Types of tech startups that fail fast and furious
Every now and then, tech startups spring up here and there, then disappear into oblivion.
Some go out quietly,
you just kind of remember them after like 2 years of silence. When you go checkout their Facebook page you discover that their last post was made in the stone age!
Some startups go out with a loud bang and a broken bank
“sorry guys, we ran out of luck, here is a long medium post about what we learnt while running”.
Personally I like such medium posts because they give others an insight into what really caused the death of that startup. I consider the medium posts a parting gift by the founders to the rest of the startup community so they can avoid some of their pitfalls. A very good thing.
Whenever my next startup fails, I’ll write my own very long medium post on it, maybe it could save someone. Yes, non of my startups has succeeded yet, otherwise I wouldn’t be broke enough to sit down to write this article.
I’ve been meaning to write this article for over a year now. But every time I want to write it, I feel that some startup may feel like I’m writing about them specifically, so I ditch it. Now, I don’t just care anymore. I am not writing about any startup that I know personally. If some startup feels that I am writing about them, you know how it is, I am in my house, come and beat me :)
Some startups go out stylishly
“Hey guys, we are pivoting, we will be discontinuing all our features from October 28th, thanks for being with us” or even more creatively “We are getting acquired, we did not do anything wrong to deserve this **cries during speech**”
Generally, I have learnt somethings about why startups fail. Though the reasons are numerous and new reasons get minted daily like cryptocurrency coins, I’ll outline the most common ones that made me write this article.
Here are some types of startups I consider doomed to fail
Note that doing all these things listed below aren’t bad, I’m referring to situations when it’s done in excess such that it prevents the founders from actually getting the startup off the ground.
- Fake T-shirt companies: Some startups are actually T-shirt companies without knowing it. They are more interested in printing branded T-shirts than actually running their startups. Each branded T-shirt costs about N5,000 . That money can fetch you about 10,000 post reach on Facebook, a handful of signups and sales. It can also be helpful if spent on A/B testing of an ad. Yes, a startup is meant to test a lot until they find a suitable ad combination that brings the most sales. Even though this appears to be an incredibly small money to some startups, this is actually a lot of money for some other startups. At least, if not for anything N5,000 can buy 10gb of data for one month.
But someone spends that money on T-shirts. They buy T-shirts for the whole team, their family members and their village people. You know that team photo-shoot where everyone is putting on a branded T-shirt is super-cool. It tells your school alumni that your startup has finally arrived. To me, issa T-shirt b’iness.
- Fake Event Companies: Some startups are event companies in disguise. More than building their startups, they are interested in hosting events, talking about their startups , feeding and clothing the unsuspecting attendees.
You know, your startup has not arrived until about 200 attendees eat your small chops. One small chop costs about N500, multiply it by 200 that’s N100,000.
N100,000 can pay the salary of one staff for one month, or buy 20gb subscription each for 10 members of the startup’s staff. But they won’t do it because staff should use their own money to buy their own internet when they are at home. Its better that the random members of the public eat small chops than for the staff to be able to work from home.
Now let us add the cost of the venue for the event, ok, let’s not add it, it will probably exceed the cost of the food. We also didn’t add the cost of the drinks. We need to multiply all these by the many times in a year the startup holds such an event.
To me, issa event b’iness.
- Fake Interior Decorators: Some startups burn a large part of their capital on the best office locations in town, the best versace furniture, Picasso artworks, video games and so on. But when it comes to paying big enough salary to attract really good talent, they shy away. You know that super expensive 6th floor office space with windows overlooking the glory of the city below is more important than having experienced staff.
Some offices cost N2.5m per year, that’s is the salary of an experienced personnel for 1 year at the rate of N200,000 per month. N2.5m pumped into adwords or Facebook ads will definitely take the startup’s sales to another level. But no, they won’t do it. Startups be running on N2.5m offices with 1,500 facebook likes, 300 followers on Instagram and 250 twitter followers.
A startup that is still in testing and development phase already has the best gucci office space in town? Facebook started in a dorm room, Apple and Google started in a garage. But no one wants to do that any more. To me, issa real-estate and an interior decoration b’iness in disguise.
- Fake Celebrity Startups: These are the kinds of startups where the founders spend the bulk of their time getting media mentions, granting interviews and speaking on radios. The founder of these startups want to be celebrities and inspirational figures like Elon Musk and Steve Jobs.
They are always craving super awesome media headlines “16 and half year old founder builds a 33 year old human being”. They want fame so bad that they can strip for it. To me, issa celebrity b’iness.
- Fake HR companies: These are the kinds of startups where the founders are spending lots of time recruiting more and more poor quality, cheap-ass staff, rather than bulking up the money to recruit a few experienced, versatile and deep people. You know it feels more rewarding to say to someone “I have a staff of 33”, than “I have a staff of 4”. To me, issa recruitment b’iness.
- Fake title startups: Founders in this type of startups work hard, put a lot of calls and long legs through to get funding. Soon as the grant/funding arrives they forget everything about their startup, show up at the village, collect 2 chieftaincy titles, buy expensive cars, relocate to an expensive part of town, then get back to the village and collect one more title!
Soon of course, they run out of cash. One year later, they owe staff like 7 months salary, relocate back to a less expensive part of town, sell car, and get right back to hustling, looking for new grants and funding up and down.
Issa title b’iness.
- Fake gamble startups: Startups in this category are better off hosting Nairabet because they are into heavy gambling. They conceive an idea, without any sort of testing, they pour in their whole capital into it.
They spend lots of money in development, and spend even much more trying to force it down people’s throats in the name of marketing. You see, the developers know that this is a totally whack product but they don’t have the liver to say it because if they do, they are getting fired for some other reason soon. The founders don’t want to hear any contrary opinion. Their business cycle goes like this — Create a completely idiotic and useless fancy product, rent a pickup truck, mount a loud speaker on it, rent 6 girls and 6 boys to twerk on the streets for publicity. You twerk, you dance, you shoki…
After some time you stop hearing about them, when you check their facebook page — last updated, 1 year ago.
I don’t know what else to say but to say, issa gamble b’iness :)
- Fake silicon valley startups: These kinds of startups run as if they are in silicon valley forgetting that their environment and challenges are completely different. They read books by some of those multi-billionaire founders that their startup hasn’t turned profitable in almost a decade. They watch all those futuristic Business Insider short videos about a startup doing one amazing futuristic stuff “This CEO worked for FBI and now his $14m startup is building drones that convert oxygen to air” :)
Next minute, they are trying to build such ultra-futuristic startups when their target market aren’t even computer literate.
Some startups in this category operate like they have access to unlimited funding and are heading for an IPO in 6 months. Sooner or later their products fail to sell, they shutdown and disappear just because issa copycat b’iness :)
- Fake firing squads: These are the kinds of startups where the founders or executives enjoy firing their staff members thereby converting it into a firing squad. Sometimes its this founder with an over-bloated ego that the staff members cannot talk to. If you make a suggestion contrary to the suggestion the founder is expecting, that’s a firing sentence, you get fired instantly or a short while later with flimsy excuses.
Sometimes this founder or the founder’s loved ones converts the whole startup into her ego massaging center. I was once in a startup where their key product manager was fired because the wife of the founder was using him as a houseboy. She wanted him to run to the house to get stuff for him, clean the house, carry her hand bag as she walks to the car and all. At some point, she was shouting on the guy some day, the guy was like “Ah ah, I am older than you, is it because you are the wife of my boss. You need to have some respect for me. You just concluded your NYSC last month while I’m married with 2 kids”
That was it, dude was fired the same day soon as the wife called up the boss crying on phone. It took another 8 months to find a competent replacement. During the 8 months the company lost many other key staff because people because Madam has a craving for having older and more educated people serve her like house boys and nobody can stand such humiliation for long.
The firing of the product manager also exposed them to the fact that their own job isn’t secure so they probably started using the office internet to apply for jobs.
12 months a year, some founders fire 12 people straight. Each time a key member is lost, it throws the project backward, some projects never recover.
New staff has to burn time trying to get up to speed with how things work only to get fired again within the year :)
Sometimes the problem is from the staff. Sometimes top management introduces too much politicking and blame game that in order for some staff members to save their jobs, they have to connive to get someone fired. Yes, it happens!
The Roman army had a name for it — decimation. When a crime is committed by an anonymous person, the suspected group is subdivided into smaller units of 10 people each. Each unit has to do a little death-lottery, the winner will be isolated from the group and killed.
Guess what, soon some other anonymous person will commit another crime :)
In startups like this, a whole lot of things can cause this kind of evil community behaviour. Staff members are trying to look super-good before the management due to pressure and office politics. Really skilled staff may have their awesome projects swept under the carpet by their supervisors so that someone else will look good. At the end of the day, the startup loses lots of money spent on the salaries and the project.
When the management is busy chasing everyone around looking for someone to put the heat on, the staff members have no other option than to present them a scapegoat.
For me, such a startup issa firing squad b’iness :)
The good old days when startups start in a garage and dorm room seem to have gone forever. The new startups, just want to shine from day one. To me, I issa shine b’iness.
The boli analogy
The truth is that the woman selling boli by the street corner is a better business person than most of us startup founders. She understands the core of business and how to make profit:
- Make sure you are located where your customers are
- Use a hassle free payment process
- Make profit on every sale
- No frivolous spending, no gucci umbrella, with versace hand gloves and hushpuppi boli, just use the minimum required.
- Make sales, everyday! Many startup founders conveniently ignore this part. Truth is, if you aren’t making sales, you aren’t in business. Well, unless you have unlimited funding like Whatsapp, Instagram or whatever then you can conveniently run for a decade before starting to think of ways to monetize.
Profit before and after scaling
The only thing she doesn’t know how to do is how to scale, probably because of lack of education. The Ibo boys that import goods from China and sell in Nigeria, understand business 101 and scaling. They follow all the basics of business and still scale. They make profit on every single unit of what they sell, so when they scale they make lots of profit.
Never scale a faulty system, the faults will scale with it
Free until world domination, then paid
The silicon valley styled startups are following a different method — get users first, figure out how to monetize later. This works only when the startup has unlimited gazillion dollars funding.
Putting it back to the boli business we mentioned earlier, imagine that you saw a woman frying boli by the street corner but instead of selling it she is giving it all out for free. Customers come, choose the best boli, and walk away, free!
What would you consider the woman to be? A mad woman, right? Then why do small startups with limited funding attempt to copy this model and make their products free?
Let’s say her plan is that after selling 1 million copies of boli, the whole city is now addicted to her boli, she will then start charging for it.
What would be your conclusion about that strategy? Huge risk, isn’t it?
Sure, she will put some other boli sellers out of business initially because hers is high quality and free, but sooner or later, she too might just be out of business too because she will run out of money eventually.
The problem with that model is that startup founders first create the culture that the product is supposed to be free. Then they later try to change it to paid, that’s a form of betrayal. Users already trust you to keep it free. Once you switch the model, you have back-stabbed them and they have to turn to some other seller. Imagine that iphones were free for some time, then they showed up some day and decided to start selling it $600/phone. What do you think will happen?
Or lets imagine that you wake up someday and Facebook asks you to start paying before using it? That same month other apps like snapchat, instagram, twitter will see an upsurge of new and active users.
Don’t burn money creating a culture, then try to destroy it to make the money back.
Gucci toilet handles
Let’s also say that instead of staying by the street corner, she goes out into town to rent a supercool office space, with gucci toilet handles and golden stair cases. Mad woman, right? Then why do some startups with limited funding do this?
To me, issa gucci b’iness :)
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