If 2005 and 2006 were the years for crazy startups forming around concepts that startups the week prior formed around, then 2007 should be the year when we start to see these companies disappear. The thing is though, when you start a company it is hard to know when it is time to hang up the boots because internally you might think that makes you a failure. That isn’t always the case, but how do you know when it is time for you company to throw in the towel? Here are some suggestions.
We were the first
If your reason for still existing is because you were the first social network catered to people who wear Simpsons underwear then maybe it is time to walk away. Being the first doesn’t mean you are the best or that you are even successful. Being the first means that you will be the first of your kind that people get to try out and that is basically it.
You can look back at your history and say you were successful partly because you had first-mover advantage, but just because you were the first out the gate that doesn’t give you a free ticket to continue on existing.
Nobody talks about you
When people enjoy something they use it and talk about it. When people hate something they talk about it…a lot. If nobody is talking about you then you know you have a problem. You can have a great service, but when people aren’t using it what good is it doing? If people don’t even care enough to hate your product, then why would people care enough to like it?
First company to hit Series M funding
Lots of companies are beginning to enter their Series B & C funding rounds, but your company might be on round M by now trying to stay afloat. By this time your valuation should at least be at a cool $100 billion and the chances of a buyout are unlikely. There are three types of startups (I’m uber generalizing here) that I can think of:
- Ones that don’t need startup money (almost all web 2.0 companies).
- Ones that need a little bit of startup money (some web 2.0 companies).
- Ones that need a ton of startup money (almost no web 2.0 companies.
Unfortuntately we are starting to see a lot of companies that fit under Scenario #1, but think they need Scenario #3’s money. There are very few problems money can fix when your company is in trouble, so don’t confuse more VC Rounds with greater success.
We are X+1
Its a given that if you are building a startup you are probably taking ideas that already exist and either enhancing them or playing off of them, but what if you just do what everyone else does with maybe one more feature? You are screwed basically. Some online video startups have already conceded the throne to YouTube while others are trying to press on with a feature set that is either lesser, similar, or a tiny bit better, but not enough to persuade people to try it out.
If you are only X+1 get out of the game because X probably already won and the only person ready to take the title is X2.
If any of these apply to your company you might want to give it some though as to whether or not you want to keep on going. Look at the bright side, there are a million more ideas out there to copy.
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Originally posted on January 12, 2007 @ 3:38 pm