It was written some time ago, and was based on a study of spinoffs rather than startups, but The Innovator's Dilemma spoke directly to this point.
One of the consistently common and bad mistakes that they found is to over-invest for a market segment. If you give people $100 million for a market segment with growth potential that can only currently support a $20 million company, they will spend it and then must find a way to justify it. Which means that they will be forced to search for a business opportunity that may not exist, rather than being satisfied with the one which clearly does.
This may be a special case, exactly because the spinoffs were into an inferior (but cheaper) technology for an existing market, and their eventual success is based on the prospect of an existing market switching to a new technology in a way that wipes out established vendors. So it was critically important is that the spinoff successfully embed itself into the marginal current market.
But I still like the way they summarized their observations of many attempts at spinoffs. "Bad money is impatient for growth and patient for profit. Good money is impatient for profit and patient for growth."
Don't over capitalize. Focus on being profitable. Be in the right line of business, and growth will come.
One of the consistently common and bad mistakes that they found is to over-invest for a market segment. If you give people $100 million for a market segment with growth potential that can only currently support a $20 million company, they will spend it and then must find a way to justify it. Which means that they will be forced to search for a business opportunity that may not exist, rather than being satisfied with the one which clearly does.
This may be a special case, exactly because the spinoffs were into an inferior (but cheaper) technology for an existing market, and their eventual success is based on the prospect of an existing market switching to a new technology in a way that wipes out established vendors. So it was critically important is that the spinoff successfully embed itself into the marginal current market.
But I still like the way they summarized their observations of many attempts at spinoffs. "Bad money is impatient for growth and patient for profit. Good money is impatient for profit and patient for growth."
Don't over capitalize. Focus on being profitable. Be in the right line of business, and growth will come.