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Startup Hacks: Know When to Walk Away, Know When to Run
August 27, 2008 - 8:53 am PDT - by Michael Cerda 10 Comments
Michael Cerda blogs about startups, people and the variety hour at Cerdafied.Startups are a gamble by nature. Some of us thrive on sitting at that table, but it’s not for the faint of heart. The reality is most startups will fail. Here are 5 ways startup employees can call a bluff.
1. No customer feedback
If no one is using it, it usually means no one cares. Why should you? Never hesitate to talk to your product people and ask the hard questions. If they don’t have answers then you have even bigger problems. Sometimes startups don’t have resources for extensive business intelligence, but any data is good data, and should be measured and discerned.
2. Business model MIA
Few companies exit big on the “free” phenomenon. Therefore having a business model is key. It takes a lot of time to validate the legs on a business model. IT’S INEVITABLE THAT YOU’LL TWEAK IT AS YOU GO, BUT if you’ve been iterating for years, that means your company is burning capital. Unless there’s a capital tree in the lobby somewhere, you’re in a race against insolvency.
3. Excessive fund raising/M&A exploration
If the company you’re working for has been fund raising for more than six months without any bites, then the market has spoken. Either the company is in between value creation inflections, or there simply aren’t enough positive data points to support the event. Either way, ask lots of questions about the fund raise and beware: you don’t want to be the last person to know.
4. Musical chairs
It’s never a good sign when your company turns over leaders more than once. It’s very common for a founding CEO to step aside for an expansion stage CEO. But if the expansion stage CEO turns over, it was either a bad hire or the business has a larger problem to face. Neither condition serves the company well. Key roles in startups require stability and continuity. That said, it’s very important for companies to ‘fail fast’ on bad hires.
5. Founders/CEO MIA
These are the people with the dream, the vision, and the tenacity to lead you to the promise land. If they’re checked out, that means they’re either giving up, they have board level issues, they’re bored, or they simply aren’t capable of taking the company to the next level. None of these bode well for the company. Tune into their vibe; it will usually tell you what you need to know.
This isn’t intended to make you run from a good, earnest challenge. It is, however, meant to provoke some thought before you decide to sit at the startup table and bet your talent, energy –and perhaps several months, if not years, of your life.
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10 Comments
this is one of the worst articles i have ever read in my life.
And this is one of the worst comments I have ever read in my life
He must not like Kenny Rogers;) [
It is very important to have business model. Many social networking sites that start up bank on word of mouth and email referral to friends as their marketing strategy. It was a good article!
I know at least five specific people who, if they’d taken this advice, would’ve saved themselves a total of about 10 years and loads of lost income. Thx for this.
Nice job again, liking your articles. Nice to have real world perspective that not everyone in a company is normally exposed to. So often people aimlessly follow ceo’s sometimes and think they know whats going on, only to get caught by surprise.
And particularly timely given the number of companies - even some that seem to be doing well - joining the deadpool lately.
I like the way this article describes a real of today’s market and gives some advices that not so many people give.
There are lots of people who joined a startup and then, later, ended up disappointed by the company.
One this happens, those people start looking for safe jobs wher they are not given the opportunity to be creative.
As result I feel that we are loosing all, not only those people.
Nice article
Regards,
Sound advice.
@Michael, you must be well read to attract trolls (Shammara). Congrats.
One thing not eluded to is research can be wrong.
Also journalists can be wrong about their perception of the market.
We were looking at doing a managed services startup, and all the research was there, and it looked wide open, but our reliance on the research instead of the customer was not aligned.
Do not read an article or report with out looking up those other business owners sited in the article or report, if it is going to influence you, look it up. I liked an article about managed services and looked up a MSP owner listed in the article, as his business went up 300% that year.
Ya, what the article didn’t mention was that the towns population was 1000 people.