Monday, November 19, 2012

Lesson #128: Try to Kill Your Startup Before You Start

Earlier this year, I had the pleasure of sitting on an investor panel with Joe Dwyer, a partner at OCA Ventures, a good colleague of mine.  I thought he made a very interesting comment, that I told him I was going to steal (with his permission).  He was counseling the startups in the room to "try to kill your startup!". 

My initial reaction was: that is a very strange comment to make to a room full of aspiring entrepreneurs trying to successfully get their businesses off the ground.  But, as Joe went on to explain it, he said "if you have done everything you could have done to kill your startup, and were unsuccessful in doing so, then you are truly on to something that is defensible and worth building."  Which I thought presented very interesting pearls of wisdom.

So, what does trying to kill your startup actually mean?  You need to poke and probe across all areas of the business, looking for holes that could lead to potential shortfallings in the business or which can facilitate potential moves by competitors that will impede your own efforts. 

Any macro level issues?  Industry too small?  Space not of interest to VC's?

Any competitive issues?  Pricing out of line?  Product not as good as others?

Any management issues?  Any weaknesses in the current team?  Is the team economically motivated for the long haul ahead?

Any revenue related issues?  Is there a real business model here?  Can revenues easily scale?

Any sales and marketing issues?  Is your cost of acquisition too high compared to revenues?  Does your lifetime customer value provide compelling economics and repeat sales?  Is it a long sales cycle or a short one?

Any technology issues?  Is it easy replicated by others?  Is it patentable?

Any human resources related issues?  Is it tough to find talent in this space?  Can you afford the talent you will need? 

Any finance related issues?  Do you have enough money to not only build the product, but to test the initial marketing economics?  Is it a small capital requirement, or a major fund raising exercise?  Do you have compelling unit economics, including a high gross margin? 

Any investment related issues?  Is there a logical buyer for this business?  Can a 10x return be easily acheived?

Etc., Etc., Etc. 

At the end of the day, this reiterates a lot of the points we talked about in my Definitive Checklist for Startup Success.  So, pull out your pistols and daggers and start firing away at your startup, much like your competitors will be doing.  If you survive that dog fight, then the hard work of building your business can really begin!!  Thanks, Joe, for pointing us in this direction.

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