
Lessons learned from 10 failed startup ideas - kristapsmors
http://kristapsmors.com/2014/11/25/lessons-learned-from-10-failed-startup-ideas/
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fivedogit
By now, everyone is aware that cloud computing (among other recent
developments) has drastically reduced the cost of starting a new business,
both in time and money. What's not so well known is that this has changed not
only how cheaply and quickly businesses can be started, but also _how_ they're
started. Rather than draw up an executive summary and business plan, talk to
advisors and research the market, it seems like nowadays folks just say "fuck
it" and put their foot on the accelerator from day one.

Even those who form a team and raise money are doing this. It's not just the
bootstrappers. For instance, I can name 3-4 people in my admittedly tiny
sphere who had an idea, raised significant amounts of money, built a product,
promptly failed, then pivoted multiple times before running out of cash.

It's as if starting a business has become _so_ easy, that it's easier to just
do it and see what happens rather than invest any kind of time and effort in
researching the market first. This shoot-first-ask-questions-later attitude is
spurred along by stories of huge multi-billion-dollar companies being born out
of half-assed "so what now?" pivots. (See Twitter.)

In my experience, it's ok to do this once or twice because in your first at-
bat, you don't know what you're doing anyway, so stopping to assess a market
is just a waste of time. Put a year or two into something, get a feel for how
it's done, and if you don't turn into Mark Zuckerberg (home run on first
shot), you'll be better prepared to assess the validity of future projects.
(That said, the best of my 4 businesses was the first, so there are
exceptions.)

While I admire his entrepreneurial spirit, the author of this article (and his
partners?) seem to have taken the "shoot first" philosophy a bit too far. 10
startups in 7 years seems extreme to me. The optics of it, from a potential
investor's perspective, seem negative, too.

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rtpg
The best advice I've heard for "shoot first" people is to sell your product
before it exists. If you can't convince anybody to give you money on the
pitch, then chances are that you won't be able to sell it after it's built
either.

Unfortunately this advice doesn't apply well to a lot of consumer, ad-
supported startups , but it would apply well to this guy's "modest"(nobody's
ever given me $250k for anything) success (GroupScript).

More of argument against consumer startups than against this principle.

~~~
fivedogit
"Shoot first" is definitely more widespread (and probably has a better chance
of working) on the consumer side.

I have done it on the enterprise side, though, and the experience wasn't all
bad. I built a face recognition system to spot TV reporters on the air and
auto-tweet. It was a "neat"-enough idea that I was able to get 3 TV stations
to run pilot programs. In the end, even though it doubled traffic to the TV
stations' live streams, it turns out they barely make any money that way and
unflattering screen shots irritated the reporters. You can argue that I should
have researched harder up front, but if 3 different top-15 TV groups
representing 125+ stations were willing to try it out, it wasn't far off. It
was close enough to a big score and took so little time (1 year) to iterate,
it was worth the try.

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xmmx
It seems like after the first startup, you realized that Lativa is not a good
market for startups. And then you went and created 9 more in Lativa and
learned the same lesson over and over.

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kristapsmors
Thanks for the comment! My favorite so far :) And partly true as well.

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butler14
all this work seems to span 7 years, and your only significant success was
$250k (split ~7 ways) - ouch.

definitely some interesting stories and some ballsy attempts - albeit that
there was probably too much focus on opportunistic copy / pasta ideas and
capitalising on Latvia's lack of search competition, rather than meaningful
value creation.

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kristapsmors
I guess this is a matter of perspective, couple of years ago $250k looked like
success to me if you take into account that salary for a developer in Latvia
was about 1,5k usd per month, and the profit was split 3 ways. And actually I
see getgamers.eu (ad network for gaming sites, profitable since Jan 2013) and
maxtraffic.com (1.2 years old, will be profitable next month) as my success,
both are still active and growing, but did not mention these in the blog post
because they have not failed.

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duckingtest
Why are (were?) you so concentrated on Latvia? That's like starting an online
business limited only to the inhabitants of a middle-sized city.

Given your energy, I'm certain you will create something big someday.

~~~
kristapsmors
Thanks! In the beginning I had no experience and ambitions, and did not even
think that Latvia could be too small, but since 2012 all new ideas/projects
are built with larger markets in mind.

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knivets
The main conclusion you can draw from this story is that you should read,
learn, research and think more before doing something, not after.

~~~
icu
I think this entrepreneur should be given a little bit more credit than your
post suggests:

1) He is willing to share his experiences which I think is brave and should be
applauded.

2) He is obviously learning hard won lessons which I think are the best kind.
I certainly learnt more from my business failures than successes.

3) Based on his HN comments he seems to have had two successes out of 12 tries
(assuming 10 failures mentioned in the blog plus the 2 other tries that are
still alive). I think this isn't too bad.

4) He has a location disadvantage. Sure you can argue that the Internet levels
the playing field but I don't quite buy it. I don't know for sure but I
suspect that Latvia's tech start-up community is nascent compared to other
geographic locations. I argue that start-up culture and knowledge are highly
valuable and while the Internet can help to transmit this I believe that,
"being there is everything".

If I would throw in my two cents in I would kindly suggest to this
entrepreneur to:

1\. Keep going and maintain momentum

2\. Build up a network and start finding complementary team members, and

3\. Focus on hard/valuable problems.

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kristapsmors
You are right about Latvia tech start-up community - before 2012 we had only 1
monthly meetup group, and only later TechHub Riga - a co-working space for
start-ups was launched, and now it is expanding, and other places are being
opened as well. So basically the start-up community is active here for about 3
years.

Thank you for the tips.

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mikeleeorg
I sent this article to a few entrepreneurial-minded developer friends who tend
to build first, research/think/plan/market later. And to be fair, that's how I
used to be too. Startups need builders, but
researchers/thinkers/planners/marketers are just as important, if not more so.

~~~
pault
How do you research a market from the outside? Especially in digital/saas
products where the barrier to entry is already low, it seems to me that the
successful people don't want to give up their competitive advantage by telling
the world how to reproduce their business model (for good reason).

~~~
icu
Hi pault,

The way I would go about it is:

Start talking to potential customers. Find out how painful and valuable the
problem is. Find out if they are currently using some other solution to the
problem (your competitors).

Approach an industry organisation, if there is one, and talk to them about the
problem, who has any existing or new solutions and find out if they have
market research from their members.

Just a comment about the above two points, you don't have to pitch your
specific solution to the problem but I would still leave the door open when
you are talking to people and say something like, "if I were to come up with a
solution that would do (insert features and benefits) would you be interested
in talking further?" If the problem just isn't perceived by your customers to
be painful or valuable then I would move on.

Now assuming the pain is sufficient and a solution is valuable then start
looking at the economics of the business and start 'building the market.' What
I mean by that is start with some assumptions about customer characteristics,
for example demographics, and start putting some numbers together in terms of
total market size. Try to do this from different angles and use different
assumptions.

Then start playing around with what you think your cost and profit structure
would look like with different business models. Think about what your cash
burn rate will be and what sort of adoption you will need to hit a 'cash
neutral' and break even scenario.

Then start applying this to your 'whole of market' model that you did before
and start thinking if it makes sense. Do you need 1% or 0.0001% of the market
to start adopting your solution? What might it cost to acquire those customers
in terms of time and money? Start thinking about how that relates to hitting
your 'cash neutral' and break even scenario.

Take a step back. Does this make sense? How much work is involved? How much
capital are you going to need to achieve this? Then multiply that by say 4-5
times to give you a margin for error.

Now start thinking about post 'cash neutral' scenarios where you are capturing
different rates of the market. How much do your costs ramp up? What is your
marginal profitability? What does this equate to in terms of return on
capital? If the returns are low then forget it. Investors want you to return
their capital plus a big fat profit. If you don't think you can grow a big
enough pie so you can get a slice of it that will satisfy you then forget it
and find another opportunity.

If things look like they are stacking up well and you got a good story to sell
to investors then good luck. Raising money is a bitch. Assuming you manage to
get enough then things get harder because you will now have to execute within
the cash 'runway' you have been given and well the rest at that point is up to
you, your team and luck.

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jdangu
Thanks for sharing! Can you tell us more about MaxTraffic.com?

~~~
kristapsmors
It is a service for e-commerce sites that helps increase conversion rates by
showing engaging messages/banners when visitors are about to leave.

