The natural evolution of a startup and why it is bad
By Donald Dodge
Successful startups are founded by product people, preferably engineers. Once the product is done the Sales and Marketing guys take over the company to push market adoption and revenue. Then the Finance guys take over to get operational efficiency and profit. Then the company declines and eventually dies. The time between these phases depends on how good the product guys were in the beginning.
This corporate evolution happens all the time as companies grow from a handful of people to a couple hundred people, to thousands of people. As revenues grow from millions to hundreds of millions, and even billions, the infrastructure expands, geography expands, and bureaucracy expands.
Most product oriented founders can’t handle, or don’t want to handle, the daily grind of growth issues. There are some exceptions like Steve Jobs, Bill Gates, Larry Page, Sergey Brin, and a few others. Mark Zuckerberg has done pretty well, and looks like he will continue to lead Facebook to the next level. But these are the exceptions.
More often the VC board members push out the product oriented founders and install “professional managers” to take the company to the next level. It even happend to Steve Jobs at Apple. I have heard the rationalization a hundred times. Many times the VCs are right…the founder doesn’t have the skills or interest to take it to the next level. But, then many times they get the replacement wrong and head down the spiral path to Finance guys taking over and eventual death. The old cliche’ “Finance guys know the cost of everything, and the value of nothing” comes into play when they are running the company towards the end of the natural evolution.
Startup entrepreneurs should study Steve Jobs, Bill Gates, Larry Page, and Sergy Brin. Follow their lead. Stay focused on the product. Make it “insanely great”. Don’t get defocused into building new features and products that don’t fit the grand vision. Always ask yourself how this new product or feature will disrupt the market, or significantly change the user experinece. Don’t build new things just because you can. Stay focused…or fail.
A few years ago I was mentoring a startup entrepreneur who had four or five ideas for new products. I suggested that he stay focused on his core business and make game changing innovation there. I repeated an analogy I heard years before. “When you are on an elephant hunt, don’t shoot at the squirrels. It wastes ammunition and scares away the elephants”. Stay focused or you could end up on the natural evolution curve and end up with the Finance guys running your company.
Don has been in the software business for more than 25 years. He was part of the leadership team of five software start-ups. Forte Software was the first multiplatform object oriented development environment. AltaVista was the first search engine on the web. Napster was the first P2P file sharing network. Bowstreet was the first web services development environment. Groove Networks was the first secure P2P collaboration platform.
