Market Timing: The Silent Company Killer
“Being early is the same as being wrong.”
When you have an amazing idea, it is not a matter of “now or never.” Successful entrepreneurs leverage a little something called market timing. Instead of now or never, a smart entrepreneur says “when the time is right.” Time and time again, companies rush their product or service to market for various reasons, which then leads to the company shutting down.
For every successful startup, there is another who tried to execute the same idea before and failed. The difference? Market timing.
Today I will highlight 4 times a company’s poor market timing, and poor execution led to their failure. We can examine what they did wrong and highlight what we should learn from their failures.
Web Van
Who are they?
Heard of InstaCart? Web Van did it first.
Founded at the top of the dot-com boom in 1996, Web Van was a USA-based company that promised delivery during a 30-minute window of their choosing. At its peak, Web Van was working in 10 major US cities and was valued at $1.2B with nearly $400M invested by venture capitalists.
Their Vision: Expand to 26 cities by 2001,
Their Reality: By 2001, Web Van had shut down.
Their idea was brilliant, but it was poorly executed and ahead of its time.
What did they do wrong?
What seemed like it could be their biggest strength was actually a core reason for their failure.
Rapid growth, resulting from pressure from investors to obtain first mover advantage, lead to Web Van spending $1B on warehouses, and employees, before launching. They rushed to market instead of first proving their business model in their first market, San Francisco. Rather than using existing infrastructure, Web Van built their own warehouses and fulfillment centers in a costly manner.
They brought in $178.5M in revenue but also incurred $525.4M in expenses. Their business model relied on scale to generate profit, but evidently…it never took off. Do you see the problem?
What should we learn?
- Always validate your business model before expanding. Find product-market fit, THEN grow.
- Leverage existing infrastructure when you can.
- Don’t be too confident. While it’s great to be confident regarding your startup… maybe DON’T spend $1B before proving your company is sustainable.
- Every dollar counts in a start-up, a dollar used incorrectly is a dollar that could’ve been used somewhere else. Opportunity cost is your true cost!
SixDegrees
Who are they?
“Six Degrees of Kevin Bacon” is a concept that states: We are 6 degrees of connection from anyone in the entire world, meaning we are only 6 steps from anyone in the world. Founded in 1997, amassing 3.5 million users at its peak, SixDegrees was the world’s first social media. The site allowed you to make posts to your first, second, and third-degree connections and allowed you to see how many degrees away you were from any user. Their revenue model was based on paid ads, and with over 3.5 million users you would think that could keep them afloat.
Unfortunately, the site would be shut down and sold for $125M in 1999, only to be sold for $7M just one year later.
The world was simply not ready for this product, but a decade later companies like YouTube and Facebook were thriving.
What did they do wrong?
SixDegrees’ concept was incredible, it was just too ahead of its time. With access to the internet (and technology to use the internet) still being developed, the entry of barrier to their platform was extremely high. Since then, technology and code have improved immensely, and the world thrives on digital social networks.
What should we learn?
- Sometimes your idea is great, but it’s too ahead of its time. Evident by this article, this happens often.
Zoomo
Who are they?
Founded in 2014, Zoomo was an online platform for peer-to-peer sales of automobiles in India. Zoomo’s employees would inspect the vehicles prior to listing them. They offered quality assurance and standardized pricing for all vehicles on their site. Their goal was to build trust in the Indian car market. Their goal failed.
Two years into their venture, Zoomo shut down and gave half of the raised $7M back to its investors. After realizing they were only selling 1 in 5 cars they inspected (which is not sustainable whatsoever,) they started charging inspection fees. Even after this, they realized their business was not profitable and called it quits.
What did they do wrong?
They had the money, and they had the team, but they did NOT have the market. India’s buy-and-sell automobile market was too young for this company to thrive. Most consumers were first-time car buyers and did not understand why Zoomo’s listings were more expensive compared to other sites (that had hidden fees, no inspections, and other reasons.) They appropriately changed their revenue model upon reassessing the future of their business, but it wasn’t enough.
What should we learn?
- Just because your idea works in one market (such as North America’s buy-and-sell automobile market), does not mean it’ll work in others.
- If your company is not working, it’s okay to walk away and return capital to investors.
- Many successful startup founders have had multiple failed startups before their big break.
- Reassess revenue models if your business isn’t working! This will increase your odds of success.
Vreal
Who are they?
Founded in 2015, Vreal was a virtual reality startup that allowed creators to interact with their fanbase on a virtual platform. Users could create avatars and roam through the shared VR space, and watch immersive content often made by streamers. Raising $15M from popular venture capitalists, Vreal was often called the Twitch for VR.
After 4 years of trying to successfully take off, Vreal shut down as a result of VR’s failure to become mainstream. Virtual reality was, and still is, confusing, pricey, and difficult to adopt.
7 years later, the concept upon which Vreal was built is still considered “the future.”
What did they do wrong?
Their founder, Todd Hopper, was the perfect person to manage this company — having managed and founded multiple companies in the entertainment (and gaming) industry in the past. Unfortunately, their platform was ahead of its time. Even now, in 2022, the world is yet to adopt VR in a mainstream capacity. Slowly, alongside the rise of the MetaVerse, the market is evolving enough for Vreal to have succeeded.
What should we learn?
- Be extremely cautious when operating in an ultra-niche market such as virtual reality for social interaction.
- Previous successes don’t indicate future success, even if it seems like you have all the correct skills.
- There are uncontrollable variables, such as market maturity, that can impact your startup.
Final Words — What if the timing is never right?
Some products/services may be so innovative and disruptive that they will face extreme resistance regardless of their timing. However, your strategy when releasing this product, or service, must be extremely well prepared.
Never be discouraged if there is already a player in the market you want to enter — AirBnb was not the first platform with its idea — just be ready to fight for your market share in a smarter way.
For every failure, there are multiple lessons. For every successful company, there were multiple failures before it. Startup life is not the life for somebody who is not comfortable with failure, or for somebody who is impatient.
Is it for you?
Thank you for taking the time to read my article. For any questions, comments, or concerns please reach out to me via LinkedIn or email (marcechaman@gmail.com)
