Yes, premature scaling is a cause of start-up death. But when an opportunity smacks you in the head, grab it with both hands and don't let go. If you can't, get out of the start-up game.
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything - all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. - Steve Jobs
Watching an entrepreneur fail is sad, but watching them fail from a lack of nerve is tragic.
At the beginning of this year Bob, one of my ex-students, was in entrepreneurial heaven. He had an idea for a new class of enterprise software, insight-as-a-service, based on big data web analytics.
Bob had taken to heart the business model canvas and Customer Development lessons. After graduating, he put together a prototype and had quickly marched through Customer Discovery, iterating his product with the help of chief innovation officers and Fortune 1,000 IT departments.
I had made one of the introductions to a Fortune 100 CIO's so I got to hear his progress from both him and the CIO.
After 90 days, things seemed to be moving at start-up speed. Bob had a backlog of users wanting to try his application, and the corporate IT people who were trying his early prototype said, "It's crude, we hate the user interface, it's missing lots of features ... but we'll kill you if you try to take it away from us."
I pointed a venture capitalist to the chief innovation officer testing the prototype. He told me the CIO wouldn't get off the phone. He kept telling him he couldn't remember when he had seen an enterprise software product with so much promise. The VC checked with other IT users and heard the same reaction. It was a "gotta use it, don't take it away, we'll have to buy it" product. After a demo and lunch, the VC (who normally did later-stage deals) wrote my ex-student a check for a seed round.
Life couldn't be better.
I followed Bob's progress in bits and pieces from updates from the CIO, the VC and his emails and blogs. He seemed to be on the fast track to start-up success. But pretty soon a few worrying warning signs appeared.
The first thing that I noticed was that Bob couldn't seem to find a co-founder. I wasn't close enough to know if he wasn't really looking for one, but given the early success he was having, it seemed a bit odd. But the next thing really got me concerned. Bob started hiring second rate developers. At best they were B-players.
A month went by, and the product stopped getting better. The user interface still sucked, and new features had stopped appearing. The next month, the same thing. I got a call from my CIO friend asking, "what was going on?" He said, "It was a great prototype, we would have loved to deploy it company-wide, and I hate to let it go, but it looks like Bob's company just lost interest in developing it. I'm going to dump it and look for a substitute." So I called Bob and suggested we grab a coffee.