Timing,  a leading cause of death

There is a phenomena that I have often observed during my 35 years as an active investor in early stage companies. More than 70% of new companies fail. While there are many reasons, one of the leading causes of death is timing.

Take the first wave of internet companies in the 1990s. Many had business models that were entirely sound in retrospect had they been done five or ten years later.

• Webvan (1996–2001) envisioned grocery delivery decades before its time. It raised nearly $400 million and built massive infrastructure—but consumers weren’t ready for online grocery shopping.  Later success: Instacart (founded 2012) and Amazon Fresh (launched 2007) thrived thanks to improved logistics, smartphones, and shifting consumer habits.

• Pets.com (1998–2000) tried to sell pet food and supplies online, but the economics didn’t work. Shipping 40-pound bags of kibble was a losing proposition without scale and efficiency. Later success: Chewy.com (founded 2011) leveraged better supply chains, customer loyalty, and e-commerce maturity—going public in 2019.

• GeoCities (1994–1999) gave everyday users tools to build personal websites—organized into “neighborhoods.” It was one of the first platforms for online self-expression, but it was clunky and had no social layer. Yahoo! bought it in 1999 and shut it down a decade later. Later success: Facebook (launched 2004), Tumblr (2007), and Squarespace (2003) offered richer, more intuitive platforms as user behavior and broadband access evolved.

• CyberCash (1994–2001) provided digital payments for the web—well before people trusted putting their credit card info online. It was solving the right problem, but the market wasn’t there yet.Later success: PayPal (founded 1998, acquired by eBay 2002) nailed the timing—riding the wave of eBay sellers and a growing comfort with online transactions.

In each case, the core insight was correct. But the companies entered too early, burned through capital and patience, and exited—only to watch others come in later and build billion-dollar businesses on the same premise.

The right thing done the right way at the right time

Great ideas don’t guarantee success. The trick is being right at the right time.  I write often about the concept I developed which I call Oyster (opportunity, strategy, executive and reward).  

But you have identified an excellent opportunity, have a great strategy and wonder team to execute it and still fail because you were to early.  

Timing is one of the hardest things to predict because it is influenced by so many factors that you can not control or can even predict.

The winners confuse us

Luck is the most important ingredient in success. Of course, there are many other factors but without luck you will most likely fail.  One of the areas where luck plays a very important role is in timing.  

Once I gave a keynote lecture at the Anderson Business School at UCLA.  I knew that the first question I would be asked was “ what do successful business have in common?” And it was the first  question.  My answer was “they are successful” but I should have said “they were lucky.”

The myth of the first mover advantage 

It is a common myth that there is a big advantage to being first.  Most companies that go first fail but the luck ones like Netscape,  broadcast.com and  Launch Media are bought by larger companies before that happens. While these business fail but the founders and investors are lucky enough to get a big payday, just ask Mark Cuban.

I experienced this when I was on the board of YouCast in 1999.   It was similar to Youtube which was founded in 2005 and later bought by Google. YouCast was the brainchild of one of the great early internet visionaries, Dave Wetherell, the CEO of CMGI on whose board I served.  In addition to being too early, it was also hit like so many companies by the dot.com bubble of 2000-2001.  But given the difficulties users had creating videos with camcorder, back then, I do not see, in retrospect, how the company could have succeeded.  Perhaps if the bubble had not happened, YouCast could have lasted long enough to benefit from the advent of camera phones capable of recording video.  But for me YouCast was a great success. I meet my wife at its launch party.

Failures can delay stating successful companies

The early failures often color the perception of the opportunity.  The companies that follow the strategy of the early failures can find it difficult to get financing as every one points to the failures as proof that the market does not exist not recognizing the changes in conditions that now enable the opportunity to be sized. 

So that is why it is useful to look at the early failures and ask the question “why not then and why now?” While you are at it, honestly address the question “Why me”?

How to wait things out

Don’t let the sense that you have to move quickly because of  expected competition propel you into the abase.  Be careful ramping up sales and marketing.   Look for adjacent opportunities that may be more mature and allow you to grow albeit slowly into the timing is right.  

VCs and entrepreneurs are not on the same page

Be careful not to raise too much money.  Understand that VCs and entrepreneurs have different models.  VCs have a diversified portfolio of companies (twenty or more) and entrepreneurs are concentrated in only one.  This drives VCs to take more risks than make sense for the entrepreneur.  That why I say,” VCs and entrepreneurs are not on the same page but it is the job of the VC to convince the entrpenure that they are.”

As an investor, especially while at Intel Capital, which I cofounded, I was often too early. While I could recognize the opportunity, I knew it was almost impossible to get the timing right.  However, I was willing to loose the small amounts we invested and keep making bets until we got a winner.  

What is worse, too early or too late

It is important to realize that everything will take longer than you think starting with product development.  Somethings you can control but much you do not particularly the rate at which the market will develop.

I don’t think this is an easy question or one that can be generalized.  But I think if you are going to fail it is better to do this quickly so you can move on.

Your company is a surf board-Find a Wave

First you have to go to a beach that has waves because you can’t make a wave.  But be ready for a wave and then pick your timing to intersect it.  You can’t surf without a wave and you can’t make a wave.  

Get in too early → Get out → Get in too late.

Establish companies suffer the same problem but not the same consequences.  The technologies driver the company to get into something too early.  Then they stay to long before deciding to pull the plug.  However, they usually start this activity because it had some competitive value.  So once the market takes off, they enter it once again but this time to late. They poor lots of money into the effort try to catch up which they seldom do. They often end up buy one of the successful startups.

Timing may not be everything but it is close

Well it is not really everything but getting the timing right is essential.  Most companies that get the timing right are just simply lucky.  Of course they don’t think they are lucky but think they are smart!

To create a successful company almost everything has to go right:

Identify an Opportunity

Develop an excellent strategy

Execute flawlessly 

  Rewards follow

All done at the right time!