When to Pull the Plug on a Start-Up

As a panelist today at an entrepreneurial forum I was asked a very interesting question by a member of the audience, “how do you know when it is the right time to pull the plug?” Not only a timely question given the current market conditions, but a great question that any entrepreneur should consider fairly early on in the development of a new company.

Overall VC Investment Drops 8.5%, Media Investment Grows

 

Coming as no surprise the venture capital (VC) spending in the first quarter of 2008 is down 8.5% to $7.1 billion, compared to the same period in 2007 according to the latest figures from MoneyTree™ Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA).  Despite the overall drop – several sectors managed to increase both deal flow and overall investment dollars.

Start with the End in Mind

 There was a great article a few weeks ago in the Harvard Business Review by David I. Collis, Michael G. Rukstad titled (Can You Say What Your Strategy Is? ).  The article highlights that “most executives cannot articulate the objective, scope, and advantage to their business in a simple statement.  If they can’t, neither can anyone else.”

So how does an organization develop a successful and clear strategy?  With the end in mind.  Not a literal end but a place in the future no less than three years and no more than five years away.  Anything less than three years does not provide enough time to deal with the real challenges and changes that will be needed to be successful.  Anything more than five becomes un-grounded in reality because there is so much evolution in the marketplace driven by the advance of technology.