

How My Start-Up Failed - parenthesis
http://www.stanfordalumni.org/news/magazine/1999/julaug/articles/condoms.html

======
fallentimes
_Though I had a Stanford MBA and regularly consulted on multimillion-dollar
projects, I didn't know the first thing about starting a business._

Truer words have never been spoken.

~~~
timr
I'm saddened that the two highest-rated comments are snarky comments about the
man's degree. He's telling an embarrassing story in good faith, and the best
we can do is insult his education? Classy.

~~~
fallentimes
Insult him? It was the author's own words; I was agreeing with his
realization.

Before doing a startup, I (fallentimes) _used to be_ the consultant on
_"multimillion dollar projects"_. I agree with regards to the second comment
though.

~~~
timr
The author clearly wrote that sentence to express the irony of the situation;
your comment contributed no additional information, except to lay on the
sarcasm.

Point being, when there are a thousand different insightful things that one
could say about the _content_ of the story, a seven-word zinger about the
value of his MBA degree doesn't strike me as a particularly constructive
comment.

~~~
mattmaroon
If you think genuinely agreeing with something the author said is sarcasm, you
should look the term up in the dictionary. I don't know whether the comment
added value or not, but it certainly wasn't sarcastic and almost certainly
wasn't insulting.

~~~
timr
If your dictionary has rules for sarcasm, I think I _would_ like to see it.

~~~
mattmaroon
<http://en.wikipedia.org/wiki/Sarcasm>

"Sarcasm is stating the opposite of an intended meaning especially in order to
sneeringly, slyly, jest or mock a person, situation or thing."

I don't think agreeing fits.

~~~
timr
Well, if wikipedia says it, it _must_ be true.

(See that? Agreement.)

~~~
timr
I see the humor police are out in force. For those of you who are unable to
resist clicking the little down arrow on comments that seem vaguely negative,
let's be clear: the whole point was to _demonstrate_ that it's possible to be
sarcastic while still agreeing with someone. Yeesh.

In particular, when you "agree" with something that you have quoted out of
context, it's quite easy to paint it with the opposite of its intended
meaning. That's what the OP did -- he took a remark that wasn't intended to
disparage the MBA degree, and turned it into something that did.

That's called sarcasm, whether wikipedia is your authoritative reference on
the subject, or not.

~~~
fallentimes
Not like it matters at this point, but I was generally agreeing with the
author because I used to be him. However, as noted in my comment above I
should have elaborated.

It's always interesting when people declare what someone else is saying or
thinking or trying to convey instead of just asking them to clarify :).

~~~
timr
Well, regardless of the original intent, it's probably a pretty safe bet that
people were voting for it because they _perceived_ it to be a bash on MBA
degrees.

My main gripe is with anti-intellectualism and other forms of low-brow
snottery in general, not so much with your specific comment.

~~~
fmora
>>perceived it to be a bash on MBA degrees How do you know????

------
tom_rath
Wow. How could a "Stanford MBA" not even know the basics of marketing? If this
fellow had clearly identified his market before specing out and ordering his
product he would have completely avoided his first-iteration fiasco.

I also suspect a bit more research would have shown that empty cases (which
the customer would fill with their own product) would sell just as well.
Instead, he plowed on through to obtain more inventory (wasn't discarding
expired inventory the inspiration for the product in the first place?) and
meet regulations (instructions, etc.) that he probably didn't even need.

Do your marketing up-front, folks. A well-designed product that doesn't
address a market isn't much better than this guy's box of greasy, plastic-
covered condoms.

~~~
nostrademons
It sounded like he did identify a market:

"just in time for the San Francisco International Gift Show...I soon began
sales calls on buyers ranging from novelty shops and porno stores to gay
rights groups and Planned Parenthood clinics...People began buying my key
chains. Small gift shops in small towns bought dozens and dozens and regularly
reordered"

His failure seems mostly economic: his financial projections didn't include
all the overhead involved in importing the keychains, getting them ready for
sale, and shipping them out to retailers. And much of that was because he
didn't know all those things were required.

He would've been saved by researching the supply chain better, not the market.

~~~
tom_rath
Not quite. The product which met with some success was his second iteration:
"Retailers told me that what the customer really wanted was a key chain with a
usable condom."

Although research of his supply chain was extremely bad, it doesn't seem as
though correcting it would have saved his first misdirected attempt at a
product.

~~~
nostrademons
It would've shown that his business idea was not economically viable,
regardless of whether people wanted the keychains, before he had invested $10K
in it. If there's no way a business will work, it's better to find that out
quickly and cheaply than to invest more money in it.

~~~
menloparkbum
This is harder than you would think. I took a year off from programming to
help a friend market and sell actual physical stuff.

Often times a product that gets well received when you have a few samples made
doesn't sell at all. Something you think kinda sucks and is just a 'filler'
product in your line up turns out to be the most popular, and you run out of
stock. Something sells well, you can get more made, so you order 500 more
units, and then all of the sudden the product is not cool and nobody wants it
anymore.

~~~
nostrademons
Oh, I know. My erstwhile startup seemed like a hot area when we began it a
year and a half ago, and people in our target market said "Thank God" when I
said what I was building. Now, nobody seems to care, and none of our
competitors took off either.

I'm saying that _even under his best assumptions about the market_ , his
product was not profitable. He ended up getting customers after all, but even
under generous volume and gross margins, it couldn't cover overhead.

~~~
eru
Perhaps he should have tried sell the key chains for 5$.

------
pavelludiq
A friend of mine has one of those with a condom and a cigar on his wall. It's
been there for years, he isn't that good with girls and doesn't smoke.

------
prakash
It's called a Master of Business _Administration_ , not Master of Business
_startups_ for a reason.

~~~
dmix
I am finishing a course called "Business Admin. - Entrepreneurial & Small
Business Management" and I still feel that the majority of the classes are
corporate focused, especially marketing. Almost everything they teach is in
the context of a mature and competitive market. We never hear about entering
new markets.

~~~
louislouis
If they had that kind of knowledge they'd be out there doing it themselves. I
don't think anyone knows about entering new markets cos they vary so much.
It's down to instinct and dumb luck I believe.

~~~
jon_dahl
Luck and instinct are important, but there's definitely skill, knowledge, and
experience as well. Fail three times and you'll have a much better
understanding of what it takes to make a startup work.

------
DaniFong
I don't know why he didn't raise the price. It's the obvious thing to do if
overheads are eating you up, and he could have sold the things for 3 or 4
dollars. Or more, over the internet, if he'd mischievously tagged 'shipping
and handling' to the price.

~~~
helveticaman
Same here. I think people would have payed ten dollars for his product.

------
dabeeeenster
I liked:

"I would wake up wishing that I had followed my classmates into something
simple and easy, like investment banking.".

Don't speak too soon...

------
h34t
Wow, was he ever over-paying.

But the story reminds me of my first searches on Alibaba: "What? you mean I
can buy cigarette lighters for THREE CENTS EACH???"

(Of course, the MOQ was a million. What would I do with a $30k sea container
of lighters? Go door-to-door at gas stations?)

------
furiouslol
I thought his biggest mistake was thinking that he can sell millions of these
keychains with ease. Since the only people capable of buying those volumes are
the big retail chains and not those small mom-n-pop stores, he should have
gauged the potential response from these retail chains prior to importing the
key chains.

I would think that it would be obvious to the laymen that such a product would
appeal only to the small novelty shops, so there is a ceiling to how much you
can scale this business.

------
dustineichler
loved this line "You're not in business until somebody sues you."... surprised
no one commented on this yet.

------
netcan
This bring up an interesting question.

Why commit to a specific product? Why not just by up a few boxes of different
funnies & see which sells? Condom keychains are funny but hardly
revolutionary. It's not going to be a product that sells it self, hires its
own consultants & negotiates with Wal Mart while you sip Tequilas. What he did
was establish a wholesaling business with only one product, where he had to
pay cash & sell on credit.

Not knocking the effort, but designing/sourcing/manufacturing apples is not
the same as selling apples. No reason to do both. Aren't you better off
selling apples & pears & not bothering with growing at all?

~~~
ghshephard
So, I've been in the valley for about 10 years, and at least half the startups
I've worked for, (and almost _all_ of the startups that my friends/colleagues
have started) - have had far worse obstacles, challenges, and difficulties to
overcome than this individual seems to have run into. He has described the
first two chapters in a 50 chapter novel of building a business.

I don't understand why he quit just when he started to get a bit of traction.
He got past his first lawsuit (it appears, and most employees of a company
aren't aware of how much legal and sometimes government friction their is
involved in running a going concern), he started to discover how important a
D&B number (or a proxy thereof) is for customers who buy from him on credit,
he overcame some serious product quality issues, and began to understand that
running a business is hard, hard, hard work. The story had just _started_.

And then, he quits.

Now is the time that he needed to start networking with other manufacturers
(or wholesalers, or retailers, or product designers - or whatever he wanted to
be) and understand how to improve his product design, his sales channels,
etc...

It sounds like he limited his distribution to less than a hundred
organizations. Certainly less than a thousand. The type of product he had
_required_ knocking on tens of thousands of doors, calling, emailing, mailing,
and reaching out to people who could distribute it.

I don't see where he hired his first employee, that would start to take over
some of that manual labor, marketing, calling, packaging, delivery, etc...

I didn't get a chance to read about the technical improvements that he made in
shipping, or even any of the passion that he had for selling. I realize this
was a "All startups fail for different reasons" + "An MBA doesn't mean you
will be successful in a startup" type article, but reading between the lines,
I wonder if there was an even better, "I didn't really fit the Startup
Character" article - despite some initial victories.

Compare that to an entrepreneur who is passionate like Joel Spolsky - even on
a completely trivial side project that I suspect is mostly part of his
recruiting efforts for FogCreek he keeps blocking and tackling and overcoming
obstacles (check out
[http://www.joelonsoftware.com/oldnews/pages/December2005.htm...](http://www.joelonsoftware.com/oldnews/pages/December2005.html)
for the summary of one)

Anyways, I do enjoy reading "How my startup failed" stories as much as "How my
startup succeeded" - but I don't sense that his startup failed. He just quit.

------
helveticaman
I would have marked it up way more than 150 percent; I would have charged USD
10.00. If this guy could make USD 9.50 off each condom, instead of USD .75, he
might have done much better.

Of course, I don't think this guy's a bad businessman. I'm just saying I would
have done that one thing differently. I'd say that, latex notwithstanding, the
demand for condoms in the right place and the right time is very inelastic.
Shit, you could charge $300 for a condom if you were in the right place in the
right time. Which place and which time those are I will leave to your
imagination.

~~~
gdee
You could even charge way, way more than that if you could somehow sell them
retroactively.

------
thedob
There are a couple of comments on here to the tune of "Why didn't he charge
more?" or "Why didn't he sell them on the internet?"

The article was written on an alumni web site, and the author lists his MBA as
attained in 1984. It's likely that he attempted this business shortly
thereafter. Probably would've been harder to sell on the internet 15 years
before Viaweb. May have been harder to sell key chains for more than $1.50
too, though who knows.

------
lsc
I'm still not sure why it failed.

it sounded like he just got tired of working on it. I mean, for a job like
that with lots of physical schlep work I'd budget for a few people to handle
the physical labor.

Maybe $10,000 was a hard budget limit? I dono. it sounded to me like he should
have stuck it out for a while longer, maybe after finding an underpaid lacky
or partner.

------
apollo
It sounds like he could have made it a success if he streamlined the
production process and kept the cost per keychain down.

~~~
JeremyChase
I think it could have been a success, but I do wonder how much a one-off
product like this can really make. There is money in novelty items, but I
think the only ones making real money there are people who already have
distribution and willing markets.

------
mattmaroon
I find this extraordinarily interesting, because I've come to the conclusion
over the last year+ that I would do a non-software startup if I ever do
another. I have all sorts of invention ideas (one somewhat similar to this
actually) and figured I'd either run one of those or a restaurant idea I have.

------
Alex3917
So he knowingly sold and gave away condoms even after learning they were
defective and had been exposed to air? What a douchebag. Why is this guy not
in jail?

~~~
seano
I think they were a novelty item and not intended to actually be used.

~~~
Alex3917
"Then came the fine-print details. According to the Food and Drug
Administration, I needed to include a "how to use" guide with each key chain.
I realized I needed insurance in case some fool inadvertently Bobbittized
himself with my product during a drunken tryst."

"When my inventory dropped below 500, I took the remainder to a local advocacy
group for prostitutes."

~~~
nonrecursive
Following the article, the condoms he sold in this way were actually bought
from stores and placed in a keychain condom holder. Most likely the condoms
stayed in their individual packaging.

~~~
Alex3917
My bad, I apparently missed that sentence.

