Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Gerry Langeler
This is essentially a follow-on post to Sasha’s good insight on product naming. It struck me that we have an interesting laboratory regarding the value and/or wisdom of changing your company name, from whatever you started with to something else.
I did a very unscientific piece of research, that begs the question of cause and effect, but still has potential for discussion. Looking over our last couple of funds, I broke the companies into two buckets:
- Those that never changed their name
- Those that did (once or multiple times)
The sample size here is over 50 start-ups, so it can be argued to be statistically significant.
Then, I simply measured the returns on invested capital in each bucket, or for those firms still developing, I put them into either a “likely winner” or “likely not” category given the best available data we have at the moment. The results are rather startling.
Companies that did not change their name show a much higher rate of success than those that have!
Now to be fair, this is not prescriptive, as I can point out examples of name-changers who did (or are doing) quite well. But on balance, the trend is clear. If you change your company name, you are much less likely to be a success than if you don’t. So, is there any reason to believe there is cause and effect here, or is this just the randomness of start-up failure at work?
Perhaps we can speculate on why it might be a sign of something fundamental. A name change can come from a number of factors.
- You are a very technical team and thought a very technical name for your company made sense. ( You think Marketing is for sissies.)
- You are a very clever technical team and loved the idea of a series of letters that were available as a URL that sounded like a real word, but spelled differently. (For an off-the-wall example: “ghoti” as “fish”. gh as in enough, o as in women, ti as in the suffix -tion). I know – no one would be that crazy, but you get the point. You think Marketing is about clever letter and word-play, even if no one can find you with a web search.
- You started life with a company name that was either too broad (Enormous Enterprises), or too narrow (Ruby-on-rails templates.com) and need to reposition to what you do now.
- Your product name, which was different than your company name, became more well-known than your company name – and you yielded to market forces.
- You hired a new CEO, or new VP of Marketing or Sales, who decided they just had to put their mark on the company.
I think a case can be made that in every bullet item above there is a business flaw or weakness that is getting reflected in the name change. And so those that didn’t make those mistakes may have had a higher probability of success.
Perhaps in the name game, unlike the malleable world of software development, getting it right the first time matters.
Love to hear your thoughts…..
