The worst things startups do

I visit a lot of startups, the video here is of Posterous, a company that is doing it right. Usually you can tell immediately whether a startup is really run well (which Posterous is). You’ll have your own ability to “smell” real startups when you go on the Startup Crawl in SF on November 20. Start the video to listen to Posterous’s founders and then compare them to your favorite startup. Can you see the difference?

Here’s some things that startups that aren’t run well do:

1. Have plush offices in the most expensive part of town. Come on, who are you fooling? You are burning someone else’s money and you aren’t spending it like it’s your own.
2. You can’t tell me what you do in a single Tweet. See that super complicated Toyota Prius in my driveway? It gets better mileage than your car. If you can’t explain why your product is better, the way I just did with the Toyota Prius, in a short space or time on the phone you won’t make it.
3. If I look around and don’t see programmers. I can smell programmers. A good company is full of them. Posterous, for instance, has ONLY programmers. FriendFeed had something like 13 programmers and one other person. Great ratio.
4. You hire a PR firm. Now this one is dangerous, but the best companies have let their customers do the talking for them. At Rackspace, for instance, they worked to stay out of the public eye and worked on building the best service organization web hosting had ever seen. The best companies, when small, have just gotten good at telling their stories. I still remember when Stewart Butterfield showed me Flickr. He didn’t have any PR flacks with him. Now, maybe a PR company was helping them behind the scenes or to take care of leads and all the other stuff that goes with building a company but it wasn’t the first interaction I had with the company. Nothing like having a CEO or CTO just show you the product and explain why it’s better. 4b: you don’t have a blog and a Twitter account. Even worse if you have a PR firm and you don’t have both of those things.
5. They spend money on the wrong things. I’ve been in more than one startup that had bad chairs and small screens for their engineers but they had an expensive coffee machine. Let me make this clear: you have 18 months to build your business. You have figured out how to get some programmers to work with you. Make them as absolutely productive as they can be. Buy them a decent chair and get them at least two large screen high res monitors with fast computers. Remember SOASTA? Every engineer had a 30-inch monitor both at home and at work along with a MacPro (you can see one of those monitors in the interview I did with them). That was a HUGE recruiting tool and I think it was key in helping them keep their best people and, hey, I hear they are doing well.
6. (This should be #1) They don’t fire fast enough. I’ll be honest, at Podtech me and another guy were pulling the company in different directions. John should have fired one of us. He didn’t. The story got muddled. The rest is history. (In those situations it doesn’t really matter who is right, either, you gotta pick one direction and go with it, startups don’t have enough resources to try out two directions). I’ve seen lots of other startups be slow to fire people who weren’t pulling their weight. Always bad because the best people get pissed and/or leave. Again, you need to have everyone pulling with all their weight in one direction. If that isn’t happening the startup probably isn’t firing people fast enough.
7. You picked the wrong infrastructure. I’ll let you read into that what you want because I’m biased here (I’m a Rackspace Web Hosting employee), but ask great startups and you’ll hear some common themes here.
8. You let VCs control your management team and strategy too early. There’s lots of advice out on the Internet about this one, so I’ll leave it for you to figure out. But your early decisions will have big leverage on your company later. Hire the wrong management team and your company won’t make it to the B-round. I’m not experienced enough to give good advice here, but I’ve seen what happens up front. I remember meeting one CEO of one company that was just, well, let’s say clueless. How did he get hired? The VCs put him in.
9. You have a too cool name and logo. Oh, OK, this isn’t a worst thing, but companies spend too much time worrying about them (it’s a sign that you have too much money before you even have a company and customers, which is a bad sign). That said, I just interviewed a company named rrripple. Now if you end up with a name like that maybe you should spend at least 20 more minutes thinking through your name! (Sorry Rrripple).
10. You say yes too often, particularly in engineering decisions. Look at Posterous (the video embedded on this blog). They have a blog publishing tool. But are their comments threaded? No. Will they be eventually? Yes! Why didn’t they do them threaded up front? Because they set priorities on other things that mattered more. That’s actually a good sign for a startup: if you have only four engineers you can’t do everything. If there’s one thing I like about Evan Williams, founder of Blogger and Twitter, is that he doesn’t try to do it all. In fact he prides himself on NOT doing things. It takes great leadership to say “no, Scoble, you can’t have more than 500 members on a list.”
11. Startups pick old technology because it’s familiar. You’re a startup, you should be picking the best of breed for everything you do. If you are using Microsoft Office “just because” then you are making a mistake. Have you considered Jive, SocialText, Zoho, Google Docs and Spreadsheets and Wave before making your choices? Have you really looked at ways to make your small company more productive? Or you just going with the same stuff your dad’s company used?
12. You don’t change direction fast enough. Every startup should be looking at its direction every month or so. Are things going according to plan? If not, fix them. But sometimes you just made bad assumptions about what the market would want from you. That’s OK! But don’t take a year to change directions, change quickly and you’ll have a chance to save the company.

What other mistakes do you see startups make?

Aside, if you work for a startup, I’d love to know the tools you are using for a list I’m keeping that I call “weapons for entrepreneurs.” I would love to know what tools/companies you’re using to outrun everyone.

About Robert Scoble

As Startup Liaison for Rackspace, the Open Cloud Computing Company, I travel the world with Rocky Barbanica looking for what's happening on the bleeding edge of technology and report that here.

85 thoughts on “The worst things startups do

  1. You all will laugh, but I use the good old US mail as a weapon to get attention from potential clients. Email is really easy to ignore, just hit the delete button. I use Endicia which prints a cool looking barcode on the envelopes for postage. For most recipients, the envelope looks cool enough to make them curious about what's inside.

  2. @scobleizer — thanks for the note on the name @rrripple — we're definitely spending some time considering alternatives — we look forward to sharing final candidates with you.

  3. Useful summary of bad things.

    One I've come across a couple of times: the founder/ entrepreneur/ ideas man gets some great professionals on board but then tries to manage them (or more accurately, interferes in their management of the resources).

    The other: burying yourself in building the new solution/ product without really roadtesting the idea. As in pharma – fail early!

  4. “Posterous, for instance, has ONLY programmers.”

    Um, Posterous’ cofounder Garry Tan is also an interaction designer, and judging from his LinkedIn profile, most of his career was in that role. Still, Posterous is a good model: don’t just create a programmer monoculture and lavish them with toys, get a diversity of thought in your company.

    Also, be an IxD.

  5. I think the general consensus is that if most start ups acted like the money came out of their personal savings account than many more would probably last a bit longer.

  6. For me, #10 really stands out. I've also heard it referred to as the temptation to be perfect. It's so important, like you said Robert, to prioritize development. If you are building something like Posterous, for example, launch it and keep hammering away at your features. Don't hold it up an extra 10 months because it has a couple of bugs or it's not all that it can be. Besides, what you have in your specs may end up being completely different in a year because your users give you guidance on where to go.

  7. If the start-up is for Business-To-Consumer (B2C) purposes, the ease with which the name can be spelled, and the relative “joy” in saying it out loud can have a large impact on the viral spread of the brand and hence the success of the start-up.

    This is somewhat less of an issue with B2B, but of course the basics of human psychology still apply, companies are run by people (i.e. consumers in another setting) after all :)

    Most of the Web 2.0 brand names we all have heard over the past 5 years or so where afflicted by poor decisions in this regard. I think the initial novelty/surprise factor that made flickr, del.icio.us, and a few others succeed (they had innovative products to begin with as well), lured countless others into “too cute by half” type of names that ultimately proved more of a detriment than anything else.

    And it doesn't take a brand consultant to get the basics right, here is a start:

    http://businessmindhacks.com/post/pownce-shuts-down-a-branding-post-mortem

  8. Thanks for the great tips – especially number one, here in Italy IT startups used to spend most of their money in “accessories” failing to understand that a basement full of tech junkies is a much better and more productive place than a luxurious office full of “managers” not knowing what the heck they are talking about.

  9. We’re doing a start-up – http://MyBucha.com. It’s a very good tasting, shelf stable Kombucha drink – fermented Chinese tea using a live culture. Because our partners are in different geographic locations we started out using WordPress for a. collaborative work, b. public facing website, c. file repository. We now use WordPress just for the public facing website. We now use Ning for our intranet, and for several specific purpose extranets. We use Skype for conf calls. We use Google reader and TweetDeck to query and record relevant tweets; we have Facebook and Twitter and several other web 2.0 type technologies. We’re still using MS Office, but we’re looking at Zoho and some others. We’re using Dia (an Open Source Visio clone, but better) for our manufacturing facility layouts and graphical depictions of our processes. We’re using Access for our databases, mainly because we haven’t been able to find a better Open Source (read ‘free’) alternative.

  10. Right on. Motorola (wireless) is the same story. Great engineers/developers, but sorely lacking in product management and market knowledge. They rode (and still ride, albeit a bit shabbily) on the RAZR success from the late 90s. There's a great article on it in Harvard Business Review from a year back.

  11. Here are my thoughts, no particular order, except my number 1:

    Lead by example – too many founders/ceo's do not lead by example

    Focus (part of your #6) – there needs to be a clear vision that can be easily articulated to everyone by the leadership and by everyone to the outside world

    Job and Vision – if there is a clear vision everyone should understand how their job and day to day activities advance the company and goals, then they can determine on their own whether they should do a particular task by evaluating it themselves

    Internal Communication – that vision of what the company does and where it is going needs to be communicated to everyone in the company, often, even if it changes be sure to let everyone know, walk into a startup and ask 5 people what they do – you'll be surprised how varied the answers can be

    FIRE, FIRE, FIRE : Removal of Bad Apples – you mention firing, in a startup you typically are hiring very smart, hard working, motivated individuals, IF you have someone that is not pulling their weight not only are they wasting money and taking a seat but others will quickly realize who is not contributing and that one bad apple can sour the whole bunch if you do not remove them quickly, I have seen exceptional individuals leave a company because they lost confidence in the companies leadership when certain individuals are not removed, the end result is that the good ones go and the bad ones stay – it can kill you

    Customer Acquisition – do not wait until you have developed a product/service for a year or two to ask the question, “how do we acquire customers?”

    Metrics – if it's an online business you should have a metric for everything and anything that can be measured, at the very least those key metrics that show whether you are succeeding or failing, just think of what you will put on a slide to show your board and work backwards to figuring out how to justify your “things are great” slide

    Revenue (part of your #6) – do not wait until you have developed a product/service for a year or two to ask “how do we make money?”, and if your business model requires that you build a sales team please do not look at a year 3 20 MM goal and say “one salesperson can hit that, right?” – sounds dumb but many do not build in a revenue model or determine how to build their company to hit it

    my ramblings after 10+ years in startups

  12. I agree that a product should talk for itself. If a product sucks then it will be rejected by consumers or users no matter the PR behind it. Marketing and PR people just jump in to boost the overall the quality of the product as well as to strengthen sales and user suppport.

    Laura Chapamn
    follow my #Labels at http://wadja.com/l.chapman

  13. Some interesting points, but I'd have to disagree with several

    Point 1 – you're assuming that the money is from an external investor

    Point 3 – Letting a business be run by programmers is a recipe for disaster. Geeks are wonderful and all that, but a lot of them have no idea about business, marketing, sales or anything else. If you let them run a business you'll end up with “wonderful” code, but no customers, no sales and no money

    Point 5 – While I semi-agree I think it's also part of the experience to make some mistakes. If you have the common sense to not waste money on overly plush offices, then I'd hope you won't waste huge amounts of money on massive screens etc.,

    Point 11 – that's just inane. If someone has the time to go off and experiment with new toys – fine, but expecting people to use new software and looking down on them for not doing so is just silly

    Michele

  14. Great topic! I can see what you are saying about PR firms- “If you don't have a Twitter account of blog, yet you have a PR firm…” However, I believe that is the point. Companies starting out need to concentrate on what they do best. If they don't have a clue about social networking, maybe they shouldn't be doing it. A good PR firm can point them in the right direction and get a company clear about what messages they want to send out, what they want the firm to represent, and be concise about what they do.

  15. Great topic! I can see both side of your PR comments- about if you don't have a Twitter Acct or Blog, but have a PR firm…but I think that is the point. There are so many types of firms and they need to focus on what they do best- and if they don't have a clue about social networking, maybe they shouldn't be doing it. I'm not saying leave it all up to the PR firm, but a PR firm can point them in the right direction and let them get a handle on how the company wants to be viewed, and what messages they really want to send out.

  16. A couple of other people hav3e picked up on the point about a company having programmers and your point that a good company can never have too many of them. I can't agree. Surely a good technology company has exactly the right number of programmers for the work they need to do. Also a lot of companies are not necessarily technology companies and can function perfectly well with off the shelf software and so don’t need programmers at all. The Open Source projects available provide an incredibly rich set of resources for people to establish infrastructure.

    If programming is needed (and I can see plenty of situations where it is), then you need to spend time working out schedules and implementing collaborative project management with realistic deadlines. All too often a startup (and plenty of established companies) either bombard programmers with unrealistic deadlines that were worked out without talking to a single programmer or flood the floor with talent that is given no direction and expected to work it out themselves. I don’t think that’s a great recipe for success.

    Programmes like Dragons Den and The Apprentice have done a lot to encourage entrepreneurial culture but in their wake have walked a series of so called Startup Business Consultants and mentors. Now I am sure that there are many people in this profession who are actually brilliantly motivated and offer real value but there are also a huge number of charlatans out there who are charging startups enormous fees for regurgitating things that someone else wrote in a book that can be purchased for less than £30. There is a sense of belonging and comfort to be gained from this kind of relationship but being an entrepreneur is about walking alone and trusting and testing your own judgement.

    In general I think the way to do it as a startup is
    1) Build the best product you can with the resources available to you
    2) Be honest about your skills and your failings and allocate resources appropriately.
    3) Hire people who are better than you at things.
    4) Read as much as you can about business skills like sales and marketing, building it isn't enough you have to get people to want it and take their money for it. These are completely different skills and you need to have both of them.
    5) Concentrate on quality, sales and service and ignore brand building activity
    6) Talk to your customers and listen to them
    7) Think of every penny you spend as if it was an investment and demand that your return on investment is at least 4 times what you spend.

  17. In my opinion, we should all be evaluating what we are doing weekly. Holding a group meeting and looking at last weeks events, then looking at how we can make next weeks even better.

  18. Prius' unique value proposition is that it gets better mileage than your car. You car's unique value proposition might be that it handles better and looks nicer than any other car in its price range. It's not a matter of “better.” It's a matter of what the customer values.

    Is this an example of why a company needs more than programmers?

  19. Glad to see someone made this point. Said another way, much of the success of the project depends on the roles people are allowed to play. If the leader is very astute at discerning their team members' strengths and perspectives, regardless of job roles (developer, product manager, etc.) and creates a complementary team with customer, engineering, and profit perspectives balanced, she has a leg up on the startup that is focused on the superficial or that knows how to create, but doesn't know how to find customers, position a product, or communicate value.

  20. Posterous is a customer of Rackspace, just like Techcrunch and Mashable are. Techcrunch, by the way, moved from a hosting company giving them free hosting to us who they are paying.

  21. For purposes of this article? A company that is less than two years old. But another way to define it is a company that hasn't hit their C-round of funding yet.

  22. I love this list, described with your usual aplomb!

    For some reason, I'm considering seeking out a start up to work for in my next job (I'm currently traveling) and its a great checklist to use.

    The idea of working directly with CEO's (4) and absorbing the expertise of programmers (3) as well as (potentially) the speed of development is damn appealing. However, since I'm a designer and not a (hardcore) programmer (3), the chance of a job is reduced… Oh well…

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