Success of tech companies



Buried in The New York Times article Europe’s Tech Sector Shrugs Off Regional Uncertainty by Mark Scott is a great quote from Niklas Zenstrom, a founder of Skype who now runs Atomico, a venture capital firm.

“Success of tech companies is very binary: They will work or they will not,” he added. “Some macroeconomic ups-and-downs are not going to make a big difference.”

This makes tech companies very unlike other businesses, which may be sole proprietorships, partnerships, life style companies, boutique companies, low or slow growth companies. And other businesses are often affected by macroeconomic factors, like the cost of capital. The corollary to immunity from macroeconomic ups and downs means there is no bad time to start a company.

Niklas Zenstrom’s quote reminds of the corporate saying “up or out” – meaning you get promoted or you get fired, but you don’t just hang around.

Perhaps the binary nature of tech companies makes starting them so alluring, they are much more like games of sports, where you either win or lose the game (everyone hates ties!). The clarity is stimulating – it’s easy to keep score.

The  question then becomes, how long does it take to make a tech company work? It will be interesting to see exactly how patient Zenstrom and his partners are with their new $765 million fund.

The VCs I worked with hated what they called “zombie companies” – those that were neither growing nor failing, but hanging on, sucking up resources and hurting the firm’s reputation. For portfolio companies it’s up or out!


Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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