder says three things. No matter what the business or the market — three things.

First, that there is a serious problem with the status quo. Something is broken, something is missing. Life could be so much better.

Second, the problem cannot be solved by current providers, nor current approaches.  The incumbents just don’t get it; no incremental solution is possible. An entirely new entrant — a whole new company — is required.

And third, everyone else who could start that company and solve that problem is unworthy. I alone can fix it! Therefore, I can do no other than to start this company.

My point: the founder’s identity is, at its heart, discontent, oppositional and audacious.  She is an insurgent; her startup is an insurgency. Every founder, no matter how benign your personality, is on the side of upheaval, of tearing something down.

That’s truth #1, about identity. Here’s #2, a truth about the world: it is arguably quite irrational to start a company. The odds do not welcome. Mortality rates are daunting.

Here’s one stat: just under 50,000 software companies were founded in the US since 1990.  11,300 raised more than $5 million in today’s dollars; about half raised more than $20 million. Of those 5,800, 290 went public — 5%. And of those, about one-eighth are worth more than $5 billion today. In short, about 1 out of 1,300. Expand that globally, and the odds are much worse: about one company out of 14,000 reach the $5 billion mark.

Now, you could define a different period or lower the hurdle. But on any reasonable definition, starting a company is closer to “reckless long shot” than “sure thing.”

How does one of these reckless insurgencies actually succeed? Every insurgent must ask the same question: “How does my smaller, weaker force defeat the larger, stronger ones arrayed against me?”

This question tormented me and my co-founders 23 years ago when we started our company, Guidewire Software. After a very long and arduous climb the company sits today, June 2024, at around $1 billion in revenue and about $11 billion in market cap.

That’s my credential, likely the most meaningful thing I’ll ever accomplish.  But I want to return to that earlier chapter, long before we knew it would all work out. For me that time is characterized by two equally strong emotions: terror and a kind of rage. The terror was the feeling of a gambler all-in on one outcome. The rage, on the other hand, is the characteristic feeling of the insurgent. Asking again, obsessively: “How can my smaller, weaker force defeat the larger, stronger, more established ones against me?”

I think founders sometimes get distracted from this most critical and obvious question. Sometimes they forget the answer with which they started. Lest you have forgotten, I want to remind you of the three special powers intrinsic to insurgency itself.

The first power is to name the enemy, that which must be defeated. Capitalism is not a zero-sum game, but insurgency is. My favorite quote: “It is not enough to succeed; others must fail.” The goal is to break the status quo. Whoever is invested in that status quo, that’s the enemy. The insurgent must burn with hatred for the enemy.

Remember: the incumbents, they don’t burn with hatred. They have massages and foosball tables where they work! Life is too good to be riled up; the feast is too abundant. 

But for the insurgent, the enemy stands in the way of all good things. They are indolent and unworthy. They should suffer defeat and disgrace. You want their children to go hungry.

Lest this sound too bloodthirsty, I hasten to add: the enemy doesn’t have to be human.  The most effective slide I ever used was a picture of Guidewire’s enemy, a greenscreen terminal.  Every company meeting, every sales call, for almost twenty years, I would say, “This is our enemy — the 1980s-era CICS COBOL mainframe insurance core system. We will not rest until they are all dead and buried!”

Why is it so important to name the enemy? Because it activates the energies of your team, their tribal impulse to win as a group. Because it renders specific the frame of the contest. Because it forces you to ask every minute: how, specifically, are we going to beat this thing? Where are we strong, where are they weak? 

Most importantly, defining the enemy defines the mission, the boundaries of what you are doing. Vague definition of the enemy means a vague mission, and no insurgent can afford to be vague.

The second superpower:  to define a pure strategy. At its origin, a startup has no assets: no team, no product, no capital, no customers, no brand, no references, no revenue, no infrastructure.

The saving grace of this naked state is weightlessness. The insurgent is unburdened by prior conceptions of the problem. He has no surface area to defend and can bring his whole force to bear on the enemy’s weakest joint.

There are only two ingredients to a pure strategy:  a diagnosis and a plan. The diagnosis is an account of how things are and why they are that way. It is a high-resolution map of the enemies’ assets and their vulnerabilities.

The plan is the theory of attack. Maybe it’s a new offering with 10x benefit for a specific segment. Maybe it’s a way of coopting a discontent channel. Maybe it is a neglected persona who longs to become a hero. Or perhaps some combination of these. Informed by the diagnosis, the plan defines a vector of attack, identifying where a breakthrough can be achieved and then how to exploit that breakthrough. A diagnosis without a plan is vacuous, and a plan without a diagnosis is wishful thinking.

What did this look like for Guidewire? In brief, our diagnosis: a $2.4 trillion global industry, P&C insurance, was crippled by obsolete core systems that had become structural impediments to insurance profitability.

An insurer looking to improve this situation had three alternatives in the 2000s: in-house development, a mainframe company called PMSC and (supposedly) modern offerings from Accenture and SAP, which were really custom development.

Our plan was to exploit the structural disadvantages of each of these. Skipping over the details here, we pounded home the argument that 21^st century insurance operations were impossible without a software platform built on a modern n-tier architecture.

We had to get the boundaries of it just right. Too expansive — say, including life insurance — we would have built too thin a product. Too narrow — say, only insurers of a certain size — and we would surely have run out of market. There was a graveyard of dead software companies that had tried with the wrong scope, wrong strategy.

But the precedents didn’t matter.  The right strategy did. It was an insurgent path the incumbents could not follow. In its core elements, that strategy remained unchanged for fifteen years.

A company can survive some bad decisions and some bad hires — Guidewire had plenty of these! — but it cannot survive bad strategy. Consequently, as an investor today, I care much more about the coherence and rigor of the strategy than any other attribute of a potential investment.

So, name the enemy, define the pure strategy. Last superpower: the insurgent can summon people to a cause. 

A cause: an endeavor to be judged by its aspiration for the future, not its present reality. Established companies have long ago forgotten that yearning, while the insurgent startup burns with it.

In the early days not only did we have no assets; we were also a very unglamorous employer. Our dingy office was a short drive from the most fascinating companies of our time: Google, Facebook, Apple, Salesforce. We served an industry that is the punchline to a joke for the most boring thing you can imagine: insurance. And every aspect of our business was difficult: it was so hard to build our product, much harder to sell it and even harder to implement it.

There was no way to palliate these truths, so we made it our identity. To the team we said, “We cannot offer you a way to get rich. We can, however, offer you a way to do extremely difficult work indefinitely, with no promise of success. We are doing something harder than climbing a mountain; we are tunneling through it. Straight into the rock face.”

My founder experience taught me surprising truths about human motivation. Shared adversity binds people together more than shared success. Shared austerity binds more than shared abundance. Most importantly, shared purpose binds more than shared enjoyment. People long to be part of something greater than themselves.

And insurance is not merely the punchline to a joke. It is thrillingly relevant to people on the worst days of their lives. Without insurance, ordinary people would be devastated by the catastrophes that are improbable in the individual case but are certainties in the aggregate. And it is our calling, our life’s work — I would say — to serve the knowledge workers that provide this vital social service that insulates us from the depredations of a world full of terrible hazards. It is an outrage that they struggle with such ancient and crappy technology provided by... our enemies.

Again: shared adversity, shared austerity and shared purpose are the crucible in which a young company finds its super-motivation.

My survivor’s tale is one example of how a smaller, weaker force defeats a larger, stronger one. It was this triad of inner assets that made the difference.

We started with the same claims as every founding team: there is something wrong in the world — and it is personified in this enemy. Current approaches won’t solve it — they’re fundamentally broken — and we will defeat them with this specific strategy. And we alone can fix it — which is why we will summon, with righteous conviction, the unreasonably intense and sustained effort of super-talented people in this crusade.

So simple, right? Marshalling these three powers takes no capital, no luck — only intention.  So surely every startup is exploiting them to the hilt?

My friends, that is not what I observe.  I am no longer a founder; I’m a VC. And it has surprised me — amidst all the brilliance and energy I see in the founders I meet — how often they under-exploit these intrinsic endowments of the insurgent.

Ask yourselves, have you named your enemy? Are you filled with hate for it? How lucid and explicit is your market diagnosis — and does it still match reality? Does your strategy intersect with maximum precision on the headpin of demand? Are you calling your team to shared sacrifice and righteous purpose every day?

If not, you may not be harnessing the full power of insurgency. You may be letting the status quo off too easily.

I understand why because I have lived it. You are fatigued by the relentless exigencies of selling and recruiting. You have investors seeking updates and assigning you annoying homework. You are tyrannized by the metrics that define your company’s progress. And you are distracted by all the mundane work of company-building — negotiating real estate, picking the T-shirt colors. 

But I urge you to set that all aside — as much as you can — and return to the core of your insurgent power. It is the duty and superpower of the founding team to revitalize it, constantly.

I have one last part of my company’s story to share: our moment of darkness. Around seven years in, we were feeling pretty good. We were deep in the mountain, but it felt like we just might win.

However, the enemy was not happy about our destruction of their Death Star, and they launched a vicious counter-offensive. In 2008 Accenture sued us for patent infringement. The patents themselves were nonsense and we thought it was a joke at first, but then it froze our pipeline. Every prospect told us, “We know this lawsuit is ridiculous, but we can’t buy from you until it’s resolved. So work it out and let us know.”

But Accenture didn’t want to “work it out.” They wanted us dead. We were in the right, but the wheels of justice turn slowly. We went six quarters without selling anything, and our existing customers started questioning whether they should renew.  Eight years into the adventure, the most likely outcome for us was to be sold for scrap or maybe even go to zero.

This was the most challenging period of my life, and I thought every dark thought a person can think.  The stronger, larger force was going to win after all.  I prepared to go into witness protection, because I could not bear the thought of facing everyone I went to school with — those happy people who had not wasted a decade of their life with nothing to show for it.

 It did not turn out that way, and again it was insurgent endowment that saved us. No longer was it the ugly but innocent mainframe who was our enemy; it was a $40 billion consulting firm that had attacked us with dishonor. They were the Enemy. It was forbidden for anyone at Guidewire to say, “Accenture.” It was only “The Enemy.”

Our strategy became even more attuned to our market because we needed our customers to attest that our product was truly novel, evolving on a different vector from Accenture’s legacy solution.

And our purpose was galvanized to a white-hot rage. We would prove the enemy wrong, no matter what it took. Our work was transformed from toiling in the mineshaft to a holy crusade between right and wrong.

And in the end, we won. We won because we were the smaller, weaker force that wanted it much, much more than the larger, stronger guys. And we won because the alternative was too terrible to contemplate.

Within each of your companies is an insurgent drama of passionate creation. Thank you for the courage of what you started.  Only you can fix it.

*Denotes a Battery portfolio company. For a full list of all Battery investments, please click here.

The information contained herein is based solely on the opinion of Marcus Ryu and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.

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