Previously I’ve written about five fatal flaws that I’ve seen that commonly causing small business demise. One might wonder if Main Street businesses (or should we call them local-market businesses because not every company needs a store front?) are just destined for higher rates of failure because the owners are lacking resources like capital, expertise, and time, or adequate motivation and a way to balance personal demands with the needs of the business.
But is it any different for high-potential, typically tech or service businesses going after venture capital?
I spoke with Brenda Lewis who has worked in the venture capital game for decades. Her company, Transactions Marketing, Inc., is a Stamford-based venture manager for mission critical enterprise systems, software and services. She’s helped launch 22 ventures in healthcare, IT, security, telecommunications, information, ﬁnancial and location services markets.
She pointed me to an article she authored that outlines three flaws that can make a venture “roadkill” on the highway as they try to cross toward funding and business success.
Her points – management weakness, not mastering the knowledge of the market and lacking a way to generate profit – sound a lot like they could happen on Main Street.
Brenda pointed me to research from a Harvard professor, Shikhar Ghosh, on failure rates. Failure depends on how you define it – liquidating assets and closing or not hitting your projected return on investment. The spread is huge 20-95%.
It’s surprising to learn that the failure rates for these well-polished entrepreneurs are so high, but they are launching more complex concepts. Still there are many similarities in the weaknesses that can smite both categories of startups.