Sick Start-up Syndrome

While managing DSX Labs for the past year, I have come across a variety tech start-ups in South Florida, mainly because we were running tech start-up pitch events in Boca Raton at The Greenhouse.

They range from 1 guy with just an idea to 3 people with a full blown app or website. They can have 100 years of combined experience or none at all.  We had a few 15 to 17 year olds interested in starting their own tech company.  There have been 1 or 2 where the entrepreneurs were in their 70s

Out of the 100 start-ups we met with, there were common patterns you could immediately identify.  These patterns can be success related or potential failure related. I call them patterns because they appear over and over again.  This is a generalization. I am being specific about a start-up.  And you know that generalizations could be wrong.  So this is just opinion.

Here are my list of start-up syndromes you need to look out for.  It’s like looking at your body in the mirror.  Some symptoms are obvious, some are not.

No Strategic Advantage
I have run into this myself.  You get going in some specific tech start-up direction.  You have a product.  You have built out some serious code!  Yet, you or you and your partners can not come up with a strategic advantage vs. a competitor.  Face it, you are building a commodity product at this point!

How To Fix: If it is early on, you can pivot or change something slightly that makes you competitive.  But pivoting will take some serious pain and some capital.  It may not be possible. You have to have a compelling reason or value proposition for customers.  Find it immediately.  Sometimes it is right in front of you and you are ignoring it.

Tech Svengali Has Taken Over The Show
This I have seen many times.  The actual business owners have been mesmerized and persuaded by some tech guy to let him make all the decisions. Yet, either he or she is not really all that he says he is or really has no clue what the market wants.  The tech Svengali may actually have their best interest at heart for you. But they are not you!

How To Fix: Sadly enough, if this has gone on too far it could be the death of the start-up.  Start-up owners need to be in charge of their ventures and give it direction.  The solution is often to let him go and if it is too late, it could be time to shut down the operation.

Money Looking For A Place To Spend It!
Sometimes in some rare cases, there is a partner or a person with a boatload of personal wealth looking to hit the next one out of the park.  They are looking at Facebook and saying “hey I can do that!”  But they are forgetting one thing; they don’t know anything about tech, or their knowledge is cloudy because they themselves are not the demographic they are serving.  So they spend like crazy, hire tons of people and find themselves in a pickle.

How To Fix: My recommendation to these want to be billionaires is stop being the owner and start being the investor when you have the capital. There are a good 20 ventures in south Florida right now that could use $50k and have a great start-up that needs capital.  Instead of spending $300k on your “idea” (which is just an idea) become the investor and invest in 6 start-up ventures. At least then you will have 6 lottery tickets and not 1.

One Feature Does Not Make A Solution
I have had a bunch of start-ups come to me with a concept that is simply a smaller piece of a larger puzzle.  For instance, I have heard of a few improvements to dating businesses.  So the start-up concept is a small piece of what dating sites do, and can’t really be a product unto itself.  Or another good example is a site that just does nice 3D products for sale.

How To Fix: Typically I would recommend that the start-up goes back and rethinks the whole idea.  Just a small part of something bigger is not enough.  One way to fix this is to pivot into being a B2B software provider. So instead of selling 3D products yourself, your start-up provides the technology for other e-commerce companies. Different market, but then you can focus on a narrow feature you offer!

Nobody Is In Charge
A single person building a start-up without a partner or team is an issue. What is a bigger issue is a group of founders with nobody actually in charge.  When they ask you, the consultant, to be in charge and be the decision-maker, you know they have bigger issues than you can really deal with in one session.

How To Fix: One of the partners has to be the CEO.  There has to be an ultimate decision-maker.  If you can’t make that decision, then maybe the start-up should end now.

Can’t Describe What You Do
I have had this problem myself several times.  It is a common problem. Why does this happen?  My answer to why it happens to me is if you spend a year or longer on a start-up you start to lose you way (and you mind) and you end up changing the business around,  You get lost as to what you ultimate do. This is especially true if you are pivoting or evolving to something else. And we are always evolving. What is your service and can you describe it?  If not, you have to recognize the problem and fix it.

How To Fix: Best to meet to mentors and advisers and figure this out.  I had a great question asked of me recently about my start-up. That question was “What Was The Aha Moment?”  At that moment I went back in time and thought carefully about that moment. This is the moment when you first had the idea.  Sometimes that moment describes the problem you are solving and ultimately putting together a solution statement solves that problem.

That’s it for now.  I could add a hundred of these items to this blog, but I am publishing anyway.  Maybe there will be a part II.

Have a great day!

Learning Failing Fast The Hard Way

What Is Failing Fast?

Simply put, failing fast means you find out right away that your idea, concept, new product is a dud, so you can either stop what you are doing or make some serious corrections.  But failing really means failing, and it generally means giving up earlier in the process.  It’s a good thing, and something like 90% of tech companies I run into ignore.   Tech guys hold fast to their concept way beyond when it was time to give up.  I know, I am one of these guys.

Start-ups Need To Fail Faster

Deep into Brad Feld’s book “Do More Faster”, there is a short chapter on failing fast for start-ups.  What his writer, because it was written by other entrepreneurs, is saying is find out right away if the product or service you are creating is going to make it or not make it financially.  Trust me, this is a definite area I have completely failed at, and I have followed around other people’s failing ideas like a pig stuck in the mud.  A lot of this is because of a lack of experience.  All that corporate experience I have gained over the years do not count, because what you need for a start-up is not what you need for a corporate gig.

Failing Even Bigger And Slower

But I think failing fast is not just a concept for start-ups.  In most big companies they have made failing slow an art form.  To be 80% more efficient corporations should stop wasting their time with concepts that failing earlier.  If they did this, billions would be saved.  In fact, entire industries have disappeared because corporations were pursuing failing concept for years.  It keeps lots of employed, but it is oh so annoying. I was talking with somebody today about a large tech company acquiring a small tech company recently.  What typically happens next is complete paralysis.  It’s like a big corporate giant eats the small company and then anything that resembles change become nearly impossible or so institutional that nobody wants to fail at anything.  So how can you fail fast in that situation.

Smaller Means Nimbler

So this is where small start-ups have an advantage.  Before blowing millions or billions, a small tech start-up can take a few small actions to end the hypocrisy and stupidity early on.  They can create a prototype or barely working product and find out from customers if they are going to pay, use it or whatever they need to prove the market works.  Even that may have the unintended consequence of telling the entrepreneur to go ahead with a product or service, when they should have just failed right there.  Let’s say you interviewed the wrong people who told you the wrong information.  Well, you still have a chance to fail early, just not as early.

Misread Market Size

Now that I know better, it is best to start with market size, not product or even customer to determine if you should stop now and fail fast. Let’s say you have created a great service that a few people love, and while you are not making any money, you know you are doing good for the world and helping people.  I will give you an imaginary service, like a mobile app which gives men advice on what to do for the women in their lives and when to do it, like “buying flowers on a friday gets a 60% approval rating from women vs. Thursday”.  Ok, cool app, mobile app, even runs and works and all that jazz.  But then will people pay for it and how many.  Sudden you add it up, wow, if I collect that 50 cents from the 1,000,000 potential real customers, and only .0001 pay, then wow I will have made $5000 on this venture in total.  Well, just fail now!  It may have been cool, but trust me I have been involved with a not so profitable business for many years with no exit strategy and it sucks.

Quit, But Don’t Always Quit

I am not saying that you should quit your venture right now, I am just saying stop taking years to figure out that there is no money to be made and that you are wasting years of  your life.  You should just try to figure this out early on.  You need to know what the total market opportunity is.  In high-tech I now say when they use the words “Billions” I don’t like it.  I want to hear the words “Hundreds of Billions” or “Trillions” as far as market size.  Sometimes there are many reasons to stay in a business and see it through, but if you see a problem with your concept or your idea and the market does not make sense, then stop now and move on to something which can make you money and make a living.