
I returned home from Silicon Valley and built a failed startup - aherlambang
https://medium.com/@aditya_herlamba/i-returned-home-from-silicon-valley-and-build-a-failed-startup-d9a2c5911d82
======
gexla
I couldn't imagine doing something like this in the Philippines, which I'm
guessing is much like Indonesia.

Nobody has credit cards to buy anything online. Credit card alternatives
haven't gained traction. People use cheap alternatives to Western Union to
send money.

Nobody surfs the web except at internet cafes. And at internet cafes it's
either FB or homework. Nobody aimlessly browses when they are dishing out
money every hour.

Nobody uses apps. Even those with smart phones only use FB, Instagram, games
and a handful of other messaging apps. Even if they did want to use apps,
cheap smart phones are out of resources after installing FB and the rest of
the above mentioned.

No matter the phone, everyone uses SMS.

The postal system is shady. I never order anything online. I don't even have a
proper address. I don't know how the postal system is able to deliver
anything.

There are exceptions to all of the above and these are likely your target
market since they likely have money. But this is a small percentage.

And speaking of money. Nobody has that either.

I noticed the post mentions there are tons of Instagram shops. I have no
experience with this, but the number of shops seems irrelevant to me. Anyone
can start an Instagram shop, post pictures once in a while and largely be
invisible. It seems that much more important would be the above logistical
issues which would also be important in Indonesia.

I imagine people selling through Instagram are much like the street vendors.
They see no problem with being the 4th guy within an hour trying to sell you
the exact same things as the 3 guys ahead of him while you are trying to eat a
meal and drink some beers. They just don't try very hard. But any money beyond
whatever income they have is better than nothing.

A place like the Philippines is all about improvisation. I don't see how you
could improve much on the Instagram / FB shop model. In the vast majority of
cases, there is probably nothing there to improve because there is no
activity. For those who do get it to work, it's probably good enough.

~~~
AznHisoka
Just curious, what is consider a high-end monthly salary (in pesos or USD) in
the Philippines?

~~~
tonydiv
Average monthly wage is around ~$200-$300 [2014].

[http://www.dumblittleman.com/2014/05/what-is-the-average-
sal...](http://www.dumblittleman.com/2014/05/what-is-the-average-salary-in-
the-philippines.html)

~~~
AznHisoka
I know about these "stats" online, but would love to hear what someone living
in the actual country says.

~~~
throwaway_xx9
My friend who lives in Manila says $1,000/month for call center manager,
$2,000/month for programmer, $3,000/month for eng. manager. Any of those
people can afford to buy an iPhone, car and house in a few years, and they use
Uber and ecommerce like a digital native.

~~~
gexla
This seems about right. The tech industry is one of the few industries where
you can break out of the ceiling of the local economy.

Otherwise, what might be (or once was) considered a solid middle wage job back
in the U.S. is probably closer to what the call center manager is making.

------
wtvanhest
> This just sounds so wrong to me. If you have a good product and it brings
> value, then others should be able to value it by paying you back for your
> product or services. Period.

I completely understand this philosophy, but an attempt at building a two-
sided market place is very likely going to require outside investors. This
opinion that you need to be profitable from day one has been proven wrong
repeatedly and while some 'unicorns' will fail or become less than worth $1bn,
their achievements are still very real.

It is 100% OK to want to build a business, but entrepreneurs should be
flexible enough to understand when it is appropriate to raise money, or make a
product that does not generate profit up front.

For the record, I also attempted to create a two-sided market and I also
failed. It was super painful and I hope you move on quickly with some really
solid lessons learned.

~~~
aherlambang
We did raise funding it was around $100k-$500k (not going to disclose the real
amount). We realized that we needed some boost to test the market overall, but
after 1.5 year of using that money and got to 30-40k UV per day, the path of
profitability from that point seems far away, numbers just don't add up.

It gets worse as I stated in the article that new startups in the same area
are raising behemoth amount of funding. The funds were used to attract and
subsidized sellers and buyers.

~~~
james-watson
I sense a lot of naive optimism in your approach.

You understand the goal of any business, especially an internet business, is
to become a monopoly right?

Look at Amazon, Google, FB, etc. They only became profitable once they became
monopolies, and thus could set their own prices based on whatever metrics they
chose.

The reason startups take outside funding is so that they can become a monopoly
in a given market, and then charge customers whatever they want.

Don't fall for the marketing hype. Startups don't save the world. Scientists,
doctors and inventors do. Startups just make a few people very, very rich at
the expense of their customers by selling them mostly crap they don't need or
want, using psychological manipulation (i.e. marketing).

Once you understand that this isn't some noble quest, you can finally begin to
understand how to play the game (of thrones).

~~~
aherlambang
I would have to disagree with the goal of any business is to be a monopoly.

There are lots of examples of successful business out there who did not
monopoly the market.

I'd also have to disagree that startups sell mostly crap they don't need or
want. Uber & AirBnB definitely provides something valuable that most humans
would appreciate of.

If you're talking about products such as Snapchat or Instagram, that's a
different genre of product. It's a vitamin type of product not a pain killer.

~~~
srunni
> I would have to disagree with the goal of any business is to be a monopoly.

> There are lots of examples of successful business out there who did not
> monopoly the market.

Such as? If you cannot eliminate competition within your given market,
marginal profit will eventually be driven to zero. The internet amplifies this
challenge because it is not geographically constrained (minimal transaction
costs) and software amplifies this challenge because of zero marginal cost
(creating massive economies of scale).

You can find more on this in the works of Michael Porter
([http://amzn.com/0684841487](http://amzn.com/0684841487),
[http://amzn.com/0684841460](http://amzn.com/0684841460)) and Peter Thiel
([http://amzn.com/0804139296](http://amzn.com/0804139296)). _Zero to One_
discusses how many seemingly successful non-monopolies are actually either
monopolies pretending not to be one or non-monopolies that are not as
successful as they portray themselves to be.

------
educar
Loved the article. I do not agree with the assessment that Silicon valley
startups compete based on better products. In fact, it's quite the opposite.
All the popular ones you have heard of have taken large amounts of money and
subsidize their products a great amount. If you are a less funded startup, it
is impossible to complete in such a scenario. In fact, you absolutely have to
get lots of funding first, you have no choice.

So yeah, you have the same problem everywhere and not just indonesia. At the
end of the day, all is fair in love, war and business.

~~~
riquito
I think you're both correct (or wrong ^_^). Silicon valley startups compete
based on better products, but against well founded competitors.

~~~
educar
well funded competitors you mean :-) ? To be clear, I don't think silicon
valley products are any better/worse than other bootstrapped products out
there (ie. I was just speaking relatively). It's just that given the massive
amount of $$, lots of effort goes into giving things for free and great
marketing.

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kaitai
I am a bit surprised that the article doesn't have any introspection about
knowing the market (or not). It seems like the reasoning was: we want some
money; women have money; women buy clothes; let's do fashion. It doesn't seem
like there was much of a value proposition for the customer. Maybe the
customer _likes_ browsing Instagram. Maybe the customer asks all these
questions (stupid questions as well as clarifying questions) to gauge how
quickly a return would be dealt with if desired, to establish some info about
company knowledge and responsiveness. (Buying clothes online is risky in terms
of fit and fabric quality, especially with resellers.) How could a startup
cater to the features of the marketplace instead of fighting them?

~~~
eterm
I think people really underestimate the value add from "easy, free returns"
for clothes shopping.

I remember using ASOS 10 years ago and at that time most online retailers had
poor returns policies. (Legally all must have a 14 day returns), but ASOS went
further with free returns and even provided shipping labels and bags for
returns with the original shipment.

I think my then girlfriend returned maybe 70% of everything ordered, it was
just how it worked. You'd browse, impulse purchase then see how it looks and
probably return it.

As a result they took almost all of her actual purchases. And because they
provided shipping bags/labels/etc they no doubt reduced the turnaround time so
they got stock back quicker and reduced the chance of lost or damaged stock
they couldn't then sell on.

I don't know but I hope that most retailers have caught on and provide similar
now.

~~~
isoos
My experience backs yours. While living in the Bay, my wife bought most of the
clothes through Macy's online interface, and we brought them back to the
stores (we kept more than 60%).

Moved out of the US, and we do miss the convenience of that kind of shopping,
and would love to use similar services, even with premium.

------
edwinnathaniel
To the author: I really respect you for building a startup back home but this
article feels more like a rant all over the place though.

It also sounds like you don't really know the market in Indonesia and you're
trying to replicate what you know about US/Silicon Valley market back home as-
is and didn't achieve the result you were hoping for (I haven't seen anyone
done that and be successful either).

I know an owner/co-founder of a startup in Indonesia and they have diverse
channels.

Having said that, I wish you more success down the line.

------
dkarapetyan
Is he being ironic

> I really hate to say this, but I am quite disappointed with the startup
> scene in Indonesia. In Silicon Valley, you compete fairly with each other
> through creating better products and services. People highly respect good
> products and services. In Indonesia, you compete with each other through
> $$$. The one who has the most cash in their bank will most possibly win the
> competition.

All the hypergrowth startups are burning piles of cash with almost no
sustainable way out.

~~~
jldugger
Indeed, I remember the 90s being an era of random free shit for consumers, and
I'm sure the cost of customer acquisition was high. Its not like that era was
known for it's sound and stable business practices.

------
seibelj
Thanks for your write up. After my own failed attempt I came to the conclusion
that any product based primarily on aggregating products that others sell is a
failed model. You are a middle man in an already thin-margin industry and are
competing directly with shops (who are incentivized to have customers come
directly to them and bypass you) and other aggregators. It would be better if
you became a drop shipper and sold the products yourself. Much more control,
and the audience you were building with ads would have stayed.

~~~
w1ntermute
> any product based primarily on aggregating products that others sell is a
> failed model

What about eBay?

~~~
seibelj
eBay is not forwarding you to third-party websites in order to purchase
products. They are listing products directly. The company the author was
creating forwarded you to someone else. In return the store paid a monthly
fee. Essentially this company was targeted lead-gen, and stores paid a fee for
them to do the work and drive traffic.

~~~
w1ntermute
My bad, I didn't realize the OP's company was forwarding traffic to a 3rd
party. That's indeed a bad idea.

------
godzillabrennus
Building two sided marketplaces is no joke. It's really tough.

If you decide to start something and it's a two sided marketplace be ready for
a rough time.

~~~
aherlambang
Apart from the rough time it needs a very long time to get the ball rollin..
it's even tougher to do in a market where the people are not ready yet

------
skewart
Thanks for sharing your experience.

It sounds like you were facing a really tough competitive landscape. Throwing
in the towel sounds like a wise thing to have done.

One thing I didn't totally get from the post is what exactly you were trying
to improve about the shopping experience? It seems like there is a lot of room
for improvement for both buyers and sellers. Could you have vetted sellers
and/or tried to answer inane questions from buyers yourselves (acting like a
web cache for popular requests), saving both parties the pain of waiting for a
response? What if you offered some kind of reputation service? I'm sure you
thought about this stuff, and I'm not saying any of this is easy. I just would
be curious to hear more about how you thought through finding real, sticky
product-market fit.

~~~
aherlambang
Thanks man!

From the buyer perspective we have made a special one-on-on online coaching
session, where they can ask us anything for feedbacks on how to improve their
shops. We gave a lot of suggestions to them but most just didn't take any
action afterwards.

We do have a reputation service. We verified each and every store by taking in
their personal government ID. We show case their customer testimonials in
their own shop page.

Two crucial thing that we can't play with, price and quality of product :)
Which is two of the most important thing needed for someone to make a
purchase.

------
matrix
This is interesting to me more because it's rare to see a story about someone
building products for the Indonesian market, which is very large. To the
author: I'd love to see an article with more about some of the challenges and
opportunities you see in Indonesia for startups.

~~~
aherlambang
I wrote about some challenges in doing growth hacking in my other medium post
:)

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calcsam
Well done. It is better to have tried and failed than to never have tried at
all.

If you want to have better odds next time, I'd advise you to read Zero to One.
Think about what your secret is. What are you trying to do, what do you know
about, that no one else knows? Then do that.

When you see lots of competitors, it's a pretty good bet you haven't found a
secret.

~~~
aherlambang
Always wanted to get a held of that book! Will definitely read it

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Animats
__" fashion social commerce marketplace."*

"Fab" tried that. They were based in NYC, and blew through about $200M in
venture capital before tanking. Did the author of this article know that? Did
whomever funded him?

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antoniuschan99
Check out Lazada. It's pretty popular in that region

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johanneskanybal
I think you are confusing startup with business, there's nothing wrong with a
business if that really needs to be pointed out..

------
lossolo
You were not first and will not be the last.

~~~
aherlambang
I hope I am not... we still see new marketplaces coming up every day

------
HoopleHead
built

~~~
aherlambang
thanks, it's fixed.. my english is rusty

