Sunday, April 12, 2009

7 Steps to Wealth While Killing Startups

I know this entrepreneur who has made himself wealthy while his companies have never caught fire. In fact most have or will die - not necessarily because the idea is bad, but because this entrepreneur unconsciously kills the company. People live their lives in patterns and this person is no different. So for my friend who asked me to send this as an email, I will instead put it into a post:

7 Steps:

1. Ideation: come up with an idea that matches some current or emerging trend. Talk it up with the network. Get a bunch of people excited.
2. Pre-funding: get angels in or put some of your money in. This is critical for the next step.
3. Funding: get friends and angels to push a fund to put significant money in. Critical to this transaction is to take "some" of your money off the table to "allow" the fund to buy in.
4. Buildup: hire management, build up the product or service. In fact, keep hiring "better" because it keeps existing people literally on their toes.
5. Slash back: as soon as the concept is ready in beta form, slash back - cut people and spending. The buildup was excessive, the released product is not ready or the pricing needs to be slashed - pick one or multiple - even use the "economy." Then, put in significant constraints on whoever is left in the company. Definitely do not invest in any significant marketing.
6. New Ideation: the previous idea did not take hold, not enough people are using it, the trend has passed. Kill it while talking up the new new idea.
7. Rinse and repeat, but do it fast enough so people don't wonder what happened to your previous concepts. Each time you are making money, so judging success or is difficult.

Do you know anyone like this? This person is always into the new thing. His or her superbright mind is always churning. They are uber salespeople and networkers, but not necessarily ones that can create successes. Since we all tend to stay within existing patterns, I'm sure there are many. Please share your story.

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