Why do start-ups tread water?

June 5, 2005

It’s an interesting case of dissection to look at the world of start-ups that are successful, treading water, or failing.

The failures are easy, it’s either a bad idea or bad management. I don’t believe you can “fail” with just bad execution if you have a good idea or good management.

The successful start-ups are a little harder to diagnose, but most of the time a couple of the following make it click: management, money, experience, connections, luck. Some people just make it work, and it’s often a mystery to me.

I once asked Ron Simon of the namesake RSI Holding Co (they make cabinets for Home Depot/Lowes type stores), a $500 million dollar company, how they got to $50M. A little confused, he started with a standard answer and then ended up saying “It was hard.” Not even a very accomplished business man could tell me how it happened, it just did.

The most troubling to me is the start-up that just treads water. It doesn’t fail, doesn’t grow, just sits there no matter what pushes on it. This one I can’t quite pinpoint the reason.

Coincidently, these are the companies I often sign as clients. Their ventures are not shy about spending money, hiring people, or marketing their businesses – at least no different than a normal mid-sized business.

My guess is that they are treading water on purpose for various reasons, either financial or personal. That’s difficult to prove, but at least I know where to look. Now I only have to figure out how to fix it!

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