C. S. Lewis Stay Hungry. Stay Foolish
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- A STARTUP SMARTCUT GUIDE to INCREASING SUCCESS FROM FAILURE
- CORNERSTONE PRINCIPLES TO FOLLOW TO REDUCE ODDS OF FAILURE
- Build Something People Want
- Poor Understanding of Impact of Pricing
- Lack of Product Planning and Validation of Need
- Failure to Design a Solid Business Model
- Lack of Respect for Marketing
- No Customer Integration Plan into Product Development
- Issues with Focus and Priorities
- No Deep Connection with the Idea
- Lost of Investor Interest
- Legal and Regulatory Issues
- Failure to Leverage Outside Assets
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A STARTUP smartcut “exerts” guide to experience success from experiences with FAILURES Failure is experience and experience is learning: A Must WATCH TEDTALK Failures, repeated failures, are finger posts on the road to achievement. One fails forward toward success. C. S. Lewis Stay Hungry. Stay Foolish. The Crazy One’s
Table of ContentsTable of Contents 2 A STARTUP SMARTCUT GUIDE to INCREASING SUCCESS FROM FAILURE 8 A STARTUP SMARTCUT GUIDE to INCREASING SUCCESS FROM FAILURE 8 CORNERSTONE PRINCIPLES TO FOLLOW TO REDUCE ODDS OF FAILURE 8 CORNERSTONE PRINCIPLES TO FOLLOW TO REDUCE ODDS OF FAILURE 8 Build Something People Want 9 Build Something People Want 9 Cash Flow Management 9 Cash Flow Management 9 Team and Culture 10 Team and Culture 10 Competitive Capability 11 Competitive Capability 11 Poor Understanding of Impact of Pricing 11 Poor Understanding of Impact of Pricing 11 Lack of Product Planning and Validation of Need 12 Lack of Product Planning and Validation of Need 12 Failure to Design a Solid Business Model 12 Failure to Design a Solid Business Model 12 Lack of Respect for Marketing 12 Lack of Respect for Marketing 12 No Customer Integration Plan into Product Development 13 No Customer Integration Plan into Product Development 13 Market Timing 13 Market Timing 13 Issues with Focus and Priorities 14 Issues with Focus and Priorities 14 Internal Conflict 14 Internal Conflict 14 Poor Execution 15 Poor Execution 15 No Deep Connection with the Idea 15 No Deep Connection with the Idea 15 Business Location 16 Business Location 16 Lost of Investor Interest 16 Lost of Investor Interest 16 Legal and Regulatory Issues 17 Legal and Regulatory Issues 17 Failure to Leverage Outside Assets 17 Failure to Leverage Outside Assets 17 Work Overload 18 Work Overload 18 Execution Failure 18 Execution Failure 18 STARTUP MYTHS 19 ABOUT YOU: The Entrepreneur 21 KNOW YOUR WHY 21 LEARNING TO PUSH THROUGH BOREDOM 21 ABOUT: The Team 22 SINGLE FOUNDER 22 SINGLE FOUNDER 2 22 SINGLE FOUNDER 3 22 LACK OF TRUST. 23 FOUNDER CONFLICT WITH FOUNDER 23 FAILURE TO LEARN 23 NO MENTORSHIP 23 TOUGH CONVERSATIONS 24 SIZE OF FOUNDING TEAM 24 IDEAL FOUNDER TRAITS 24 PERSONAL CHARACTER 25 A HALF-HEARTED EFFORT 25 BAD ATTITUDE. 26 LEADERSHIP 28 SUCCESSFUL TEAMS: SURVIVING ON BREAD CRUMBS 29 SUCCESSFUL TEAMS: EXPERIENCED AND WELL FUNDED 30 FINDING THE PEOPLE 30 QUALITIES THAT ATTRACT INVESTOR INTEREST 30 COMMON CHARACTERISTICS FOR GREAT TEAMS 31 INVESTORS OBSERVATIONS: ON BUSINESS. 31 INVESTORS OBSERVATIONS: ON PEOPLE 32 INVESTORS OBSERVATIONS: ON PRICE 32 ABOUT: The Investor 33 INVESTOR CHARACTERISTICS 33 WHAT TO EXPECT FROM INVESTORS 33 INVESTOR INVOLVEMENT 35 POOR INVESTOR MANAGEMENT 36 VENTURE CAPITALISTS FAVOR EXTREMELY HIGH-RISK BUSINESSES 36 ABOUT: The Idea: 37 #1 Reason Why Startups Fail: MAKING SOMETHING NO ONE WANTS. 37 MARGINAL NICHE 37 DERIVATIVE IDEA 38 BAD IDEA 38 SUGGESTED REFERENCES 38 GOOD IDEA 38 SUGGESTED REFERENCES 38 IDEAS ARE EASY AND EXECUTION IS NOT. 39 SUGGESTED REFERENCES 39 PROBLEM UNDERSTANDING 39 NO AWARENESS FOR YOUR PRODUCT 39 SUGGESTED REFERENCES 39 FAILURE TO HAVE A CLEAR IDEA 39 SUGGESTED REFERENCES 39 SIMPLICITY AND SOLVING PROBLEMS. THAT’S ALL PEOPLE REALLY WANT 39 SUGGESTED REFERENCES 39 ABOUT: The Market: 40 TOO EARLY TOO LATE NEVER WAS 40 #1 STARTUP FAILURE REASON 40 MARKET SIZE 41 MARKET SEGMENTATION 41 ABOUT: The Product: 42 POOR PRODUCT COMMUNICATION 42 PRODUCT REQUIREMENT UNDERSTANDING. PROPER RESOURCE ALLOCATION 42 FIELD OF DREAMS SYNDROME. “IF YOU BUILD IT, THEY WILL COME.” 42 HAVING NO SPECIFIC USER IN MIND 43 CONSUMER EXPERIENCE MISFIRE 44 PRODUCT COMPLEXITY (MVP) 44 NO PRODUCT SPECIALIST 44 LACK OF UX FOCUS, PLANNING AND EXECUTION 44 FOCUS: FOLLOW ONE COURSE UNTIL SUCCEED 44 PRODUCT LAUNCH 45 SLOWNESS IN LAUNCHING 45 LAUNCHING TOO EARLY 45 MARKETING EXECUTION 46 PRODUCT EXPERIENCE/DOMAIN EXPERIENCE 46 FEATURES 46 ABOUT: The Business Model: 47 MONETIZATION STRATEGY TOP 5 STARTUP FAILURE REASON 47 PRODUCT SUCCESS BEFORE BUSINESS MODEL DEVELOPMENT 47 THE ESSENCE OF A BUSINESS MODEL 47 THE CAPITAL EFFICIENCY “RULE” 48 ABOUT: TRACTION 49 POOR TRACTION 49 METRICS 49 EARLY CUSTOMER TYPE 50 DON’T HIRE A SALES TEAM TOO EARLY 50 ABOUT: BURN RATE/CAPITAL 51 RAN OUT OF CASH 51 TOP 5 STARTUP FAILURE REASON 51 BURN RATE 52 SPENDING TOO MUCH 52 FRED ROGERS: STAGES OF BURN RATE MANAGEMENT STAGES 52 BURN RATE MANAGEMENT FOR 52 STAY PRACTICAL w SPENDING 53 ABOUT: MANAGEMENT 54 KNOW THY SELF 54 PIVOT 54 TOP 5 STARTUP FAILURE REASON 54 OBSTINACY FAILURE TO PIVOT 54 SCALE 55
PRIOR EXPERIENCE 55 BIG BATCHES & SCALABILITY 56 MISMANAGE RESOURCES 56 MANAGEMENT SKILL 56 EXECUTIVE HUBRIS. 56 THE SIZE OF THE TASK 57 Bad Location 58 Top Startup Failure Reason 58 ABOUT: The Investment 59 VALUATION 59 FUNDING MANAGEMENT SKILLS 59 POOR ALLOCATION OF RESOURCES AND MONEY 59 RAISED TOO MUCH MONEY. 59 RAISED TOO LITTLE MONEY. 60 RAISING TOO LITTLE MONEY 60 RAISING TOO MUCH MONEY 60 FUNDRAISING EXPERIENCE 61 INVESTMENT ROUND OBSTACLES 61 ABOUT: Out of Control 63 BUSINESS IS HARD. 63 LOTS OF RANDOM VARIABLES 63 RAISING MONEY IS A HORRIBLE PROCESS 63 ABOUT: MENTORSHIP/OBSERVATIONS AND QUOTES 64 STARTUP PREPARATION 64 REFERENCES 65 BIG MISTAKES 65 Additional resources 69 Startup Training Institutes 69 Startup Accelerators 69 Online Startup Communities 69 Q&A; on Startup 69 Co-working spaces 69 LEARNing to Code 69 Good Startup/Investor Blogs 69 Startup Resources 69 ONLINE RESOURCES FOR STARTUPS 70 IDEA GENERATION 71 IDEATION 71 DOMAIN NAMING CONVENTION SEARCH 71 NAMING 71 DOMAIN NAMES 71 HOSTING 71 MARKET RESEARCH 71 MARKET SURVEYS 71 MOCKS AND WIREFRAME 71 UX/UI 71
DEVELOPMENT 71 SOCIAL TOOLS 71 NAMING 71 MVP 71
NAMING 71 MARKETING 71 STARTUP Directories and search 71 PRESENTATIONS 71 Mobile App development 71 LAUNCHING 71 ANALYTICS 72 PROGRAMMING LANGUAGES 72 ASP.NET 72 ADOBE COLDFUSION 72 JAVASCRIPT/JSCRIPT 72 PHP 72
PYTHON 72 RUBY 72
THE GO PROGRAMMING LANGUAGE 73 RUST SYSTEMS PROGRAMMING LANGUAGE 73 XCDODE OVERVIEW 73 YOSEMITE (OS X 10.0) TOOLS 73 Technical Resources 73 3D PRINTERS 73 3D PRINTING SERVICES 73 API'S 73
APPLE IOS AND MACOS FRAMEWORKS 73 BUG/ISSUE TRACKING 74 CAD/CAM SOFTWARE (LOW COST) 74 CLOUD SERVICES AND TOOLS 74 DATA CENTER ORCHESTRATION AND CONFIGURATION MANAGEMENT TOOLS 75 DEVELOPMENT TOOLS 75 DESIGN 75 EMOTION ANALYTICS 76 ENGINEERING 76 FIND BETA USERS: 76 IN-APP PURCHASES 76 LOCALIZATION 76 MOBILE USABILITY TESTING/HEATMAPS/BUILD TOOLS 76 PASSWORD API’S 77 MINDMAPS 77 ROBOTICS/DRONES 77 TEXT ANALYSIS TOOLS/NATURAL LANGUAGE PLATFORMS 77 USER TESTING 77 WEB SCREEN SCRAPING TOOLS 77 WEBSITE USABILITY TESTING/HEATMAPS/MOUSE TRACKING 77 WEBSITE A/B AND LANDING PAGE TESTING 78 WEBSITE/BROWSER TESTING 78 WEBSITE PERFORMANCE TESTING 78 WEB APPLICATION FRAMEWORKS 78 WIREFRAMING TOOLS 78 WEBSITE 79 CREDIT CARDS/PAYMENTS 79 DIY WEB SITE CREATION 79 DRAG AND DROP SITE CREATION 79 FORMS 79
HOSTED: 79 LAUNCHING SOON PAGE: 79 LANDING PAGES SELF HOSTED: 79 MOBILE 79 ONLINE STORE AND MARKETPLACE CREATION 79 PROTOTYPE/MANUFACTURING CONSULTANTS 80 CUSTOM MACHINE PARTS/INDUSTRIAL SUPPLIES 80 SELF CREATED PRODUCTS SELLING SITES 80 TURNKEY WEBSITES 80 VIDEO 80
WEBSITE DESIGNERS 81 WEBSITE DESIGN TOOLS 81 WIDGET FOR YOUR WEBSITE 81 Operational Resources 81 ACCOUNTING: 81 CLOUD STORAGE/BACK-UP 81 COMMUNICATION 81 CONTINUING EDUCATION: 81 COWORKING SPACES 82 CRM 82
CUSTOMER SUPPORT: 82 COLLABORATION/GROUPWARE 82 FILE SHARING: 83 FRAUD DETECTION 83 HUMAN RESOURCES/RECRUITING: 83 INTELLECTUAL PROPERTY ADVICE 83 INFORMATION, PAYROLL DATA, ETC. 83 LEGAL 83
OFFICE GEAR: 83 OUTSOURCING/FREELANCE HELP 84 PAYMENT: 84 SUBSCRIPTION SERVICES 84 TRAINING 84 VIDEO CONFERENCING: 84 Marketing 84 ADVERTISING 84 AUTOMATION 84 ANALYTICS / DASHBOARD 84 CONVERSATION RATE OPTIMIZATION: 85 COPY WRITING: 85 COLLABORATION/CLIENT PORTAL 85 CONTACT FORM 85 CONTENT MARKETING TOOLS 86 CUSTOMER ACQUISITION 86 CUSTOMER REFERRAL PROGRAMS: 86 DATA ACQUISITION 86 EMAIL MARKETING/BLASTING 86 EMAIL TESTING 86 GAMIFICATION 86 GROWTH HACKING 86 LOYALTY PROGRAMS 86 MARKET RESEARCH RESOURCES ONLINE 87 MARKET SIZING TOOLS 87 MOBILE APP LOCATION / AD PLATFORM / MISC 87 MOBILE APP STORE CUSTOMER ANALYTICS / AD PLATFORM 87 ONLINE MARKETING SUITES 88 PRODUCT LAUNCH TOOLS/LANDING PAGES 88 PRODUCT DEMO VIDEOS 88 PLATFORM AS A SERVICE 88 Public Relations (PR) For Tech Companies 88 SEO FOR MOBILE APPS 89 SEO FOR MOBILE APPS 89 SEO 89 SEARCH ENGINE OPTIMIZATION AND TOOLS 89 SOCIAL ACQUISITION 89 SOCIAL MEDIA 89 SOCIAL MEDIA ADVERTISING 89 SOCIAL MONITORING 89 SURVEYS 89 TESTIMONIALS/SOCIAL REVIEWS 90 TRANSACTIONAL EMAIL 90 ONLINE COLLABORATION 90 PRODUCT ROADMAPS FOR PRODUCT MANAGERS 90 REAL WORLD 90 SOFTWARE / WEB 91 TASK MANAGEMENT 91 TIME TRACKING: 92 WEBSITE CREATION 92 WHITEBOARDING 92 SUBSCRIPTION MANAGEMENT 92 SOFTWARE LISTING SITES 92 INDUSTRY NEWS 92 COMPETITION AND SALES RESEARCH 92 FUNDRAISING/STARTUP ADVICE 92 ANGEL/SUPERANGEL INVESTORS 92 ADVICE ON RAISING STARTUP CAPITAL 92 BEST STARTUP ADVICE 93 BUILDING/MANAGING A BOARD OF DIRECTORS 93 CAP TABLES / VALUATION 93 CROWDFUNDING 93 ENTREPRENEURSHIP ONLINE 93 FOUNDER EQUITY/COMPENSATION ISSUES 93 FINANCE 101 FOR ENTREPRENEURS 93 FUNDING 93 Hardware Incubators/Accelerators/Crowdfunding 94 INCUBATOR LIST/ STARTUP JOBS 94 MARKETPLACE REVENUE MODELS 94 METRICS/BENCHMARKS/GROWTH 94 MUST READ BLOGS 94 PIPE LINE DEALS 94 STARTUPS DATA 94 VC’S FOCUSED ON COMMERCIALIZING UNIVERSITY TECHNOLOGY 94 |
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Failure Reasons * CB Insights Data/Research |
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Resource References |
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1. NO MARKET NEED Tackling problems that are interesting to solve rather than those that serve a market need was cited as the number one reason for failure in a notable 42% of cases. As Patient Communicator wrote, “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.” Treehouse Logic applied the concept more broadly in their post-mortem, writing, “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. NOTABLE ADVICE “Don’t halfass a dozen ideas. Pick one and kick ass instead!”- Devesh Dwivedi @deveshd “When building a product, solve the problem for someone in the cheapest, most rudimentary way before building too much tech. Often this means using spreadsheets, the telephone, or email. You get two benefits. First, by doing the dirty work you understand the problem. Secondly, you can ask them to pay you. People telling you what they’d like in a customer interview does not guarantee they’ll ever pay you or use it. Until someone pays you, you don’t have a customer.” - Jon Cartwright @Jon_Cartwright
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42% |
READ: The 7 Day Startup READ: The Wide Lens: What Successful Innovators See That Others Miss READ: Zero to One: Notes on Startups, or How to Build the Future READ: The Innovator's Dilemma: READ: Startup Lessons LEARNed at Google: It’s All About Data READ: How to Know When You Have a Winning Idea. WATCH: Steve Jobs Stanford Speech LISTEN: (Tina Wells, founder and CEO of Buzz Marketing Group) VIEW: Google Analytics tells you what's happening. KISSmetrics tells you who's doing it. LEARN: How do you evaluate a market need before starting to develop the idea. LEARN: Where do you go to validate an idea LEARN: How do you match the market need with the right investor profile/interest REVIEW: validating your idea better. http://www.fiverr.comas a resource http://www.quirky.com |
Cash Flow Management
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2. RAN OUT OF CASH Money and time are finite and need to be allocated judiciously. The question of how should you spend your money was a frequent conundrum and reason for failure cited by failed startups (29%). As the team at Flud exemplified, running out of cash was often tied to other reasons for startup failure into product-market fit and failed pivots, “In fact what eventually killed Flud was that the company wasn’t able to raise this additional funding. Despite multiple approaches and incarnations in pursuit of the ever elusive product-market fit (and monetization), Flud eventually ran out of money — and a runway.” NOTABLE ADVICE From Marc Andreessen: High cash burn rates are dangerous in several ways beyond the obvious increased risk of running out of cash. Important to understand why: First: High burn rate kills your ability to adapt as you learn & as market changes. Co becomes unwieldy, too big to easily change course. Second: Hiring people is easy; layoffs are devastating. Hiring for startups is effectively one way street. Again, can't change once stuck. Third: Your managers get trained and incented ONLY to hire, as answer to every question. Company bloats & becomes badly run at same time. Fourth: Lots of people, big shiny office, high expense base = Fake "we've made it!" feeling. Removes pressure to deliver real results. Fifth: More people multiplies communication overhead exponentially, slows everything down. Company bogs down, becomes bad place to work. Sixth: Raising new money becomes harder & harder. You have bigger bulldog to feed, need more and more $ at higher and higher valuations. Therefore you take on escalating risk of a catastrophic down round. High-cash-burn startups almost never survive down rounds. VAPORIZE. Further, to get into this position, you probably had to raise too much $ at too high valuation before; escalates down round risk further. Seventh: Even if you CAN raise an up round, you are increasingly likely to incur terrible structural terms like ratchets to chin the bar. That nice hedge fund investor willing to hit your valuation bar? Imagine him owning 80% of co after down round. How nice will he be then? Eighth: When market turns, M&A; mostly stops. Nobody will want to buy your cash-incinerating startup. There will be no Plan B. VAPORIZE. Finally, there are exceptions to all this. But if you're reading this, you're almost certainly not one. They are few and far between. Worry. NOTABLE ADVICE “When launching a new product or service, you need to focus on doing one thing really, really well and then expanding out. Novices try to build out everything too quickly, and get their offering diluted.” - Jeff Goldenberg @jeff_goldenberg “Always remember that less is more. That is what your design should be.” - Salman Aslam @salmanamughal |
29% |
READ: Burn Rates How Much? READ: The Hard Thing About Hard Things READ: How Darma Raised $100K in the First Day of their Kickstarter Campaign READ: Startup Metrics WATCH: Motivation to Sell LISTEN: both sides of the entrepreneur/investor table VIEW: LEARN: LEARN: Do I truly have product/market fit? Without it there is no sense in increasing burn aggressively to drive future growth. For a particular business model like (SaaS) there are several indicators to monitor: MRR growth, churn rate, cost of customer acquisition and payback period. For consumer startups it could be usage/engagement, each model is unique. LEARN: Am I scaling up hiring because we have a real need, or am I stockpiling talent because people keep telling me its an arms race? LEARN: Is more than 5% of my budget going to things outside of payroll, payroll tax, benefits and rent? If so you are probably overspending on things like servers (get AWS!), advertising, meals and travel. LEARN: Am I spending like we’re chasing a big market, when it’s actually a small one? If you’re getting a lot of feedback that the market seems small and you don’t agree, you might need to re-frame your vision. (old vision: Bloomberg for startup investors, new vision: Google for B2B) LEARN: Is the kind of growth we’re seeing sustainable beyond the first six months? It’s awesome to build something a small group of people love and are willing to pay a lot for, but don’t forget to go find the next group. |
Team and Culture
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3. NOT THE RIGHT TEAM A diverse team with different skill sets was often cited as being critical to the success of a starting a company. Failure post-mortems often lamented that “I wish we had a CTO from the start, or wished that the startup had “a founder that loved the business aspect of things”. Standout Jobs wrote in their post-mortem, “…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.” In some cases, the founding team wished they had more checks and balances. As Nouncers founder wrote, “This brings me back to the underlying problem I didn’t have a partner to balance me out and provide sanity checks for business and technology decisions made.” NOTEABLE ADVICE: “Whenever you have a rough time in your startup, read the biographies of great achievers and you will know that every single one of them went to the rock bottom before they saw the signs of success. So persevere, work hard and enjoy the roller coaster!”- Abdul Munda @amunda “One of the most important and powerful tools every entrepreneur possesses is their attitude. How we respond to opportunities and challenges, wins and losses, ups and downs plays a tremendous role in whether we succeed or fail.”- Ian Yates @iwyates |
23% |
READ: The Hard Thing About Hard Things READ: Rhythm: How to Achieve Breakthrough Execution and Accelerate Growth WATCH: Steve Jobs Profile: How a Dreamer Changed the World SPORTS: Becoming a Team LISTEN: Nailing the Hard Things |
Competitive Capability
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4. OUT COMPETED Despite the platitudes that startups shouldn’t pay attention to the competition, the reality is that once an idea gets hot or gets market validation, there may be many entrants in a space. And while obsessing over the competition is not healthy, ignoring them was also a recipe for failure in 19% of the startup failures. Mark Hedland of Wesabe talked about this in his post-mortem stating: “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.” NOTABLE ADVICE “Do not be afraid of competition, as competitors signal that a market opportunity exists. If you find there are no competitors in your market, it is safe to assume on the balance of probabilities that demand may be weak or non-existent. Unless of course you are a true visionary in the Steve Jobs mold!” - Alan Gleeson @AlanGleeson
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19% |
READ: Little Bets: How Breakthrough Ideas Emerge from Small Discoveries WATCH: "underdog" startups LEARN: - How do you know when your are losing to your competition? How well do you know your competition? READ: Traction. A Startup Guide to Getting Customers READ: Crossing the Chasm READ: Creating Business Agility |
Poor Understanding of Impact of Pricing
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5. PRICING/COSTING ISSUES Pricing is a dark art when it comes to startup success and startup post-mortems highlight this difficulty in pricing a product was not too high or too low to make money in context of the particular costs of a company. Delight IO saw this struggle in multiple ways, writing, “Our most expensive monthly plan was US$300. Customers who churned never complained about the price. We just didn’t deliver up to their expectation. We originally price by the number of recording credits. Since our customers had no control on the length of the recordings, most of them were very cautious on using up the credits. Plans based on the accumulated duration of recordings make much more sense for us and the number of subscription showed.” NOTABLE ADVICE “Persistence and continuous learning together is the only thing you need to do. Improve and keep going!”- Sean Fahey @VidCruiter |
18% |
READ: Impact Pricing: Your Blueprint for Driving Profits READ: The Strategy and Tactics of Pricing The BASIC Components of Your Startup Financial Model PRODUCT PRICING 101 FOR ENTREPRENEURS
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Lack of Product Planning and Validation of Need
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6. POOR PRODUCT Bad things happen when you ignore a user’s wants and needs whether done consciously or accidentally. Here’s what GameLayers wrote on their product UI, “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.” NOTABLE ADVICE “If you have to sell your product hard, you don’t have it right yet. Great products are in demand. Trying to build a company based on awesome sales people who can push any product is a difficult, uphill battle.” - Mike Kelland @mkelland |
17% |
WATCH: Jonny Ivie about Design READ: The User Experience Team of One READ: How to Create Products and Services Customers Want READ: The Lean Startup READ: Lean UX WATCH: Jonny Ivie Tribute to Steve Jobs LISTEN: LEARN: Start Now. No Funding Required VIEW: Startup Metrics, a love story LEARN: Do you know when to pivot? WATCH: Why Products Fail |
Failure to Design a Solid Business Model
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7. LACK OF A BUSINESS MODEL Failed founders seem to agree that a business model is important staying wedded to a single channel or failing to find ways to make money at scale left investors hesitant and founders unable to capitalize on any traction gained. As Tutorspree wrote, “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.” NOTABLE ADVICE “Successful social media marketing is not about what time of day you tweet or how often you update your Facebook page. It’s the way you make people feel, it’s the story you share with your community.” - Shanelle Mullin @shanelle_mullin |
17% |
WATCH: Top 10 Business Model Pitfalls WATCH: Talking About Business Models LISTEN: Using Business Models to Beat the Competition LEARN: Mapping Customer Pains to Value Proposition LEARN: Sketching Out a Business Model LEARN: The Business Model Canvas 1 VIEW: The Business Model Canvas 2 LEARN: The Business Model Canvas 3 READ: Business Model Generation READ: Scaling Up: READ: The Road to Reinvention: How to Drive Disruption and Accelerate Transformation. Audible Version READ: Behind the Cloud |
Lack of Respect for Marketing
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8. POOR MARKETING Knowing your target audience and knowing how to get their attention and convert them to leads and ultimately customers is one of the most important skills of a successful business. The inability to market was a function of founders who liked to code or build product but who didn’t relish the idea of promoting the product and came up in 14% of the startup post-mortems. As Overto wrote, “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. That would be another stopper if we dealt with the problems mentioned above.” NOTABLE ADVICE “If you become the doctor of your customers, they’ll become marketers of your business. It’s that simple - solve their actual pain and you won’t have to spend a dime in marketing.” - Adeel Vanthaliwala @adeelv “Be undeniably good. No marketing effort or social media buzzword can be a substitute for that.” Anthony Volodkin @fascinated NOTABLE VIDEO
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14% |
READ: WATCH: Marketing Plan How To WATCH: Series on Social Media LISTEN: Toby Jenkins: How to find the pain points of your potential customers READ: Crossing the Chasm READ: Use Content to Find Customers |
No Customer Integration Plan into Product Development
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9. IGNORE CUSTOMERS Ignoring users is a tried and true way to fail. Tunnel vision and not gathering user feedback are fatal flaws for most startups. For instance, eCrowds, a web content management system company, said that “We spent way too much time building it for ourselves and not getting feedback from prospects — it’s easy to get tunnel vision. I’d recommend not going more than two or three months from the initial start to getting in the hands of prospects that are truly objective.” Similarly, VoterTide wrote, “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.” NOTABLE ADVICE “Create advocates and mobilize them. That is the way to market dominance.” - Mark Organ @markorgan “It’s okay to have a long-term goal of wanting to help a wide range of people. It’s important to realize, however, that often, trying to help all of them up front isn’t an efficient customer acquisition approach. Start with a specialized product, on the most focused niche within the larger group that you want to reach. The group that has the biggest pain as a result of the problem you’re trying to solve. Build your product and trust for your brand there. Then expand to other niches within that larger group until eventually, you’ll be helping all of the people that you originally envisioned.” - David Spinks @thecmgr |
14% |
READ: Stanford School – Customer Development Series REVIEW: Voice of Customer Insights SPORTS: Impossible is Nothing READ: Interviewing Users The hero of your story is the main target user you are serving. Finding out what helps your hero to reach his goal is a way to differentiate what’s core to your business and what isn’t. |
Market Timing
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10. PRODUCT MIS TIMED If you release your product too early, users may write it off as not good enough and getting them back may be difficult if their first impression of you was negative. And if you release your product too late, you may have missed your window of opportunity in the market. As a Calxeda employee said, “In [Calxeda's] case, we moved faster than our customers could move. We moved with tech that wasn't really ready for them i.e, 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.” NOTABLE ADVICE “You should get the market in, not the product out! Understand the needs of your potential customers and address them in your marketing campaigns and biz dev meetings. You should know what pain you solve for your customers or which need you satisfy. Tell them you have the solution for their need or pain and they will look for you.”- Gaia Costantino @earthgaia88 |
13% |
READ: Avoid Building Poor Products WATCH: LISTEN: (Tina Wells, founder and CEO of Buzz Marketing Group) READ: Hooked: How to Build Habit-Forming Products. AUDIBLE Version READ: Making It Right: Product Management For A Startup World |
Issues with Focus and Priorities
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11. LOSE FOCUS Getting sidetracked by distracting projects, personal issues, and/or general loss of focus was mentioned 13% as a contributor to failure. As My Favorites wrote on the end of their startup experience, “Ultimately when we came back from SXSW, we all started losing interest, the team was all wondering where this was eventually going, and I was wondering if I even wanted to run a startup, have investors, have the responsibility of employees and answering to a board of investors.” NOTABLE ADVICE “Work for 5 years like no one else will and you will live the rest of your life like no one else can. As an entrepreneur, it truly is all about that type of hustle. Know that it takes determination, hard work, sacrifice - basically a very strong work ethic in order to be successful. Opportunity recognition is also a key element of success. And know you will make mistakes. The difference between an entrepreneur and an average person is that entrepreneurs call these ‘learning curves’. It’s about adopting the mindset of perpetual learning, which allows your mistakes to motivate you to improve rather than discourage you.”- Monica Rivera @monicaBMH |
13% |
READ: WATCH: Leadership and Motivation: The SPORTS: Give it your all Be Perfect - How do you know when to Pivot READ: Focus. Finding New Ways to See the World READ: Focus: The Hidden Driver of Excellence READ: Do One Thing Well as a Startup. Identify Your "One Thing" Like This |
Internal Conflict
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12. DISHARMONY ON TEAM/INVESTORS Discord with a cofounder was a fatal issue for startup post-mortem companies. But acrimony isn’t limited to the founding team, and when things go bad with an investor, it can get ugly pretty quickly as evidenced in the case of ArsDigital. Phillip Greenspun writes: “For roughly one year Peter Bloom (General Atlantic), Chip Hazard (Greylock), and Allen Shaheen (CEO) exercised absolute power over ArsDigital Corporation. During this year they, 1. spent $20 million to get back to the same revenue that I had when I was CEO 2. 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.”) 3. 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) 4. created a vastly higher cost structure; I had 80 people mostly on base salaries under $100,000 and was bringing in revenue at the rate of $20 million annually. The ArsDigita of Greylock, General Atlantic, and Allen had nearly 200 with lots of new executive positions at $200,000 or over, programmers at base salaries of $125,000, etc. Contributing to the high cost structure was the new culture of working 9-5 Monday through Friday. Allen, Greylock, and General Atlantic wouldn’t be in the building on weekends and neither would the employees bother to come in. 5. surrendered market leadership and thought leadership” NOTABLE ADVICE “Successful entrepreneurs only surround themselves with hard working, high integrity people. Find co-founders, employees and mentors that are highly skilled and knowledgeable in areas where you are not.” - Jonah Lupton @JonahLupton |
13% |
SPORTS: Bill Walsh Coaching Philosophy READ: Save the Deal, Save the Relationship READ: 7 Habits READ: Team Building READ: Leaders Eat Last SPORTS: Building a Team RESOURCES READ: FounderDating premiere site for founders/co-founders VIEW: CoFoundersLab find a co-founder in any city VIEW: YouNoodle founder matching READ: CodeArmy CTO’s for Non-Tech Founders VIEW: FoundersNation founders in Israel, London & NY READ: AngelList Angel List jobs board VIEW: Startup Weekend Launch a Startup and meet a co-founder READ: How to hire developers mike greenfield |
Poor Execution
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13. PIVOT GONE BAD Pivots like Burbn to Instagram or ThePoint to Groupon can go extraordinarily well. Or they can be the start of a path down the wrong road. As Flowtab’s post-mortem explains, “Pivoting for pivoting’s sake is worthless. It should be a calculated affair, where changes to the business model are made, hypotheses are tested, and results are measured. Otherwise, you can’t learn anything.” NOTABLE ADVICE “Successful entrepreneurs only surround themselves with hard working, high integrity people. Find co-founders, employees and mentors that are highly skilled and knowledgeable in areas where you are not.” - Jonah Lupton @JonahLupton |
10% |
REVIEW: Voice of Customer Insights READ: Pivot. How to READ: Running Lean: Iterate from Plan A to a Plan That Works LISTEN: Do the Things Others Don’t want to Do |
No Deep Connection with the Idea
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14. LACK OF PASSION There are many good ideas out there in the world, but 9% of startup post-mortem founders found that a lack of passion for a domain and a lack of knowledge of a domain were key reasons for failure no matter how good an idea is. In their post-mortem, NewsTilt candidly spoke about their lack of interest in the domain they selected writing: “I think it’s fair to say we didn’t really care about journalism. We started by building a commenting product which came from my desire for the perfect commenting system for my blog. This turned into designing the best damn commenting system ever, which led to figuring out an ideal customer: newspapers. While there, we figured they were never going to buy, and we figured out a product that people were dying to use if it existed. But we didn’t really care about journalism, and weren’t even avid news readers. If the first thing we did every day was go to news.bbc.co.uk, we should have been making this product. But even when we had News Tilt, it wasn’t my go-to place to be entertained, that was still Hacker News and Reddit. And how could we build a product that we were only interested in from a business perspective.” NOTABLE ADVICE “If you were going to sell your business in five years, how would you describe it? What would be its value? Why would someone want to buy it? Now, build your business.”- Joyce Fredericks @inbodytraining “When you start a company, burn your ships and never look back. Don’t give yourself any option but to move forward to build a great company. You will succeed because life rewards and reveres those who persevere.” - Adeel Vanthaliawal @adeelv
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9% |
WATCH: I am a Champion SPORTS: John Wooden simple Principles READ: How I Raised Myself From Failure READ: A Passion for Success READ: Ignite Your Passion and Power of Why READ: Start with Why READ: 25 Inspirational Quotes on Building a Strong Startup |
Business Location
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15. BAD LOCATION Location was an issue in a couple different ways. The first was that there has to be congruence between your startup’s concept and location. As Meetro wrote, “We launched our product and got all of our friends in Chicago on it. We then had the largest papers in the area do nice detailed write-ups on us. Things were going great…The problem we would soon find out was that having hundreds of active users in Chicago didn’t mean that you would have even two active users in Milwaukee, less than a hundred miles away, not to mention any in New York or San Francisco. The software and concept simply didn’t scale beyond its physical borders.” Location also played a role in failure for remote teams. The key being that if your team is working remotely, make sure you find effective communication methods; else lack of teamwork and planning could lead to failure. As Devver wrote, “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… for a small team, it was a major annoyance and distraction.” NOTABLE ADVICE “Learn fast. Test your assumptions. Know thy customer.”- Dan Stone @stonemit
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9% |
READ: Remote. Office Not Required |
Lost of Investor Interest
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16. NO INVESTOR INTEREST Tying to the more common reason of running out of cash, a number of startup founders explicitly cited a lack of investor interest either at the seed follow-on stage (the Series A Crunch) or at all. NOTABLE ADVICE “Know what you get yourself into. Don’t be naive. Go learn something. Soak in your failures. Test often. Iterate all the time. Dream about it. Iterate some more. Convince them to give you funding. Freak out because you got funding. Iterate some more. Stay hungry even if it’s tempting not to. Stay in the ‘let’s build this startup’ frame of mind. You’re just getting started. Entrepreneurship isn’t for everyone. Not even for entrepreneurs.”- Eyal Toledano @EyalToledano “Don’t take rejection personally. Think of everyone who slams a door in your face, whether it is an investor or a customer, as saving you valuable time. It’s a quick no! Move on to the next house, rinse and repeat.” - Jordan Smith @JordanYFC NOTABLE VIDEO WATCH: Leadership and Motivation: HOW TO SURVICE REJECTION |
8% |
READ: Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist READ: Hacking the Investor Pitch READ: Matching Investors with Startups |
Legal and Regulatory Issues
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17. LEGAL CHALLENGES Sometimes a startup can evolve from a simple idea to a world of legal complexities that can prove to be a core cause of shutting a startup down. As Decide.com wrote in their post-mortem, “We received a notice from them informing us we weren’t compliant and unless we removed it they’d suspend our affiliate account. We weren’t making a lot of money but that account probably represented more than 80% our revenue.” A couple music startup post-mortems also associated the high costs of dealing with record labels and legal headaches as a reason for startup failure. High-profile startup Turntable.fm wrote, “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.” NOTABLE ADVICE “Learn fast. Test your assumptions. Know thy customer.”- Dan Stone @stonemit |
8% |
READ: About Startup Lawyers. Inside their Minds |
Failure to Leverage Outside Assets
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18. DON’T USE NETWORK/ADVISORS/BOARD OF DIRECTORS Often startup entrepreneurs lamenting their lack of network or investor connections. Get your investors involved. Your investors are there to help you. Get them involved from the start, and don’t be afraid to ask for help. Don’t make the mistake early on of trying to do (and know) everything yourselves, perhaps out of insecurity over being so new to the business world or whatever the reason. This is a mistake. Not learning how to best work with a board of directors can prove to be fatal. Use them wisely and they will be amongst your best asset. Fail to use them, and they will quickly turnout to be your undoing. NOTABLE ADVICE “Starting is hard, and determining where to start may be the toughest task of all. I frequently encounter people who have good ideas, but no idea how to get them moving - and this is when they often give up. My advice is simply to start, and accept that where you start will likely be wrong, but at least you started. Then take the second step, and third. And accept that these may not be correct either, but you are moving! If you have to go back and re-do or fix some steps along the way, it is OK because you started which is much more than most people with ideas.” - Sunny McGaw @EdithLeaver
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8% |
READ: How to get the most from your Board READ: Building Your Network w Linkedin |
Work Overload
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19. BURN OUT Work life balance is not something that startup founders often get and so the risk of burning out is high. Burn out was given as a reason for failure 8% of the time The ability to cut your losses where necessary and re-direct your efforts when you see a dead end was deemed important to succeeding and avoiding burnout as was having a solid, diverse and driven team so that responsibilities can be shared. NOTABLE ADVICE “Don’t fall into the trap of confusing activity for achievement. Pause during your day and ask: ‘Is this helping us build sh*t or sell sh*t?’ If the answer is no, then you’re working on the wrong things.”- Christian MacLean @FourSlice |
8% |
READ: Reclaiming the Fire: How Successful People Overcome Burnout WATCH: |
Execution Failure
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20.FAIL TO PIVOT Not pivoting away or quickly enough from a bad product, a bad hire or a bad decision quickly enough was cited as a reason for failure in 7% of the post mortems. Dwelling or being married to a bad idea can sap resources and money as well as leave employees frustrated by a lack of progress. Pivoting requires courage. If you are pivoting you are doing so because your initial plan and assumptions are not being proven and the team has determined the need to pivot while still able to operate within this pivot period. NOTABLE ADVICE “Learn fast. Test your assumptions. Know thy customer.”- Dan Stone @stonemit
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7% |
READ: Pivot Points: Five Decisions Every Successful Leader Must Make WATCH: Knowing when to pivot LISTEN: Peter Reinhardt raised money, failed, pivoted, failed again… and then? LEARN: Ideas, Products, Teams and Execution |
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