Friday, June 4, 2010

Why do you think startups fail? (Namita Bhasin's Answer at Quora)

A follow up to my prior answer at Quora and repost here. I liked Namita Bhasin's answer, so I'm reposting it here:

I did a research project on this in SJSU's MBA dept a few years ago. The short version of my findings:

- Human Capital
Given the choice between a team of rockstars or a less-proven team that works well together, you're better off with the latter. No matter how brilliant people are, if they can't work together, your startup is going nowhere. The synergy between people that collaborate productively can lead to amazing success.

- Social Capital
Weak ties are more useful than strong ones. When you are closely connected to someone, you tend to have many resources in common; when you are more loosely related to someone, they tend to have more resources (connections, money, expertise, etc) that you don't already have access to.

- Financial Capital
Too little money is an obvious problem - but so is too much. You risk spending your money too freely, shortening your runway (seductively high salaries for the aforementioned rockstars) and/or you may spend on the wrong things (logo t-shirts and laptop bags are not the best marketing tools).

Namita's answer also overlaps with my old article on "Building the Perfect Team" for startups, which emphasizes team chemistry and trust.

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