Hot products make successful startups

Sunday, March 09, 2008 by Dave Winer.

There's a thread on Techmeme about startups and money, and how important it is that they watch every penny.  

Mike Arrington says they must do this or fail. Something really bothered me about this, and I couldn't immediately put my finger on it, but then I re-read the piece in the morning and it struck me. 

Companies can't watch every penny. Of course everyone you hire in a startup has stock options, so theoretically they're all doing everything they can to make the company successful at all times. But that's just a theory, even the founder isn't going to watch every penny. You go out to eat a nice sushi dinner with people you want to influence, you go to a nice restaurant, order a nice bottle of wine. All that adds up to a lot of pennies that weren't watched. 

As a general rule, no one in a startup works harder than the founder, and no one watches pennies more carefully than the founder. If the founder upgrades to business class, so does everyone else.  

Companies even small ones are out of control messes that waste a lot of everything. All organizations do. Can't help it. 

Yet some of them don't fail.  

Imho, having started two companies -- one that failed and one that succeeded, and watched dozens of others over 30 years, the difference is the ones that succeed have a hot product that lots of people want, and the ones that fail don't. I don't think whether you savor every penny makes much of a difference, in fact if you pinch them too hard your people are going to hate you, and they have to love the founder, just as the customers must and the press and even the competitors.  

When I think about the people who had runaway successes that made them fortunes the ones that had great products and were admired by many were the ones that really hit it out of the park. I can't think of anyone who had a great product and failed because they didn't watch every penny.