We got funding! Aren't you excited about it?

Summary:A start up has convinced someone in the investment community to give them money. The PR folks are excited, should you be?

When PR professionals approach me with the news that one of their clients has gotten funding, they're often excited and think I should be too.  For the most part, I'm not excited. I want to know if what they have to say passes the "reasonable person test."

"What is the reasonable person test?", you may ask. Simply, does the company have sufficient information to answer the question, "why should anyone care?" I want to know quickly and concisely what the company is doing, who they think will be interested, who they think will be competitors and why they think that they'll win.

More often than not, I get the "I've got a secret, a company I'm sure you'll want to know about, and I'll only tell you more if you agree to signing a non-disclosure agreement and accepting an hour-long, rambling meeting with company executives" treatment.  I often suggest that the PR person send along the presentation materials and promise to contact them if I have questions.

If the PR people won't or can't offer information, I gently and reverently escort their messages to the trash bin.

I wish I had the ability to list all of the failed companies I've spoken with over the years that had an interesting idea, built a somewhat plausible business plan based upon that idea and found someone in the investment community to give them money. The fact that they received money and started operations is exciting for those involved with the company, but Industry watchers want to know if their idea has any chance of being successful in the marketplace, not just that the company obtained funding.

When I consider what went wrong and why a start up faded into history, the reasons often are a combination of the following:

  • Another company, often a very large supplier of IT products, had a similar idea, had an implementation of the idea that was good enough to get by, and unleashed a marketing campaign backed by a very large pile of money
  • Either they didn't get enough funding or they didn't use the funding they received well.
  • The company had a great idea, but didn't have an audience interested in that idea. Turbine powered turtleneck sweaters won't be of much interest in the tropics.
  • The company didn't know how to reach the interested audience.
  • The company was following the "build it and they will come" product strategy and did nothing to expand awareness, create interest, create desire and get people to take action. So, the product died on the vine.
  • The company had a good idea, it was implemented well, but their pricing was totally off kilter. They had no idea how to price for the value customers and potential customers perceived. These companies often looked about, found a competitor offering something vaguely similar and copied the pricing without also copying the sales and marketing efforts that supported those prices. Sometimes, they follow an even worse strategy, that is, pricing for the value they think the product or service has without finding out what potential customers believe.

Successful industry-watchers learn how to rapidly sift through the deluge of Email and telephone messages to pick out the interesting. More often than not, these watchers think to themselves "why does this company think someone would be interested in a new database technology that will require rewriting every application and migrating petabytes of data?"

Topics: Enterprise Software, CXO, Data Centers, Software

About

Daniel Kusnetzky, a reformed software engineer and product manager, founded Kusnetzky Group LLC in 2006. He is responsible for research, publications, and operations. Mr. Kusnetzky has been involved with information technology since the late 1970s. Mr. Kusnetzky has been responsible for research operations at the 451 Group; corporate and... Full Bio

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