Focus can come in several forms but one that I look for is how many problems is the company trying to solve? In my experience the fewer problems they try to solve the better. In fact solving one problem with one product family (based on scale) seems to be the best ingredient for success.
Companies that take a multi-tool approach seem to have a greater challenge. While a case can be made that these companies have an advantage because the potential target market is larger, it seems these companies have a harder time explaining what they do and for whom they do it. It is much easier to say we solve a specific problem and here is how.
Beyond the first product and how focused it is, there is also the challenge of staying focused on that market and not expanding too quickly into other markets. While larger, more resource rich companies can get away with solving a host of problems (although they struggle as well), smaller companies don't have that luxury. It is the classic case of getting stretched too thin.
It is especially tempting for smaller companies to try to take advantage of an adjacent market opportunity. They are often cash-strapped, and that one-off project could help pay some bills. Reality is that in most cases, this adjacent market becomes a time waster and costs the emerging company valuable time and development resources that never leads to significant revenue.