Failing, Falling Startups…
So this post is about a fictional company I wasn’t asked to investigate. Someone I don’t know approached me to pretend to look into this company that supposedly sells this cool product but doesn’t generate much revenue but burns a lot of cash. This non existent person was not an investor and wasn’t considering making a future investment to save the company.
So I did my non-digging by sending out 10 emails to my network and getting feedback from people that weren’t C-level executives or investors in the space. The feedback was that no one really knows anything about the product but it sounds good.
So what does this mean? It means they don’t know how to position or sell their product. In fact this non-entity has a name that doesn’t represent the product, the wrong sales pitch and is selling the product as a single product when it should be brought into parts. The underlying technology may even be worth something but the company is running out of cash and may end up being shut down.
So what can we learn from this situation? Don’t staff up and hire a huge staff until you have revenues. In fact, don’t even attempt to do that until you have proved the concept behind your company and have a fail safe sales pitch and product positioning. If people don’t know what you do or want your product, no amount of money will save you.
Will this non existent company raise another round? Maybe, probably not but maybe. If they do, the odds are they will give up control and most of the company. All because they put staffing up above proving the market.
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