Wednesday, May 24, 2006

Kool-Aid Filter for Alt.Space

Space Cynic

There seems to be some confusion about defining what is and is not Kool-Aid in The following, reprinted with permission, can be used as a Kool-Aid filter when applied to your favorite start-up:

If you see any of the following, run away --

1. The principals cannot understand why the coolness factor is not enough to get capital.
2. The principals adhere to the “build it and they will come philosophy” instead of specifically defining their market by depth and size in their business plan.
3. The principals do not carefully adhere to securities rules and fail to give at least quarterly financial reports to their investors.
4. The principals aspire to increase capitalization by orders of magnitude, as in having raised and spent $500 Thousand, they now want to raise $50 Million without a track record or a clear implementation plan.
5. The principals dismiss other disciplinary contributions – “We are great engineers and don’t need a finance person’s help (by the way, what does ‘present value’ mean?).”
6. The principals casually talk about staff expansion by orders of magnitude – “There are 2 of us, but we will hire 50 engineers and technicians the month after we raise the money and fly within 2 years.” Yet, none of the principals have ever run a group of 50 engineers and technicians.
7. The principals display a casual attitude about angel investors and shareholders in a closely held corporation – “It is my playground, don’t bother me.”
8. The principals don’t have adequate tracking and business systems in place – “We will implement them when we need them.”
9. The web site uses the present tense to describe concepts without associated hardware – “We offer cheap access to LEO.” This is akin to vaporware in the software industry.
10. The announced corporate goals expand faster than milestone achievements. For example, the first announced goal of achieving LEO is renounced in favor of the goal of rescuing the Hubble telescope without ever achieving LEO.
11. Logos and logo shirts from Lands End cost more than the rockets they have built.
12. The principals cannot convincingly demonstrate an annual ROI of at least 20 percent.
13. The organization displays obsessive secrecy about plans, markets, progress, etc.
14. A balance sheet with intellectual property dominating the asset list.
15. There is no realistic budget allocation for regulatory compliance, licensing, etc.
16. The principals appear to be more interested in talking to CNN about future dreams than in working to make those dreams happen.


Blogger Dan Schrimpsher said...

Funny, that fits most of the (failed) Dot-com startups. Probably for the same reason (no business sense).

Wednesday, May 24, 2006 7:40:00 PM  
Blogger Shubber Ali said...


We have a winner!

Atoms and Electrons, folks. That's what counts.

Wednesday, May 24, 2006 8:00:00 PM  
Blogger Jon Goff said...

Nice list, but who specifically are you referring to? I'll admit that there were several companies in the past that were completely unrealistic, but most of the companies of which I'm familiar don't fit any of those descriptions. Not a single one of those warning signs applies to XCOR. You'd have to stretch a bit to pin a single one of those on MSS. I don't know enough about TGV, but I assume they're firmly grounded in reality. I'm not sure that really describes Rocketplane or Scaled Composites either. The Kistler part of Rocketplane, maybe.

If you look at some of the purely orbital ventures, you might have more of a point. But most of the suborbital companies that I know of that are serious whatsoever don't really suffer those warning signs (unless I'm missing something).

I guess I'd just like to hear you name a few names. Because the way you're coming across is as though you think most firms are Kool-aid drinkers, while most of the ones that I'm personally familiar with don't seem to fit that definition.


Thursday, May 25, 2006 12:01:00 AM  
Blogger Mark said...

Dan makes an interesting historical point. The fact that many people who get excited about an emerging industry have no earthly notion about how to grow a business. That's why over ninety percent of such startups fail. And that just doesn't apply to or In the early 80s, it was personal computers. Anyone remember the Osbourn?

Of course even knowing how to run a business is no guaruntee of success. Andy Beal is a great banker. His launch company failed when the market collapsed on the late 90s.

In the great scheme of things it doesn't matter. The five or so percent of companies that succeed will change the course of history.

Thursday, May 25, 2006 11:45:00 AM  
Blogger TomsRants said...

The five or so percent of companies that succeed will change the course of history.

Of that there is little doubt. But it is also my fervent hope that our humble efforts here (and that of others elsewhere) may serve to improve the odds of success for all of in its present nascent stage.

Thursday, May 25, 2006 1:32:00 PM  

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