Start-up Entrepreneurs' Blog

The start-up cemetery – what can we learn from the tombstones of failure?

June 24, 2010

Ancient history in the technology business is only 10 years ago. People always believe that today is different. What happened to those companies yesterday won’t be repeated again because today, we are wiser and smarter. We believe we will escape the fate of our predecessors because we have learned from the mistakes of previous generations.  

There are thousands of tech start-ups. The number of start-ups proposals getting funding is in the low single digits, often touted at 1%.  We all know this, but it doesn’t really sink in because it is a statistic. I went back and read the headlines in Red Herring for the year 2000, and then this point really hit home because the names of all those start-ups were written there in black and white.

Here’s one such product from that era ….

We witnessed the birth of “padvertising” product concept with the My Smart Pad, the first mouse pad with rotating ads. This was an ingenious new mouse pad with a couple of flat buttons embedded in the surface. As the user rolled the mouse over them, printed templates under a clear overlay would show you what was there. The company, MySmart had raised $35 million mostly from Softbank Capital Partners in an early round.

Headlines about the general tech trend were filled with the hype of overinflated expectations and the trough of disillusionment, all at the same time.

• Faded glamour, who’s next to file for bankruptcy
• IPO week – A record breaking August? Floodgates are still open.
• How low can Dell go?
• Startups outpace Cisco in revenue growth
• Microsoft is losing its grip and becoming marginalized in the Internet economy
• B2B Bummer – Revenue? We don’t need any stinking revenues
• Storage stocks are soaring.
• ASP: Hurry up and wait? Renting out apps. New ASPS are swimming in venture capital.
• As expected, the Internet shake out has begun in earnest
• Robotics – Hot Sector, Cold stocks.
• Fiber-Optic Frenzy

It seems as though the headlines were filled with start-ups I didn’t even recall ever existed. Anyone remember these companies’ names? The sheer volume of start-ups with new concepts was astounding and it wasn’t just about the dotcoms and telecom. There were start-ups in just about every market segment that one can think of – biotech, import & export, electric utilities, financial software, and more.

• Edgematrix gets $17M with Singapore connections
• Investors deliver $30M to Kozmo.com
• Aquila Energy looks to warm frozen IPO market
• Doubleclick tire to regain credibility
• Carstattion.com hits a pothole
• Cybergnostic takes on Loudcloud
• Commercialware start-up or startover
• Avenex and Turnstone sizzle in winter
• Linux users thrilling to Trillian
• Neoforma keeps warm
• Triscend leads a hybrid chip charge
• Telcobuy.com serves up $25 million
• Corillian’s success hangs between privacy and convenience
• Jamcracker logs $45 milion in funding
• $35 million paves the way for Charitableway.com
• Inforte IPO has sizzle
• Onebox.com receives $50 million
• Teraconnect aims to be a survivor
• Cybercity gets $17.6M for incubating China IT
• Secureworks hatches $20 million egg
• Datasweeps VCs off their feet
• Meshnetworks mines futuristic wireless technology
• Medunite takes two, will call back later
• Kintera’s kinetic CEO lands $5M
• Centerbeam achieves equilbruim at $115M
• Narus grabs $26M to boost broadband carriers
• Aerogen takes a deep breath
• Mirapoint aims to master messaging
• Kosan Biosciences steps up antibiotic research
• Dialpad’s free service attracts $50M
• Cramer Systems makes profit fashionable again
• Avigenics lays a $10M golden egg
• New Edge Networks bucks trends
• Is Broadvision on the way back up?
• Manley Labs amps up demand for vacuum tubes
• Top banks ante $50M for Bolero.net

        (And the list goes on and on, but there is only so much space in a blog)

Was all that money really wasted? All that start-up funding paid for suppliers and employees, who in turn spent that funding on items in the marketplace and created a vibrant economy.  Today, people are hoarding money and the velocity of money is in the dust, and look at the state of the economy.

The more things change, the more things stay the same.  Today’s headlines will look just like these from the historical perspective.  Many will try, few will succeed, most will fail – so much for this time is different.  But what can be taken from this history lesson? While getting a tech start-up funded is very challenging, making one succeed is much more difficult. And despite what we are taught as young children, it does matter if you win the game, not necessarily how you play the start-up game. No one wants to engage a physician whose patients all die, or a lawyer who loses all their court cases, or a start-up entrepreneur whose companies all fail! It does matter if you succeed so play the start-up game in earnest.

Filed under: From Concept to Start-Up

Tags: business failures, dotcoms, Red Herring, start ups, start-up headlines, technology start-ups, telecom