If one googles this question, he will find the following reasons at the top of the list:
- Market Problems
- Business Model Failure
- Poor Management Team
- Running out of Cash
- Product Problems
I have to agree that these root causes could be attributed to the early-stage startups, but in this article I want to talk about the scenarios where venture capital companies have already examined the company and its product(s), checked for points (1), (2), (3) and (4) and still chose to finance these enterprises. Since VCs are the most experienced organizations out there in the startup assessment business, we have to assume the best vetting process possible.
I have worked with a lot of tech startups around the world over the course of last twenty years. All of these companies have been in the “post VC financing” stages and here are the somber facts:
- The vast majority of them failed (roughly 9 out of 10 which aligns with scientific data)
- In almost all of the cases the product, business model and cash situations were in a reasonably good shape
So, what happened?
Company grew getting more and more customers. Customers were getting bigger in size. Contracts they signed were getting larger and larger. Companies were becoming more and more profitable. And at one point of time (usually when the said organizations reached approximately US$10 million in revenues threshold) the company just couldn’t handle one of the two (and frequently both) things:
- Product development that was sophisticated enough to handle the demands of the markets
- Professional services: ability to deploy their software/hardware at the client’s site
Reason? Complete disregard to all aspects of project management and requirements engineering
And no matter how many times you would tell the C-level people
“Guys, roll up your sleeves and work harder approach does not work any more! You need to invest in project managers, business analysts and proper project management methodologies”
no one was willing to listen.
The end result? On one hand the key customers conveying a message, “Don’t bother calling us again until you fix your sh*t (i.e. deficiencies in product)”, and on the other hand a string of failed large-scale implementations where the company had to foot the bill for their own planning mistakes.
Once you leave the world of street soccer (or street hockey or street basketball) and transfer into the Champions League (or NHL, or NBA) you can’t just rely on the talent of your people. You need a sound methodology in place to select, plan and manage your projects. If you neglect to understand this point, your startup will most definitely fail!
What is your opinion on the topic?
- I agree, project management becomes a strategic asset for a startup at one point of time
- No, a technology startup can and will grow even if its project management and/or requirements engineering domains are weak
- Something else
About the Author
Jamal Moustafaev, MBA, PMP – president and founder of Thinktank Consulting is an internationally acclaimed expert and speaker in the areas of project/portfolio management, scope definition, process improvement and corporate training. Jamal Moustafaev has done work for private-sector companies and government organizations in Canada, US, Asia, Europe and Middle East. Read Jamal’s Blog @ www.thinktankconsulting.ca
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Jamal is an author of three very popular books:
- Delivering Exceptional Project Results: A Practical Guide to Project Selection, Scoping, Estimation and Management
- Project Scope Management: A Practical Guide to Requirements for Engineering, Product, Construction, IT and Enterprise Projects
- Project Portfolio Management in Theory and Practice: Thirty Case Studies from around the World