Fail Factors - Why Startups Die: Misdirected Value

Last week Boston area startup AutoVirt failed. They failed not because their stuff didn't work (it worked quite well). They failed not because there was not a legitimate need (people need to do data migrations between systems/storage).

They failed because they built a value proposition aimed at a person in an organization that the organization itself sees limited value in.

Read that again.

The specifics of Autovirt are that they automated a shitty, never-ending, manual labor intensive, error prone task called Data Migration - or moving stuff from one system to another. Data Migration is the no glory, all problem tactical task of IT. The best case you can hope for is that nothing goes wrong. No one in management gives out bonuses for nothing going wrong.

Data migration projects in big enterprise shops can take 6-9 months to plan and execute (and something always goes wrong). That is painful. Show me a way to reduce that risk and cycle time (say down to 24 hours) and people will PAY for that. Customers will pay for that - and Vendors will pay for it (Vendors can't recognize revenue of the new stuff you bought until they get the old stuff out and the new stuff functioning many times). That's a problem worth going after.

AutoVirt instead elected to attack the Windows market - small pieces of the enterprise and bigger pieces of the SMB. The value prop is the same - they will take a shitty task that some poor slob has to do from 24 hours down to 3.

What's the problem here? The problem is that no one up in management that spends money gives a shit if their Windows admin saves themselves 8 hours. Where is the benefit to the company? Sure, there is a benefit to the Windows Admin - but isn't that why we pay him to begin with? (I'm not making a value statement here, just telling you the way it is.)

Thus, AutoVirt was doomed from the start. The only way they could succeed is if their customer, the Windows Admin, was willing to pay for their stuff out of their own pocket - because lord knows the company itself couldn't care less.

Hence, AutoVirt misdirected their value proposition to the wrong target(s). They should have focused on markets that care (Enterprises with BIG stuff to move that takes 9 months), or built a value proposition that drove value to the COMPANY, not to the Windows Admin. Those are the pieces they could never put together.

What's tragic is that I believe there is legitimate value to the ultimate company that implements such stuff. But the buyer (Admin) was never armed with a story to sell to the business - and that is AutoVirt's failing. The stuff worked great, it absolutely saved time, it created consistencies and eliminated risk - but the only thing the Windows guy was able to articulate to finance was "cool, I can get 8 hours back to do other stuff no one cares about either." Tough sell.

The messaging was all wrong. They never took the time to figure out how to do it right. Thus, $25M clams have gone bad.

So the bigger truth, kids, is that you can't stop at solving a problem - even a legitimate one. You have to KNOW who really matters in the decision-making process - and make sure that you aren't stopping at the first guy who sees a benefit - you have to direct your value prop as high up the food chain as you can - because that's where the money is.

You can read Steve's other blog entries at The Bigger Truth.

Topics: Data Protection