7 hard-learned lessons from failed startups
It’s easy to find successful entrepreneurs. They’re all over the news and all anyone ever talks about as they secure more and more funding, their businesses thrive and they just get everything right.
I love these success stories too, but they paint an unbalanced picture of the industry, and what it means to be an entrepreneur.
When you look at the data, most cite a scary-high failure rate for startups. The Startup Genome Report (which was co-authored by authors from Berkeley, Stanford and Steve Blank) looked at 3,200 startups over three years, and found 92% failed. Fortune says it 90%.
Personally, I think it’s rather ominous that nine out of every ten startups fail. Especially when I’m running a business of my own. But what’s even scarier is how few people actually look into the reasons behind each failure.
Fail and fail quickly is a term that’s been thrown around in nearly every conversation on startups I’ve had, but it’s even more important to understand what went wrong and what could have been done better.
Otherwise, you’re going to make the same mistakes the next time round.
Taking examples from real startups, just like yours, here’s the hard truths these founders faced before closing their doors.
Learn from their experience, and don’t make these mistakes yourself.
1. Spinning your wheels and postponing your launch
Working hard is what it takes, but you need to focus on the right metrics.
It’s easy to fall into a routine of busy work as you chase an arbitrary number, say 1,000 email subscribers or 5,000 Facebook fans before putting a product out there but this is a mistake.
The hours and hours you’ve spent marketing or writing code means diddly-squat if your product sucks. Put together a minimum viable product, even if it’s just a landing page, and see what your market thinks.
Gift recommendation platform Wishareit didn’t make it because they started building their solution before they even validated the idea. Big mistake. Always be ready to answer “Why am I doing this?” and “Who am I building this for?” recommends founder João Romão.
Or Kolos. A racing wheel designed for gamers to use with an iPad. Three years in development, a failed Kickstarter campaign and $50,000 in capital spent before realizing no-one was super excited to buy their product. Failing to properly validate the idea in the first place was their downfall.
Lesson: Read the Lean Startup. Then, get a basic bug-free version of your product in front of customers as fast as possible and pivot until you find what works.
I signed my first customer before I even had my own website up. For a company that develops websites, I wanted to make sure there was a market for what I was offering before I invested time and effort on my idea.
2. Make a product people actually want to buy
If your business solves a need, an actual need your customers believe is important, you’re going to be fine.
Don’t focus your efforts on a perceived problem that no-one cares about. Fortune found this too. 42% of the failed startups they surveyed cited “lack of a market need for their product” as the primary reason behind their failure.
That’s almost half.
Almost half of the entrepreneurs out there were putting their time, money and heart into developing products the market didn’t want.
Like Rate My Speech. They created a platform to help users improve their public speaking skills. After 11 months of work, the team realized 95% of people didn’t care enough about the problem, and the remaining 5% were highly unlikely to buy their paid service. Not good.
Or Bawte. They provided a platform for consumers to log purchases and track warranties and contact customer service reps. Whilst an important problem, it wasn’t perceived as an urgent need from their audience, and despite signing up new users, they would ultimately fail to use the software.
Lesson: Make sure your target audience is eagerly throwing money at you to buy (or use) whatever it is you’re planning to sell. Go talk to them. Just ask. Really.
3. Look under the hood and get a scalable business in order
Just because you’ve got a brilliant team of founders and a *rock-star* CEO, you can’t neglect the fundamentally boring (yet critical) processes of your company. Assigning specific responsibilities to people does not mean you’re good-to-go.
Startups need to be fluid, able to respond to changes in the market, and have a scalable business model at their core. There’s only so long you can “fake it” until you need the processes in place to “make it.”
Or Manila. A ton of users, awards, and three years operating their household organization app before realizing they were “ unable to achieve the scale necessary to make the economics of the business viable.”
Lesson: Get your back-of-house in order and make damn sure you’ve got a scalable business model that can deliver a positive return.
4. Be different and explain why customer’s should choose you
Customers are spoilt for choice. It’s a simple fact. In almost every market you can imagine there’s a solution in place to currently meet their needs.
Your startup needs to find a novel approach, offer a better solution, or if there really is nothing like it; make it clear, simple and easy for your target customers to understand why you’re solving this need, and why they need your business to overcome it.
Everpix was a photo sharing tool that rocketed to early successes with paying clients, but as free apps flooded their market user attrition slowed, to the point where they couldn’t meet their monthly overheads.
Lesson: Look at the trends of the industry and the current players in the market to determine if there’s sufficient opportunity for your startup to turn a profit.
5. Actually have a passion for the business you’re in
No matter the industry you’re looking to disrupt, if you’re lacking a deep knowledge of the subject, the ability to tackle problems creatively, and an unwavering amount of stamina to get you through the late nights, early mornings and endless pitches; things are going to be tough.
Be passionate about the business you’re in.
It’ll give a competitive edge, and who really wants to spend all their waking hours on a product that’s not exciting?
Pumodo offered sports fans a tool to share their favorite moments, but the app they created was regarded by athletes as only “meh” and while the founders loved the idea, they also didn’t love the app they created.
Secret allowed users to anonymously share a secret, but design changes and the misuse of the app for cyber bullying led to founder David Byttow deciding to shut it down as “ Secret does not represent the vision I had when starting the company.”
Lesson: Solve a problem you care about. If you’re not building an exciting product you yourself would use, are you honestly going to put in 110 percent?
6. Be ready for a massive amount of work
Entrepreneurship isn’t a lifestyle endeavor. You’re putting obstacles in your path if you’re gallivanting about all over the world, or only running your business as a side-project.
There’s a reason the investors in Shark Tank are only ever interested in businesses where the founder is 100% dedicated to the project; so make sure you are too.
There is no miraculous “overnight success” or ways to avoid the hard work.
You just need to do it.
Blurtt helped users caption and share photos, and started its first iteration in 2009 before shutting down in 2014 as founder Jeanette Cajide had burned herself out. Cajide advises budding entrepreneurs to ensure they’re always happy working on a project and remember why you started it.
Lumos was an internet of things startup that created smart electrical switches. After five months of work the founding team realized just how hard it was to launch a hardware startup, in addition to overestimating the demand for the finished product so they pulled the plug.
Lesson: Understand what it’ll take to get your startup operational, and make sure you’ve got enough fuel in your tank to put in what it takes to achieve success.
7. Build a supportive team and network that lifts you up
It’s almost impossible to survive in a startup on your own. You need people.
Find a network of customers, suppliers, service providers, employees and co-founders (all people), who share a common passion and will help you succeed.
Mentors offer advice when you’re stuck for ideas, friends can pick you up after a rough week, and every prospective client you meet reassures you that you’re not crazy for what you’re working on.
All of us are battling similar obstacles, and your team needs to support you.
Pixloo enabled virtual tours and cross-posting of real estate listings. Unfortunately the co-founders were not aligned on the company’s direction or position on raising capital, and they were acquired. After a series of changes, what was left of the startup was eventually wound down; only 9 months later.
Findory offered a personalized newspaper which learns as you click and read. Greg Linden recounts the five years pushing to make the app work, citing how his mentors and a supportive team kept him achieving and on track, even though he was trying to do too much himself.
Lesson: Don’t think you’ve got to go it alone, find people who support your vision and are willing to help you work towards making it a success. You need them.
These seven lessons cover a broad range of failures, using real examples to demonstrate just how important each one is to a startups success. One screw-up can mean you’re headed rapidly down the wrong path.
Learn from the failures from the entrepreneurs who have gone before you, and get your plan in order. These mistakes are all easy fixes if you tackle them head-on, so clear the elephant from the room and make sure your startup isn’t lacking on any fronts.
For the other startup founders out there, is there anything you wish you would have done differently? Are there any other mistakes you see new entrepreneurs continually making?
I’d love to hear your thoughts in the comments below. Plus, your input could help save a fellow entrepreneur from falling into the same trap.
P.S. Shout-out to Autopsy for providing the curated source of many of these failed startup stories in one place. You guys rock!