Anatomy of a Failure
Posted By Rob Millard - 1 Comments -
It's not often that one finds candid and objective feedback following a commercial failure. Too often, what is reported is heavily tainted by the subjectivity that results from people downplaying their own role in that failure.
Brad Feld has a post that links to a post-mortem of a failure that is remarkably candid and objective. The firm in question is (was) an IT start-up, but the reasons for its failure were similar to those that one might very, very easily find in a professional service firm.
Essentially, the failure resulted from disagreements between founding shareholders that were staying with the firm as it entered a new era involving venture capital, and those that were leaving. (Can anybody see how this might happen in a post-Clementi UK law firm?)
Two "sound-bytes:"
" ... as investors became more interested it was clear that we need to rework Cryptine Networks structure and equity distribution from that of a lifestyle business to something venture fundable. Unfortunately, this became a struggle between the team members who left Cryptine when we sold our consulting assets ... and those that continued to work on the software development project."
"No matter how close of friends, how much you trust each other or how good your intentions are money comes between people and everyone over estimates their own contributions. Furthermore, founders become highly emotional about their companies. Thus, the process of negotiating taking back stock from founders is not rational and inherently very difficult."
Comments, as always, are most welcome and may be posted below.
http://www.robmillard.com/admin/trackback/16389
Rob:
I'm glad that you found my post useful and thank you for the kind words.
-Andrew
