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Saturday, September 1, 2012

Founder's Myopia

Unfortunately for entrepreneurs, it is human nature to focus on the facets of the business with which we are most comfortable, even to our detriment. History is littered with failed startups that couldn’t see the forest for the trees. Salesmen bleed their company of resources by chasing inappropriate customers. Financiers produce spreadsheets that bear no resemblance to reality. Technical founders write code while the bank runs dry. Products are created with no customers, business plans go unrealized, and popular but profitless online services linger as the remnants of past founders’ myopia. To paraphrase novelist Henry M. Tomlinson, founders see things not as they are, but as they are themselves.

Insidious internal biases afflict techies, MBAs, first timers, and veterans alike. Take the failed startup Monitor110. Lead by brilliant technicians and Wall Street veterans, the startup’s ambitious plan to index of entire the dynamic web’s financial information made it one of the most anticipated new firms of its time. In mid-2005, despite willing customers and a working beta product, the firm opted not to release V1.0, choosing instead to explore newer and more powerful search technologies. The decision to pass up early market feedback proved fatal. As time passed, both internal and external expectations for the product soared. In response, the firm retreated inside of itself. Although the team was working harder than ever, fear of disappointing an eager market began to push the firm farther away from its customers. Without regular feedback, the firm’s product-market fit began to erode. By the time Monitor110 finally released v1.0 almost two years and three rounds of funding later, the gap between product and market had grown insurmountable. They had built a product no one wanted and there was no money left to build something new. Despite having all of the prerequisites for success—a rock star team, an innovative product, a massive market, and plenty funding—Monitor110 failed. Success is not only sourcing and building the critical pieces, but aligning them together in a sustainable way.
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