June 15, 2011

5 Things that Predict Success in Software Companies

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?


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