http://goo.gl/1RspNU | WHY DO START-UPS FAIL? A look at the biggest startup failures, GovWorks, Iridium, Flooz, WebVan, eToys, SpiralFrog, Fab, Wesabe, Argyle Social, PayByTouch. To answer why startups fail, the expert on startups and venture capital, Ross Blankenship (http://rossblankenship.com) shows you how to analyze the founding teams of startups, the product, the execution and timing of some of the biggest startups failures in software and technology from the 2000 dot-com bust until now.
Fab.com is an example of charismatic founders without a clear vision. They could talk a good enough game to get even seasoned investors to kick in, but there was no passion for any particular aspect of the business model. The only thing the founders had in common was admiration for Shelhammer’s aesthetic sense, and that was ultimately not enough to keep them together.
Even with a great product idea and founders who are passionate about the product, the path to success is fraught with peril. Hedlund’s failure to listen to advice about the platform was a major contributor to Wesabe’s death. Having the coolest proprietary platform meant nothing to consumers who wanted ease of use, and the company failed to come up with a great story explaining why its platform was superior.
3. PAY BY TOUCH
We all like to think that investment firms know what they’re doing, but don’t rely on the list of previous investors to make your decisions. Do your own due diligence. Investigate the track record and background of the individuals at the top and make sure your ownership agreement protects your interests. While Pay by Touch could arguably have paved the way for Apple Pay, the reality is that good people lost good money because they didn’t follow well due diligence practices and so fell for a good conman. This is one instance where “all good” turned out to be all bad.
Pay By Touch went through four CFOs in four years and a number of board members. The turnover should have been a red flag for later investors, but money continued to pour in from investors and out because of Rogers’ wild spending. The company was forced into Chapter 11 bankruptcy in November 2007.
4. ARGYLE SOCIAL
While they say that most entrepreneurs start several companies before they hit the big time, you don’t want to be the one funding the education. Make sure the founders are committed to the idea and that they have broad enough backgrounds and expertise to cover all the necessary parts of making a business a success. Shoestring budgets coupled with a too narrow focus from one founder and a lack of commitment from the other seem to be what did Argyle in.
3 Lessons Learned on Startup Failures:
1. Spend wisely. Cash is king. Don’t waste it.
2. Don’t have unnecessary inventory. Inventory depletes your business more than you could ever depreciate.
3. Of course, build something innovative and different, but make sure the demand exists first before you launch.
Learn about startup investing at http://angelkings.com/invest-in-startups
Or get insight from a media expert on startups, http://rossblankenship.com