In Startups

It’s no secret that I have been in this startup game for a long time… I started my first company about that same time Apple and Microsoft were still working out of garages. The scary part is going from the youngest person at the boardroom table to the oldest. I’ve seen a lot of companies come and go over the years. Even back in the 1980s we had a few companies that were considered the Unicorns of their day.

But now those former Unicorns are gone… What lessons can we all learn from these dead Unicorns to make sure we don’t unwittingly make the same mistakes and join them?

Your company might be just starting up and you feel like an indestructible eighteen-year-old out for an awesome summer day at the beach. Nothing could possibly hurt your company. But lurking just off shore a hungry thirty-foot white shark is looking for its next appetizer. You!
That’s right… You could go through the pain, suffering, and all-nighters of building your company, hit it big, real big! Then one day the phone stops ringing and your business is done. All that’s left to do is auction off the furniture and turn off the lights.

Maybe you think it can’t happen to you?

The former Unicorns I’m talking about didn’t have traction problems. These companies all had wonderful products/services with great teams, large customer bases, huge revenues, and healthy profits. They were truly the fittest eighteen-year-olds at the beach on that sunny day. They just missed the fierce eating machine lurking just off shore. Then bam!

If you are closer to eighteen than fifty years old these company names will probably not mean much to you but listen up… Their rise and ultimate shredding demonstrates a few important lessons that will save you from a similar fate.

Here’s the list of shark food companies from the past along with what happened to them. You just might see the pattern that put them on the shark’s dinner menu:

  • Long Filenames – That was the actual product name for the 1980s company. They had a breakthrough software product that revolutionized digital file naming for IBM PC compatible computer users. Using their software you could use more descriptive (longer) filenames because at that time without their software your filenames could only be eight characters long. The company raked in millions until Microsoft included this feature for free in an upgraded operating system.
  • Packrat – This was the leading contact management system of the day. Names, addresses, phone numbers, email addresses, contact tracking (calls, emails, meetings, scheduling, next contact date, etc..). Their phones stopped ringing when Microsoft released MS Outlook with all their features. It was included with the MS Office suite basically for free.

    Young sharks on the hunt

  • Word Perfect – The undisputed leading word processor of the 1980s. It sold for around $400 each plus they charged for annual upgrades. There were several competing word processors on the market but then over less than ten years Microsoft Word evolved into the “do-it-all” totally integrated word processor. Now Word Perfect is mostly gone.
  • Lotus Spreadsheet – This was the first spreadsheet for IBM PC compatible computers and basically the reason businesses filled their offices with PCs. It’s gone now. Same story as Word Perfect. Microsoft ate them up. You might think Lotus got what they deserved because they ran VisiCalc, the first spreadsheet for Apple computers, out of business almost overnight when they released their product. It’s like the big fish eating the small fish then the shark east the big fish.
  • Novel – This company was the first one to actually link computers in an office so files, printers, hard drives, and messages could be shared across a secure network. This company was so big! Before them computers and other devices could not talk to each other. Novell had the awesome solution. Then Microsoft and Apple made networking part of the operating system. Bye, bye Novell. Burp…
  • BlackBerry / Nokia / Motorola / Palm – As cell phone service costs moderated and the actual cell phone devices evolved to something you could fit in a pocket several cell phone manufactures emerged. Most notably Blackberry/Research In Motion. They had the first keyboard so you could easily send texts and emails. Awesome… They were so hot. Then Google released their Android cell phone operating system so other manufacturers could get in the smartphone game. Apple finally put them on the Gourmet Sharkfood menu with the iPhone.
  • AOL and others including IBM Prodigy and CompuServe – These all had many millions of users. Mostly because they made accessing the early internet easy and cheap. Once phone companies, cable operators, and satellite companies got into the always on internet business these companies virtually disappeared.

    More young sharks on the hunt

  • MapQuest – The first mapping service that brought roads, waterways and geography in general to your computer screen. Killed off by Google maps and Apple maps. Those big sharks just keep getting bigger.
  • Gateway, Compaq, Packard Bell – These PC computer manufacturer names may not sound familiar to you if you don’t have any gray hair. These were the leading PC compatible computer makers in the late 1980s and 1990s. They were all huge. They owned the market and were in all the retail stores. That last one, Packard Bell , shipped more computers than anyone else for a few years. They are all gone now. A handful of big computer manufactures like DELL, Acer, and HP basically took their business away from them by innovating quickly and perfecting direct sales to get the latest technology delivered right to your door without the retail middle-person.
  • The Daily – This was the first Digital Newspaper with full Graphics, videos, etc…  Unfortunately it didn’t take long for the likes of the New York Times, Wall Street Journal, USA Today, Buzzfeed and other old line media companies to go digital and eat up The Daily.
  • EverNote – I covered this one in my last article. A great product with lots of users. But enter the great white sharks by the name of Microsoft OneNote, Apple Notes, Dropbox Paper, and Google Keep. All basically free. I don’t think the future for EverNote looks so good without a major pivot.

This is not the whole list but I think you get the idea. The mighty can turn into shark food with one wrong turn and get swallowed up when they least expect it.
Will you let this happen to your company? What can early stage companies do to try and put some shark repellant in the water?

When you look at this list dead Unicorns and the many other companies that have come and gone over the last few hundred years (think Pullman Train Cars, Montgomery Wards, and PanAm Airlines)  what seems to be the common lessons more relevant to today’s early stage companies survival.

There are five basic things early stage founders can do right now:

  1. Lock in Intellectual Property (IP) from day one – Take the time on day one of your company to identify your IP portfolio. Patents, trademarks, copyrights, trade secrets, etc… Someday this will keep the sharks away and most certainly it will increase your company’s valuation.
  2. Constantly innovate – This may seem obvious but so many companies release a product or service then sit back to see what happens. When good thigs happen they seem to forget how to really innovate. You need to start your next version the day after you release a current version. Even better keep two (or more) teams that overlap on your product development. While one team works on one version the other team works on the next version. How do I know this works? This is what Microsoft does. In the advanced class you can learn about Parallel product development. This was my secret weapon for delivering on time. Two teams working ion the same product. Ship the one that delivers on time and selloff the one that delivers late.
  3. Protect your distribution channel – This can make all the difference. The way you get your product in front of target users (buyers) can make a big difference. You need to grow and maintain your user base. Always listen to what they need and want. If you are a Business to Business (B2B) company keep your sales reps in constant contact with your current and potential customers. If you are a Business to Consumer (B2C) company then maintain your customer base with stuff like frequent content such as newsletters.
  4. Be ready to pivot – Identify your true company/team strengths and be ready to leverage those strengths to pivot your company if/when your target user needs and wants change. If the competitive landscape changes you need to pivot or you will end up on some Sharks lunch menu.
  5. Assume sharks are in the water – No matter how good things are going with your company you can be sure the big white sharks are circling. Especially if you have any level of success. Be smart and operate like you are in shark infested waters. Just because you don’t see them doesn’t mean they are not there.

When an early stage company really feels like it’s making it you will feel like it’s a great day at the beach. But just remember… If you are not the Shark you are the food. Your days may be numbered.

Showing 2 comments
  • Todor Gigilev

    Very though provocative article!
    Indeed many companies like Evernote and Blackberry had a leading edge and then lost the race.

    What do you think prevented Evernote becoming Dropbox and Blackberry to OnePlus (or any other smartphone producer)? Did they feel too safe? Or it was lack of vision and leadership?

    • VHSchiller

      The story is not over for EverNote. They have a large user base so they have another year or two to pivot or die. But that said, if they would have locked in some intellectual property on day one and continued to improve it, others may have come into the space but EverNote would be the market share leader.

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