5 Things that Predict Success in Software Companies

Thursday Jun 16, 2011 by Firas Raouf - Venture Partner, OpenView Venture Partners

I got a question from Jeff Guass on LinkedIn that I thought I’d share with you…

Firas: You folks publish quite a few lists in all of your labs postings. How about a list from your partners of the 5 things you see that predict success?

Jeff

Best I can do is give you a list that’s aligned with our world, which revolves around early stage software companies.

Here’s my list:

1. Obsessive focus on customer wants and needs. In today’s world, starting and finding a startup is nowhere near as expensive as it was a few years ago. Building products rapidly has also been made much simpler with the plethora of tech platforms and development tools. The only remaining competitive advantage these days is gained by being exceptionally good at precisely targeting the perfect customer persona/segment, and understanding his needs and desires. Here is more on what market segmentation means to more profitable growth.
2. Extreme alignment between the product/service experience and how the customer wants to experience the product/service. Gone are the days where a developers get to figure out how their product is going to be consumed, and the customer having to shape his behavior to suit the product. These days, there are too many solution choices for customers to pick from. The only way to gain and keep your customers is to figure out exactly how they want to use your product, and deliver it to them in a highly agile manner. This is one reason why SaaS companies are making the world a better place.
3. Capital efficiency and a profitable distribution model. I won’t deny that there are several success stories written by companies that raised a crap-load of money and spent it on buying market share. But the majority of companies that have tried that approach failed miserably. The best way to control your destiny is to figure out the optimal path to engaging prospects, winning customers, and getting them coming back to buy more. Here is more on the ideal path for expansion stage growth.
4. Cohesive and aligned senior management team. Most VCs would put the management team top of the list. I don’t want to imply that a strong management team is not important. I do. It’s just not as important as the items I prioritized above. The trick to pulling together a great management team is to start with a great leader. A great leader would in turn know how to identify, recruit and motivate the right team with the right talent that suits the current stage of the company’s evolution.
5. Focus on the few things that matter. There is always more to do than what the collective time and resources and capital can possibly permit. The more you try to do, the less you will get accomplished. The more market segments you target, the less you will sell. Focus, focus, focus. 

Firas Raouf is a Venture Partner with OpenView Venture Partners.  You may find this post, as well as additional content on OpenView's blog located here.  You can also follow Firas on Twitter (@fraouf) by clicking here. 

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