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More than anything, I love the startups. Most of them have whacked out ideas--but some of them have really great ideas. Most of the great ones never see the light of day, however, and that's a bummer.There are just too many startups.
Most startups fail for common reasons. They assume they will get one of the OEMs to fall in love with them, take their product/technology to market for them and make them rich. Dell, EMC, Hewlett-Packard, IBM, NetApp and Veritas get approximately 11 billion phone calls per year from startups that can solve all their problems. These guys do about four OEM deals a year. The odds really aren't with startups on this strategy.
If they're not misunderstanding the big OEMs, startups may make another mistake: grossly overestimating the value-added reseller (VAR) channel.
Let's face it, most VARs are horrible. The V should be dropped from the acronym altogether because I don't consider "taking the order" value. Very few sophisticated IT shops count on the VAR to educate them on new technologies. Some VARs are great (I like Daymark, NEXL, SANZ and TIG, for example), but most suck.
Once you've blown the OEM and VAR issues, your next fatal error, if you're a startup, is to grossly underestimate the need to fund and build a direct sales effort. The key to getting the best VARs and OEM deals is not needing them.
Ditto for customer support--it's an afterthought to most startups. Big mistake. Getting a customer is hard, losing them because you have an idiot supporting them is easy.
And then there's just the silly egotistical things entrepreneurs sometimes do. Startups talk too much--their CEO yaps at a financial conference which is attended only by their competitors. They pay a zillion dollars in rent that new, high-end building, when it was smarter to stay in the dumpy old mill and pour the money into better people.
What's the problem?
All the serious innovation comes from some crazy engineer in Cambridge, MA, or out of garage in Tel Aviv. With all due respect to my big-company vendor friends, they really can't afford to be truly innovative--they have legitimate businesses to run. I firmly believe that all of our technical challenges have already been solved, but we never got to see most of the results.
To improve the situation, do me and everyone else a favor--invite a few startups into your office every now and then and hear their pitch. Buy and try at least one interesting startup product every year. Remember that Cisco, EMC, Veritas, etc. used to be startups. If you do that, we'll double the life of most startups, and that means we'll double the chances of finding the next big thing.
This was first published in June 2004