No survivorship bias here. A compilation of startup failure post-mortems by founders and investors.
On his many failed experiments, Thomas Edison once said,
I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.
And so while we have dug into the data behind startups that have died (as well as those acqui-hired) and found they usually die 20 months after raising financing and after having raised about $1.3 million, we thought it would be useful to see how startup founders and investors describe their failures. While not 50,000 ways it cannot be done, below is a compilation of startup post-mortems that describe the factors that drove a startup’s demise. Most of the failures have been told by the company’s founders, but in a few cases, we did find a couple from investors including Roger Ehrenberg (now of IA Ventures) and Bruce Booth (Atlas Venture). They are in no particular order, and there is something to learn from each and every one of them.
Unfortunately, Secret does not represent the vision I had when starting the company, so I believe it’s the right decision for myself, our investors and our team.
So what went wrong? Short answer: burn. Burn is that tricky thing that isn’t discussed much in the Silicon Valley community because access to capital, in good times, seems so easy. Burn is the amount of money that goes out the door, over and above what comes in, so if you earn $100 in a month but pay out $150, your burn is $50.
Title: Farewell to Circa News
Our ongoing plan was to monetize Circa News through the building of a strategy we had spent a long time developing but unfortunately we were unable to close a significant investment prior to becoming resource constrained.
Title: ‘Slack Ate the World‘
Slack ate the world and we failed to gain traction. Our SAML- and SCIM-enabled enterprise product had no takers from larger companies.
Title: One Last Update
Product: The Last Guide Company
Unfortunately, having failed to execute on our original vision, we recently made the decision to wind down the company.
It turns out we underestimated the complexity of the project, and overestimated our ability to complete it on a limited budget should, closer to launch, any complications arise.
Title: Well, We Failed
I suppose our failure can be summed up quite easily: An inability to show traction.
Title: Down, But Not Out
Everything was going good. But we always had one issue. We never had enough money in our bank. and This became the cause of our death. We ran out of money.
Title: Nebula Is Shutting Down
At the same time, we are deeply disappointed that the market will likely take another several years to mature. As a venture backed start up, we did not have the resources to wait.
Title: DoneByNone Goes Down
Here’s the long story: we’re a small start-up, and as you can imagine, life has been quite tough for small e-commerce retailers – and we went to hell and hopefully are on our way back from there. While we were focusing on other things that needed solving, we took our eyes off you and your issues.
Title: Brawker Shuts Down
However, our growth rate did not meet our expectations, and the service does not scale as we would have expected to.
Title: Company Update
Unfortunately, our attempts to change the face of manufacturing weren’t aligning with our original vision. As a result, we’ve opted to step away from ProtoExchange and re-evaluate our position in the manufacturing sector.
Unfortunately, we haven’t been able to reach the escape velocity necessary to be a large, innovative, independent player in the payments space and have decided not to continue building Balanced.
Product: Wardrobe Wake-Up
Ultimately, we were unable to secure outside funding at a time of critical growth and did not have the resources to fulfill demand on our own.
Title: Verleih App, Shareconomy
Product: Why Own It
Unfortunately, not everyone who likes an app recommends it to friends and family. And besides that, they got stuck with the chicken-egg-problem.
After much deliberation, we at Melotic have decided to take the unfortunate step of winding down the digital asset exchange. Simply put, we did not experience enough growth in this product to justify the ongoing costs of development, maintenance, and support. However, we have exciting new products in development, and we will be focusing our resources on that.
Title: Grooveshark is Dead
As part of a settlement agreement with the major record companies, we have agreed to cease operations immediately, wipe clean all the data on our servers and hand over ownership of this website, our mobile apps and intellectual property, including our patents and copyrights.
Business, much like life, is not a movie and not everyone gets to have a story book ending.
Title: Hanging Up the Crown
Product: Digital Royalty
Some of these shifts were in our control and some were not. In order to honor our core values, which have been the epicenter of our culture, we have decided to hang up our crown.
We were living the American Dream. Until a patent troll — a company whose only business is suing legitimate businesses to force expensive settlements — hit us with a frivolous lawsuit.
Title: Talentpad Is Shutting Down
We failed to figure out a scalable business for a big enough market. One of the things that our entire team has been passionate about is making a big impact to a wide ranging audience. We could not figure out a way to achieve that.
Title: Jam Preserves
Product: This Is My Jam
But as these platforms matured and consolidated, streams moved from the web into apps, and more sophisticated licensing and geographic controls meant “sorry, this cannot be played here” messages became the norm rather than the exception.
The decision to cease operations and to shut down our service was difficult. Despite the best of intentions, we were unable to deliver a quality product that showed product-market fit.
Despite continued attempts to alter the company’s current business model and explore alternative ones, we were unable to make Campus into an economically viable business.
We had never used the existing home automation products in our homes. We were not experts in the IoT sector. When you have new at something, you give yourself the famous Dunning Kruger Pass on your decisions.
Eventually I had to realise that our basic concept was flawed. Most people (95+%) just don’t care enough about their presentations.
Title: Premature Scaling Killed Us
Don’t scale until you’re ready for it. Cash is king, and you need to extend your runway as long as possible until you’ve found product market fit.
The sad truth is that it’s very hard to make money on something that deserves to be free.
By postponing the investor challenge, we also postponed — and thereby ignored — the distribution challenge. And Kinly is dead because of it.
With Kolos, we did a lot of things right, but it was useless because we ignored the single most important aspect every startup should focus on first: the right product.
Product: College Inside View
I overestimated the likelihood that I successfully raise money…I underestimated people’s distrust and reluctance to try unfamiliar products…I underestimated the importance of design.
Product: ComboCats Studio
And maybe it’s just me, but I underestimate the work required for UI, even with fully prototyped wireframes, every time. It was hard to build it correctly from the start.
What I didn’t understand was, you charge not for how much work it is for you. You charge how much the service is worth.
It took us time to realize we had big on-boarding issues…
And the rest of the conversation explained why they would not be doing that. My stomach dropped. I knew they were our best shot of getting the money, and some of the angels who had previously invested were interested in coming in but only if I could get a VC to lead it, probably for some oversight. We now had very little cash left, and very little time to find someone else.
This turns out to be the original sin of Dinnr — there never was an opportunity. And whatever we did later to try to breathe life into it (iterating on the website, different marketing tactics) was akin to giving aspirin to a deathbed patient.
Product: Seismic Video
Sure, it was seven years ago, pre-iPhone and pre-Android, so it was ahead of its time, we had to use Adobe Flash on a browser which sucked in so many ways I can’t even start to explain how bad it was. Technology would be so much better and more important all mobile today.
Product: Treehouse Logic
Startups fail when they are not solving a market problem. We were not solving a large enough problem that we could universally serve with a scalable solution. We had great technology, great data on shopping behavior, great reputation as a though leader, great expertise, great advisors, etc, but what we didn’t have was technology or business model that solved a pain point in a scalable way.
Unfortunately we were not able to adapt fast enough to changing market and product conditions which quickly began to show in usage metrics. With a feed product on the horizon all looked well until our funding began to dry up. Deals fell through leaving me in the difficult position to close Backchat and YouTell.
Product: Patient Communicator
I realized that many of the true money-making businesses in healthcare really aren’t about optimizing delivery of primary care. This is a longer discussion but I realized, essentially, that we had no customers because no one was really interested in the model we were pitching. Doctors want more patients, not an efficient office.
Title: Twitpic is shutting down
Unfortunately we do not have the resources to fend off a large company like Twitter to maintain our mark which we believe whole heartedly is rightfully ours. Therefore, we have decided to shut down Twitpic.
Title: Week 483
We’ve not reached a sustainable business in connected products. But: There’s our troop!
Cultural inventions! I’m proud of this British Experimental Rocket Group. Thank you fellow travellers, in your thousands. Behind the mountains, there are more mountains.
Title: The Final Note
We set very high goals for us when we raised our first investment in April 2013. As a startup, data is your best friend. Reviewing those goals at the end of the year, we realised that we have trailed behind on few of them. For us a team, we have always believed in chasing bigger dreams and not take up smaller challenges.
Title: Failure of a success
Product: GreenGar Studios
If you still remember my pitch: “We already made $1 million. Let’s talk about $1 billion.” Maybe one day that statement will come true, and I’m still working very hard on that. However, it will not be with my GreenGar chapter.
Product: Rivet & Sway
If only running a business were straightforward enough to boil down to one thing I would change to effect a different outcome! Hindsight is 20/20 (no glasses needed), so there are a lot of things I would do differently. Here are a few at the top of my list:
Drive market awareness/dominance regionally: Seattle, NW, West Coast…
Adapt the Home Try On model sooner
Scale only when absolutely necessary (we outsourced to a big-company 3PL way too early)
Focus more on PR
Get more sleep
Title: Why our startup failed
A good product idea and a strong technical team are not a guarantee of a sustainable business.
One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company.
Title: Some news about Wantful
What we did not accomplish yet is the kind of highly acceleratedgrowth required to secure later-stage venture capital, despite the enduring enthusiasm around what we’ve built.
The coming holiday season was shaping up to be pivotal for us, but the loss last week of a planned follow-on investment from a strategic partner leaves us little time to secure an alternate source of capital, or to pursue the other opportunities on the table.
Title: The Disruptive Advantage 3
Product: Disruptive Media
Launching this globally would have required lots of funding in order to get production and logistics to work well internationally. Getting deals with big international companies was hard and plugging into their production pipeline turned out to be technically impossible, since they did not have any APIs. It’s hard to tell whether this would have worked, since we were running out of money and had to leave it there. Potential investors were not too crazy about investing in a declining market either. The numbers did not fully work out.
In [Calxeda’s] case, we moved faster than our customers could move. We moved with tech that wasn’t really ready for them – ie, with 32-bit when they wanted 64-bit. We moved when the operating-system environment was still being fleshed out – [Ubuntu Linux maker] Canonical is all right, but where is Red Hat? We were too early.
Title: Shutting down
Ultimately, I didn’t heed the lessons of so many failed music startups. It’s an incredibly expensive venture to pursue and a hard industry to work with. We spent more than a quarter of our cash on lawyers, royalties and services related to supporting music. It’s restrictive. We had to shut down our growth because we couldn’t launch internationally. It’s a long road. It took years to get label deals in place and it also took months of engineering time to properly support them (time which could have been spent on product).
Although we achieved a lot with Tutorspree, we failed to create a scalable business…. Tutorspree didn’t scale because we were single channel dependent and that channel shifted on us radically and suddenly. SEO was baked into our model from the start, and it became increasingly important to the business as we grew and evolved. In our early days, and during Y Combinator, we didn’t have money to spend on acquisition. SEO was free so we focused on it and got good at it.
The cloud is great. Outsourcing is great. Unreliable services aren’t. The bottom line is that no one cares about your data more than you do – there is no replacement for a robust due diligence process and robust thought about avoiding reliance on any one vendor.
Title: PostRocket to Shut Down
When we first started PostRocket, we wanted to not only help marketers like you succeed in Facebook marketing, but do so with an exceptional product and service to back it. We were never able to reach the high bar we set for ourselves. Our product had many issues and even through the down-time and bugs, you stuck with us. We thank you for that.
Title: VoterTide Postmortem
We didn’t spend enough time talking with customers and were rolling out features that I thought were great, but we didn’t gather enough input from clients. We didn’t realize it until it was too late. It’s easy to get tricked into thinking your thing is cool. You have to pay attention to your customers and adapt to their needs.
Title: A Startup Postmortem
But one day something changed.
Money stopped coming in the door.
In addition to a lag in sales, new product challenges arose and pretty soon I began to question myself. With each pitch following that period of doubt—whether it was to a girl at a party or an interested investor—my enthusiasm and perceived confidence dwindled.
Title: A Story of GameLayers
Ultimately I believe PMOG lacked too much core game compulsion to drive enthusiastic mass adoption. The concept of “leave a trail of playful web annotations” was too abstruse for the bulk of folks to take up. Looking back I believe we needed to clear the decks, swallow our pride, and make something that was easier to have fun with, within the first few moments of interaction.
Title: Serendip Is Shutting Down
The high costs of processing millions of posts every day, and serving relevant and engaging playlists to our users across our web service and mobile app (yes, no Android, I know…) are really bigger than we can handle, a very challenging position for a small startup to be in.
Title: Unifyo – Post Mortem
We aimed to build a great, highly automated user experience first, focusing on the end-users and SMEs with plans to grow into companies from the bottom up (like Skype, Yammer, Dropbox). We couldn’t empathize with big corporations and heard only scary things about the long sales cycles. However, every company we have kept track of in the ‘relationship management’ space has either shut down or moved at least into the B2B space
Title: Couldery Shouldery
We exposed ourselves to a huge single point of failure called Facebook. I’ve ranted for years about how bad an idea it is for startups to be mobile-carrier dependent. In retrospect, there is no difference between Verizon Wireless and Facebook in this context. To succeed in that kind of environment requires any number of resources. One of them is clearly significant outside financing, which we’d explicitly chosen to do without. We could have and should have used the proceeds of the convertible note to get out from under Facebook’s thumb rather to invest further in the Facebook Platform.
Title: Today my startup failed
Company: Canvas Networks
It may seem surprising that a seemingly successful product could fail, but it happens all the time. Although we arguably found product/market fit, we couldn’t quite crack the business side of things. Building any business is hard, but building a business with a single app offering and half of your runway is especially hard.
Title: Shutting Down Blurtt
I started to feel burned out. I was Blurtt’s fearless leader, but the problem with burnout is that you become hopeless and you lose every aspect of your creativity. I’d go to work feeling tired and exhausted. I was burning the candle at both ends.
Do not launch a startup if you do not have enough funding for multiple iterations. The chances of getting it right the first time are about the equivalent of winning the lotto.
Title: Manilla Is Shutting Down
This was a hard decision given that, over the past three years, Manilla has won many awards and has been well supported by its valued user base but was unable to achieve the scale necessary to make the economics of the business viable.
Our biggest self-realization was that we were not users of our own product. We didn’t obsess over it and we didn’t love it. We loved the idea of it. That hurt.
My presentation was ok. The mandatory Q&A afterwards was horrible. The only two people in the room that we hadn’t gotten prior support from were skeptical to say the least. As I left the room I was shattered. And as my contact didn’t call me later on that day I knew where it was going. My chairman didn’t either. Not a good sign.
Title: Springpad Says Goodbye
Unfortunately, we were not able to secure additional funding or scale to become a self-sustaining business. Thank you to our loyal users and partners – We couldn’t have made Springpad what it was without you!
Title: Changing Tune
The high costs of processing millions of new songs every month while attempting to keep that data relevant and useable is monumental. The technical challenges are compounded by the litigious nature of the music industry, which means every time we have any meaningful growth, it’s coupled with the immediate attention of the record labels in the form of takedowns and legal emails.
Title: Samba Closing Down
Company: Samba Mobile
Samba has had to take the difficult decision to close, primarily due to high and increasing – and therefore unsustainable – data costs. This makes the current model of offering a meaningful value exchange of mobile broadband unsustainable.
Title: inBloom Retiring
It is a shame that the progress of important innovation has been stalled because of generalized public concerns about data misuse.
We stepped up to the occasion and supported our partners with passion, but we have realized that this concept is still new, and building public acceptance for the solution will require more time and resources than anyone could have anticipated.
Title: Starting Findory: The end
I learned that a cheap is good, but too cheap is bad. It does little good to avoid burning too fast only to starve yourself of what you need.
I re-learned the importance of a team, one that balances the weaknesses of some with the strengths of another. As fun as learning new things might be, trying to do too much yourself costs the startup too much time in silly errors born of inexperience.
I learned the necessity of good advisors, especially angels and lawyers. A startup needs people who can provide expertise, credibility, and connections. You need advocates to help you.
Starting a company and trying to change the world is no easy task. In the process we learned that the majority of our users did not need FindIt often enough to justify our continued time and effort on this problem.
Having a web app being created at the same time was ridiculous too — especially since we still hadn’t nailed down the favoriting process or tried it with any users. I was blowing cash — at a ridiculous pace. I had 7 guys working on this thing at once, as we were hustling for SXSW launch deadline. We decided to focus on the iPhone app, which sucked for me and Dan the backend programmer, because we both couldn’t even use the app — we both have Droid X phones.
Title: Inq Mobile Shuts Down
Company: Inq Mobile
Inq has been a really exciting business over the last few years and whilst there have been significant successes, the technology that’s been borne out of that work has been identified to have greater application within the wider Group. Consequently, we’ve taken the hard decision to close the Inq business down.
Giant, complex systems appear insurmountable, but aren’t—they were built by people just like you and me
The main asset the government (and big companies) has is time—which is the resource of which startups have the least.
You may think government organizations are completely, insanely backwards; you are wrong—they are worse.
If you can’t find a hardware solution to your needs, build it—it’s not that hard.
Doing extraordinary things for customers is time consuming and hard—but very worthwhile.
Life is too short to pursue anything other than what you are most passionate about.
We’re a very small company based in a great area, but it’s definitely not Silicon Valley. It’s a double-edged sword, because in the Valley, you’d be paying twice as much for developers and land. But out there, there’s a different attitude toward raising money.
Many new online-to-offline entrepreneurs have asked me about my experience founding Exec.
Unit economics matter a lot more than in pure software businesses.
Turnover of errand runners was very high.
Demand was very spiky.
Customer activation was hard.
We shouldn’t have run jobs ourselves.
Title: Close, but no cigar
After Bloom.fm was placed into administration we received incredible amount of support from our users and a lot of commercial interest from prospective buyers. One offer stood out in particular, as it would have allowed Bloom to continue in the spirit we originally intended. We have worked furiously on finalising it but unfortunately, due to very tight timelines and complexities associated with the administration process, the deal fell through at the last minute.
Title: Stipple Shuts Down
We had turned on revenue, but did not scale fast enough. We were not yet profitable. Like many companies we got into the Series A crunch and we weren’t able to raise more money. We simply weren’t able to get dollars flowing from the marketplace to line up with our expense structure.
All of us at Zumbox remain committed to the concept of digital postal mail and have great confidence this capability will one day be the way you receive and manage your postal mail. However, at this point, the time and cost required to deliver on the vision is more than the market is prepared to invest.
Customers pay for information, not raw data. Customers are willing to pay a lot more for information and most are not interested in data. Your service should make your customers look intelligent in front of their stakeholders.
Follow up with inactive users. This is especially true when your service does not give intermediate values to your users. Our system should have been smarter about checking up on our users at various stages.
Company: Mochi Media
Nobody at Mochi wanted this to happen and there were parties interested in acquiring Mochi from them (including myself) for more than they’d make by dissolving it. They’re simply not interested in making a rational decision here, and they certainly don’t care about you all like we do (past and present Mochi employees). We’ve been trying to prevent this from happening for quite some time, but we failed to change their plans.
Title: Salorix Shuts Operations
Unfortunately, all good things must come to an end and this one did, too. It is better to fail fast, than to have a slow death.
Title: The last step
Our goal was now to transform that passion into a sustainable platform. We have failed to make this possible and without the resources needed for development. It has been a difficult decision to close the platform, made with every consideration of alternative ways to continue.
Many challenges in the world of ebooks remain unsolved, and we failed to create a sustainable platform for reading. Unfortunately, it is not possible to sell books on Apple’s platform at a competitive price. We also considered the book subscription model but did not find it to be a viable option for us. Finally, even if all users paid for the app, it would not provide the necessary resources to sustain and develop it.
Social networks (by my general definition and among which I count Plancast) are essentially systems for distributing content among people who care about each other, and the frequency at which its users can share that content on a particular network is critical to how much value it’ll provide them on an ongoing basis. Unlike other, more frequent content types such as status updates and photos (which can be shared numerous times per day), plans are suitable for only occasional sharing. Most people simply don’t go to that many events, and of those they do attend, many are not anticipated with a high degree of certainty. As a result, users don’t tend to develop a strong daily or weekly habit of contributing content.
Original 51 Startup Post-Mortems (Published January 20, 2014)
You Are MUCH More Resilient Than You Think
Had someone told me I was going to work a night audit job, get 4 hours sleep a day, consult, and be part of a startup, I would have told them that they’re crazy. I knew I was resilient, but this really pushed me to the next level. NEVER underestimate your capabilities.
Focus and simplicity are often more difficult to achieve than building features on top of features on top of features. As a result, too many startups are unfocused. The time required to trim back an idea is not insignificant — said best by Mark Twain: “If I had more time, I would have written a shorter letter.”
(Don’t) multiply big numbers
Multiply $30 times 1.000 clients times 24 months. WOW, we will be rich!
Oh, silly you, you have no idea how hard it is to get 1.000 clients paying anything monthly for 24 months. Here is my advice: get your first client. Then get your first 10. Then get more and more.
Until you have your first 10 clients, you have proved nothing, only that you can multiply numbers.
Company: Standout Jobs
I raised too much money, too early for Standout Jobs (~$1.8M). We didn’t have the validation needed to justify raising the money we did. Part of the reason for this is that the founding team couldn’t build an MVP on its own. That was a mistake. If the founding team can’t put out product on its own (or with a small amount of external help from freelancers) they shouldn’t be founding a startup. We could have brought on additional co-founders, who would have been compensated primarily with equity versus cash, but we didn’t.
Title: Cusoy: A postmortem
I didn’t want a startup, but an actual business that generates revenue, and Cusoy would not fulfill that personal goal for me without a full-time team, 1-2+ years of funding, multiple years of hard work (3-5+ years at the very least?) trying to answer the if/when questions of whether or not Cusoy could make money (very expensive questions too, might I add — not only in money but time, my most valuable asset).
While I know there might be a possibility I could hustle incredibly hard and try to set up partnerships, the time investment required far outweighed the already incredibly slim chances of generating revenue.
We hired a local operations manager in Denver (Sasha Juliard) and soon launched at Shotgun Willie’s (the highest-grossing strip club in CO) and two other bars. We made about $1,200 on each deal (50% went to DexOne, we spent $800 on each launch event and we had $500 in hardware costs), this was the only sales revenue Flowtab ever made. We were tightening up our sales process, but it was hard to market ourselves properly in those bars without being there. It quickly become a distraction to our operations in San Francisco.
Title: Formspring – A Postmortem
Entrepreneurs: build your product, not someone else’s. The most successful products execute on a vision that aligns with their product’s and users’ goals. It’s hard to put blinders on when your stats are slowly coming down and you see other startups skyrocketing around you with various tactics and strategies. For the love of god, put them on. It’s the only way to build what you should instead of chasing others’ ideas.
Product: Mass-customized Jeans
We weren’t going to draw from the business until we had recouped our (parents’) initial investment. That meant continuing to operate 9-5 while earning an income at night, which was fine for the months leading up to launch, but totally unsustainable once orders started coming in.
No one likes someone who is too aggressive, but looking back, my idea of “too aggressive” could probably fit very nicely into the “persistent” bucket, which, quite frankly, is not enough when raising money. My father told me that, especially as a woman, to never be afraid to ask for what I want or to remind others of their commitments. People these days are busy, forgetful and over-scheduled; it’s quite possible my three emails each got buried, so a fourth or fifth email (not daily, though; maybe weekly) would have served me well. I’ll never know.
If you’re bootstraping, cashflow is king. If you want to possibly build a product while your revenue is coming from other sources, you have to get those sources stable before you can focus on the product.
…we most definitely committed the all-too-common sin of premature scaling. Driven by the desire to hit significant numbers to prove the road for future fundraising and encouraged by our great initial traction in the student market, we embarked on significant work developing paid marketing channels and distribution channels that we could use to demonstrate scalable customer acquisition. This all fell flat due to our lack of product/market fit in the new markets, distracted significantly from product work to fix the fit (double fail) and cost a whole bunch of our runway.
Title: My Startup Failed. F@<#.
More importantly though, people really didn’t really LIKE anything about our product. No one that used the service thought it was that cool. In fact, some people that participated in the sale didn’t even like our “dynamic pricing” system. They were trying to support the artist, so saving a few dollars didn’t excite them. They could easily have just gotten his music for free elsewhere.
The founders acknowledge they made mistakes along the way. They spent too much time on the product and not enough time on growth and distribution. The first pitch deck they put together for investors was mediocre. They began marketing too late. They failed to effectively position themselves against giants like Apple and Google, who offer fairly robust — and mostly free — Everpix alternatives. And while the product wasn’t particularly difficult to use, it did have a learning curve and required a commitment to entrust an unknown startup with your life’s memories — a hard sell that Everpix never got around to making much easier.
Rimer put it a bit differently: “Having a great product is not the only thing that ultimately makes a company successful.”
But we never defined clear hypotheses, developed experiments, and we rarely had meaningful conversations with our target end-users. And while we had some wonderful advisors in the parking industry, we should have met with everyone we could get our hands on. Worst, we rarely got out of the building.
Title: Play By Your Own Rules
Unfortunately, once your key metric is tied to cash value in the eyes of investors, it sucks to be number two. Your ceiling has been bolted in place. Your future capacity to raise cash or sell has a lid on it now.
We felt that in order to survive we had to get our numbers up. We tried just about everything to juice growth, some ideas being more successful than others.
We received conflicting advice from lots of smart people about which is more important. We focused on engagement, which we improved by orders of magnitude. No one cared.
Growth is the only thing that matters if you are building a social network. Period. Engagement is great but you aren’t even going to get the meeting unless your top-line numbers reach a certain threshold (which is different for seed vs. series A vs. selling advertising).
Decide how you want do things then hire people that want to do things that way. There’s value in having a diversity of opinion but in a early stage startups, the benefits (moving fast) of hiring people that generally agree with you outweigh the benefits (diversity of opinion) of hiring people that don’t.
If you can’t hire anyone that agrees with you, re-evaluate how you want to do things.
Title: Shnergle Post Mortem
Does your idea only monetise at scale? If your idea can only be monetised at scale, head to San Francisco / Silicon Valley. There isn’t enough risk capital, or enough risk appetite, in the UK/EU venture market to pour capital into unproven R&D concepts. If you want to build in the UK, find some way of charging money from day one. You can still use a freemium structure to up-sell later. Shnergle was never going to monetise before it had scaled fairly significantly. Fail!
Don’t raise money from people who don’t invest in startups. We raised a (comparatively) small amount of money from friends and family. For the most part they were very supportive, but there were exceptions. Aside from the fact that we got little (non-monetary) value added from these investors, people who are unfamiliar with investing in startups and the risks and challenges of building a company will drive you bananas. (Tempting, but don’t / duh.)
Title: Travelllll Post-Mortem
If your monetisation strategy is advertising, you need to be marketing to an enormous audience. It’s possible to make a little money from a lot of people, or a lot of money from a few people. Making a little money from a few people doesn’t add up. If you’re not selling something, you better have a LOT of eyeballs. We didn’t.
Product outside area of specialization: Nobody in the team had built a successful consumer product before. We all had experience in the enterprise space, selling to businesses. We had no experience in consumer of video. We were not playing to our strengths.
Next time I will play in a space I have lived in before.
Title: Why Startups Fail: A Postmortem For Flud, The Social Newsreader (Editorial)
“We really didn’t test the initial product enough,” Ghoshal says. The team pulled the trigger on its initial launches without a significant beta period and without spending a lot of time running QA, scenario testing, task-based testing and the like. When v1.0 launched, glitches and bugs quickly began rearing their head (as they always do), making for delays and laggy user experiences aplenty — something we even mentioned in our early coverage.
Not giving enough time to stress and load testing or leaving it until the last minute is something startups are known for — especially true of small teams — but it means things tend to get pretty tricky at scale, particularly if you start adding a user every four seconds.”
Title: On-Q-ity, a Cancer Diagnostic Company: R.I.P. (A VC’s perspective)
Getting the technology right, but the market-timing wrong, is still wrong, confirming cliche about the challenge of innovating… We may have been right that CTCs are “hot” and will be important in the future, but we certainly didn’t have enough capital around the table to fund the story until the market caught up. It will be great in 5-10 years to see CTCs evolve as a routine part of cancer care, though clearly bittersweet for those of us involved with On-Q-ity.
Title: How My Startup Failed
Product: Condom Key Chains
There was no doubt about it: I had discovered The Next Big Thing. Like Edison and the lightbulb, like Gates and the pc operating system, I would launch a revolution that would transform society while bringing me wealth and fame. I was about to become the first person in America to sell condom key chains.
Title: Why Wesabe Lost to Mint
Between the worse data aggregation method and the much higher amount of work Wesabe made you do, it was far easier to have a good experience on Mint, and that good experience came far more quickly. Everything I’ve mentioned — not being dependent on a single source provider, preserving users’ privacy, helping users actually make positive change in their financial lives — all of those things are great, rational reasons to pursue what we pursued. But none of them matter if the product is harder to use, since most people simply won’t care enough or get enough benefit from long-term features if a shorter-term alternative is available.
- spent $20 million to get back to the same revenue that I had when I was CEO
- declined Microsoft’s offer (summer 2000) to be the first enterprise software company with a .NET product (a Microsoft employee came back from a follow-up meeting with Allen and said “He reminds me of a lot of CEOs of companies that we’ve worked with… that have gone bankrupt.”)
- deprecated the old feature-complete product (ACS 3.4) before finishing the new product (ACS 4.x); note that this is a well-known way to kill a company among people with software products experience; Informix self-destructed because people couldn’t figure out whether to run the old proven version 7 or the new fancy version 9 so they converted to Oracle instead)
Title: RiotVine Post-Mortem
It’s not about good ideas or bad ideas: it’s about ideas that make people talk.
And this worked really well for foursquare thanks to the mayorship. If I tell someone I’m the mayor of a spot, I’m in an instant conversation: “What makes you the mayor?” “That’s lame, I’m there way more than you” “What do you get for being mayor?”. Compare that to talking about Gowalla: “I just swapped this sticker of a bike for a sticker of a six pack of beer! What? Yes, I am still a virgin”. See the difference? Make some aspect of your product easy and fun to talk about, and make it unique.
Title: The Last AnNounce(r)ment
A month ago, half way through my angel funds raised from family members, I decided to review the progress I’ve made and figure out what still needs to happen to make this a viable business. I was also actively pursuing raising VC funds with the help of a very talented and well connected friend. At the end, I asked myself what are the most critical resources I need to be successful and the answer was partners and developers. I’ve been looking for both for about a year and was unable to find the right people. I realized that money was not the issue.
Title: BricaBox: Goodbye World!
Go vest yourself.
When a co-founder walks out of a company — as was the case for me — you’ve already been dealt a heavy blow. Don’t exacerbate the issue by needing to figure out how to deal with a large equity deadweight on your hands (investors won’t like that the #2 stakeholder is absent, even estranged, from your company). So, the best way of dealing with this issue is to take a long, long vesting period for all major sweat equity founders.
Ethan and I came up with the “Zombie Team” test for figuring out whether or not someone is ready to work on an intense project, be it a start-up or otherwise. The test is this: If zombies suddenly sprung from the earth, could you trust the perspective team member to cover your back? Would they tell you if they got bit? Most importantly would you give them the team’s only gun if you knew they were the better shot? If the answer is no to any of those questions you need to let them get eaten by the cubicle wasteland of corporate culture, because they aren’t ready for this kind of work.
Title: EventVue Post-Mortem
Our Deadly Cultural Mistakes:
- didn’t focus on learning & failing fast until it was too late
- didn’t care/focus enough about discovering how to market eventvue
- made compromises in early hiring decisions – choose expediency over talent/competency
Title: YouCastr – A Post-Mortem
The market was not there.
The thesis of our current business model (startups are all about testing theses) was that there was a need for video producers and content owners to make money from their videos, and that they could do that by charging their audience. We found both sides of that equation didn’t really work. I validated this in my conversations with companies with more market reach than us, that had tried similar products (ppv video platform), but pulled the plug because they didn’t see the demand for it.
Video producers are afraid of charging for content, because they don’t think people will pay. And they’re largely right. Consumers still don’t like paying for stuff, period. We did find some specific industry verticals where the model works (some high schools, some boxing and mixed martial arts events, some exclusive conferences), but not enough to warrant a large market and an independent company.
Title: Leaving IonLab
Second, as one of my friends observed, I talked to about 7 people (both acquaintances and friends) whose judgment I trusted. 3 of them sympathized and agreed with my decision and 4 of them admonished me and asked me to “hang in there.” You know what was the clincher? The first 3 had done startups themselves and the latter 4 had not. The latter 4 did not really understand the context, even though they meant well and are intelligent folks.
Title: Lessons Learned
The most significant drawback to a remote team is the administrative hassle. It’s a pain to manage payroll, unemployment, insurance, etc in one state. It’s a freaking nightmare to manage in three states (well, two states and a district), even though we paid a payroll service to take care of it. Apparently, once your startup gets larger, there are companies that will manage this with minimal hassle, but for a small team, it was a major annoyance and distraction.
Make an environment where you will be productive. Working from home can be convenient, but often times will be much less productive than a separate space. Also its a good idea to have separate spaces so you’ll have some work/life balance.
Thin line between life and death of internet service is a number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately no one of us was skilled in that area. Even worse, no one had enough time to fill the gap.
Title: Monitor110: A Post-Mortem (A VC’s perspective)
The Seven Deadly Sins
While we certainly made more than seven mistakes during the nearly four-year life of Monitor110, I think these top the list.
- The lack of a single, “the buck stops here” leader until too late in the game
- No separation between the technology organization and the product organization
- Too much PR, too early
- Too much money
- Not close enough to the customer
- Slow to adapt to market reality
- Disagreement on strategy both within the Company and with the Board
Title: Why We Shut NewsTilt Down
None of these problems should have been unassailable, which leads us to why NewsLabs failed as a company:
- Nathan and I had major communication problems,
- we weren’t intrinsically motivated by news and journalism,
- making a new product required changes we could not make,
- our motivation to make a successful company got destroyed by all of the above.
For anyone faced with winding down a company, I’d highly recommend taking a while off before making any big decisions, and not just the two and a half weeks that I’d initially tried. You’re not thinking straight when your startup dies – your perspective may be a bit different in a few months, as might your preferences for what you want to do next.
The corollary to that is to wind up your startup before you’re totally out of money, so that you have options for what to do next and don’t have to bargain from a place of total weakness.
Product: Link Management System
So the most important thing is to sell – a fact lots of startups forget. And we did too. After much thought it comes down to these six reasons why we failed (beside the obvious one that the VC market imploded when we needed money and noone was able to get any funding):
- We didn’t sell anything
- We didn’t sell anything
- We didn’t sell anything
- The market window was not yet open
- We focused too much on technology
- We had the wrong business model
I would advise any entrepreneur or investor considering content to think twice, as Howard Lindzon from Wallstrip warned us. Content is an order of magnitude harder than technology with an order less upside; no YouTube producer will earn within a hundredth of $1.65 billion. This will only become more true as DVRs and media-sharing reduce revenues and pay-for-performance ads eliminate inefficient ad spend, of which there is a lot. The main and perhaps only reason to do content should be the love of creating it.
I have been hearing this advise from the time I have been in my mother’s womb. Dont take this easily.If you are a techie there are more chances that you won’t follow this advise. Your heart doesn’t get satisfied with any levels of development.Ignore your heart. Listen to your brain. If you are a web startup , you can take max 6 months to release your first version( for something like mint.com) .Simpler websites shouldn’t take more than 2-3 months.You can always iterate and extrapolate later. Wet your feet asap.
Company: Untitled Partners
Hiring is hard, and without proper experience, we should have leaned more heavily on our investors to help us with this decision. Hiring was a challenge we found difficult throughout the life of our Company. We made as many bad decisions as we did good ones with regard to hiring full time, part time, and independent contractors/consultants. Biggest takeaway: As soon as the data starts to suggest someone might be the wrong hire, don’t wait, immediately start recruiting a replacement, and upgrade as soon as possible.
Company: Cryptine Networks
No matter how close of friends, how much you trust each other or how good your intentions are money comes between people and everyone over estimates their own contributions. Furthermore, founders become highly emotional about their companies. Thus, the process of negotiating taking back stock from founders is not rational and inherently very difficult. However, vesting schedules reduce the difficult negotiation to simply and mechanically exercising the companies pre-agreed right to repurchase stock at the price it was issued. I foolishly let myself fall into the “it won’t happen to me” trap but no startup gets it right on the first try and theses hiccups often lead to changes in the team. Believing that any startup won’t have to deal with stock vesting issues is totally unrealistic.
Title: Imercive Post-Mortem
For one, we stuck with the wrong strategy for too long. I think this was partly because it was hard to admit the idea wasn’t as good as I originally thought or that we couldn’t make it work. If we had been honest with ourselves earlier on we may have been able to pivot sooner and have enough capital left to properly execute the new strategy. I believe the biggest mistake I made as CEO of imercive was failing to pivot sooner.
Title: Meetro Post Mortem
Company: Meetro (aka Lefora)
We could have gone about trying to fix Meetro but the team was just ready to move on. Raising money on the flat growth we had was nearly impossible. Plus I knew that in order to keep the tight-knit team we had built together, we needed to shift focus for sanity sake. People (myself included) just felt beat up. We knew that fixing these issues would involve a complete rearchitecturing of the code, and people just weren’t excited about the idea enough anymore to do it right.
As the product became more and more complex, the performance degraded. In my mind, speed is a feature for all web apps so this was unacceptable, especially since it was used to run live, public websites. We spent hundreds of hours trying to speed of the app with little success. This taught me that we needed to having benchmarking tools incorporated into the development cycle from the beginning due to the nature of our product.
Title: Hubris, ambition and mismanagement: the first post-mortem of RealTime Worlds (Editorial)
Company: RealTime Worlds
Dave Jones made a virtue of having no business model for APB. He said “if a game is built around a business model, that’s a recipe for failure.”
Company: Q&A Service
But the more we moved down the path, the more I realized the complexities involved with selling answers. Knowledge is a tricky thing to sell, because even experts disagree on some answers. What’s worse, most people think they know more than they really do. Look at how many idiots think they know stocks, or programming, or even business. Nearly everyone thinks they can give good management tips. It is difficult to sell something so… confusing, and we realized it would lead to problems down the road. Yahoo, and most of the other sites, fix this by having people vote on the best answer, but we couldn’t post answers in public because that would take away our residual incentives. And anyway, I’m not convinced in the “wisdom of crowds” for anything beyond general knowledge. It doesn’t work for domain specific stuff.
Hyper-local is really hard. Don’t kid yourself. You don’t just open the doors and hit critical mass. We knew that from the jump. It takes a lot of work to build a community. Look carefully at most hyper-local sites and see just how much posting is really being done, especially by members of the community as opposed to be the sites’ operators. Anybody who’s run a hyper-local site will tell you that it takes a couple of years just to get to a point where you’ve truly got a vibrant online community. It takes even longer to turn that into a viable business. Unfortunately, for a variety of reasons, Backfence was unable to sustain itself long enough to reach that point.
Title: What an Entrepreneur Learned from His Failed Startup (Interview)
Company: Sedna Wireless
Finances were just one part of the story. The other part was that we failed to execute our own plans. Both external factors (e.g. the hardware ecosystem in India) and internal reasons (e.g. the expertise of the team) played a role. With money it would have lasted a bit more longer.