In our new “Advisers Answer” series, we pose a single question to the founders, investors and start-up experts who serve on the Founder’s Workbench Advisory Board.
This week, we’re thinking about great ideas.
As an entrepreneur, when you hear stories like Dropbox’s Drew Houston turning down Steve Jobs and then demanding offers from platinum tiered VCs, BuddyMedia’s almost $700 million dollar sale to Salesforce.com, and Bazaarvoice’s high performing IPO last year, it’s easy to think that with just One Great Idea, you too can become a runaway success.
Unfortunately, it takes much more than a great idea. And even with a great idea, many start-ups still fail. Why?
We’ve asked members of our Advisory Board – each of whom has either founded, funded or otherwise been a part of successful start-ups – the top reasons why good ideas fail.
Here’s what they had to say:
Eliot Durbin – Partner at Penny Black and BOLDStart Ventures
An idea doesn't fail - attempts to build businesses on ideas often fail.
I've found it's always correlated with a misunderstanding or interpretation of the market (do they “get it” or not) by the entrepreneur. Then, if the entrepreneur does get it, the question becomes whether he or she can act on it (execution); and further out, eventually compete successfully with others that enter the market.
Finally there's what I call variables that are outside a business’ control; sometimes stuff just happens and you do the best you can.
Lizette Pérez-Deisboeck – General Counsel at Battery Ventures
Lack of focus, poor execution and too early to market.
Nithya Das – Legal Counsel at AppNexus Inc.
1. A solo founder or weak founding team.
2. Feature creeping on products.
3. An inability to scale.
Frederic Kerrest – COO and Co-founder at Okta, Inc.
Market, Team and Product - in that order. As David Morgenthaler, one of the pioneers of modern venture capital, once told me: "If you use horse racing as an analogy, you want to race in The Kentucky Derby or the Preakness (market), with the best horse (team) and a good jockey (product) for the best chance of winning big!" He explained that he invests 70% on market, 20% on team and 10% on product because with a big market and a great team, if the product isn't quite right, the team can pivot and fix it.
Sean Glass – Venture Partner at Novak Biddle Venture Partners
1. It doesn't meet a customer need in a competitive way.
2. The company has insufficient capital to reach break even.
3. Execution is poor.
Stay tuned for more questions in the “Advisers Answer” Series.