Venture Adventure

Today’s theme is failure.

We start with Paul Bragiel who disects his creation Meetro for TechCrunch. Well, he sort of disects the failure, but ultimately blames it on being too soon for the market, and claiming he could have fixed everything but was ready to move on to bigger and better things.

Next up is David Feinleib of Mohr Davidow, with an actual analysis of why startups fail. David’s thoughts (with my comments):

• Spend too much on Sales & Marketing before their ready
  
  Absolutely an issue – in the early ’90s, NeTpower had an inside sales force of 10 to sell MIPS based NT workstations – before we ever had a product of our own and were simply reselling ACER workstations. And were only selling about 5 units a month.
  
• The market outpaces the startups ability to executeI actually boil this down to simply Poor Execution. David mentions analysis paralysis, which is one cause. Another is just not understanding the time-frame by which startups operate. Chromatic Research attempted to create a kitchen sink multimedia processor ASIC and board while simultaneously creating an Intel x86 clone. Yet all of the internal managers and directors running these two very aggressive projects were ex-HP and believed in management by consensus. We could not make a decision on even the simplest of tasks without a quorum. My particular group had 3 leads, and our weekly staff meetings would run 5 to 6 hours!
  
• There is no EntrepreneurThis is super critical (and I expand upon this below). I’ve seen way too many startups where the founders are sidelined by the VCs for the professional CEO. While the professional CEO may know how to run a business, they have no passion for the technology or for the customer, and are often more interested in deals than in customers or product.
  
• The market takes too long to developThis is Meetro’s complaint. I was also hit by this at Silverback Systems, where we were too early in the iSCSI market. This is where a professional CEO falls apart. The lack of a market becomes an excuse for the lack of success. This was always the claimed cause of failure at Silverback Systems, where we developed an iSCSI offload engine ASIC.

  However, a Real Entrepreneur is able to adapt his company and product to the existing market. At Silverback, we could have retargeted our product (through software changes) to other markets, such as network processing and deep packet inspection for routers, firewalls, and DPI solutions. This is a market where a high cost low volume ASIC can succeed.

Bernard Moon follows up with some additional thoughts:

• Breakdown in team chemistryThis is really a Failure in Leadership. A fundamental component of leadership is team and personnel management. In fact, of Colin Powell’s 13 Rules of Leadership, only one doesn’t relate to people.
  
• Bad VCsBad VCs exacerbate bad situations – typically by making decisions either without truly understanding the underlying causes of the particular situation or without analyzing for unintended side effects and consequences.
  
• Not enough capital at the early stagesReal Entrepreneurs build a business plan so they truly understand what it takes to build their business. The Entrepreneur may do this in their head or on paper or on the computer, but the Entrepreneur understands the true cost of the business.
  
• There is no marketThis may be the Achilles Heal of the Real Entrepreneur – too much passion for the product may cause blindness about the market. And this is one area where good VCs and good advisers can provide significant value.

I think David and Bernard have hit it on the head, but may have missed a couple of critical items:

• Burgers vs. BusinessToo many people these days are creating startups with the intention of flipping them to a Google. Unfortunately, there are very few Googles, and even few ideas worth pursuing by a Google type company. If you build your business, eventually, it will be worthy of additional investment, either in the form of an IPO or an acquisition. If you build your business with the goal of flipping it a few years later, what happens when there’s no one to buy?
• Entrepreneurial PassionI touched on this before - many startup leaders – the founders and the leaders – are in the business to win the lottery – they all want to be the next Google. So, when they don’t win the lottery the first time, they’re unable to figure out what to do next. Real Entrepreneurs (as David says, with a Capital E), have a vision. But, more importantly, they have a drive to make that vision successful, and are unwilling to let anything get in their way. Real Entrepreneurs understand and internalize the old saw “Lead, Follow, or Get Out of the Way!”

As a summary, have a gander at Brad Feld’s Famous Failures….