Business

The surprising reason why some B2B tech startups fail

IT professionals in the Spiceworks network

Above: IT professionals in the Spiceworks network

This sponsored post is produced by Spiceworks.

Why do startups succeed? Usually, the credit goes to dynamic innovation and entrepreneurial energy. Why do startups fail? Often, it’s down to a simple—and surprising—reason: beta testing.

Many startups today are driven by an impulse to rush to market, get their software out the door, create buzz, and, if all goes right, see their valuations soar. In many cases, they’d be better served to take their time, run their solutions through a formal beta program, make the necessary fixes, and save money and time—by making a great first impression.

A major key to startup success is obtaining feedback, feedback, and more feedback. It really is that simple.

Entrepreneurs are well aware of the pressure to raise capital and hit development milestones in today’s hyper-fast market, and sometimes you don’t get a second chance to get it right with customers or your sales force.

As an investor, I watch how portfolio companies are putting their products through their paces: It tells me a lot about product readiness for early revenue and the optimal time to raise the next round of capital.

So, how bad is the problem of beta-testing neglect? It has grown to epidemic proportions.

For example, a study by the National Institute of Standards and Technology found that 50 percent of software development budgets goes toward testing but that flaws in software still cost the U.S. economy more than $59.5 billion annually. It concluded that more than a third of this cost could be avoided if better software testing was performed.

But while beta-testing neglect can be broad, some startups have embraced a rigorous process and reaped big rewards. They’ve tested, listened, gained valuable insights, tweaked their products, enabling them to put out a much a stronger 1.0 version. They’ve also gotten much stronger traction with initial customers and built social advocates as a result.

Take cloud networking startup Pertino (a Norwest Venture Partners portfolio company). When they began, the founders knew trying to find beta customers was going to be difficult. Because cloud networking is not like the consumer world, you can’t simply ask a few of your friends to download an app to their phones or install a piece of software on their home computers. So the Pertino team decided to try a different path, using a “social first” approach by engaging Spiceworks and its online network of 2.5 million IT professionals. (Spiceworks is not a Norwest Venture Partners portfolio company.)

Pertino’s first step involved an extensive survey of IT pros in Spiceworks to discover the challenges IT pros address while simultaneously validating Pertino’s solution. Pertino found Spiceworks to be a solid platform to test its products and pricing, lock down the value propositions, and win over future buyers. The feedback Pertino received was candid and helped to identify the features and functions that worked, and frankly, didn’t work.

Another Norwest Venture Partners portfolio company, storage company Exablox, benefited in the same way from Spiceworks’ community. It leveraged the community’s expertise during a rigorous beta testing process that ensured a better first version was sent out the door and stronger traction was achieved with initial customers.

To recap, here are the bottom-line benefits for startups that embrace rigorous testing.

Candid feedback: IT professionals are not shy about telling you the truth. You’ll build a better startup by listening to your future customers.

Accelerated development: Cogent input that comes early in the development process helps you quickly identify problems and other features customers need.

Cost-efficiency: It’s more difficult and more expensive to fix a problem after the fact than early in a product’s life cycle. This is firefighting versus fire prevention.

Customer advocates: IT professionals rely on one another to recommend the products and services they buy. Engaging them early in the process helps you build early customer validation and advocates who will share their experiences with your product.

Managing Partner Norwest Venture Partners

Above: Managing Partner Norwest Venture Partners

Matthew Howard

Matt brings over 25 years of experience in marketing, product management, engineering, business development, and sales in a wide range of technologies to Norwest Venture Partners. Howard has appeared on the Forbes Midas List as a top 100 investor for three years and was recently recognized by Business Insider as one of the “19 Best Enterprise Tech Venture Capitalists.” He was also featured on AlwaysOn’s list of “Power Players in the Cloud.”

Howard focuses his efforts on mobile, security, rich media, cloud based services/applications, networking, and storage sectors. He currently serves on the boards of Avere Systems, Bitglass, Blue Jeans Network, ConteXtream, Exablox, Hadapt, MobileIron, Morta Security, and Pertino Networks. Previously, Howard was on the board of Airespace (acquired by Cisco Systems), Omneon (acquired by Harmonic), Reconnex (acquired by McAfee), Retrevo (acquired by Shopzilla), Skystream Networks (acquired by Tandberg Television), SpectraLinear (acquired by Silicon Laboratories), Spinnaker Networks (acquired by Network Appliance), Summit Microelectronics (acquired by Qualcomm), Swan Labs (acquired by F5 Networks), and Webstacks (acquired by Extreme Networks). He was a board observer with FireEye, Veraz Networks (Nasdaq: VRAZ), Yipes (acquired by Reliance/Flag Telecom), and ZettaCom (acquired by IDT). He previously served on the board of the Wireless Communications Alliance (WCA).


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