Founders who lack industry knowl

In March 2012, Harvard Business School graduates Alexandra Nelson and Christina Wallace launched Quincy Apparel – a company which promised that its unique sizing system would provide women with business clothes that fit well. Nelson and Wallace were astute founders. They’d done market research, held trunk shows where women could try on samples, and raised $950,000 in seed capital.

Initially, sales were promising, and 39 percent of women who purchased items in the spring bought more in the fall. But problems were emerging behind the scenes. While the founders had recruited some fashion experts, they themselves didn’t have industry knowledge. This ultimately led to the collapse of the company – less than a year after its launch.

As cofounders, Nelson and Wallace were the perfect pairing – at least on paper. Wallace was charismatic and could sell Quincy’s vision. Nelson, a trained engineer, was analytical: the perfect person for managing strategy and operations. She’d also spent the summer after graduation working at Hermès on inventory optimization.

But neither Nelson nor Wallace understood the specialized roles that garment manufacturing requires – like pattern making, sample making, and technical design. In fact, they thought they’d manage garment design themselves and hire just one production manager to oversee manufacturing.

This lack of knowledge created a range of operational issues – from ordering unsuitable fabric to not understanding sizing conventions. Quincy’s garment return rate was 15 percent higher than Nelson had projected, and 68 percent of those customers returned items because of poor fit. This meant that Quincy had failed to deliver its core promise – business attire that fit well – and all those returns ate into profit margins.

Quincy had three of the author’s core opportunities in place – a great idea, solid marketing, and a viable profit formula. But its operations weren’t sound, due to its founders’ lack of knowledge. This weakness led to its undoing.

If your startup belongs to a sector outside your expertise, put some measures in place to compensate for your lack of knowledge. Bring on a cofounder with the right experience, or develop a partnership with an expert who can provide you with advice. Alternatively, equip yourself with enough industry knowledge to guide your recruitment strategy. That way, you’ll have a clear picture of how to build the team you need and avoid fatal mistakes.