"Why do startups fail?", Chip Hazard (General Partner at IDG Ventures)

We visited the offices of IDG ventures in Boston to meet Chip Hazard, general partner, Stanford and HBS alumni, and former partner at Greylock.

In the past, IDG has backed up companies like Excite or Netscape. The previous week, they had raised an additional $280M fund in Boston and changed the name to Flybridge Capital Partners.

We asked him why startups fail and he gave us 5 different causes:

1. "Quick failures": After 1 year you learn that the tecnnology does not work. That is okay in the VC business because you look back and you think that you would make the same decision.
2. "Market opportunity slow to develop or not so big": You think that there is a market, you get the first customer but it never scales but at the same time it is never so bad to stop and close the company.
3. "Technology takes longer to develop": If it takes extra 18 months you end up with competition
4. "Level of competition": If large and leading firms enter early in the same market you may have problems to compete
5. "Management team does not scale with the business"In order to solve it, you need to look for  an entrepreneur who is a proven leader (e.g., he has grown a company in the past) or founders who are willing to give away leadership.

He also talked about typical questions he asks himself before investing:

• Who are the customers and why they need to buy now? If the customer can delay the purchase one year then it is always a bad sign.
• He uses an internal framework/analytical process to identify what can go wrong with the company. And then, he talks to a lot of people to generate and validate hypothesis.

He also mentioned that for him, "PASSION is a strong believe that you are right and the world is wrong"

Finally he mentioned that he tries to invest only in companies that are less than 2 hours away from Boston because then he has the ability to help the company. Particularly at the beginning, when there are only 5 people with an idea and dream; he needs to meet them frequently to guide and help them.