“A good product idea and a strong technical team are not a guarantee of a sustainable business. One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company.”
Source : Dijiwan’s Leadership (Failed Startup)
: 90% of Start-ups Fail (Forbes) 2015
“…. Organizations that understand the link between projects and strategy and has a culture that supports project management … can help ensure project success”
Source: Gig Economy, Success in Disruptive Times
PMI Pulse of the Profession 2018
“Our senior leadership team recognizes that great project management delivers against strategy”
Source: Lisa Glatch
Chief Strategic Development Officer, CH2M HILL
Does the above sound familiar? 90% of start-ups fail, and not because they did not have vision, a great product nor the right passion to drive them towards the path of success.
It typically starts out like this.. Founders have a great idea, the next great thing it would seem, they set-up and they go about their passion towards their holy grail. The CEO focuses on business, leadership, sales and creating a market demand as they begin their Proof of Concept (POC) stage, the CPO creates the product based on the founders’ vision. They start out at someone’s garage or in a basement somewhere. They’re good at what they do, the CEO drives demand, sells, talks to the market, the CPO tinkers, explores, programs and builds. Soon, the angel investors come calling. The company secures their first SEED investment and they carry on driving the product to market fit.
9 months later, they fold.
It doesn’t make sense. What went wrong? Well, as Dijiwan leadership team would attest to, product + vision most often do not make the magic formula needed for a successful start-up endeavour. What is key and equally important are the business processes / systems, the glue that bring the product to market fit in a reasonably structured and controlled manner. ‘Build the features and they will come’ – seems to be the rallying cry at each startup’s enclave – well, seems not mate.
Roll back a bit to when the start-up receives SEED funding, a couple of hundred grand in the coffers, time to break out the champagne! The founders believe that soon, SEED becomes Series A, and more zero’s come into the equation. They carry on doing what they did up till then : the CEO sells, creates markets, tells the CPO the features needed, and the CPO builds. Hiring starts, programmers, technical analysts, data scientists, marketing sales staff all line the payroll. Soon, the burn rate balloons but it’s alright – Series A fixes it right? The founding team believes that to paper over the growingly insane costs, they just need to keep building in features, and purportedly charge the market a price which correspondingly increases as a function of the number of features in the product.
Fast forward a few months later, first product ships, but.. hang on a minute.. the lights are on but no one seems to be home. Customers are not exactly flying off their chairs to use the product. Some even say that they might not deploy the product even if it was given for free! The investors get nervous.. the downward spiral starts..
Source : Journal of Empirical Entrepreneurship – Dissecting start-up failure rates by stages – Sebastien Quintero, 8 Nov 2017
Interestingly, as can be seen above, the highest failure rates for start-ups actually happen from SEED to Series A.
This could be due to many reasons, but a singular one that seems glaringly obvious is that many Start-Ups fail to go beyond SEED investment because they lack operational and project management skill-sets, or rather they lack focus on these areas. If they reached a successful POC, their thoughts would hinge on the fact that what they did so far was right and they needed to keep on doing what they were doing to plough on. This couldn’t be further from the truth.
Imagine if u will, a clear starting point from SEED to a clear ending point of Series A (or at least, Series A ready state). Throw in the fact that in between these 2 milestones, there will be a lot of pivoting/change management, resource management, risk management, planning, scope determination, time and cost considerations and you have at the very basic core, a project. Once you dissect that, you then realise why failure rates are exceptionally high from SEED to Series A, i.e. CEOs and CPOs are typically not genetically manufactured to look at managing projects, cutting off scope creep, hearing beyond what the MVP should have, learning to ignore the ‘wish list’ that many clients would want etc. These are the areas that least interest or concern them..
Hence, the one most overlooked area and skill-set crucial in the start-ups journey, i.e. strong and excellent project / operations management skills are sadly lacking or to put it bluntly, non-existent in most start-ups at the SEED stage. A typical conversation amongst would-be founders would be :-
“Hey, let’s go build the next best thing, I just know there will be a market for this product, it will disrupt the entire thingamajig industry, we could capture the local market first and then expand”
“Yep, I know how to build it, we will put in all the features we can think of, you sync with the customers and the team of programmers we hire will get it done”
Project Management? Nope – NADA.
Many investors, when queried about the above, acknowledge the issue, but explain that as SEED investors they typically do not get involved with the running of the operations or management of the company, they hedge their bets by placing quite a few, making up for uncertainty with sheer numbers, i.e. increasing their hit rate by force-feeding quantities.
The solution – extract out key project management practices, adopt an agile framework to maintain Business-As-Usual (BAU) for the start-up while ensuring JUST ENOUGH layer of governance, planning, control is in place to drive the start-up to Series A. Supplementing this with key project management experience with practical know-how to balance governance vs creativity. This period is typically 6-9 months, but what an important period in a start-ups journey. Find out how DotProjects can support start-ups in their journey here…