Recently, two really interesting articles have been published regarding the difficulty of growing and/or scaling a business.
The first, titled “Startups Can Be a Struggle,” summarizes the September 18, 2014 panel at Denver Start Up week led by Boulder Venture Capitalist Brad Feld, discussing the realities of managing and raising capital for emerging companies.
The panel emphasized that running an emerging or growth company (all in this case who were venture funded by Feld’s Foundry Group) is not by any means a cakewalk. Some issues the CEOs (all who are successfully growing) report include:
- Not being able to separate emotion from fact. “You’ll feel a lot of things about (your) company, which you should as the CEO, but feelings are not facts.”
- Not being able to effectively communicate the ups and downs causing employees to question what is going on in the company.
- Either not having the focus or ability to learn from empathetic colleagues or mentors. “I’ve never heard anything like I heard in this forum. I wish my 21-year old self, or my 25- to 29-year-old self could be in the audience, because I think that would’ve helped me a lot.”
- “It’s always ‘(e)verything is fantastic. We’re crushing it. And then you go home and curl up in a ball at night because you don’t know how you’re going to make payroll unless you got a term sheet in the next month … You’re going to have a near-death experience at some point in your journey, so don’t be afraid of it.’”
Similarly, in a September 24th blog posting, Peter Adams, the Managing Director of Rockies Venture Club and author of “Venture Capital for Dummies” posted “100 Start-Up Failures Post Mortems.” I would say that while reading about the death of 100 different emerging companies is both depressing and overwhelming, I observed that the failures have common themes:
- Lack of funding at all stages of growth to assure that cash flow does not become the issue of the day, every day.
- The technology was not timed right. In some cases, it launched in a declining economic market. In others, it was way ahead of its time.
- The company branding/marketing was not communicated to solve a true market need.
- The company leadership was focused on the current stage of growth so could not focus adequately on the future. Accordingly, the technology became stale or was leapfrogged.
- The company did not have the focus and/or funding to adequately protect the intellectual property.
- The company vision was not sufficiently or consistently communicated to the relevant stakeholders (clients, investors and/or employees).
- The company was never meant to survive in the first place as there was either too little/no market and/or market interest.
- The company was insufficiently capitalized to take on the industry’s 800-pound gorilla.
- To raise capital, the company needed rapidly accelerating growth. While the company was able to book a million dollars of revenue, it had little vision on how to scale that million to a billion.
In summary, it is better to learn from someone else’s failures than your own. While no one wants die by one million cuts, be a member of the walking dead, or have your business fail, there is much to learn and plan against.