Why do startups fail?

Ciarán O’Leary

Harry Stebbings interviewed Ciarán O'Leary, the General Partner at BlueYard, a $120m early stage fund. The fund’s thesis is focused on three fundamental forces:

BlueYard Thesis

Some of our favorite questions:

How does one become a VC?

“There’s this industry wisdom — it may not be wisdom at all — that says you can’t plan a career in venture capital and I think it’s true. Probably because there are so few venture capitalists across the world that all the stars have to align — time, luck, your track record, when is the fund looking for somebody to join the team. All those things are pretty rare.”

What makes a good VC fund?

Information now is much more available and cheaper than before. Good VC firms work in all sizes and shapes. We just picked one model. Like entrepreneurs, the best VCs are very missionary and passionate about something they believe should exist. There is no white board session where they get together and say, “Look up here in the top right. We should work here and earn some money from this sector.” The best VCs are creating a venture firm that stands for something. We wanted it to be a thesis driven firm and for our entrepreneurs to build on these forces we were seeing.

On How The Firm Is Run

We will always be a partner driven firm — entrepreneurs will be dealing with people who can deliver the firm and make decisions; we will not outsource key entrepreneur interactions to junior investment staff. We place an extreme value on honesty and transparency — between ourselves and especially with our entrepreneurs and limited partners.

We chose to keep things simple and focused and free from politics. Our central focus is on early stage. We’re not going to raise a growth fund. And we’re prepared to shut BlueYard down. We modeled ourselves after firms like Foundry Group, USV, or Benchmark, a small group of people who are equal and missionary.

Why do startups fail (or succeed)?

There are all the usual reasons that startups fail, like, you build the wrong product or product quality or the team fell out. With teams that are brutally honest and brutally fast about how much customers and users really like their product, and being really tough with saying “Next, Next, Next.” Looking at Seed and Series A investments, the more fluid and brutally honest with themselves and how good their product is and how willing they are to make extreme iterations, even if it means canning literally every line of code, that I feel is a recipe for success in a startup’s DNA.

But often it’s just bad timing. There have been lots of studies on this. I had dinner with an entrepreneur, Schuyler Deerma, who was the first entrepreneur I ever backed. He built a company called Moped.com and this is going to sound familiar. It was a private, Twitter-like product with the Twitter syntax and you could have channels and bots. If you’re thinking, “Slack,” you’re correct. The product never had Slack’s quality. But it was two or three years before Slack. All the right thoughts. Besides product quality, it was just not the right time for that product.

But people are not good at calling whether technology deployment waves are real are not. You never know if this wave is the one to back. Take Bitcoin or Blockchain. There are so many lame hindsight comments now, like “I’m so glad I didn’t invest in Bitcoin.” That’s silly because when something like Bitcoin comes along, with such a promising protocol and technology, you should be deploying capital into it. You should be backing entrepreneurs. You don’t have to bet the farm on it, but you should be part of that wave. So I don’t personally call the shots on whether the time is correct for technology waves.

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