Sunday, March 21, 2010

Focus.

I visited a startup in Silicon Valley a couple of months ago; for purposes of confidentiality I won't name them. They're executing a business plan that calls for them to develop an online eCommerce service, client software and a new hardware platform. They started from scratch on all of it, and their goal is to get to market about a year after the company was first conceived. They're well funded, but they're obviously not generating any ongoing revenue, and they're still in stealth mode.

The single most important thing that a startup has to do is to focus. There's never enough money, time or resources. The three things that this startup is trying to do--Internet services, client software and hardware--would be big challenges for three startups, but they're trying to do it all themselves.

The irony is that they don't have to do everything they're trying to do. There are plenty of software clients out there that do what they need, or they could contract out for the client's development. The hardware segment they're focusing on is one of the most active and rapidly evolving areas in consumer electronics. There are (or certainly will be by the time they launch) tons of platforms that they could support, but they've deliberately chosen to build their own hardware platform. They could focus on their eCommerce service, which is going to be a big enough challenge in itself.

By trying to do everything themselves, they're scattering their resources and dramatically increasing the risk of failure. Also, by staying in stealth mode for so long, they're running the risk of coming to market with a poor product/market fit. They think that staying in stealth mode will protect them from competitors, but competitors don't need them to understand what the market needs.

The single most important thing that a startup must do is focus. Focusing helps you to conserve resources, pivot more adroitly, and leverage external partners and technologies. It decreases the potential points of failure. The company I just described is one of those "fat startups"; being fat has enabled it to unnecessarily scatter its efforts.

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