Keith Schorsch, a former Amazon senior exec with a Harvard MBA most notable for increasing Amazon’s sales from $16 million to $3.2 billion and raising online customer count four-fold within 5 years, was forced to close his most recent
independent venture less than a year after launch. While I believe great businesses are built on the principle of 99% perspiration and 1% inspiration, this recent example illustrates that there are other important issues to consider when analyzing an investment and the long term viability of a startup.
Keith Schorsch, the founder of the startup Trusera mentioned above, clearly had success while working for a large organization but was unable to transfer his success to Trusera. Although the real reason why the startup failed remains unknown, Trusera was clearly having capital management issues as their $ 2 million seed funding was burnt through just five short months after the website was launched.
When a startup burns through cash that quickly, it shows many signs of weakness: unclear revenue model, poor sales management and lack of finance or operations experience, just to name a few. Various online sources criticized noted Trusera’s vague financial model, including focusing only on onsite advertisements and premium service fees for revenue.
The company appeared unsure and un-descriptive in their financials while touting the potential of their network. As a startup, the main focus needs to be on how to build a business and not only on ways to raise funding. By building the business methodically, from the ground up, money will begin to flow in and the company will soon be sustainable and less susceptible to failing.
Having a detailed, well-throughout financial plan is crucial to a startup, as one small misstep can result in precious time and money being wasted. A lot of money, and possible the business itself, would have been saved if Trusera had an advisory team in place to help them with creating, implementing, and monitoring their business model.
Although some may believe the costs outweigh the benefits of hiring an adviser, many entrepreneurs have found this expense worthwhile, as it is proven to increase the chances of your company’s survival. At the very minimum, adviser’ financial expertise and services will allow more time for you to focus on your product or service. Experienced, connected and competent advisers may just be the missing link that struggling companies have been overlooking.
