I read the sad news this morning that BetterWorks is shutting down. And while I’m sure that the usual haters will come out in the comments, the real lesson here is that any startup can fail.
(Disclosure: Paige and I have been friends and co-investors for a couple of years, and I like him, Zao, and George. I’ve visited their offices in LA several times, and everyone I met was a first-class individual. In other words, this post is biased.)
BetterWorks began its life with every advantage. In Paige, Zao, and George, it had a truly all-star founding team. I mean, Zao created Farmville, for goodness sake, and George designed Yammer.
It also had what I thought was a great business model: Employee perks for smaller companies. By aggregating demand and offering deals on core, regularly consumed perks like food, it struck me as both lucrative and consistent.
And of course, it had a great group of enormously successful investors, a number of whom are friends, and all of whom probably thought the same things I did.
I don’t know what went wrong. I suspect that BetterWorks ran into the double challenge of selling to SMBs and selling locally; both are significant challenges in and of themselves. Together, they could prove insurmountable for any company.
But that, in the end, is the unavoidable truth: The market is smarter than all of us.
Success is never guaranteed, even when you have what I think is easily the best founding team I’d ever seen, as measured on intelligence and accomplishment prior to starting the company.
I know that Paige, Zao, and George will move on and do other great things. I’d still bet on them every time. But the BetterWorks example shows why investors have to assume a high failure rate in their investments.