What can we learn from startups’ post-mortems?

Enterpreneurship

Do you sometimes feel that the startup industry is one big bubble?

We hear about millions of valuations and investments, and on the other hand the vast majority of startups are failing.

Most startup founders themselves are perceived with a grain of salt to say the least. Many people say that the comedy series “Silicon Valley” is in astonishingly high correlation with the reality.

Even though many past and present startup projects fail, we can’t blame the whole startup industry for it. In many articles on Astra.Software website, we emphasize that the amount of risk taken by the startups is significantly higher than by the owners of traditional well-established businesses.

Fortunately, more and more people who have failed are willing to share their experiences despite the natural human tendency to only brag about the success.

Analyzing real stories you can identify repetitive patterns. Thanks to this realization, reports and powerful info-graphics are created. The CB Insights study is the most widely cited, highlighting 20 major causes of failure.

The general root causes of failures are logical, but they do not speak to our imagination and will not cause a paradigm shift so much-needed for a change to occur and sink in an entrepreneur’s mind. In this article we mention a few real startup failures from around the world.

Inadequate market need

The problems are obviously related, but the lack of sufficient market demand is often the biggest and fundamental common denominator. If the product was picked up by customers then in many cases despite making other mistakes the project would be resumed. Unfortunately, the absence funding from customers makes it hard to survive in the long run.

One of the best examples is Gigger – an Australian application aimed at facilitating the employment of local musicians. An Airbnb for the music industry.

Startup was supposed to be a tool used by music agents, or intermediaries. Such a model was never properly tested, resulting in the service being fully utilized by one of the co-founders.
It’s not enough to only rely on potential interest from future users. Within the first 2 weeks of releasing an MVP, Gigger had 150 registrations, but no one has opted for a paid account. Anthony Manning-Franklin:
“I called a few booking agents to have a chat about their needs. The thing is, everyone roughly knows what you want to hear in this context. ” 

The Gigger lesson clearly shows us that the startup should get a source of revenue before the investment is made to move from the MVP phase to the full product.

Running out of cash

There are many sources of financing available today. Especially in Canada we have government funds available through programs like SR&ED or IRAP, as well as many Venture Capital funds.

Even the largest amounts can end up being spent in the wrong way however.

An example of a startup who openly admits to improper spending is Everpic. For a $ 2.3 million budget, up to 1.4 million was spent on developers and designers who were to create the perfect product. The final version of the application was released after a year and a half. When this happened, it was time to build a suitable user base for further development.

Despite creating a beautiful application lack of care for the business side of things made the entire project implode. The purpose of every startup is to meet the needs of users and monetize by doing so. Everpic failed to cash-flow the current operational costs, as well as lost its investors’ patience.

Another Canadian startup Liverides failed due to the same reason. As a Startup founder – Steven Lanhance – mentioned, “the team burned through too much of the development budget, with not enough users to show for it.”

Equal development on several levels is essential to the success of a startup.

Not the right team

For the success of your startup, you need to hire the right people on the right positions.

First and foremost, you need to take care of the development of key business areas, which is largely related to the previous paragraph. Founder of Everpic openly admits to the misconception that there were practically no salespeople and marketers in the band.

Kenneth Svenningsen also mentions problems with the team as one of the key factors in the failure of his Shipbeat project. Although they have managed to solve their problems, “Shipbeat aimed at changing all of them by creating a platform to automate and acquire logistic services for online retailers”

What was missing?

Of the many reasons for the project’s failure (nobody seems to point out a single reason):
“That required hiring entrepreneurial minded people with logistics experience and network to build relations at C-level with the carriers.”That proved impossible to find at our stage.”

Another reason was to properly plan the initial startup phases. Develop it evenly in many areas, primarily in the technical and business fields.

In the stories analyzed for the purposes of this article, the lack of guilt was directed to the “incompatibility of characters” of the creators and employees. Perhaps the recruitment process in my cases was so good or the founders did not want to just scratch the wounds. However, despite the lack of specific stories, it is worth to keep in mind the threat and from the very beginning try to build a team that will work very much with each other. Kickoff blog has interesting information on this topic also.

Lack of passion

In the CB rankings lack of passion occupies the second place in the cause of the fall of startups. Often, however, startup founders may not realize how important this was to their project failure.

This is also due to the fact that this is one of the most personal reasons for the failure of the company, and it is often difficult for us people to admit such intimate mistakes. Sometimes we are in such denial that we convince ourselves that it wasn’t our fault.

Michael from the Echelon Exchange confesses about his lack of passion of even obsession: “I lacked the passion behind my idea. Do not get me wrong, I liked working on Echelon Exchange, but I never really loved it, I never obsessed about it. ”

In Michael’s eyes the problem was so significant that he decided to prioritize it over everything else. Only actual work on the startup has made him aware of the importance of this factor in the success of the project. On one hand, it can result in a failure, and on the other, great passion and willingness to go through all adversities can become a key success factor.

Because of this, any startup project that is set up only for financial profit has little chance of success. In many articles on the Astra.Software blog, we highlight the advantages and disadvantages of taking innovative actions. One of the key shortcomings is the possibility of facing problems with which no one has yet dealt with. Without adequate passion or even obsession, converting problems into solutions may not seem possible.

Summary

In this post, I came up with four possible causes for the fallout of ideas for startups. Of course, this does not exhaust the subject, because each failure is different complex case and may have more than one reasons behind them.

Many mistakes, however, could have been avoided by using commonly known rules. The proven path to maximizing your chances of success will come true. Audrey L on his blog: “The Lean Startup” lays out exactly how to build a new product and maximize its success – starting with an incredibly raw version of a product and then going through endless testing and correction, developing it based on user’s reaction.

You just have to leverage the experience. If you would like to build your valuable startup idea with us leveraging a clear and transparent agile process, then feel free to reach out and boo a no-obligation conference call with one of our experts.

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