Mediocrity, not failure, is the worst-case scenario for startups

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There’s an excellent article over on OnStartups.com, about the dangers of mediocrity.

Back in 2000, I was CTO of a startup called ZedZed.com. The founders (I was the first employee) had raised £800,000 in seed funding and we got things rolling in November 1999. Four months later, the dot-com bubble burst and the VCs we’d been talking to about a multi-million pound investment round seemed somewhat less keen. However, the original seed investors were pleased with the progress we’d made and were prepared to continue funding us to the tune of another £800,000.

However, in June 2000, we decided that the prospects for raising the money we needed to execute on our business plan before the end of the year were remote and, rather than limp along, the board opted to shut the company down and return the investors’ money. We effectively mothballed the company, left the site running on a server in a data centre, laid off the employees and took freelance contracts to pay the rent while we waited to see if the investment climate improved. It never did so we continued on our separate ways.

Had we opted to keep going, we’d probably have survived well into 2001 before running out of money. It’s unlikely that we’d have been able to raise another investment round but it’s possible that someone like Lastminute.com might have been interested in sympathy-acquiring us to get our content management platform. The bottom line is that it wouldn’t have been a stand-out success. So, the decision to shut the company down was the right one.

Obviously, it’s important that you believe in your business idea but it’s equally important to keep a sense of detachment and recognise that, although your idea may a good one, its success or failure may well depend on circumstances that are beyond your control.

Or, to put it another way, you need to know when to quit.

Written by jackgavigan

April 19, 2011 at 8:20 pm

Posted in Entrepreneurship

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