I failed my startup : the hard truth. 4 lessons learnt you should know about
Motivational quotes and success stories are plentiful these days, but failing stories are just as important to learn from.
Startups are hard: 9 out of 10 will fail. As an entrepreneur, you can’t ignore those numbers. But you also believe wholeheartedly that your idea is special. You believe that your team is special and that you will beat the odds. Cold stats can’t temper your enthusiasm, and nor should they.
But here, I want to talk about the hard truth of failing. I wish we talked more about the toughest phase of the entrepreneurial journey. We need to talk about it more openly, and more in details... not just the mental concept of “failing fast”… but the hard truth of face planting and eating s*@#! We were residents of StationF since their opening. I know that many struggled with the fund raising aspect, and through the rough times of doubts. But closing shop was not a topic. Even though this is the most likely to happen… and will be the hardest step! Let’s address it, and face it: what did we learn from our failed venture?
Creating a new listening experience was the dream
It is with a heavy heart that I write this post. I just lost my professional raison d’être for the last 3 years, a significant amount of my money and funds raised from Friends & Family. I just let down friends that embarked on the adventure with me and worked blood and tears to make it work.
Forward Labs SAS (www.forward-labs.com) was created around the insight that there is always more quality content to listen to. But there are too many screens and gadgets in our lives. Our goal was to simplify the experiences of listening to new audio content, streaming and podcasts in your every-day. We designed 2 products: one for the main market, and then one dedicated to kids. (no screens, simplest interface for navigation and intuitive discovery). Unfortunately we did not manage to raise our 2nd round of funds to take our products through Mass Production. We had to fold and close the company. “Hardware is hard” they say… but I say “Hardware is expensive”! We had the dream team to make great hardware products, but not the money…
Don’t get me wrong, we achieved a lot. We built many great prototypes. We raised a good size seed round. We were incubated at StationF. We took part in CES2018 and many French Tech events. We showed our products at Orange stores. We had our mentions in the press, and thousands of views online. We pre-sold many devices. We built a community around our mission. We built great partnerships. We recruited great people. But now it is hard to feel accomplished, it is the time to reflect on the reasons why we didn’t make it and share 4 key learning.
1- The funding building block is essential to your success. Think about how you will raise the next 2 rounds, before you start!
We had a good idea, a stellar team and all the right connections to start our device company. I focused hard initially on raising our seed round. It felt natural at the time: let’s get this thing off the ground! Right? I was showing off the founding team impressive background, and our execution track record shipping millions of products for Apple, Bose, Withings, Pure, Bang&Olufsen. I demonstrated our early prototypes and sold our concept of mindfully listening tirelessly. I convinced friends & family to invest in our adventure. I convinced top level advisors to join us.
But what I missed was thinking 2 steps ahead. I was thinking crowdfunding may help us kick things off. But I didn’t think of plan B. What if we didn’t get enough backers? How are we going to raise the next round of money? Blinded by the intense focus of raising the first few tens of thousands Euros, I missed the next million! I should have taken a hard look at the next round: would VC invest? Would Business Angels invest? On what conditions?
Hardware, Audio, Consumer products are all red flags for the VC industry. Pretty obvious…Somehow, I knew it, but the mistake was to not focus on this earlier, and hope that something else will pop up in the meanwhile. Trusting the journey, and embracing the unknown may be too dangerous… We did not manage to show enough real market traction to convince VCs and BAs to join us on the journey.
Money is your lifeline, your oxygen. You run out of it, and nothing can be done! As simple as that.
Think hard about how you will raise funds for your next 2 rounds, and what you will need to show to unlock your next lifeline.
2- Marketing is not a dirty word.
Go-To-Market (GTM) is of the essence for consumer products. What is your Unique Selling Proposition (USP)? How do you differentiate against the competition? More pretty obvious statements, aren’t they? As a founding team of engineers, we were extra careful to not fall into the trap of designing a great product that nobody wants. BUT, even then… we kinda missed our GTM!!!
Our DNA was not from the marketing world. We tried to compensate by hiring a good branding agency in London. It was very helpful in spelling out our vision, and put colors on what we wanted to convey: simplicity. We partnered with a great studio to build a cool visual identity and online presence. We hired another partner to test social media ads thoroughly together. But we still didn’t have enough know-how in-house to deliver on the key topic of messaging and GTM. Great product, great interface, great engineering, great experience… all that is not enough if customers don’t get it instantly!
I looked back in details through our expenses and found that we did well balancing the spending. We spent about exactly as much on engineering/product development as on marketing. So, this was not an engineering bias. 50% spent on marketing just didn’t get us far enough. We did not have the DNA to make this investment pay off. We should have spent even more on marketing. We should have learnt faster how to get a powerful message across.
Exaggeration may feel counter natural for some of us… but, showmanship, big words and making others dream is a needed ingredient to success. Realistic is not sexy!
Force yourself if it doesn't come naturally. (this will help with your product marketing, but also with your fundraising…)
3- Pivot… FAST !
Another statement we have heard many times before. But changing idea, or product focus is extremely hard to do. Being a startup, your key (and only?) advantage is that you are nimble, agile and should be fast at taking decisions! But, you never know for sure that you are on the right track, by definition of the startup uncertainty. So, how do you know to keep going in the same direction (“resilience is key!”) or you need to pivot ? Well… I have to say we struggled with that for a long time; until we just saw it. Our kids targeted speaker was what we should have started with. We changed course after months of struggle with the initial mainstream product. We made our first Padam Kids and went to a toy fair in Nuremberg to test it out. There it was… people stopped by. Business partners and distributors offered up real deal discussions, not just polite encouragement…
Except, this was too late for us already. We found a bit of traction, but needed to close our discussions with retailers fast. They wanted to carry the product as soon as the device was manufactured, ready to ship. We didn’t have any more money to get to that point. So, it is that much more frustrating when the concept finally shows real legs, but you can’t execute on it!
Pivot fast, you’ll recognize the pivot when you see it. But please don’t wait too long… you are in a race against time. Nothing like facing the wall to realize that. Focus on the wall before you get too close to it.
4- Save your self enough time and energy to go through one last BIG project: the Exit.
In the same spirit as “pivot fast”, you should realize that your lifeline is not endless. When you see signs that your fund raising is not paying off, or that you will run out of time; then please don’t drag it for too long. We did. We were hoping that reducing costs would just give us more time to figure it out. But, when you slow down every expenditure, and run on fumes, you just don’t progress. Things start to come apart naturally, over time. Your team, your suppliers, your partners, your product… they will all start to undo themselves.
Don't let that happen. Stay proactive, and on target. Your project now is to not get depressed, and to make an exit for your company before it is too late. This will save you from looking desperate. Obvious fact #n+1 here: nothing is more of a turnoff to investors than desperation. Proactively owning the end process will give you the best chances to explore all avenues: selling IP, merger, acquihire, competition offers, etc…
In our case, at the end, we had advanced discussions with an industrial partner to merge our efforts, and sell our product through their distribution. That was a great potential exit. It didn't go through for many reasons you can ask me about, but this was the only real shot we had at saving the company! I wish we had more time to explore other opportunities. But, by that time we were exhausted mentally and physically because of the last many months of no progress and failing slowly…
Give yourself more time. Start earlier. Your startup exit deserves to be a real high energy, high intensity last project you run as well as you can!
Lessons really learnt .. the hard way
I now understand clearly why investors favor 2nd/3rd time founders vs. 1st time founder. I have made so many painful mistakes that I will never forget them. Definitely not doing those same mistakes twice!
I know failure is ok. I know failure makes you grow. I did indeed learn a ton in the process. I know failure is not a shame… but, god! Failure is such a b!#)~ !
Now it is up to us to figure out the next phase of our adventures. How well we will learn from this experience, and make this a full part of our journey.
Wear those scars with pride, and move on.
Thank you for reading so far. Please reach out with your comments and feedback. I would love to hear from you.
In the spirit of learning from each other… re-Share are welcome.
Cyril Labidi, ex. CEO and Co-Founder at Forward Labs.
