As we all know, there are only no more than 5 star-ups can survive over a hundred. What are the major reasons cause their failures? Two VC managers give their experience about the most important thing CEO should focus on. Also, three tips to keep start-ups on the right track are listed at the end.
Sun Zhichao, a famous VC manager stated in his article About Start-ups: one of the most important reasons that a lot of start-ups fail is they didn’t focus on one thing. The resource and time are very limited for start-ups. They should concentrate these to the most essential product. Sadly, what start-ups usually do is to try different things as much as they want. Then they realize that they are short of time and money. So they talk to VC for more money and reduce meeting time with clients, further decentralize their energy and lead to vicious circles. Here is the link to About Start-ups: http://sunzhichao.baijia.baidu.com/article/40935
Another article from Zeng Liqing listed 9 major problems in start-ups: wrong industry, lack of capability, wrong partner, problematic equity structure, lack of communication, distraction, over optimistic, too early and too slow. All these problems will harm start-ups in the long run and are difficult to solve. Among these 9 problems, the most serious is obviously the problematic equity structure. The problem is usually occur when two partners have equal weight. Even the start-up does not see the problem now, it will encounter difficulty when two partners have different opinions on the firm's operation. Employees will also have trouble balance the work from two partners. Comapny is distracted from core business as a result. The expected outcome of a equal-weighted equity is a breaking-up relationship. More details can be found at : http://cy.51zjxm.com/chuangyezixun/20120827/20322.html
To avoid failures, entrepreneurs can follow the three tips listed: Firstly, write clearly in the term sheet who is the only CEO of the company. Secondly, meet with the whole team and VC to make sure what is the main function or product. Thirdly, set milestones in each period and stick to it.
Shang Lin
Investment manager assistant of Innovation Works, VC
Participated in the investment of Douyu TV, Triopen Studio, etc.
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