This is a post I did a couple years ago for Xconomy, which I think is still very relevant today. I’ve lived these mistakes too many times with entrepreneurs and venture capitalists. By paying closer attention to them, I hope we can avoid them more in the future.
Nobody likes to fail. No entrepreneur or venture capitalist thinks a particular venture is going to be the one to fail. As veteran venture capitalist Bob Crowley at the Massachusetts Technology Development Corporation says, “we’ve never made a bad investment; just investments that have gone bad.” If we as investors or entrepreneurs thought the odds were stacked against us at the outset, we wouldn’t pursue new ventures.
In reality, however, they are. And, rather than just accept that the risks are high and failure happens, there are many things we can do to better the odds of success.
Only about 1 in 100 companies that pursue venture capital money get it. Probably the worst thing you can do right after the financing is then to blow this precious resource. Yet, there is tremendous pressure to scale the company for a large market quickly. Here are the top three catastrophes I have seen first hand and heard from veteran venture capitalists time and time again over the years:
CEOs, Entrepreneurship, Venture Capital
- Hiring the right CEO at the wrong time
- Scaling the sales force prematurely; and
- Building the product ad nauseum