Startup Studio Advice #4 — How to let go of failed startups?
Have metrics that let you measure a startup’s success, and be prepared to let go easily. Do a post-mortem, and move on to your next startup idea…
(Startup studios are organizations that build startups with internal resources in a sustainable and repeatable way. You can call them startup factories, venture builders. The model is quickly spreading among entrepreneurs and investors. Here is a quick-to-read ebooklet about the essentials of how a startup studio works.)
The bread and butter of a studio is to launch one startup after another. We already discussed how to have a strong idea pool. Now let’s look at a sensitive topic: How to discontinue not-so-successful startups. This is important, because in a venture builder you don’t want to have resources bogged down by startups that go nowhere. It’s much better to let go of it, and focus your forces on a new, more promising initiative.
This is easier said than done. In a startup studio you might have different types of startups. And sometimes it’s hard to clearly decide which one can be successful and which can’t. Also, letting go might become an emotional challenge too. Especially for people who were dedicated to that project.
Phoenix reborn
For example, last year we had a startup, called Offixed. We wanted to disrupt the office supply market by creating a solution that makes it easier and more cost efficient to order office supplies. We brought onboard a new CEO, Bence, who already built a successful import-export business, and was ready to take on a startup challenge.
After a few months, we had to admit that the office supply market in CEE was not as easy to penetrate as we thought. For sure, we could have sticked to the idea for half a year more, in hope of a breakthrough. But we were concerned that it will consume too many additional resources. That would have prevented us from building some more startups. So in agreement with the CEO, we stopped operations. So far so bad.
The delightful surprise was, that after a short vacation, Bence came back to our studio, with a new idea. Apparently it’s quite a struggle to resell your e-tickets or buy one on the secondary market. And while there are some solutions in the western markets, Hungary and the CEE region was still uncovered. So Bence proposed to build a solution that let’s people easily and in a safe way to buy and sell e-tickets. Tickething.com was born. Thanks to our core team and Bence’s quick customer discovery work, the initial product was ready within weeks. Tickething was off to a strong start, as buyers and sellers quickly started to use the platform. After 2–3 months, we successfully closed a seed round. Behold, a new startup is born.
What enabled us to move so quickly from one idea to another were 3 key points:
I. Make fast and transparent decisions
The worst thing one could do is to continuously postpone the hard decision to kill a project. This would keep everybody in a frustrating state of uncertainty. It’s much better to have clear success/failure criteria, a hard deadline or a set budget to get traction. When the startup reaches the success criteria, carry on, commit some more resources if needed to reach seed funding. If not, then cut ties fast and move one.
II. Prepare your team professionally and personally
Chances are, if this is your first studio project, then most of your people will have focused on this project entirely. So letting go of it will be difficult. One way to mitigate the problem is to scale back effort on Startup A and initiate work on Startup B. And only then fully withdraw from the failing one.
When your studio already has more resources and startups in progress, then it becomes easier. However, the sunken cost fallacy will still haunt you. So learn to detach yourself from any startup, at the right time.
III. Strengthen the studio’s collective experiences
One of the best advantages of a studio versus a regular startup is, that even if a startup fails, you can keep together the team. This includes the CEO-s. And this means that over time your organization will build up a huge collective knowledge base. This will let you build your next startups easier.
To build on this opportunity, you can — and should — include a post-mortem evaluation of each failed startup attempt. And do a pre-mortem before you start one.
Learn more about venture builders
If you found this quick-to-read advice useful, and you want to learn more about startup studios, you can easily do it. In the last 18 months I had the opportunity to interview the most exciting startup studios, gather their experiences and insight about how they are doing it. We put all this knowledge into a book, that answer the following questions:
- Who are the studio founders;
- How are are studios funded;
- Where do they take ideas;
- How they are organized;
- What are their exit strategies;
- What are the pros and cons;
- How different startup studios operate across the Globe;
- How corporations can leverage the benefits of the model;
- How you can build your own startup studio?
Visit www.startupstudioplaybook.com to get it and discover all the exciting ways you can make this model work for you.
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