What Makes a Company Fail

Following our article DOCUMENT: (About) All Dead Storage Start-Ups, we got this opinion from Bocada’s President and CEO Nancy Hurley.

 Nancy is a seasoned sales and marketing executive, with over 25 years’ experience in the storage, communications, and networking industries. Prior to joining Bocada as VP of marketing and strategy, she was senior director of storage software marketing for Sun Microsystems. Before Sun, she was a senior analyst at Enterprise Strategy Group where she provided consulting to vendors in the storage software and infrastructure markets. Prior to that, she served as the WW strategic planning manager for Tektronix Communications Test Group and was with HP for ten years in various senior sales and marketing roles. Nancy holds a B.S.E.E. from Syracuse University.

This is interesting for me as I spent many years as an analyst, trying to help many of the companies on the list be successful and so I could comment away on what makes a company fail … but we have to talk about what makes one succeed. So rather than just saying – don’t do the typical start-up things (like build up your sales force too fast, make the mistake of thinking no one can catch your technology lead or be too arrogant that you annoy the big guys who then find it amusing to crush you)… I’ll go with these tips:

Regardless of how much funding you have, run the business like it is your own – like it’s your own personal checkbook that you are writing the checks out of. The CFO should have as much if not more say on what expenses get approved as anyone else on the executive team. Assume that money needs to last through multiple iterations of product and go-to-market strategy before you get it "right".
 
Managing marketing expenses is critical as this can be a huge drain on the budget – a great deal of funding can go out the door when a start-up tries to act as big as the big guys  with large trade show booths, advertising, give aways and costly marketing campaigns. While you need to reach a broad audience, there are many more cost effective ways to get customers attention than having a booth right next to EMC on the show floor or giving away cars. Many smaller, focused events/venues/web promotions can go a long way – especially if you truly do have a unique solution.

Be very careful of big name partnerships and bus dev opportunities. It is always great to say "we are partnered with the 800 pound gorilla", but realize those big companies know how to negotiate the hell out of a deal – many start-ups end up sinking tons of resources into making the product fit the partners needs only to end up making next to nothing for margin in the long run. Make sure the financials make sense in any kind of resale or OEM agreement before you go too far down the path of investment in the partnership.
 
Be willing to say no to the customer. A lot of small companies will land a big name customer, and then feel captive to that customer … next thing you know the roadmap is not market driven but driven by a handful of installed base customers. This is a perfect way to let the competition sneak up and take over … by taking your eye off the broader market.
 
The converse of this tip is never think you don’t have to continue innovating. You may have a great idea, and yes yours is the only technology like it on the market- but not for long. VCs will fund competitors with slight better ideas or a more experienced management team, and the big guys can afford to throw resources at the technology. Always keep innovating.
 
Be flexible – you may need to change up everything almost on the fly. Realize your first attempt might not work, you might need to change the sales model, you might need to change the market message (think storage virtualization, at first no one understood what it was … when they changed from "we virtualize storage" to "our technology lets you replicate from an expensive array to a cheaper one" the market changed completely). You have to be willing to innovate and change on every level to find what works in the market.