Why my VC funded startup failed

http://www.codemonkeyism.com/archives/2008/10/27/6-reasons-why-my-vc-funded-startup-did-fail/

by fogus • 17 years ago

46 25 17 years ago

datums• 17 years ago

Very relevant to today's bubble. Are we calling it a bubble ? A better bubble?

SwellJoe2• 17 years ago

Building a quality bubble is like building quality software. Iteration is key, and sometimes you have to throw the first one away.

jacquesm3• 17 years ago

I think bubbles are bad news all around.

Lots of money gets thrown at projects that are doomed to fail. They give the industry a bad name.

They are a typical example of the pendulum in action, it never stops in the middle, it always swings through to one side or the other. Either everybody and their dog seems to be able to get funding or nobody. There is never a long time when investors seem to have a cool head and a steady hand.

sdesol• 17 years ago

This resonated with me way too much, which is kind of scary. My startup hasn't failed yet, as I haven't launched yet, but I truly understand the technical mindset issue.

I've been getting better at this as I have started to focus more on the marketing/business aspect of things. As much as I have learned in the past couple of months, with regards to the business side of things, I can't seem to shake the mentality of "it's just not good enough yet".

I may have a point though, as I will be competing against in house solutions, so I really have to come at them with a compelling reason to use my solution.

I guess the good news is in the next couple of months, I'll have the opportunity to be more formally educated on the business side of things.

rjurney3• 17 years ago

There is salvation. It is called Customer Development. It is a methodology described in this book: http://www.cafepress.com/kandsranch

It will save your startup. And no, I don't get a dime from your click but yes, I am going to buy 10 copies right now so I can have 3 in my bag to sell at cost to anyone that asks, wherever I go.

mahmud• 17 years ago

Can you describe what's unique to this "Customer Development" method that isn't discussed and taught in the rest of the business literature?

cool-RR• 17 years ago

I think the "VC funded" title is misleading: In the article he says "We’ve got quite some money as a seed investment from a VC."

Technophilis• 17 years ago

Indeed, after I read the title I thought that one of the reasons the startup failed is the fact that it was "VC funded".

quizbiz• 17 years ago

I'm not sure how I feel about the post implying that every startup needs a salesperson in order to succeed.

ghshephard• 17 years ago

I thought the need for sales (and therefore, a salesperson) was the most important element of the post. If you don't have revenue, you go out of business. Period.

The salesperson might be the CEO, the VP of Marketing, or even an outgoing CTO - but each and every day, someone needs to be chasing down a source of revenue, talking to customers, and figuring out how, one day, the company is actually going to make revenue - and feed that information back into whoever your "product manager" is.

If you wait for year two or three, after you've built a great technology, it may be too late to discover that your customer doesn't want to buy what you've been building.

mediaman• 17 years ago

I agree completely with ghshepard. Presuming it's not some sort of consumer play, if one of the founders is not good at sales, you'd sure as hell better (1) learn to sell and/or (2) bring in sales talent. Preferably #1 before #2. The absolute worst mistake you can make is focusing on a fancy technology without bringing in dollars.

Look at the way a typical company runs. They spend huge sums of money on third-rate products, many of which have a superior alternative available. Why didn't they buy the better product? Why do vendors with clearly inferior products get the sales dollars that a vendor with a better product doesn't? It's because the vendor with a good sales team gets the product to the customer, and the fact is that a mind-blowing offering will not get bought unless there's some guy getting that customer to buy that product. If you can combine a fantastic product with a great sales team, watch out. But if you've got a great product but aren't selling early, don't look for a technical solution out of a business problem.

bjelkeman-again• 17 years ago

I, for one, do not start a company these days without a sales person onboard, and it better be a great one. Sale of product rarely happens by itself, you need someone who is passionate about getting those deals set up.

The hard part is finding a sales person who also truly believes in your product and gels with the team. I have worked with some awful sales people, who even when they sell can be terrible for your company (often selling the wrong thing). The first sales person in your organisation, I believe, should not be paid commission, but be paid just like the rest of the founders and have a long term interest in the company.

rjurney3• 17 years ago

Most startups fail because they fail to connect with a market for their product. If you don't need salespeople to connect with your market - good for you!

fauigerzigerk• 17 years ago

My somewhat limited experience with selling to enterprises leads me to this conclusion:

Sell either to the people at the very top for a high price, or sell to the actual users inside the enterprise for a price (and using a deployment model) they don't need approval for.

jacquesm3• 17 years ago

I'm all for reason #4, the rest of them can be fixed, especially if you are funded to some extent.

But timing really is everything and if your timing is off the rest does not matter.

msort• 17 years ago

Maybe it is because they failed to make something people want badly enough.

jbarciauskas• 17 years ago

The sixth point may or may not be true, but surely plenty of software companies in the last 10 years have started on the VC model of spending a ton of money on upfront development and then reaping the economies of scale afterwards. He doesn't mention anything in his specific situation that would lead us to believe that model couldn't possibly have worked. It sounds like his consulting idea would have been a valid risk mitigation strategy, but ideally in software you always want to get to the point where you are selling zero marginal cost bits, rather than only charging customers for person-hours.

1gor• 17 years ago

There may not be any specific reason for a startup failure. It is quite normal that only a small percentage of startups find a unique spot on the 'fitness landscape' that would allow them to grow and prosper. The rest may be just as well equipped and funded as the lucky ones, but still they will perish. Randomness among reasons for success dwarfs most of other factors.

The rational strategy is not to try to discover some 'success recipe' (there is none), but to do a lot of tinkering, be prepared for many false starts, and make sure that the unavoidable failures will not kill you as an entrepreneur.

joshu• 17 years ago

The number of people who come out of the woodwork to say that they invented delicious before delicious is ridiculous.

He says "essentially the same" and then indicates it was actually a great deal more complicated.

The hard part is not deciding what to do. It's deciding what NOT to do.

I can't seem to find any image or screenshots of the actual site (it appears to have been prodata.de) so I can decide if "no product clue" should be added to the list.

gojomo• 17 years ago

Indeed! Many, many failed startups have hidden within them a much smaller and more simple idea that could have succeeded, if they'd had the insight and guts to strip away the excess.

Another example is that the earlier generations of bookmarking sites (which included Backflip and HotLinks among others) overlooked the massive-potential of delicious-style tagging and public link-sharing-flows. They were hung up in, among other things, a model of categories/folders/outlines, and explicitly-created interest groups.

Why my VC funded startup failed

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