Deciding to End Your Start-up

Blog post today on the DMG web site about deciding when is the right time to wind-down a start up venture.

The obvious answer is when you run out of money and in many cases that is a reality, but many companies should have enough data and market insight to wind down a company well in advance of depleting their bank accounts.

Relationships with investors (regardless of family, friend, angel or VC) should be considered long term opportunities. One of the panelists presented a great story about an entrepreneur friend who was able to return about 70% on the dollar back to the group of investors once the entrepreneur realized that the business was not going to succeed. Although I am sure all parties would have preferred a more positive outcome, the entrepreneur was able to establish trust and credibility with the investors. This trust allowed the entrepreneur to raise funds from the same group of investors a few years later for a new venture because they understood this entrepreneur was a good steward of their money.

The story also highlights another important concept; most entrepreneurs are serial entrepreneurs and will have many ideas through the course of their life. The greatest success an entrepreneur can have with their first venture is that they learn to be a successful entrepreneur. There will be many opportunities to make money so the primary focus in not money but understanding how to develop an idea into a successful company.

Click here to read the entire article.

Too Little Value

If you have ever attended a business plan seminar, an elevator pitch class or a forum on how to pitch your company to investors you will realize a common theme exists – your idea provides a solution to what problem? Another way to describe this concept is what value do you provide to your target audience? Generally this concept is held in high regard – except in the world of the Internet business.

Almost on a daily basis there appears an entrepreneur with a new widget or concept that has little market value. One of the most recent examples is Cuil, a search engine launched last month by a few x-Google employees claiming a better search engine. Even if technically it is true, to the average user it offers no visible advantage. And because the search results return in a manner that is unfamiliar on the site it appears different but offers no real advantage. Might be some brilliant technology folks, but did they ever ask what problem they are solving for their respective target market?

Start with the End in Mind

There was a great article a few weeks ago in the Harvard Business Review by David I. Collis, Michael G. Rukstad titled (Can You Say What Your Strategy Is? ).  The article highlights that “most executives cannot articulate the objective, scope, and advantage to their business in a simple statement.  If they can’t, neither can anyone else.”