Warning: Bad analogy coming

Most Indie bands break up, reform, and break up again, trying to find the right combination of musicians. Follow any city's indie bands and you'll see people jumping from project to project, all in hopes of finding the right mix. There's band to band to see the mix of players.

Start-ups are similar.
The first one is never the one where you make it big. It's usually a mix, and remix of people and ideas. Getting the right CFO/CEO/CTO/CxO is a matter of skill, luck and out waiting the other company that currently holds your key man.

A discussion I had about the DC area's lack of strong success brought this out. Even with NIH/FDA/NSF, and all the DoD beltway bandits hasn't made the DC metro region anything like the success felt in Boston or Silicon Valley.

A critical mass of people and companies to jump to/from is important. This is one reason why many localities trying to emulate silicon valley will fail. There are not enough people and not enough good ideas.

Washington D.C. suffers from another failing, the Federal Government. Ironically, the very systems that are there to help companies start out: SBA loans, SBIC's, Government Contracts, 8-A, etc. prevent a healthy start-up environment.

Part of any start-up is the ability to succeed, and fail. When a start-up fails, it dies off. The people jump ship (willingly or unwillingly) to other companies, other businesses. But if the start-up is still around, subsidized by local, state, federal grants and contracts, then the people have less incentive to jump. And the company can enter a steady state where the grants and contracts can pay for the salaries of everyone involved.

This makes it a business, but not an investment.

People don't always want to join another start-up when they have a stable work environment. The bills are getting paid, the contracts and grants are getting written. For most of the team, it's a reasonable way of life. The very funds that are keeping the business afloat are poisoning the innovation that started the company. People, and then divisions are dedicated towards grant writing, not R&D.; Customer sales falter as more reliable government money takes precedence. Then the company begins to suckle on government financing only, ignoring the open marketplace. That is until the politics changes at the government, and funding dries up.

It's not just start-ups that have this problem. Non-profits and foundations see the same thing every year. Groups that are given grants, with the understanding that this is "seed money" and the group will be self-sufficient or sustainable in the future, come back, year after year. Never learning what it means to cut themselves off from the easy financing.

It makes you understand why Cortez scuttled his ships when he reached the new world. Sun Tzu said to break the cooking pots of the army, to force them to fight.

The world is dark, and scary, but if you don't venture forth, you'll never succeed.

While in Pittsburgh, there were instances where a local business would be given a loan or a grant from the city. A tax break, in order to help keep the business going, and the jobs in the area for one more year. And then the next year, the same business came back, with the same problem. But the next time, the funding wasn't available, and the business went under.

Letting companies fail and reorganizing the talent pool, is necessary and painful.