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Startups are Easy

At some popular websites you can read that leading cause of failure is inability to raise capital. That does not tell anything about actual reasons. Really why wouldn't venture investors put their money into awesome startup with huge potential returns?

Despite popular opinion that 90% of startups fail. I've seen quite a few companies that manage to get funding despite not being deliver anything.

Intro and Disclaimer

Not being a business person, but rather a humble code monkey trying to help businesses with tech. I nevertheless seen 4 small companies in my career., 2 of them were successful and other 2 not so much.

And there was a few very specific things about 2 not-so-successful ones. Please consider this a techie view on a startup problems.

Inventing Weird Stuff

It is not about entering occupied market. This is possible with certain level of technical excellence, Intellij Idea and Gitlab are only few examples.

This is about building stuff having no business purpose whatsoever, while not having enough resources. In house built web-frameworks, communication frameworks, integration-test frameworks and so on, despite abundance of better and often free alternatives.

Movement Enchancer

A company that makes financial services software decided to build an integration testing framework. The XML-based monstrosity resided in 3 different repositories while lacking basic features such as ability to run tests with different parameters.

When asked what other options have been considered, CTO gave me a blank stare. Such a waste. They could be way better off using any existing framework.

Building your very own proprietary framework sounds fun and easy, but the ugly truth is that it's almost never possible with small resources startups have. Industrial grade frameworks require extensive documentation, testing, high-quality api design, should be highly maintainable, the list goes on and on. None of this is usually included in the original estimations leading to software that creates problems instead of resolving them.

Failure to follow core processes

Blindly following all the processes from the latest super-agile-whatever book could be devastating, but in this case at least you'll read the book and at least some things you do could be right. Ignoring parts of the process without understanding implications is outright destructive.

"Can you imagine there are teams who have time to do estimations with cards and stuff?" - Anonymous CTO

By the way this was said by the same guy, who invented XML-based testing framework from chapter above. Not only estimations were missing, but lots of other things were wrong. Spring planning were routinely skipped because of "lots of work". And we did have lots of work indeed. The work that wasn't necessary.

It is the processes that force you to ask right questions. For example this could be fixed almost a year before if the company had retros. But even if something prevents you from following "proper process of choice" it is understanding that is important.

Just asking 2 simple questions from scrum guide:

  1. What do we want to build?

  2. Why this thing is better than competition?

Will weed out 90% of wrong ideas. I'm not advocating for scrum or any other method. There's nothing wrong with using anything

Frugality Done Wrong

Cutting costs that are easiest to cut. Trial versions of everything that has trial, lowest-end computers, cheapest internet provider. All visible costs are eliminated! Not so visible costs are greatly increased: time spent waiting for builds, waiting on provider's hotline.

The most outrageous are salary delays. Why would anyone work at a company that delays salary? Only guys who just can't get any other job, so they stay. When an anonymous company decided to delay salaries it was less than a year when all competent people left. The company bankrupt. This is very frugal. They won't spend a penny from now on.

The other extreme is "we pay you money" attitude. This will works if you're investment bank swimming in cash. However when it comes to software this approach is just rigged. It's very hard to become a good engineer if your sole motivation is money. Most good devs perceive their role as learning experience.

What do you do when you've high wage job you hate? If you're able to learn you learn until you get same pay somewhere else and leave. Otherwise you stay. That's called a dead see effect.

Being top-paying firm just means you're paying people with certain qualifications more then their market value. This does reduce employee turnover, yet overall a dubious business decision.

Failure to Hold Management Accountable

Yes most of things mentioned above are due to incompetent management. Even if speaking about purely technical issues it is the management who build processes helping incompetent devs getting the job in a first place. The question if investors have enough courage to do the right thing.

This does apply to having friends and relatives in managements positions. Despite it's OK to start a business with your friend, just like there are extremely successful family companies. The problematic part is having friends in a decision-making positions because they're friends. Like main shareholder appoints his son as CEO of company despite lacking qualifications. For a company this is the end. You don't fire your son. You don't fire your best friend or spouse.

A fun counter-example of company being able to hold management accountable could be a big company doing productivity software. After several years of struggle with cloud migration they purged upper management. All of it. Positions were refilled with new hires and promotions. Migration was successful and their shares rose by 100%.

It's All Just For The Looks

That's how you do it

  1. Hire random folks from "big well known companies" disregard their qualifications.

  2. Make demo app that barely holds together.

  3. Sell it to unsuspecting investor

  4. ...

  5. Profit

This differs from rest of the example in the sense that founders perfectly aware of what they're doing. Good investors should be able to crack such cases.

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