 Wide Area NetworkingThis newsletter is sponsored by AkamaiNetwork World's Wide Area Networking Newsletter, 10/11/07Start-ups: The bad and the truly uglyBy Steve Taylor and Jim MetzlerLast time, we started looking at the good, the bad, and the ugly of working with start-ups. And, by the way, our definition of a start-up could include companies that have been in business in some cases up to at least five years. In the prior newsletter, we mentioned that these companies often provide excellent opportunities to sample innovative technologies well ahead of the normal curve. But this time we’re going to look at the other side of the picture. A phenomenon that we often see is that in an emerging technology, such as Wi-Fi a few years ago or network and application optimization today, there typically are more companies than can survive. One of two things typically happens to these start-ups. They either grow into a substantial company on their own, or they get acquired. The latter is much more common, since the entrepreneurial spirit and typically engineering-based management teams often lack the skill and/or the desire to grow to being a long-term entity. However, the risk comes when neither of the above happens. In fact, at one time (many years ago), the State of North Carolina required that all high-tech vendors at least put schematics of the equipment into escrow in case the company failed. This is clearly not a reasonable request in most cases today, but the purchaser of leading-edge equipment from a small start-up does present a question: What happens if the company fails? The buyer is left without support or product updates, and the money could be essentially wasted. This gets back to our point in the last newsletter: If you decide to buy the product, make sure the company has enough funding for 2 or 3 years, so you are not hurt as badly when/if they go belly up.
That’s the bad, but then there’s also the ugly – and the ugly sometimes affects the overall telecommunications economy and, unfortunately, the overall reputation of smaller companies in general. For instance, one of the “restructuring” techniques used when corporate resources are depleted is to sell the assets of the company to a major creditor or another entity that then reinvents the company as a new entity. Secured creditors, if they are lucky, get pennies on the dollar, and unsecured creditors (like analysts) get nothing. The above situation happened to Steve about three years ago, and, by the time this newsletter is published, it either will have happened again to both of us (by the same company) or will within a few days. Journalistic ethics prevent us from naming the company, but it is indeed a company that you have read about quite a bit in this segment of the industry. Unfortunately, those who are hurt most – even more than our losing a quite significant amount of overdue money – are the start-ups of the future. This type of action leads to cynicism about companies that are being innovative, ultimately hurting the entire industry. Shame on you, “name of the guilty withheld”!
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| Contact the author: Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. For more detailed information on most of the topics discussed in this newsletter, connect to Webtorials, the premier site for Web-based educational presentations, white papers, and market research. Taylor can be reached at taylor@webtorials.com Jim Metzler is the Vice President of Ashton, Metzler & Associates, a consulting organization that focuses on leveraging technology for business success. Jim assists vendors to refine product strategies, service providers to deploy technologies and services, and enterprises evolve their network infrastructure. He can be reached via e-mail. This newsletter is sponsored by AkamaiARCHIVEArchive of the Wide Area Networking Newsletter. BONUS FEATUREIT PRODUCT RESEARCH AT YOUR FINGERTIPS Get detailed information on thousands of products, conduct side-by-side comparisons and read product test and review results with Network World’s IT Buyer’s Guides. Find the best solution faster than ever with over 100 distinct categories across the security, storage, management, wireless, infrastructure and convergence markets. Click here for details. PRINT SUBSCRIPTIONS AVAILABLE International subscribers, click here. SUBSCRIPTION SERVICESTo subscribe or unsubscribe to any Network World newsletter, change your e-mail address or contact us, click here. This message was sent to: networking.world@gmail.com. Please use this address when modifying your subscription. Advertising information: Write to Associate Publisher Online Susan Cardoza Network World, Inc., 118 Turnpike Road, Southborough, MA 01772 Copyright Network World, Inc., 2007 |
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