When a startup dies because of its founder’s lack of nerve

Photo credit: Pixabay.

Watching an entrepreneur fail is sad, but watching them fail from a lack of nerve is tragic.

A few years ago, Bob, one of my ex-students, was in entrepreneurial heaven. He had an idea for a new class of enterprise software: insight as a service based on big data web analytics as a cloud/SaaS application.

Bob had taken to heart the business model canvas and customer development lessons. After graduating, he put together a prototype and quickly marched through customer discovery, iterating his product with the help of CIOs and Fortune 1000 IT departments.

Having introduced Bob to one of the Fortune 100 CIOs, I got to hear about his progress from both him and the CIO.

Takeoff

After 90 days, things seemed to be moving at startup speed. Bob had a backlog of users wanting to try his application. The corporate IT people who were trying his prototype said, “It’s crude. We hate the user interface, it’s missing lots of features , but we’ll kill you if you try to take it away from us.”

I pointed a VC who followed the space to the CIO who was testing the prototype. The VC told me the CIO wouldn’t get off the phone. He kept telling him he couldn’t remember when he had seen an enterprise software product with so much promise. The VC checked with other IT users and heard the same reaction. It was a “gotta use it, don’t take it away, we’ll have to buy it” product.

After a demo and lunch, the VC (who normally did only later-stage deals) wrote my ex-student a check for a seed round.

Life couldn’t be better.

I followed Bob’s progress in bits and pieces from updates from the CIO, the VC, and his emails and blogs. He seemed to be on the fast track to startup success. But a few worrying warning signs appeared soon after.

The first thing that I noticed was that Bob couldn’t seem to find a co-founder. I wasn’t close enough to know if he wasn’t really looking for one, but given the early success he was having, it seemed a bit odd. But the next thing really got me concerned: Bob started hiring second-rate developers. At best, they were B-players.

Stall

A month went by and the product stopped getting better. The UI still sucked and new features stopped appearing.

The next month, the same thing.

I got a call from my CIO friend asking what was going on. He said:

A lack of nerve

Lesson learned