3 decisions that kill start-ups
Round A investment is a done deal. You got your $125 million and an approved term sheet. You’re happy, the investors are happy – now what? Well – now comes the fun part. If you’re ready to play a different game. If you’re ready to go to the next level. Most aren’t.
I remember years ago being part of a dot com startup. I had left Rutherford Appleton Laboratory as a high energy partical researcher and I thought I was going back to do more research on Cosmology.
At this point, everyone was talking about the ever expanding universe. I looked at one of the quantum lines in Helium in Super Nova’s and thought waaaaaaait a minute here. Long story short, I suspected we got the expanding rates of super nova’s wrong because of a miscalculation and that lead us to the wrong explaination on the universe expanding rates.
When I went to work on it, the professors looked at me as if “what are you talking about? This is how the universe IS – except it”. My jaw dropped to the floor. Of all people, I feel researchers should be the ones to keep an open mind and at least REAEARCH a question when it pops up.
Back to the dot com company: The marketing people were up in arms about our product – and not in a positive way. Yes the product gave HUGE value to the customer at 1/100’th of the cost, improving this and that and we had recieved millions in funding because we got this one!
Marketing looked at us as if we came from a different planet and scolded us for not listening. In essence, we were going to market with a product no one would buy. Our cash burn rate was… killing us. And the company ended belly up within a year. $25 million spent on marketing. I think we had 10 sales worth $100.000 – gross.
Years later I found out what happened. People create closed loops. This is very good for creating sub realities and when you’re trying to figure out something new the others haven’t come around to yet, it’s great. And we read the bad side of this in the news daily. People end up thinking they have a handle on reality and are prepared to go to war on it.
In a startup – we are working in a closed loop – that expands!
It starts with the founders (obviously!). “oh I bet this idea could take market shares! How long time it’ll take to develop? It’s all off-the-shelf technology and I’ve got class A++ designers and developers at hand. We should be ready by next friday mr investor.” But Friday comes and goes.
Were they wrong? No they are not! They are just not tracking for a change in games.
The work that goes into figuring out if you have the right mustard to develop something and bring it to market is one thing. Actually developing it is changing the game and the timeline shifts.
While you’re developing it, another shift occurs. At some point, you need other stockholders including customers to bring their insights to the tabel. That’s expanding the loop.
Notice there are many levels to this ranging from pure conceptual work to customers bying, owning and raving about the finished product. Most likely, you’ll be working at several levels at the same time!
Which finally brings me to the idea of going up in levels.
Let’s play a game where reaching level 10 is when you’re ready for launch. Going up any of the levels means that you get insights that pivot what you are doing. You go from thinking “THIS is reality” to “OMG! No it’s not! THIS is reality.
This is why attending ANY tech festival or networking or all of it is so important. It’s the decision to keep challenging the loop you are in. If you don’t do it, you’ll end up developing and developing and developing – but not getting anywhere.
It’s the secret of Silicon Valley and the few other tech hubs in the world. People are so close to each other, it’s like living at a tech festival. The result is that startups have a much higher chance of getting to the next level here than anywhere else in the world.
Let’s look at the three decisions
Expression: Your startup will fail miserably if you are not 100% on what it is you are expressing. The easiest way to think of this is that your startup is telling a story and your objective is to get absolutly everyone to tell that story for you.
Blitz: When you want to, you must have tactics in place to get to talk to the next level of people you need to meet and involve in what you are doing. How are you going to find the right parters? Find your lead users? And so on. You need to get their attention.
Stage Split: Not only is there a timeline involved but your startup must split into different projects that are going to develop differently. For instance, most startups still think that selling their coming product IS the business. You need to split your R&D from your business development. It’s one of the stage split decisions you need to make.
As you are focused on these three decisions, you are deciding to succeed and that means you are always looking for inspiration on how you get to the next level. Remember – getting to level 10 means you’re launch ready but without the right insights, shoves and pulls, you’ll stay at the level you are at.
This is why the advisors checklists and smart processes may help identify something you need to focus on (SEO, outreach, distributions etc) but how to answer those questions will arrive from these three decisions. Thus,
If you make the these three decisions instead, it will kill your startup:
“we’ll get to what story we’re telling later down the road”. This means you have no idea of quality, the difference you’re bringing to the market, what kind of contact you have with your customer or even if you’re going for a high or low end product/service.
“Lets reach our peep’s by FB, Amazon and Google. Let’s get our digital strategy up and running and we should be fine”. This isn’t just a question of knowing where the people you want to approach are – it’s a question of how they want to find your product/service. It’s even how they want to be seduced by what you’re offering. If you don’t understand their temperament – they will not respect you.
“Let’s go Scrum and Agile and everybody has to be positive about what’s going on”. The strength of your people is that they get different things. Thus, when they are arguing about things, they’re not necessarily being negative but looking at critical questions that need to be answered. If you decide to work as if everyone is equal, you’ll end up with tech people deciding on marketing and vice versa. Your top A++ people will leave faster than you can say “arghh!”.
This is why you should go to the Uprise Festival April 20-21 in Amsterdam. It WILL help you get to the next level. The right people come here and the attending startups get to meet them and all their assumptions will be challenged. You get to see how others work with Expression, Blitz and Stage Split. It’ll help you make the right decisions.
Thanks for stopping by!
Erik Micheelsen is the founding partner of Innovation Embassy, an international expert on Innovation and crowd-sourced Innovation for companies and cities. He has worked with innovation in corporate settings, mentored startups and now he advises leaders.Originally an Astrophysicist from UCL, he is used to describing things you can’t touch such as Galaxies, Black Holes or the beginning of time. Just like you can’t touch your next innovation or disruption. So how do you navigate?
Leaders who would like an advisory session with Erik can contact him here.