Designer. Disruptor. Startup Mentor. Digital Innovator.

Author: jeanneleez

Why Startups Fail – Money

Deciphering Term Sheets - ibuildcompanies.com by Jeanne Heydecker

Most people will say that money is typically the reason why a startup failed, but that doesn’t take into consideration all the reasons why companies fail. In this series, we have discussed inexperienced teams, lack of influential connections, weak execution, and lack of vision. All these may be the cause or a contributing factor as to why a startup failed.

Lack of money is a nightmare. I know the sleepless nights trying to figure out how to make the next payroll. I remember negotiating with vendors to give me another month to pay them. I’ve been there, and no one wants to be in that position.

Funders also capitalize on struggling startups. I recently overheard a Silicon Vally investor talking to a colleague telling him that he was interested in funding a certain startup. The gent responded, “I’m gonna wait six months until he runs out of runway to give him a term sheet.” In this way, he can get more from the startup because he may be the only one who’s willing to fund them at that time, when the owner is desperate to keep the lights on.

Practicing good financial planning from Day One is critical. You don’t need a fancy office. You don’t need Aeron chairs. I started up a company with just my co-founder and we had used furniture and the office was behind a newspaper company on the second floor of a furniture company. Each one of us handled separate parts of the business: I handled customer servicing, web design and development, and marketing. My partner handled finances and sales. When we finally started hiring, we moved to another space and people had plywood and saw horses for desks and they faced each other on both sides. They complained about splinters. We gave them sandpaper. We got the cheapest rent and had to deal with rats chewing our wires. Keeping costs down is critical.

Don’t hire until you absolutely have to. Use freelancers for specific short term projects, call in favors, barter services (free web site for setting up our network, free web site to handle a H1B visa, etc.), and if legal in your area, call colleges for unpaid interns you can mentor and do some of the grunt work. Masters programs are ideal since they can put their newly learned theory into practice. I’ve done all of these things to reduce costs.

Get credit cards for anyone doing sales/marketing and pay them off each month to establish a credit history. Establish a line of credit as soon as your company is showing revenues quarter-on-quarter (how many will depend on where you are). Then hustle. Get on the phone, cold call businesses in your target market and introduce yourself. Establish whether they need your solution. Find the decision maker in the company and get to work selling. The more revenue you make and the less money you spend, the longer your runway will be and will keep you from giving away more than you bargained for to a potential funder when you have no money left to keep it going.

Money will always be a problem in a small company, especially one with no recurring sales to existing customers or diversified business models with consistent revenue, where one may be strong during down cycles of another. Consider these options as you start evaluating your idea. You may come up with something that needs nothing more than seed money to get started and then revenue does all the rest.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Startups Fail – Lack of Connections

Four Parts to Finding Your Purpose and Two Paths for Getting There - ibuildcompanies.com by Jeanne Heydecker

Startup teams all too often underestimate the importance of building their own network of influential connections. Connections to influential users, influential industry groups, influential analysts, influential media, and influential business alliances. Or they hope to find investors and mentors that provide those connections once they think they are ready. In reality it’s just doesn’t work that way.

Networking is the best possible way to connect with other entrepreneurs and potential hires, along with media and investors. You should start as soon as you begin discussing your idea, not later. You may want to start networking while you’re still working for someone else. Be prepared with an elevator pitch that tells enough about you (what industry, what problem your solution solves) but not enough to give your idea away. That’s NDA (Non-Disclosure Agreement) territory. You may not have to recreate the wheel. There may be someone in the room whose been there, done that and would be happy to introduce you to some of the people they work with.

When connecting with people, invite them out for a coffee. Ask them for advice. Tell them your idea and ask them what they think about it. If they want more detail, ensure you have an NDA with you or tell them that you can’t discuss your intellectual property until an NDA is signed. Some unscrupulous people can steal your idea at this stage and since they have the connections, they can get to market very quickly compared to you.

Let’s say the guy (it’s usually a guy) is interested and can set up a few meetings for you. He may even accompany you, which is ideal. You may not have a pitch ready, but typically that is still okay at this time. What you’re looking for is expertise. An understanding of where the gaps are: in your team, your solution, your funding, your marketing, your sales forecast, how and when to launch, target audiences. You will probably need an advisory board or board of directors at some point. You don’t know how much you don’t know until you start talking to people who do.

Find a few of these types of people through your networking. Invite them for coffee at the event itself if you can. Get business cards and connect with them on Angelist and LinkedIn. Follow up with them regularly. They may not be the funders of your project, but they may know the people who will.

Effective networking is the way to make those connections in business that can create value for your company. They may not be traditional networking events: it may be at the golf course, or the gym. I know someone who pitched his idea to the CEO of a company in the mens toilet.

The price of a cup of coffee can yield immense results with the right connection. Keep doing it until you find the right set of people that helps you take your company to the next level.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Startups Fail – Weak Execution

Why Project Managers Rule the World

I once worked for a company in the telecom industry whose Director of Sales was highly reactive to prospects and would promise them every feature possible. He would then meet with the CEO who had accepted a large investment from the Sales Director’s father to start the company. Whenever the Sales Director came in with new feature requests, he felt compelled to add them to the product requirements prior to launching our first product. We were selling integrated inboxes for small businesses, along with a suite of other modules you could add on, like IVR, Inbound Call Management, etc. We were ramping up a new sales channel – computer network installers – who could make more money selling these phone related services as well.

Every time a requirements document changes, we in the business call it “scope creep”. A simple project may need to be entirely re-written due to a new feature. There were several times, after the CTO was called in that shouting ensued, doors were slammed and I hoped against hope that the CTO wouldn’t quit. I had learned a lot from him and because he took a chance on me, he taught me everything I know about user interface experience and design.

This company had a small sales force and they weren’t making sales with our traditional offerings to trunkers who sold, installed and customized PBX switches and telephones. We were running out of money quickly. We were doing a few trade shows and I managed to get the CTO up speaking about our new technology, and also executed a press tour once we had our minimally viable integrated inbox for fax, emails and voicemails. It was very successful. So successful that even before we sold a single box, Nokia bought the company for USD $56MM, put the tech in a closet and took all of our tech staff with them. Everyone else was let go.

This case shows a failure to execute, and we were very lucky that Nokia showed up when they did. Most failed startups just can’t execute in a timely manner. Some show a huge lack of judgment. They work too hard on product features, and too little with the market. They build too many “nice to have” features into a product while other similar products are launching in their industry, so they did not launch in time and lost market share before they even had a chance. Maybe they did not work hard enough to build a user/customer base. Didn’t manage expenditures well enough. Failed to identify opportunities, failed to build strategic connections…

Good companies can be strong in their tech, but weak in their marketing. Good companies can be strong in their marketing, yet weak in their tech. Great companies are strong at both. We were lucky we were strong in the marketing department because without it, the company would have disappeared, not because of the CTO, but because the Sales Director was delaying the project over and over. He was a weak salesperson because he could not manage customer expectations. If it wasn’t for marketing opening new sales channels, getting out to speak at trade shows and doing that press tour with the first iteration of our basic product, Nokia never would have come knocking with a check in hand.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Startups Fail – Inexperienced Team

How to Hire a Development Company for Your Project if You're Not Technical - ibuildcompanies.com by Jeanne Heydecker

Picking your initial startup team can be tricky. A person who has been wildly successful at IBM may not do well in a startup situation. They may have had a legion of support staff. They may have become very political in order to survive in that environment. They may have no sense of urgency. They may not be willing to wear a lot of different hats and play multiple roles within your startup, and may become frustrated with the amount of grunt work they may deem “beneath them”.

You need someone who can focus on everything devoted to technology. You need someone else who can focus on finance and government compliance. You need someone with enough experience to manage everything in operations on a shoestring. You need someone with marketing experience to get your brand designed, and start working on business development planning while software development is still under development and testing.

Some of these jobs may be able to be filled with consultants, for example, the finance and legal compliance, and since any mistakes in this area could cost you money and lawsuits, this would probably be a good investment. You may want to hire an expert events management company to launch your company and its products or services. But operations and technology are your core intellectual property and should be overseen by people you trust in-house.

So where do you find these people? Some may be friends (but that can be a minefield), but your best bet is to get out there and network. Go to tech incubator and accelerator open houses, barcamps, tech cocktails, industry conferences, co-working spaces, and meet people. Find interesting people, get their business cards and do some research on them, even if it’s just to read their LinkedIn profile. See if you have mutual connections that you can contact directly for information on them. Angelist is another great place to find people comfortable in the startup environment, so check out what you can find there, too.

You can also connect with the investors in your circle for recommendations. They may know someone perfect that just had their startup shut down and are looking for something interesting in your industry. They may already have hit some of the stumbling blocks before and can help you avoid them.

Having the wrong people one your startup team, especially friends, could lead to a disaster. Just because you trust the guy and know he can generate beautiful code with his eyes closed, doesn’t mean he’ll be able to lead a team of people once you start hiring teams to support your leaders. Investors may see that the same person has never held a job, perhaps never went to college. Besides, are you will to risk your company on a friendship? If it fails due to your friend’s inexperience, what will that do to your friendship? They can do a lot of damage while in their role even without understanding they’re doing it. You may end up not only without a company, but a friend as well.

So choose wisely. Your initial team may be just you and a software developer to get your minimally viable product online. The longer you can wait, the longer you have to do the due diligence on the people who will help you build your business. Hire the smartest people you can find and let them do their job. You’ll be happy you did.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Startups Fail – Superficial Market/Customer Research

"Four Ways to Build Out an Effective Board of Directors" ibuildcompanies.com by Jeanne Heydecker

Many startups do very little market research. It is expensive, time consuming, and may indicate major issues that would keep your startup from becoming successful. Hiring a consulting firm to execute this step may be a viable option for you. However, this may also prove disastrous. At Lycos, I was responsible for tripod.com’s traffic and promotion. My KPI was to increase the number of page views per day from 12 million to 16 million in one year. When I joined I was handed a market research report that was around 250 pages long and indicated that the majority of visitors were white low to middle class women over 40. When I reviewed the pages that were the highest trafficked pages on the site, they were devoted to Backstreet Boys, Britney Spears, Nsync, J-Pop, and K-Pop – not the subject matter that that would be attracting what the marketing firm stated were our target market. Lack of product/market fit is typically fatal.

Lack of Product/Market Fit

Very often startups develop products for themselves instead of for a large market. They keep their development too close to their chest instead of involving test customers very early on – even before they create their first prototype. The result is often too far off from what the market needs. There may be multiple targets. For example, I built an overnight sourcing platform which guaranteed customers 12 matching resumes to their job order by 9 AM the next morning. I was targeting small businesses and was surprised that the majority of our customers were staffing firms and they were giving us just their junk – for example, a groundskeeper who was also a veterinarian, or a sales person for a company that sold $50,000 plastic trees to airports and other public buildings (none of which was spelled out in the job order). We were charging $59.00 for the service and would barely break even on each order. Completing do-overs for poorly submitted job orders cost us money, and the staffing firms felt the price should be much lower – around the $29.00 range. They wanted to know if they could get a discount. We failed to attract the small business owners who also felt the price was too high, so after a year, the project was scrapped.

We didn’t show our product to existing staffing firm clients because we didn’t want to cannibalize our current business. Perhaps we could have approached past clients to help plan the prototype and get feedback on the price. Perhaps we could have approached a few small business associations across the country to see if their members would be willing to BETA test the system for free.

Finding BETA testers is the hardest part. Identifying who to approach and getting on the phone with them takes time. You only need seven testers for each target market to get 98% of your issues. The good thing is that many of these testers typically will become paying customers when you open the system to the public because they helped you build it and feel a bit of ownership in your project.

Doing market research doesn’t have to cost a lot of money, but it does take time. If you want quality and you want to keep costs down, you’ll need time. If you don’t have time, you may need to pay for volunteers to BETA test your project and they won’t necessarily come back after you stop paying them.

Ultimately, it’s up to you to ensure you have a market and a product or service that your market can afford with a margin of four times the cost to company (4 x CtC) in order for your company to grow and become a sustainable business.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Startups Fail – Missing a Long Term Vision

Why Startups Fail - Lack of Vision | Jeanne Heydecker - ibuildcompanies.com

Startups are a risky proposition. Even if you have your dream team in place, plenty of time, and more money that you need, you can still have a spectacular failure on your hands. I have had numerous sleepless nights trying to come up with ways to make payroll for certain startups, and others where everything just seemed to fall into place seamlessly and became wildly successful. This is the first of a series of posts listing the main reasons I’ve experienced as to why startups fail and how you can address them before they cause an issue for you.

Missing a Long Term Vision or Exit Strategy

Without a vision and a plan to get there, your startup will have a lot of issues staying focused. At one point, a web consulting company I founded in Chicago, had challenges getting sales after 9/11. Previously, we’d been creating web sites for a lot of law firms. Now they were asking us if we could do eDiscovery (computer forensics). Since the sales weren’t there for designing web sites anymore, we needed to pivot in order to keep the company going. Since the initial vision was no longer the focus, I cashed out since I was not interested in working in computer forensics. The five year plan I’d created was no longer the path the company would follow.

Regardless of whether you’re a product or service company, you will need a vision that can enable you to create a road map with milestones on how to achieve that vision. At a staffing firm, the vision was to have 25,000 employees on retainer by 2025. No one had done the math on that when I joined the company, but with our existing employee base and its organization, we would have to increase employees by 40% year-on-year to achieve that number. We decided that it was unrealistic to expect those results through our traditional business model, so we started to test new business models that could get us closer. In addition, we changed the vision to be the largest recruitment outsourcing company in the world by 2025. We developed a new road map, opened new markets, added new services, created new business models and they have grown significantly since the new vision was created.

Vision can also used to inspire employees. If they believe it, feel part of it, and understand the road map to getting there, they will become more productive, innovative and stay longer with your company.

When it comes to customers, they may not need to know or understand your vision unless it can be leveraged to become more interested in your value proposition and where your startup plans to go in the next few years. For customers who require very long sales cycles, for example, regulatory or government approvals, it may be critical for them to know what your future plans are in order to seal the deal.

It’s also easier to convince investors and partners, and attract top talent if you can express where you plan to take the company. They all want to see where you see the company going, revenue generation strategy and your exit strategy in order to evaluate whether your company has a long term plan as a sustainable business.

Planning this vision can take a while. Sit with like-minded people – ideally people you may want to work with at a later date – and decide where you’re going to go and whether that vision can be the start of a roadmap your people can follow, milestones that can be achieved, and ultimately build that sustainable business.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Customer Complaints: More Valuable Than You Think

Maximize Team Performance - ibuildcompanies.com by Jeanne Heydecker

Whenever I’ve had the opportunity to work with customer service representatives, I have a three vital questions:

  • How the team is organized?
  • How they are compensated?
  • What is their primary objective?

Team Organization

Depending upon the size of your overall company, you may only have a couple of people answering customer calls or maybe the sales team handles all incoming calls. If you’re a call center responsible for the service of customers of a large organization (or more), the answer can be very complex. Regardless of the size of the team, the most vital answer to quality customer service is employee empowerment. They need to be able to resolve solutions without going up the chain of command to get permission to resolve a customer complaint.

There may be ways to gamify the organization. It may be achieving certain milestones, but could encompass many areas of employee development. The rewards could be automatic promotions, raises, or bonuses. Figuring out how to create this gamification is complex in large teams, so you may want to create smaller teams within the team. such as by client type, product line type, etc., and create milestones that make sense to each group.


Compensation may be just a straight salary/benefits package or a performance-based program that focuses on certain key performance indicators (KPIs). Some organizations focus on number of resolved customer interactions per day or similar factors, but the most vital focus for quality customer service is exceeding expectations and creating delight in that customer.

This is not something that is simple to do, and it requires reaching out to customers regularly, asking them how we are doing, what else could we do, and would you recommend us to a friend or colleague? Were there any specific situations that arose since the last call that went well or did not reach a satisfactory conclusion? Can you tell us more? Any negative feedback should be regularly analyzed and resolved by the management team creating new milestones to encourage employees to reach those milestones and collect their rewards.

Primary Objective

What is your customer service team’s overall mission? Everyone has sat on hold for forty minutes or more trying to get an answer about a charge on your credit card, or to understand why your telephone bill doubled this month, only to get no answer that makes sense and the person you’re talking to doesn’t have a way to resolve your issue. Their primary objective should be to use their ability to create solutions that make the client loyal, tell a friend, rate your service at five stars, ultimately converting that client into an extension of your sales team and social proof that your company is a customer-focused organization.

Whenever a customer complains, it means that more than ten have simply just stopped buying from you, disappearing into the wind. It is vital to ensure that you document the types of complaints and set up a team that meets regularly to address them head on. It may mean scrapping obsolete products or services, or you may need to develop new options.

Complaints are valuable. They can speak volumes about what you need to do to streamline processes and expand your business, while increasing top line revenue.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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Why Design Matters

"Four Ways to Build Out an Effective Board of Directors" ibuildcompanies.com by Jeanne Heydecker

This may not seem like a design blog, discussing colourways, fonts, and product design in detail, but designing and formalizing processes and procedures that empower employees to create delight in customers is a hard thing to do well without disrupting the status quo.

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Innovation Can Begin with Your Unsatisfied Customers

ibuildcompanies.com Offers Free Download for Starting Your Own Innovation Program

I once worked at a company where we made closed loop motion control devices – very complex components used in machinery that controlled the motion of manufacturing equipment down to the nanometer. A typical customer would be hard drive manufacturers that need to create tracks in hard drives in order for the hard drives to store information. When I first joined, the motion control devices we made were able to create 10,000 tracks per inch. Only one of our competitors were close.

During an annual offsite, the team created a three-way product development roadmap system between Sales, Marketing, and R&D. Sales would forward to Marketing any emails citing potential customers’ reasons for not purchasing our products (needed a smaller size product, needed a linear version when we only offered a rotary version, more feedback options, price, etc.), as well as complaints from current clients on why they were dissatisfied with the existing line. They also created a spreadsheet where they added the same data from phone calls they received.

This was shared with Marketing, who gathered all the data and created monthly reports which were shared with Sales, R&D, and upper management. Each quarter, all three teams met to review the reports and the roadmap. We would re-prioritize certain requirements. We would schedule new features to the software. This enabled the Sales team to know when new features were coming out and match them up with those clients and prospects who were looking for those features early – critical when manufacturing is engineering new machinery for new products they will be producing. These meetings were critical to ensuring we were developing products clients needed in their future as well as today.

This also enabled the Sales team to act as a partner instead of as just a vendor. For example, if a printer company was planning on making a portable printer that would be used in your car, the manufacturer doesn’t recreate the wheel. They will use components from vendors to design and assemble machinery to produce these new printers. The sales lifecycle is long, and depending on the industry, may require regulatory approvals, etc. If components are already approved, it helps them move more quickly. By gathering this data, and proactively planning, we could act as enablers and make it much harder for them to convert to a competitor at a later stage.

At the time, our only major competitor was a very large hundred year-old company who had barely changed their offering since the ’60’s. We were taking market share away from them industry by industry. R&D created something entirely new based on our three-way product development roadmap system – a series of products our competition would never be able to manufacture – motion control systems that could handle 100,000 tracks per inch.

MicroE Systems Full Page Advertising Launching Motion Control Systems Handling Up to 100,000 Tracker Per Inch -Ten Times What the Competition Could Offer, Essentially Cornering the Hard Drive Manufacturing Market | ibuildcompanies.com by Jeanne Heydecker

We started with the electronics market, then cornered the medical devices market, avionics and other critical industries where exact motion was critical.

We went further, based on this prospect/customer feedback data, and challenged R&D to do something about the size of the product line. While we had created something that changed many manufacturing sectors, there was more to do.

We developed an industry leading product line that was no bigger than 1/4″ square, literally unheard of and considered impossible. This got us noticed by GSI Group, who purchased the company for USD $54MM. They then merged with Celera Motion to become part of a much larger organization.

Innovation can come from anywhere and expensive focus groups and independent marketing consulting firms may not be necessary if you leverage what you probably already have: prospects that never became customers and customers who are not happy with your existing offering. See it as a challenge. It wasn’t hard to set up. It didn’t cost a fortune. It simply required documentation, communication, and empowerment of teams to work together to build innovation into their daily work.

Do you want to outsource this type of work so that you can focus on higher level activities? Subscribe today to learn more about building your business and receive a free PDF “Process Plan for Creating Your Own Innovation Program”. Feel free to email us to learn more about how we can help you grow your business.
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ibuildcompanies Launches Online Business Courses

"The Dark Side of Entrepreneurship" - ibuildcompanies by Jeanne Heydecker

SINGAPORE – March 31, 2020: ibuildcompanies.com is proud to announce BETA versions of five new online business courses focusing on starting up a business and leadership development to improving management communication skills to help be better leaders.

“I wanted to share the information that made me the type of leader I am today. Having worked in startups at different levels of scale all my life, I have experienced both success and failure. Even failure teaches you something, and I want to provide a sense of best practices for each participant. By allowing access to participants to ask me direct questions, their unique experience may also stretch my skill set and I can also learn,” Jeanne said. She went on to add, “I recently met a young man that worked for me nearly 14 years ago, and he thanked me for his career (now a high level employee at IBM). I told him that I saw potential in him then and that it was worth my time to teach him how businesses work. He did the work, put in the hours, and he is where he is on his own. I have created these courses to give other people with potential the opportunity to live their best lives as managers, leaders and mentors.”

The courses start at $19.99 and run up to $299.00 and each participant has exclusive access to our Founder and CEO, Jeanne Heydecker, during their progress through the courses. To learn more, click here.


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