Pondering – Startups and Downs

Let’s start, as many articles/presentations do, with some statistics – including failure rates and sources (courtesy Meta AI):

a.?????? 90% of startups fail: According to CB Insights, a venture capital research firm, 90% of startups fail, with 20% failing within the first year

b.?????? 70% of startups scale too quickly: A study by Startup Genome found that 70% of startups scale too quickly, leading to premature scaling and ultimately, failure

c.?????? 50% of startups fail due to lack of market need: CB Insights reports that 50% of startups fail because there is no market need for their product or service

d.?????? 29% of startups run out of cash: Running out of cash is a common reason for startup failure, with 29% of startups citing this as the primary reason (CB Insights)

e.?????? 23% of startups fail due to team issues: Team problems, such as lack of leadership or poor communication, contribute to 23% of startup failures (Startup Genome)

f.??????? Average lifespan of a failed startup: 20 months: According to GEM Global Entrepreneurship Monitor, the average lifespan of a failed startup is 20 months.

And completing the list, with the published Top reasons for failure:

a.?????? Lack of market need (50%)

b.?????? Running out of cash (29%)

c.?????? Team issues (23%)

d.?????? Got outcompeted (19%)

e.?????? Poor marketing (17%)

f.??????? Failure to innovate (17%) (CB Insights).

Now adding a point that is often overlooked… There is no such thing as a ‘magic wand’… but I digress, so back to the flow of the article…

Nothing surprising with the above lists, when these are considered from an outsider’s perspective.

Trouble is that, in most startups, there are a limited number of relevant business-type people (they are usually very competent at their specialist disciplines but, I guess, most will be techie-types) and thus an extremely limited number of seeable (is that a word?) problems with the company and associated solutions.

In reality, like in any other business, all of the achievements (or otherwise) resulting from the startup’s actions/activities need to be continuously monitored, to ensure the correct tracking to the Business Plan (I hope that one is available) and be able to correct any deviating trajectories or address/adjust for arising problems (there will be).

Now to a few points that address a number of the above issues:

a.?????? When people are discussing the creation of a company (the startup) they focus on the products and services (sadly?). This is usually because they already have a product in mind and they can ‘see’ where it can fit. (Unfortunately, they forget that, in most instances, the potential customer base has contracts with providers, have long budget-cycles, have adapted their current solutions for their needs, have trained personnel administrating the solutions… need I go on?). Don’t get me started with competitive knockout…

b.?????? Funders (those with the money) want to see a return and that becomes a priority when the investment/s start to pass what was initially budgeted. The result is a priority focus on available cash, reduction of expenditure etc. and these cost reduction/cutting exercises impact the overall ability to deliver on the initial plan (admittedly, the budget amounts deviated). However, all of this causes distraction and, in most situations, this is where the downwards trajectory commences

c.?????? The correct business model is an imperative. In many situations, the startup builds excessive structures that may not be necessary. For example, if a product is available and it’s to be sold (standard practice) there are multiple ways to sell them. One is to create a sales structure, another is to utilise the services of a 3rd party that do not have competitive products, but are already in the target customer base… and there are plenty of them to approach. However (another one), they may not see the potential that the startup resources have seen and that could be a major wake-up call for startup resources – including the funders

d.?????? A belief that the product/service is the best in the market and is evidenced by reputable assessment companies. However (another one), let’s be quite honest, the top 10 (I’ve picked the number) of anything will be pretty close to being equal… making them undistinguishable to typical marketplace procurement units

e.?????? Too heavy a business reliance on previous relationships. It’s human nature to leverage what/who we know, but it may not be relevant in this startup phase (or actually ever). A drinking/golf partner is good to know but, unless they’ve been identified in the Business Plan, they merely remain a drinking/golfing pal. Nothing more and nothing less.

I have seen, and experienced, the downfall of a number of startups where many of the above were in evidence. In each instance the key personnel in the startups (primarily the funders/investors) believe there is a ‘magic wand’ to solve the problem/s that materialise.

As stated above, there is no such thing as a ‘magic wand’.

There would have been no ‘magic wand’ mentioned (hopefully) in the Business Plan, so why should one be mentioned now?

Let’s now look at the common pitfalls that cause a startup’s downwards trajectory and some points for consideration:

a.?????? Over-thinking, Over-complicating and over-intellectualising aspects of the startup. For example, feeding a CRM/OMS (Opportunity Management System) when, initially, an Excel spreadsheet would suffice

b.?????? Over-emphasis on the product and its development maturity – thereby neglecting marketing, sales, customer experience and support

c.?????? Inadequate (relevant) market research: It’s an imperative to understand the target market/audience, their needs, preferences, budget and (possible) appetite for change

d.?????? Insufficient funding: Plan for contingencies, manage cash flow and explore funding options

e.?????? Lack of mentorship: Ensure the complete startup team is surrounded by experienced advisors, mentors and peers (Listen to them, to comprehend)

f.??????? Resistance to change: Openness to feedback is essential, willingness to pivot and adaptable to market shifts.

In an ideal world (which it never is), it is desirable to build a Startup team from those that have relevant experience/skills. For example:

a.?????? Startup experience: Familiarity with the startup ecosystem and potential growth development (the actual ‘heartbeat’ of such entities)

b.?????? Industry expertise: Knowledge of the specific industry or market the startup is targeting (and this is not just relationships)

c.?????? Leadership and teamwork: Experience in leading teams, collaborating and coaching/mentoring (resonating with the team)

d.?????? Adaptability and continuous learning: Ability to adapt to new technologies, frameworks, and methodologies (Understand the future may not contain elements of the present)

e.?????? Communication, presentation and delivery: Strong communication, presentation, and interpersonal skills (being able to produce and communicate the message in a relevant and understandable way, to the specific audience).

In a penultimate closing: Here’s some pre-planning ‘Success Strategies’ that should be considered and built into the Business Plan as scheduled activities/tasks/sessions:

1.?????? Continuously assess the idea – against the Business Plan: Ensure there's a market need for the product or service before embarking on such a venture – unless it’s just a hobby

2.?????? Build a strong team: Foster a culture of collaboration, innovation, adaptability and reserve knowledge

3.?????? Reduce unplanned customer interactions: Develop a well-planned interaction and communication plan with prospects/customers (valuable inclusion)

4.?????? Focus on a robust customer experience: Develop a solid go-to-market (GTM) strategy, prioritise customer acquisition and retention strategies… and include a risk management matrix that can be enhanced on a continual basis

5.?????? Closely monitor the financials and funders’ intentions: Manage cash flow, keep costs under control, interact with the funders and plan for as many contingencies as can be identified

6.?????? Stay alert, flexible and adaptable: Be prepared to pivot the business model, strategy or any other aspect of the startup, as needed

7.?????? Continuously innovate: Monitor closely and stay ahead of the competition by innovating and improving the product/service. However (another one), there should be no knee-jerk reactions/changes without thorough investigations and discussions.

Final closing, with my views from experience while ‘working in the trenches’ – the Deciding Dozen:

1.?????? Startups will benefit from having multi-disciplined individuals on their team, as this will also reduce the number of people (and costs) of a fully mature organisation

2.?????? Ensure appropriate decisionmakers in the correct positions. Remembering that any incorrect decisionmakers will produce bad decisions and those cannot usually be resolved by those that made the bad decisions

3.?????? Produce only Pertinent products/services for the target market – ensuring the potential for sustainable revenue streams. Beware of being caught up in the trap of having an opportunistic focus (i.e. ultra-focus on a limited number of opportunities, because they could provide high-returns but are, typically, driven from personal relationships and agendas)

4.?????? Build a beneficial Business Model. Modern companies enable the tool for their Business Model to be adjustable, to be able to undertake sensitivity analyses

5.?????? Remove all Marketing hype. Prospects/Customers do not like it. They want to understand what you can do for them and their business. Simplify, simplify and simplify

6.?????? The era of having a website to be successful is long gone. Look at economical ways to get the message out to the target market (e.g. presentations, articles, LinkedIn groups etc.)

7.?????? Craft checklist trackers (akin to a Risk Management matrix) for each aspect of the Business Plan’s journey. ("You can't manage what you can't measure." – attributed to Peter Drucker)

8.?????? People grow and develop. Ensure ability for growth across disciplines and appreciate the reserve knowledge/experience of individuals that you may have ‘put in a box’. They are valuable resources to enable the facilitation of knowledge flow across the organisation

9.?????? Specialised expertise is crucial in certain areas, such as complex technical domains or highly regulated industries. These resources will be readily accepted and resonate well, with their peers in the prospect/customer base

10.?? Back-office sales support personnel (e.g. Sales Operations, Sales enablement, Bid Management, Proposal Management etc.) are NOT administrators but professionals in their own right. Do not allocate these functions to just anyone, as it will end up badly (as will be found out). Adding: Sales Operations (and the like) is NOT about feeding a CRM/OMS and merely generating the unusable, boring reports

11.?? Inculcate an adapt and evolve mindset. This will allow relevant and rapid changes to external (and sometimes internal circumstances.

12.?? Do not allow cliques to form, as they produce groupthink and ostracise not-clique members. They also, typically, recommend and bring in their pals – producing a culture (potentially) at odds with the one that would produce successful results.

Synthesising the Imperatives:

1.?????? Imperatives: Multi-disciplined team; Beneficial Business Model; Specialised expertise; Valued decisionmakers; Pertinent products/services; Evocative marketing; Accredited Sales Services professionals; Relevant assessment/tracking; Thriving business culture

2.?????? There is no such thing as a ‘magic wand’ but there are Merlins out there, that could help a lot

3.?????? Have a good heart.