2014-01-23

Co.Labs

Startup Post-Mortems Offer All Sorts Of Surprising Lessons

We read 51 startup failure stories and pulled out the best tips from founders who learned the hard way.



Startup "success" is a matter of luck and timing—but mostly it's a matter of persistence. Companies that fail don't usually do so by objective measures—they just become so miserable to operate that the founders decide to euthanize it.

CB Insights collected 51 accounts of startup failures in multiple industries from 2007 to the present day to try to make sense of what compels people to pull the parachute in their early stage venture. After reading them all, I thought startup founder Brianne Garcia summed up the struggle well in her obituary for her company Parceld:

Most of us don’t have big wads of cash and time to burn, so we have one shot and then we have to figure out how to pay the rent and feed ourselves. Those who achieve success in that one shot are just as lucky as they are admirable. And those who don’t hit it big on the first try, but have the time and money to figure stuff out, are extremely privileged.

Yes, it helps to already be rich and lucky—but while every failed startup implodes in its own unique car crash of money, relationships, and broken dreams, a few common themes emerged. You must have a technical cofounder, seek continuous customer validation of your business idea, and avoid the perils of half-assed marketing. Focus, focus, and more focus was also a popular theme. The tips we have chosen below go beyond these more obvious mistakes.

Define Founder Roles And Expectations

The founders must agree on the roles they will play in the business as illustrated by the story of Teamometer.

Conflict and disagreement arrived early, because expectations of work and founder roles were not agreed upon and everyone had a different idea about their share of the load. The developer had no intention of being the project’s developer. Everyone but me had other businesses, so time was constantly an issue and deliverables just didn’t happen.

Since we were 3 business people, we spent all this time into idiot plans, budget forecasts, BUSINESS CARDS, fancy website… all useless things which in the end did not contribute to anything. The result of this was that in the end we had to hire a full-time (and paid) developer. So we had zero revenue, 4 co-founders and a paid employee (which was effectively the only one doing real work).

Your Product Is Just A Checkbox

Building a business is not just about building a product according to the founder of Saaspire.

You absolutely need to get your product right, but it is just one of several equally important things you need to get right to create a sustainable business. In our case our product was good, our business model was reasonable and well worked out, our marketing plan was terrible. It wasn’t until pretty late in the game that we really tried to figure out how we’d go about selling our thing to customers.

Don’t Always Listen To Your Users

Listening to your users is a more risky business than you might think says the founder of Sonar.

"I would use your product if only you had X feature” is a dangerous signal to follow. Users do their best to anticipate what they want before they’ve seen it but, like entrepreneurs, they are often wrong. You are probably not the Steve Jobs of ______. Removing friction from existing user behaviors (e.g. checkins) almost always has a higher ROI than building castles in the sky (e.g. hypothesizing about your API). Find all the dead ends/local maxima in your current products before building new ones!

Stop Worrying About The Competition

In another tip from the excellent Sonar post, stop slavishly following your competition.

Are your competitors releasing a bunch of the same features that you have on your roadmap? Yes? Do you know what consumers want*? No? Great, then neither do your competitors. Get back to figuring out what users want! Lesson Learned: Be steady at the wheel. The only way one startup can kill another startup is by getting into the other’s head and leading them off a cliff.

Figure Out Streamlined Metrics To Measure Your Progress

Intellibank’s founder discussed about the dangers of over-measurement in the vein of Lean Analytic’s one metric which really matters.

I once had a board member tell me that we were over-measured and under-prioritized. It stung. A lot. But it also made quite an impression. As a business leader you need to figure out the metric that matters most for your company and understand that the more you measure, the less prioritized you’ll be. Don’t fall into the trap of trying to measure everything. What I’ve learned is that in the early days, what matters most is having customers who love and use your product. Figure out the one or two best measures to determine this.

Don’t Raise Too Much Money Too Early

To many startup founders, raising too much money may seem like the ultimate luxury problem. They would be wrong according to founder of 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… Raising the money felt like winning. It felt like all (or most of) the justification we needed. It set us on a path of building a bigger product than we should have, and committing (falsely) to our own assumptions of what would work, without fully testing them.

Sometimes You Need To Do The “Wrong” Thing

A good business decision that makes you miserable is never a good decision according to Saaspire’s postmortem.

We actually saw this bootstrapping problem coming way before it happened. We had plenty of time to correct course and focus our energy on building a stable consulting business before building the product. Why didn’t we do it? We really didn’t want to. It was one of those situations where we had to decide what we wanted in life. Lesson Learned: What the “right thing to do” is and what the “right thing for you to do” are not always the same thing. Be honest with yourself and your partners about what you want and what will make you happy.

Stop Reading. Start Doing.

And now that you have gotten through this entire post, the best advice of all from IonLab’s founder.

Simply reading A-Z of books and essays is not important, you have to internalize the learnings by testing it out on the field and realizing the value for yourself instead of saying “that makes sense” and forgetting about it a few minutes later.

[Image: Flickr user Followtheseinstructions]


Article Tags: failconfailed startup.





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8 Comments

  • Great article! I work in a start-up in Singapore, and we are just about to launch our first product. If we fail, I know that we can pick ourselves up and learn from our mistakes/shortcomings. These lessons apply not only to start-ups and businesses, but life in general.

    Already shared on Twitter! @SophieSyed

  • Love the article, as a founder of a business nearing the end of its 4th year I can relate to many lessons learned. I will be passing this on to others!

  • Interesting nuggets of hard-wrought wisdom here.

    The insight about "doing the wrong thing" reminds me of a recent Slate article by Miya Tokumitsu <a href="http://www.slate.com/articles/technology/technology/2014/01/do_what_you_love_love_what_you_do_an_omnipresent_mantra_that_s_bad_for_work.html">challenging the "conventional" wisdom of doing what you love</a> ... and of an earlier series of blog posts by Cal Newport <a href="http://calnewport.com/blog/category/features-rethinking-passion/">rethinking passion</a>.

    While some people do find happiness via the "do what you love, the money will follow" trajectory, the nugget you extracted above suggests that sometimes - especially in starting a commercial venture (which must make money in order to be sustainable) - one must "do what will make you money, the love (or happiness) will follow".

  • This was my first comment here at fastcolabs.com. It appears that HTML may not be allowed... a not uncommon constraint, but one that I find often limits the depth of conversation.