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
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.
I asked him how things were going and got the update on how the earlyvangelists
were using the product. As I had heard, they were ecstatic. But Bob
said he was worried he hadn't found the right customer segment yet. "I'm
not sure I can get all of these guys to pay me big bucks," he said.
"That's why I stopped coding, and I'm spending all my time out in the
field still talking to more customers." "What does your venture capitalist say you
ought to be doing?" I asked. "Oh, he hasn't had much time for me, his
firm almost never does seed deals. It turns out I was an exception."
The conversation was starting to make the hair on the back of my neck
stand up. Bob had gotten to a place most founders never do. His
product was a "gotta have it for people with big budgets." He should
have been back rapidly coding, iterating and finding out what feature
set would get him to paying customers.
Instead, he had produced barely three weeks of progress in the last five months. His prototype was rapidly wearing out its welcome.
LACK OF NERVE
When I pressed Bob on this he admitted, "No I guess my
engineers aren't very good. But I hired guys who were cheap because I
wasn't sure if my hypotheses were right. Didn't you tell us to test our