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August 29, 2011

The Secrets to Startup Company Success - Do You Measure Up?

By Peter Bernstein, Senior Editor

Be forewarned, they don’t mention this on ABC’s hit show “Shark Tank.” It is a well kept secret that 90 percent of startups fail. The other 10 percent tend to encounter several near death experiences.  That is why the sharks on the show can extract a pound of flesh from the supplicants and feel no shame about doing so. TV exaggerated egos aside, their business savvy is what is really on display.

The questions that arise from these statistics are:

  • Is what makes startups successful measurable or is it mostly art/magic?
  • If the ingredients for success can be measured and their application repeated, how do your efforts stack up?

Read on. The answers may surprise you.

Getting to know the startup Genome Compass (News - Alert)

If you follow me on Twitter (@berniebernstein), you know from my following list that I have eclectic tastes. This includes people like serial entrepreneur and all around thoughtful guy Steve Blank. In a Tweet today, he linked to his recent post, “It’s Not How Big It Is – It’s How Well It Performs: The Startup Genome Compass.” It highlights the exploits of one of his former students, Max Marmer, and Max’s quest —through his Startup Genome Project —to quantify the art of startup success and share the insights so that those who can learn from history do not repeat the past. It is fascinating.

I will not steal all of Steve’s thunder. Plus, if you wish to know the answer to the second question posed above, you are going to have to become part of Max’s project (takes about 20 minutes). So, with the caveat that the findings and processes are open to some skepticism, the tool seems better than anything comparable; here is a tidbit to whet your appetite:

It’s Not How Big It Is – It’s How Well It Performs

Max and his team have analyzed responses from 3200 early stage ventures. They have summarized their finding in a report “Startup Genome Report Extra: Premature Scaling.”

As Steve says about the findings:

One of the biggest surprises is that success isn’t about size – of team or funding. It turns out Premature Scaling is the leading cause of hemorrhaging cash in a startup – and death. In fact:

  • The team size of startups that scale prematurely is 3 times bigger than the consistent startups at the same stage
  • 74 percent of high growth Internet startups fail due to premature scaling
  • Startups that scale properly grow about 20 times faster than startups that scale prematurely
  • 93 percent of startups that scale prematurely never break the $100k revenue per month threshold

 Who knew? It makes sense. Good jockeys know when to rate their horse so they not only make it to the finish line, but come in first.

Now it is your turn

As stated above, for those of you who are interested, you can see how you measure up.

Click on Startup Genome Compass and follow the instructions. This will enable you to benchmark what you are doing. I suggest this be done without friends, family, colleagues and investors standing by to “help.”  Remember, this still is art as much as science. As a tool, it is very much in its own early stages. It is meant for educational purposes.

Hence, consider the output for what it is: a knowledge point that can expand your thought processes as to how you wish to proceed with your own unique set of challenges and opportunities. Thus, be careful about using the results, but don’t be shy about participating.

That said, if you knock it out of the park, let me know. It sounds like you are on the right track. As a veteran advisory board member of over a dozen startups myself, (and unfortunately my hit rate was exactly the number cited above) I am curious about your secrets for success.  

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.


Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya (News - Alert), Alcatel-Lucent, Telcordia, HP, Siemens, Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.

Edited by Rich Steeves
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