Fred, thanks for the link but you're slightly overstating my point of view.
I can't think of an example of a company with a hot product that failed because it didn't manage money well. That doesn't mean there aren't any -- can you think of one?
On the other hand I've seen plenty of well-managed companies that failed because they never created a product people wanted.
ErikSchwartz
· 1 year ago
Dave.
WebVan
One of the best product/services I ever used.
dave
· 1 year ago
I think it was their economics that were out of whack, in other words they lost a lot of money on every sale, so growth meant more losses. Though these days that would go for every tech company from Google to Digg. These companies burn money. I think there's a diff betw burning money on your product or service, or burning money by eating at fancy restaurants and flying First Class.
BTW, I agree that companies should be lean and mean. Save the luxuries for celebrations of success in the market. My companies did best when everyone was sacrificing for the good of the company, then the victories were personal. In the second company we did everything first class, and that led to a feeling that we had already won so people didn't try as hard. I know the people at the second company probably won't like that, but that's how I see it.
ErikSchwartz
· 1 year ago
My point was a hot product is not enough.
If you have a hot product with a flawed business model, selling out early is your best option.
dave
· 1 year ago
Part of the definition of a hot product is that it have a good business model. Otherwise I could have a hot product by setting up a store in Times Sq, and give people $5 bills for free. I bet that would be pretty popular but it's not much of a product. :-)
ErikSchwartz
· 1 year ago
Where do you put YouTube in this spectrum?
fredwilson
· 1 year ago
If you ³strike oil² then you are generally in a good place, although we all know the friendster story
But what I have seen countless startups do over the years is miss the boat with their first try, but because they have low costs, they try again and get it right
Flickr started out as a game company, for example
fred
Dick Costolo
· 1 year ago
excellent use of the verb 'husband'. +2 writing points for you. Marc A. wrote a great post about the importance of team, product, or market over blog.pmarca.com a while back. I would go find the link for everybody except that, um, I don't feel like doing that right now.
jason
· 1 year ago
to take two very personal examples:
Fred's Kozmo.com was a great company that ran out of money. it is working today in many cities in various forms. :-) My Silicon Alley Reporter was a great company that ran out of money. It's working today at AlleyInsider. :-) SixDegrees was a great company that ranout of money. You could say too early I guess, but too early is another way of saying not enough money to go the distance. There were a ton of video hosting companies that got tanked like iClips before YouTube. not sure more cash would have saved any because they didn't have the DMCA rules back than. best j
I agree, there isn't one way for a startup to succeed. Moreover, where there are patterns, they only apprear in hindsight. I thought every venture investment I ever made was a winner on the way in. Lately, I'm more focused on what common personality traits breakthrough companies exhibit, rather than the traditional scorecard: great team, hot market, etc. i'm writing an entrepreneurial pulp fiction book about it here: http://wildrumpus.typepad.com/mediavc/2008/02/l... and here: http://wildrumpus.typepad.com/mediavc/2008/03/e.... I'd be interested in your thoughts.
Cory Levy
· 1 year ago
I think this is very cool! All of these smart people giving advice/data to start-ups! I will be sure to read all of these posts above.
mndoci
· 1 year ago
I've seen startups with great ideas but no tangible product fail. I've seen startups with a great product and no business model fail. What I have yet to see is a start with great ideas, a good product and fiscal discipline fail. How one gets there: I doubt there is a hard and fast rule, but people in the company have to have a sense of ownership. It needs to be personal and not just for the founders. That does not mean mistreating them (which in my opinion Jason is pushing the boundaries on)
Ethan Bauley
· 1 year ago
Coincidentally, this is the exact same advice you need if you're trying to build a career as an artist:
- there is no one "path" - make something people want - persist - husband your cash
Yeah, def an excellent use of "husband" there, lulz
vruz
· 1 year ago
I think it's all great valuable insight, and it's comforting to verify we're already doing all of this. (except using Macs exclusively, but that's because we need to support platforms other than Mac)
I might add another thing that I think is important in a tech startup: buying books and investing in continuous education. One could argue this is something excellent developers should do naturally and if they don't do it they're not good enough to be in our startup.
But there's a different way of seeing this: just as it is important to have generalists who can do anything from coding Ruby to dismembering a laptop, it's important to develop some sort of homogeneous company culture, speaking the same language, handling memes and concepts that aren't alien to any of the startup members. It doesn't matter much if Joe listens to electronica and Jane is more keen on thrash metal, but it is important the original team has to have a grasp the economics of the business we're running. (do they know who Marc is ? and Chris Anderson ?) There's antimemes too. I don't think we can really work well with someone who thinks Microsoft Visual Basic is great technology.
It's not enough to have great people, they have to have the right memes. (and they have to lack the antimemes) And if they don't, it's important to enable those memes for them, instead of leaving it to chance.
stone
· 1 year ago
I don't necessarily believe in the "field of dreams" approach. Build a cool product and they will come. You need to build useful products and you need to be able to properly introduce them to the marketplace. How you position a product is key to defining the customer base.
Being able to tweak ideas over time to adjust your model is also key to being successful.
NewWorldOrder
· 1 year ago
I totally agree. I also agree with Reid Hoffman when he says that Distribution Strategy is more important that Product Strategy. Think about it. Microsoft arguably doesn't have the best OS, but they probably have the best distribution strategy. Starbucks probably doesn't have the best coffee, but they definitely have one of the best distribution strategies.
fredwilson
· 1 year ago
I totally agree, particularly with the latter point
Fred
harold
· 1 year ago
Jason Calacanis, 1.5 successful startups Michael Arrington, 0 successful startups Robert Scoble, 0 successful startups Dave Winer, 0 successful startups
I'd rather hear from people like Marc Andreessen, Ev Williams, etc.
stone
· 1 year ago
Totally agree with Harold. I have respect for Jason but would characterize his track record as *mildly* successful. Michael Arrington is a successful blogger but has a string of failures as a start-up founder. His advice about start-ups is often laughable and entertaining. I view Jason's rantings as entertainment, too.
It's incredibly difficult to be successful. It's takes a lot of luck and some decent skills. What doesn't take any luck? How you talk about your successes.
webwright
· 1 year ago
You wouldn't call TechCrunch a successful startup? I sure would. Not a huge exit yet, but it's growing and making tons of money. And it's hugely influential.
I think your comment is ironic given the "there is no real path to success" meme. I've heard from both Marc and Ev (though the YCombinator program) and they are actually both humble enough to NOT offer a "3 steps to success" plan. Read Marc's post on product/market fit: http://blog.pmarca.com/2007/06/the-pmarca-gu-2.... ...
stone
· 1 year ago
I think Michael Arrington *may* be successful someday. His blog is influencial in the start-up community. To be really successful he's going to have to broaden out a bit. That's a big challenge and will test Michael in numerous ways. We'll see how he does.
ErikSchwartz
· 1 year ago
TechCrunch is a successful niche publication.
Let's say TechCrunch has ~1,000,000 regular readers. That puts them at about the same scale as Gourmet Magazine.
The questions about techcrunch are how much space is left in the niche and can they extend beyond that niche. Back of the envelope calculations puts TC at grossing $5M a year. How much can that grow? How many people are there interested in tech startups are there that DON'T already read TC?
blogcosm
· 1 year ago
"Dave Winer, 0 successful startups"
Not true. ("Kids these days; just don't know their history.") Here's some background: http://productarchitect.com/more1987.html ... AFAIK he made real money selling to Symantec. He also sold Weblogs.com for a reported $2.3M. In between: Frontier was influential in many ways, not to mention all the other things he's had a hand in. Actually, Frontier is an interesting case study: a great product that didn't turn into a great company....
fredwilson
· 1 year ago
I think that's unfair to mike and dave
Fred
Richard Stiennon
· 1 year ago
Great sum-up. It's true.
What has been bugging me lately is the lack of business sense that most VC's have. There is this ingrained mind set that a start-up has to:
Have huge barriers to entry that the startup in question has somehow overcome. Have a mature team already in place that have done this before. Have a lock on IP like a patent. Have killer technology.
There are many great business ideas that don't have any of these. Businesses that:
1. Take advantage of a shift in market place 2. Apply new technology to an old problem 3. Employ smart dedicated people from other walks of life 4. Have quick ramp ups and quick demonstrations of feasibility 5. Rely on execution not re-inventing the world 6. Will be the next Starbucks, not the next Google (20 billion not 100's of billions)
I am frustrated because I am in the process of getting the second type of business off the ground. We have gotten funding but it won't be coming from any of the dozen VC firms I have talked to.
-Stiennon
stone
· 1 year ago
I disagree that you should ever tell anyone that you're trying to build a company worth $20B. It's great if you think that and even better if you accomplish it but one may sound foolish if they make it a stated goal. In our last company we thought we'd build a $20-30M company. We ended up building something more than 10x the size. We kept our heads down and focused. The goals kept getting bigger and bigger over time.
rent a car
· 1 year ago
Oto ve Araç Kiralama'nın Türkiye'deki en kolay yolu.İster Minibüs Kiralama ister Otobüs Kiralama isterseniz şoförlü vip oto kiralama...
ryan
· 1 year ago
Not to be off topic, but I do think it can help a startup. Fred, do you have any links or information on budgeting for a startup to help a newbie get a better idea of how much they need to raise? Is this an unfair and too open ended question? In my case, I'm creating a social network and need some angel investing. Yet I'm having a hard time getting a real sense for what it would cost me to "float" for a year while I try to gain users. Any help would be great. Thanks.
All Comments
I can't think of an example of a company with a hot product that failed because it didn't manage money well. That doesn't mean there aren't any -- can you think of one?
On the other hand I've seen plenty of well-managed companies that failed because they never created a product people wanted.
WebVan
One of the best product/services I ever used.
BTW, I agree that companies should be lean and mean. Save the luxuries for celebrations of success in the market. My companies did best when everyone was sacrificing for the good of the company, then the victories were personal. In the second company we did everything first class, and that led to a feeling that we had already won so people didn't try as hard. I know the people at the second company probably won't like that, but that's how I see it.
If you have a hot product with a flawed business model, selling out early is your best option.
know the friendster story
But what I have seen countless startups do over the years is miss the boat
with their first try, but because they have low costs, they try again and
get it right
Flickr started out as a game company, for example
fred
Fred's Kozmo.com was a great company that ran out of money. it is working today in many cities in various forms. :-)
My Silicon Alley Reporter was a great company that ran out of money. It's working today at AlleyInsider. :-)
SixDegrees was a great company that ranout of money. You could say too early I guess, but too early is another way of saying not enough money to go the distance.
There were a ton of video hosting companies that got tanked like iClips before YouTube. not sure more cash would have saved any because they didn't have the DMCA rules back than.
best j
The lazy web did the work for you
It's now in this comment thread for all to see
fred
I agree, there isn't one way for a startup to succeed. Moreover, where there are patterns, they only apprear in hindsight. I thought every venture investment I ever made was a winner on the way in. Lately, I'm more focused on what common personality traits breakthrough companies exhibit, rather than the traditional scorecard: great team, hot market, etc. i'm writing an entrepreneurial pulp fiction book about it here: http://wildrumpus.typepad.com/mediavc/2008/02/l... and here: http://wildrumpus.typepad.com/mediavc/2008/03/e.... I'd be interested in your thoughts.
- there is no one "path"
- make something people want
- persist
- husband your cash
Yeah, def an excellent use of "husband" there, lulz
(except using Macs exclusively, but that's because we need to support platforms other than Mac)
I might add another thing that I think is important in a tech startup: buying books and investing in continuous education.
One could argue this is something excellent developers should do naturally and if they don't do it they're not good enough to be in our startup.
But there's a different way of seeing this: just as it is important to have generalists who can do anything from coding Ruby to dismembering a laptop, it's important to develop some sort of homogeneous company culture, speaking the same language, handling memes and concepts that aren't alien to any of the startup members.
It doesn't matter much if Joe listens to electronica and Jane is more keen on thrash metal, but it is important the original team has to have a grasp the economics of the business we're running. (do they know who Marc is ? and Chris Anderson ?)
There's antimemes too. I don't think we can really work well with someone who thinks Microsoft Visual Basic is great technology.
It's not enough to have great people, they have to have the right memes. (and they have to lack the antimemes)
And if they don't, it's important to enable those memes for them, instead of leaving it to chance.
Being able to tweak ideas over time to adjust your model is also key to being successful.
Fred
Michael Arrington, 0 successful startups
Robert Scoble, 0 successful startups
Dave Winer, 0 successful startups
I'd rather hear from people like Marc Andreessen, Ev Williams, etc.
It's incredibly difficult to be successful. It's takes a lot of luck and some decent skills. What doesn't take any luck? How you talk about your successes.
I think your comment is ironic given the "there is no real path to success" meme. I've heard from both Marc and Ev (though the YCombinator program) and they are actually both humble enough to NOT offer a "3 steps to success" plan. Read Marc's post on product/market fit: http://blog.pmarca.com/2007/06/the-pmarca-gu-2.... ...
Let's say TechCrunch has ~1,000,000 regular readers. That puts them at about the same scale as Gourmet Magazine.
The questions about techcrunch are how much space is left in the niche and can they extend beyond that niche. Back of the envelope calculations puts TC at grossing $5M a year. How much can that grow? How many people are there interested in tech startups are there that DON'T already read TC?
Not true. ("Kids these days; just don't know their history.") Here's some background: http://productarchitect.com/more1987.html ... AFAIK he made real money selling to Symantec. He also sold Weblogs.com for a reported $2.3M. In between: Frontier was influential in many ways, not to mention all the other things he's had a hand in. Actually, Frontier is an interesting case study: a great product that didn't turn into a great company....
Fred
What has been bugging me lately is the lack of business sense that most VC's have. There is this ingrained mind set that a start-up has to:
Have huge barriers to entry that the startup in question has somehow overcome.
Have a mature team already in place that have done this before.
Have a lock on IP like a patent.
Have killer technology.
There are many great business ideas that don't have any of these. Businesses that:
1. Take advantage of a shift in market place
2. Apply new technology to an old problem
3. Employ smart dedicated people from other walks of life
4. Have quick ramp ups and quick demonstrations of feasibility
5. Rely on execution not re-inventing the world
6. Will be the next Starbucks, not the next Google (20 billion not 100's of billions)
I am frustrated because I am in the process of getting the second type of business off the ground. We have gotten funding but it won't be coming from any of the dozen VC firms I have talked to.
-Stiennon