By Matt Massey, CEO drive2 Inc.
The most recent failure of another Ottawa-based start-up; Spotwave (www.spotwave.com) leaves me in awe of the challenges facing technology companies in today's marketplace. It also leaves me wondering how some very intelligent people can burn through $36 Million plus in VC financing in a little over 5 years and I'm positively scratching my head as to why there is an apparent lack of stewardship from the company's former board members to allow senior management not have a clear strategy to be revenue neutral (let alone revenue positive) in as short a timeframe as possible.
There are undoubtedly many factors that contribute to the demise of a start-up, and we will likely never know all of the issues a company like Spotwave had in building and bringing their product to market. There is always the potential for a venture-backed Phoenix Strategy and we'll see the company rise from the ashes. However, a more likely strategy is the technology patents will be sold to the highest bidder and the VCs will get out with whatever they can salvage.
I can say having worked with Spotwave in the past year, there were/are some inherent flaws in the business model that needed to be addressed and at a very basic level. The company positioning just didn't make sense, here's an example of what I mean - direct copy of the content from Spotwave's website (www.spotwave.com):
Spotwave Wireless is the de facto standard for providing carrier-approved, adaptive indoor coverage solutions. The Company's solutions seamlessly bring the outdoor signal inside for both commercial and residential locations - ensuring that cell phones and wireless devices work reliably indoors where they are being used more often.
Changing the economics of in-building wireless coverage, Spotwave's solutions protect the wireless network, are cost-effective, quick and easy to install, and require no maintenance.
What?
Read that a couple of times and try and decipher what the company sells.
Here the quick answer:
Spotwave builds products that improve wireless coverage in buildings where cell phone and wireless service is poor or non-existent.
So, why all the marketing speak? I honestly don't know the answer, but if that's the type of language you're using to position, your company and your products or services, you need to shift your thinking and your language sooner rather than later.
Now, back to the real subject of this blog and my take on why so many technology Startups are failing.
Very simply - Ottawa Tech Companies are placing way too much focus on engineering and product development and never enough focus on marketing and sales infrastructure, strategy, tactical programs and business development.
Yes, we all understand that there at least has to be a semblance of a product ready-to-market, but the reality is; most technology companies are run by engineers. Unless the Engineer CEO also has a marketing or business development background, they very likely inherently believe in the "if we build it, they will come" business strategy and that they need to build the Mount Everest of products before.
It's this type of thinking that needs to be reengineered in order for more Ottawa companies to compete and succeed in an increasingly global marketplace.
What we're seeing now is the lack of a business-first focus by many tech entrepreneurs in a number of ways:
- Venture Capital investment in Ottawa StartUps was down significantly in 2007.
- Angel Investors and VC Firms are now looking more security for their investment: product maturity, customers and sales revenue all factored in as key indicators of the investment opportunity.
- Greater accountability for meeting company revenue objectives and growth strategy in subsequent financing rounds is significant.
- More tech companies are bootstrapping in order to build their company, the demands on the entrepreneur's time and due diligence process by investors requires too much heavy lifting.
It's a stacked deck against the tech entrepreneur.
My view is to take a more aggressive attitude to growth and development:
Put your sales and marketing infrastructure in place as quickly as possible - if you don't know how, find the people who can do it for you, make this a priority.
Place a significant investment in your marketing programs but keep focus - marketing programs should always have quantifiable ROI.
Leverage others' experience – bring in experts to help you and utilize the web - there are great websites like Marketing Profs (www.marketingprofs.com) and Marketing Sherpa (www.marketingsherpa.com) where you can research hundreds of articles, white papers and case studies to help build and hone your marketing skills.
Take on some risk. The old adage is true - no risk, no reward. The number one question I get from CEOs "Well, what if it doesn't work?" My response is always the same; We take the same approach to demand creation that you take to product development and apply it to marketing - it may take some time, but with the right strategy, research, timing, testing and market opening, your investment in marketing will deliver a solid ROI.
drive2 is a demand creation company. We develop performance driven, results-based lead generation and demand creation programs for technology and services companies. For more information on demand creation on how drive2 can work with your company, visit www.drive-2.com.
