Venture Adventures

The typical startup company usually consists of a charismatic CEO, a brilliant CTO, a driven sales executive and a tight-fisted CFO.

The sales executive typically has a lot of experience selling directly into a Fortune 500-class account. For the initial stages of a startup company, that is what's required. After all, getting a few accounts that can be used as references is crucial to getting a company on its feet.

But that's often where things start to go awry. Many times the company gets hooked on the direct-sales model because that's all the sales management team knows. The idea that they could grow their business more rapidly by engaging solution providers at an early stage is completely lost on them.

Instead of setting up a lemonade stand at a relatively busy intersection where there is a fair amount of traffic, this sales team continues to try selling its lemonade door-to-door. As any channel executive can tell you, the cost of sales in selling anything direct is a lot higher than using an indirect model. So, the next thing you know, the startup looks to be acquired by a bigger company because it can't sustain its cost infrastructure. Only a few lucky ones will get to make that deal.

Breaking this cycle of boom and bust would not take much effort. All that is really required is for venture-capitalist firms to start building relationships with networks of solution providers instead of focusing on either flipping the company to a larger vendor or working over some poor IT guy until he agrees to divert some miniscule portion of his budget to serve as a guinea pig for testing.

But for all that to happen, the highly insular world of venture capitalists would have to actually build relationships with solution providers in the market. Unfortunately, most of them are too busy reminding themselves how brilliant they are to actually do the work required to create companies that have sustainable business models and generate real wealth for the economy.