Wednesday, November 20, 2013

Failing Big - A Personal Experience

The "Seven Ways To Fail Big" article was particularly interested in light of a venture I was involved in.  During the Dot Com Era, I helped to start a B2B company in Pittsburgh, PA called Medebiz, which provided e-contracting tools to large group purchasing organizations within the healthcare space.  We secured  a large investment from a venture capital firm, developed innovative software and identified viable pilot installations.  Things were going strong until we were targeted by a Silicon Valley company that had complementary technologies.

The company that targeted us for a merger was called Moai Technologies.  They had received tens of millions of venture funding, but had burned through most of it.  They were the prototypical internet startup.  They threw lavish parties with their money, but had installed their web based software in a number of businesses worldwide.  They created a reverse auction software that they thought would integrate with our contracting software and be a good fit. 

The merger went through, but the synergy between the two companies was not optimal.  We were very frugal with our money and relied on close contacts to sell to.  Moai relied on huge marketing campaigns and 'wooing' clients with extravagenet dinners and other sales techniques.  At the time, the big gorilla in this space was also a Pittsburgh based company called Freemarkets.  Although they had not targeted healthcare group purchasing organizations, they had established software that ran seemlessly.  Our newly merged company, however, had to allocate significant resources to integrating our two sotware packages. 

There were other obstacles to creating good synergy as well.  Moai sales force personell were used to using money to attract new clients.  We were a more traditional sales force.  The Moai team resented the travel restrictions and client funds.  Additionally, our software did not really integrate well.  They were built on different systems, one being web based and the other a more traditional architecture.  In the end, existing clients did not renew their contracts and it was hard to penetrate the market that Freemarkets had established.  Furthermore, the Moai salesforce left the company, taking with them valuable intellectual property and know how.

In light of this, it is important to ask, "Can our products be integrated?"  "Do our teams complement each other?" and "Do our fundamental approaches to sales and client relationships work well with each other?"


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