Start-Ups - Should We Learn From Mistakes?

BabylonMink asks: "I have been involved in 2 start-ups from day 1. Both have, at one point, run into major financial problems (don't they all?) and one actually closed operations 4 months into the venture. The second just chopped staff by 60% and I ran while I could. I am now in a position to join another start-up. Admittedly, I have looked at their business plan with cautious, almost suspicious, eyes and my initial instinct is to ask them if they have missed the last 3 months of NASDAQ hell, VC cowardice and major corp. market domination. So, should one be weary of start-ups if recent experiences have been prematurely ended due to financial problems (especially in the current climate) or should one bite the bullet and throw your life into a start-up and plan to get out when I can if things look hairy?" Start-ups are a risk, but they can be profitable ones, and I think the best thing one can do when assesing whether to join one is to: "Use your head." Take a look at the company you are thinking about joining and if you feel good about the work you will be doing, and if the company looks healty, then a start-up is as good as any other company. Also, being prepared to leave a sinking company is a good thing to do for any job, whether it be a start-up, or a major corporation, so it would be better to have contingency plans in place when changing employment...just in case.

"I believe that this new start-up might be different as they are trying to develop and market a physical product and not jump on the e-commerce or software bandwagon. It has also been my experience that no matter what happens, the experience of being involved with a start-up is always positive and a major learning curve. I also enjoy the atmosphere more than a corp. conveyor belt."

Comments

The business model and the key players

[Infonaut]

Most of the dot-bombs failed because they were me-too businesses not in the technology sense, but in the business sense.

Businesses exist to make money..

If the people starting the business don't know how they're going to get profitable quickly and maintain profitability, they shouldn't be starting the company. The days of instant 20-year old CEOs is over. Real-world business experience matters.

Even if you have the best online Widgetizer in the world, and millions of people use it, if your company doesn't have a solid method of deriving revenue from all those visits, the company won't succeed.

Look at the companies that are succeeding, and you'll see that the business model is what makes them different:

eBay is essentially a flea market. Like a flea market, they simply set up the marketplace and take make money from advertising. Note that this model only works if eBay generates a sufficient volume of business that is self-sustaining. Nobody really heard of eBay through advertising, at least at first. They were smart and used word of mouth to generate traffic. They didn't pull a Pets.com and blow all their money trying to generate traffic up front.

The reason they were able to do this successfully stems from the company leadership. They weren't going along with the lemmings. They had a clear vision. They knew what they wanted to do. They executed well and made using their site exciting for people. They kept operating costs down.

When checking out a start-up, remember that the technology is a secondary matter. Try to look at it as a total technology neophyte and just ask yourself "do these people have a solid method of making money, and are they smart enough and experienced enough to pull it off?"