Where Failing Startups Get Lost

startup failures

Conversations in the startup community seem to be dominated by funding, features, and hacks. The ability of founders to balance the new information that’s out there with the tried and true principals of business is a critical differentiator in the success or failure of startups. Failing to prioritize the basics of running a business can doom the business, regardless of the product, the sales team, or the investment. Likewise, sufficient attention to running the business can cure a failing startup.

Partnerships

Partnerships are both a blessing and a curse. The right partner can make a startup successful. While that’s true, it is important to remember that the converse is not. Not getting a partnership is rarely the cause of a startup’s failure. When you find partnership opportunity, it’s ok to pursue it as long as you compartmentalize.

Partnerships tend to monopolize a disproportionate amount of a founder’s attention without contributing to the startup’s success to justify the diversion. Partners also tend to cause feature creep (adding features that were not on the project road map). Startups need to focus their time on sales and the features that are required to get paying customers in the short term. A partner is not an investor, and should more typically be viewed as a potential customer with a very, very long sales cycle. Managing partners as a potential sale help a startup allocate time without overspending in this one area.

Infrastructure

Many technology startups fall into the infrastructure trap. Just because the founder dreams of becoming the next Twitter does not mean that the company, in its infancy, should build the infrastructure of a mature company from the outset. The aspiration to integrate with every platform on the market doesn’t mean a startup should do it today.

When a startup plans to build key components from scratch, it start with off the shelf product and grow into those custom components at a measured rate. Instead of building it’s own servers at the outset, Facebook implemented years later, when the time was right. For every startup whose infrastructure was less than perfect, there are ten-fold that overbuilt and ran out of money before they saw any traction.

Hiring

Startup news sites, pitch days, and startup contests can mislead entrepreneurs to believing that skyrocketing growth is just around the corner. Founders frequently rush to hire, but startups have limited funds and founders have limited time. New employees take both. Very few startups need an executive level software engineer to build their minimum viable product. That is not to say that startups should not hire the talent they need, but only hire the people absolutely necessary. An early stage company rarely needs a data architect or executive vice president of business development. Begin with people who can get you to the next level and share your vision whether their employees or contractors.

Side Projects (aka Distractions)

Don’t start side projects. They require time, money, and attention that a fledgling business can ill afford. You don’t need to organize a community garden to sell your rain gauge. You don’t need to create your own camera to sign customers for your photo sharing website. Yes companies, especially large ones, do it all the time, but it’s a startup killer. Instead, stick with your near term product and sales goals.

 

Michael Johnstone brings over a decade of technology and business experience to Mark Cuban Companies. He has a proven history of strategic planning, leadership, product development, and operations in both startups and mature companies. Michael is responsible for deal flow and manages internet and technology strategy for MCC portfolio companies. He previously founded Taglyn GPS Tracking, specializing in small fleet management, before selling it to a private company in 2011. Prior to Taglyn, Michael spent nine years as founder and president of eLocomotive Design, which built custom software and websites. He brings a depth of first-hand entrepreneurial knowledge and operational expertise to every transaction. Michael also serves as an advisor and mentor to multiple startups and is a mentor to accelerators including TechStars and DreamIt. Michael is passionate about helping founders turn their startup into fully functional and profitable enterprises.

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