I was an early engineer at a startup that failed for a somewhat unique reason with an important overarching learning.
We built a software platform that intended to automate the job of market researchers. Those researchers we hoped to replace ended up finding the tool itself useful. Since the platform didn't replace the employees, our pricing model fell short. In the end, we found success by hiring our own market researchers and effectively pivoting into a software-driven consultancy. Profitability came slow and steady.
After months of profitable growth, things changed on a dime. Our lead investor effectively unseated the CEO one day, and made the statement that we were doubling down on the original SaaS vision. Within a month our 100 person company had been reduced to around 60. The now-unneeded consulting staff were recipients of strategic layoffs. Revenue dropped overnight.
The morale of the company also fell off a cliff. The C's lost their ability to cheer up the team and the senior staff saw the holes in the boat and promptly abandoned ship. The company folded about 1.5 years later for a fraction of the initial investment.
My learning in all of this: the tales you hear about the "bad VC"s are occasionally very real. Make sure when bringing on investors that they align philosophically with your founders' vision. Make sure that philosophy is deeper than "we want to make that cash". Great investors i've worked with since can be an immeasurable resource in so many ways. It is absolutely critical that founders be excellent in their courting of valued investors. Similarly, they must be ruthless in their rejection of the bad ones, however sweet the check may appear.
VCs run funds and need a decent return consulting biz generally does not fit the ticket for them. If you intend to run a consulting shop you def. do not want VC money. (Unless you can spin and market like Palantir than you can easily position a consulting outfit as high grow tech company)
We built a software platform that intended to automate the job of market researchers. Those researchers we hoped to replace ended up finding the tool itself useful. Since the platform didn't replace the employees, our pricing model fell short. In the end, we found success by hiring our own market researchers and effectively pivoting into a software-driven consultancy. Profitability came slow and steady.
After months of profitable growth, things changed on a dime. Our lead investor effectively unseated the CEO one day, and made the statement that we were doubling down on the original SaaS vision. Within a month our 100 person company had been reduced to around 60. The now-unneeded consulting staff were recipients of strategic layoffs. Revenue dropped overnight.
The morale of the company also fell off a cliff. The C's lost their ability to cheer up the team and the senior staff saw the holes in the boat and promptly abandoned ship. The company folded about 1.5 years later for a fraction of the initial investment.
My learning in all of this: the tales you hear about the "bad VC"s are occasionally very real. Make sure when bringing on investors that they align philosophically with your founders' vision. Make sure that philosophy is deeper than "we want to make that cash". Great investors i've worked with since can be an immeasurable resource in so many ways. It is absolutely critical that founders be excellent in their courting of valued investors. Similarly, they must be ruthless in their rejection of the bad ones, however sweet the check may appear.