Notes from a failed startup. Or was it a hobby?

Perhaps we learn more when things go wrong….this post also could be titled, How to keep your startup from turning into a hobby.

I learned a tremendous amount in 2010 – 2011  about iOS development, but I learned even more about what to avoid the next time I form a startup. Towards the beginning of 2010 a friend and I formed the idea for a startup around a topic we both really enjoyed and know a lot about: travel. Specifically, we wanted to create in-depth guides that enriched the experience of travel beyond the checklist of tourist sites listed in most guidebooks. Our slogan: destinations in context.

My business partner was a domain expert: a highly experienced tour guide who had extensive contact over the years with customers. I had a deep background in technology and management experience in a non-profit environment. We made mistakes by not understanding the unique nature of a startup.

None of this is a list of regrets or complaints. This is not a lament, “If we had only done that, then…” No, this is all about learning for next time.

I do believe that my business partner and I shared a vision of our products and what the  company could accomplish. We were very excited and motivated by that. But I realized too late that we did not share an understanding of the process to grow the business.

There’s a wonderful description of a startup by Steve Blank: “a startup is a temporary organization designed to search for a repeatable and scalable business model.

We had a vague idea of our business model but didn’t put the effort into really thinking through the elements that comprise a business model.

Too much initial attention to branding. We placed enormous effort in devising a brand name. Months (!) of conversations across two continents resulted in brainstorming of nearly a hundred domain names. Finally, I simply gave in and agreed to one of my partner’s suggestions. I didn’t love the name but it worked fine. (So would have about a dozen others that were discarded, but that’s my view.) Somewhere there’s a classic statement, “Your brand is not your logo.” (Or something like that.) Your domain name is also not your brand. It’s an important element but there are so many more things that need deep thought when creating a startup.

Too narrow of a niche requires scaling to many destinations. The problem with travel content is that once you acquire a loyal customer then that customer is not likely to travel again for another year. And then they’re most likely to go to a different destination and probably not to the one other city we were writing about. See a post I wrote, “leisures travelers don’t scale“. We knew we needed to cover other destinations but we both didn’t grasp that the only way to sustain the business was by generating a significant number of guides to many different cities. That simply cannot be done with one or two people writing content, especially if the content is well researched and extensive. We did not understand the need to scale and the resources required. Mainly, we ignored scalability. Of course our startup failed.

Thought we knew the customer. We created a product that we ourselves wanted as travelers and assumed that there would be plenty of others like us that would want the same. I don’t think the product concept is bad even today, but we didn’t explore the product market fit adequately. This also links back to the narrow niche, the urgency to scale, and resources for doing so. We should have examined the possible customer segments and identified if there were products more easily scalable to a broader segment. “But that’s not what we want to do”, is a common phrase when a business is very focused on its product idea and not willing to see whether it really fits the market in a way that can work for the business.

In other words, we were not willing to pivot in our search for a business model. 

Perfecting & perfecting a 1.0 release. Our first product, an iPhone app that provided a guided tour of a prominent historic & cultural attraction in a major city, took almost a year to produce. As the actual developer of that app I can testify that it could have been completed in less than 2 months. I wanted to get a good enough app out on the market and improve it with incremental development while we continued pushing out other products. This was not the kind of app that was going to sell thousands or hundreds of copies in the first few months. Instead, we tweaked the design, the content, and functionality for months. My business partner, who was supposed to be focused on content, couldn’t restrain himself from adjusting every aspect of the design even though we had a professional graphic designer working with us. I ended up having to mediate conflicts with the designer (who was also my spouse). There was a need to create the perfect app, perhaps even the best iPhone travel app ever designed. Really, did we need to do that? In a bootstrapped startup did we need to spend all our resources in this manner?  We were too focused on perfecting the launch release rather than getting it out into the hands of customers, listening to customers and evolving the business strategy. The argument for the extensive 1.0 release ran like this, “If it’s not great, then people won’t buy anything else from us. I wouldn’t.” How did we come to that conclusion? Potential customers didn’t tell us that. It was an assumption without validation.

Admittedly, during the year of developing this product I didn’t work on it full-time, but about 80% of the time. Had to pay the bills with freelance work, plus I had a newborn child. And one month I stopped work completely on the product in order to earn an additional income; that was when the product was 5 months behind schedule. My spouse encouraged me to abandon it completely, but I wanted to finish at least this initial app.

A 50/50 partnership leads to no clear decision-making. We needed a CEO to make decisions, but probably neither of us would have worked for the other. The company would have dissolved within a week. Maybe that would have been the real test of the partnership and how well we would have worked together. But someone needed to guide the business, make decisions, and keep things moving ahead. A startup with 50/50 decision making does not work.

Ultimately, the money ran out. We had made the decision early on to bootstrap this startup and not seek external funding. (No one would have given us funding anyway with this business model.) In the last few months I had prepared spreadsheets with financial projections that would be needed to sustain the business and estimated the volume of sales required to meet those finances. After our first product launched (with sales far under expectations) we immediately moved into developing the next product. We did recognize the need to get multiple products on the market but we just didn’t examine if we had the right product or not.

Just before the end I invited my business partner to discuss a new strategy for the business, a pivot (if you will, though I didn’t call it that). After more than a year and a half of devoting the majority of my time to this business I had no more money left to put in. For me to continue I needed funding. We needed a strategy to continue and that meant a serious rethinking of our business and how we moved forward, particularly how we continued to finance the operation. Rather than rethinking the business my partner suggested that I take a job, save money and come back to work with him once I had a savings. The next week I took another job.

I learned a lot from that experience. A lot was my fault in not assertively pursuing strategies that I knew would be better for the company, but would those have survived the 50/50 decision-making?  Unfortunately, this startup ruined a friendship. My former business partner is still hard at work pursuing the same business. Maybe it’s working for him, but in hindsight, it’s clear that the strategy we employed could only support one person with a very modest residual income. That isn’t a startup, it’s a hobby.

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