Start-Up Love Will Go On and On

  |  January 11, 2001   |  Comments

Even if you've loved a start-up and lost, the only way you'll know the successes from the failures is to stay on board.

There are several types of recessions. In the mild case only real fools are killed off. In the moderate case fools and the overly optimistic go down. In the severe case it's the last part of "Titanic," and anyone without a lifeboat is fish food.

It seems the latest downturn is of the last variety because some good ideas are going down. Even when marketing dollars are spent wisely, it seems, spending too many can be fatal.

That's my epitaph for Send.com, which announced this week that it "'retired to an exotic island never to return.'" While many dot-coms wasted their marketing budgets, Send.com was well branded through a character called the Giver, whose voice appeared on the company's voice mail and in all its ads.

Unfortunately, launching the Giver and his back-office staff cost $45 million, which was easy to raise in 1998 and even in early 1999. But today, not one more dime is available, so bye-bye.

Lots of other start-ups I considered "clued in" a few years ago are either gone or going because their sales didn't grow fast enough or they couldn't turn losses into profits quickly enough to suit a fickle public market.

I still think highly of eToys, but seemingly it lacked the financial strength to last more than a few seasons. Its ads were marvelous, and its fulfillment was excellent. But its losses mounted, and it's heading for delisting on the Nasdaq.

Another great potential failure is Webvan. I've used it several times, and its delivery system works really well. But the stock is practically worthless (another delisting), and it's questionable whether the company can get more funding.

Some great content sites with interesting business plans have also failed, of course. I'll always think fondly of Intellectual Capital.com and APBnews.com, while TheStreet.com may turn into a fine movie script about unbridled (and unfulfilled) euphoria.

I thought Streamline had some great ideas. It spent a long time working on a system that would let it deliver stuff while you were out, but the company could never make the numbers work. MotherNature.com had a good niche, but again, it seems to have spent too much on marketing, and the market didn't scale fast enough to meet the company's fulfillment.

To many reporters, especially those with friends who lost their careers reaching for dot-com riches, all this proves the lesson of Dorothy in "The Wizard of Oz." You should stay home, you shouldn't take risks, and there's no place like home. But the real lesson of the film is different: Everyone grows up, and without adventure the world's just gray.

Every start-up is an adventure, and most fail. The lesson in the failures described here is that, in addition to good marketing, decent fulfillment, and proper scale, you need the financial strength to stay the course. Money buys time, and even good business models take time to develop.

Even if you loved a start-up and lost, however, you've had an adventure and are ready for another one. Another ship will beckon and another and another. Some will founder, but some are bound for glory. The only way you'll know which is which is to get on board.

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ABOUT THE AUTHOR

Dana Blankenhorn

Dana Blankenhorn has been a business reporter for more than 20 years. He has written parts of five books and currently contributes to Advertising Age, Business Marketing, NetMarketing, the Chicago Tribune, Boardwatch, CLEC Magazine, and other publications. His own newsletter, A-Clue.Com, is published weekly.

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