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Ask HN: Why did your startup fail?
93 points by red_flags_q on May 27, 2019 | hide | past | favorite | 47 comments

Oh boy! Which one?

Startup #1: we did not recognize the need to bring in the talent we lacked (graphic design). We had an interesting but ugly product in a space where looks were important - had some traction but not nearly enough.

Startup #2: we did some market research, got some interest from prospective clients, got excited and started building our MVP before fully validating the requirements. Spent a lot of effort on a feature that ended up much more complicated than we expected, that in retrospect did not belong in the MVP. Ran out of money / energy and we gave up (too early, I still think).

...around this point I switched to freelancing and let others take the risks.

Client startup project #1: did not do much/any market validation before starting, and had no clear marketing plan. Built and launched, failed to get traction, folded.

Client startup project #2: did not do much/any market validation before starting, and had no clear marketing plan. Built and launched, failed to get traction, folded.

Client startup project #3: did not do much/any market validation before starting, and had no clear marketing plan. Built and launched, failed to get traction, folded.

I can keep going but it's getting a bit repetitive :)

This is consistent with my observation that 80% of startups fail due to a bloated MVP [1]

[1] https://bloatedmvp.com

Can you expand on the lack of market validation? What else would validating include, apart from interviewing users (qualitative research)? What kind of useful quantitative research could one do? The obvious answer I can come up with is building a landing page with a sign-up field to gauge interest, but what other useful quantitative research can one do to validate the market?

"What else would validating include, apart from interviewing users"

Interviewing (prospective) users would actually be a good start. Some of the B2C projects I worked on did not do this until after launch.

B2B - I've worked on projects that did not have a single prospective client lined up before development started (let alone before MVP launch). I think there is a certain optimism entrepreneurs have in the face of rejection - sometimes it takes the form of "no one is interested right now, but we just need to have an MVP to show them and then they will become interested!"

Here's an easy low bar that most startups can't clear in my experience: https://medium.com/@lironshapira/how-to-sanity-check-your-st...

> Built and launched, failed to get traction, folded.

What should be the next step after failing to get traction?

Ideally pivot, if you have the runway.

If the initial idea was way off it might be hard to pivot within reasonably short time/cost.

If the plan is self fund - launch - show traction - get funding, then the "get funding" step probably won't happen so the next step is folding.

If you're looking for potholes to avoid when starting a company, I'd encourage you to read Inspired by Marty Cagan. Not a startup book per se, but a fantastic read on how to eliminate the 4 types of risks for any product (value, usability, feasibility, and business viability risks).

Not the OP but always thankful when relevant books get recommended. Thank you.

We were super excited by the technology and didn't focus enough on what customers actually cared about.

Relatedly: we addressed a need all the CIOs we talked to were in their top 3 concerns. But what we forgot was concern #0: not losing their job. Basically: if you use startup S's product and increase sales by 5% you're a hero, but if startup S's product fails you can be fired. While if you stick with your current crummy approach, if it fails, well, it's the industry standard. It's worth costing the company 5% of revenue to make sure you don't lose your job.

The "Nobody ever got fired by buying IBM" factor

Oh god this is so similar to an experience I had. Nothing kills an enterprise deal faster than bringing additional risk for marginal improvements.

"Abandoned" might be a better term than "failed" in my case. I founded two bootstrapped startups.

In both cases, I had an idea for a product that didn't exist yet and that I was confident I could build. In both cases, I failed to appreciate how quickly other well-funded startups would show up and beat me to market with products that were more robust than anything I could build on my own in my free time. (To be clear: I'm not saying they stole my idea. I'm saying good ideas have a tendency to be arrived at independently by many.)

I've also been involved with many clients and employers who have looked to cash-in on startup ideas. For some, the ideas were just bad (oops). But for every good idea, someone else did it better and faster.

Lessons I've learned:

1) Not every idea is a good one. (Learned this very early on, thankfully, but everyone thinks their ideas are awesome... and they're not.)

2) If I have a truly good idea for a new product that does not exist yet, the odds are exceptionally high that lots of other people have that idea too. So time is not on my side.

3) This is where the VC value is. VCs can get you the resources to build a team, launch an MVP, and scale. If there are no VCs at my table, the odds are they're funding someone else that I'll eventually see as a competitor.

All of which is to say: If I were to do it again, I'd focus all of my initial energies on getting funded and building a team. Going it alone is just a terrible idea, unless it's a passion project that I don't mind seeing "fail".

First time around it was a very small one-man operation (just me). I think my main problem at that time was that I lost track of what I wanted to build because I fell in love with the underlying technologies too much. Typical case of when something new came around which seemed a better fit, I switched over. I guess I was still not experienced as I should have been at that time. In the end I was not sure what I was actually creating and lost motivation.

The second time there were different issues (and I was not alone). Product-wise we focused on the wrong thing. We tried to mostly build something which was already provided from our competitors (just improve it) and did not focus on something more original first which could have given us an edge. Financially we invested into the wrong things early on, even we did not need them yet (like marketing tooling). In the end we were simply out of fuel (money).

Third time is a charm and I am currently involved in a few businesses (most of them not even started yet) beside a full-time job. It looks like my current problem is that I want to do many things at the same time, so will have to reduce what to focus on soon.

I had quite a lot of failures, but one of the most interesting was/is my software for managing wineries.

Go niche they said and I did. I also picked real pain point: doing compliance tracking in EU is ridiculous process and it is often called as a biggest burden of wineries.

It turned out that small to mid sized wineries really hate doing paperwork, but they dont like to do it on computer as well. So after four years I found being in limited marked with product that my customers seeing more like necessary evil and with high cost of getting new people converting to core users.

Once they did convert they tend to stay for years (zero churn for customers that make effort to start using it systematically).

I do have some customers and I do keep the doors open, I even do additional development as I see fit, but I dont see bright future for the product. Four years of fulltime work went into building it, but hey thats how it goes.

My startup failed because we were too late to ship our minimal viable product. We waited too long to make it perfect and by then a competitor had shipped their imperfect product and captured our market.

Funny, so many people say that competitors don't matter. What size was your market?

I screwed up backups and lost a lot of data customers trusted us with. Maybe we could have recovered from that, but it sent me into a depression that kept me from doing anything professionally for the next two years. That was twenty years ago, and I’m still ashamed to talk about it with anybody who knew me then.

The startup was just me and one other guy. He went on to become a priest. That fits his personality perfectly based on how quick he was to forgive me.

The majority owners felt that it wasn’t important to keep the only person who knew the product employed.

The literally felt they could exit with a patent and a prototype that none of the remaining people understood.

The engineer spent 3 months cleaning up previous bad engineering decisions, and spent another year making the product strong enough to be used as a test system.

Then they did a round of funding, but paying that engineer was not where the money was going to go.

Heh. Been there, done that: The marketing/sales side messed up, fire all the developers.

Most recent startup I worked for had a decent concept for an entirely new kind of advertising channel, but the CEO was more interested in fantasizing about running a unicorn than actually building the company. We had the following problems:

- Relied on legacy systems built by large, entrenched companies

- No consideration given to interchange fees that nearly guaranteed operating at a loss

- Repeatedly burned clients by drastically over-promising, delivering late, then abandoning support beyond minor bugfixes

- Poor project management (more interested in tweaking JIRA than answering critical questions)

- No product ownership

- Refusal to build MVPs or prototypes to prove concepts were feasible before trying to turn them into finished products

- Extreme lack of focus

The company still exists because keep having to get money from more and more questionable sources (most recent round came from an investor who is wanted by the Chinese government for corruption). Assuming they continue to operate, I wouldn't be surprised if they got raided and shut down for one financial crime or another.

We built a huge dataset that we thought could be usedfor supply chain management, but the only successful p/m fit was by putting it on the web and putting ads on it. Even when we got to 5 figures/mo in ad revenue, we insisted on a different model.

So we ignored the thing that was working in favor of our "vision".

Ended up in an acquihire for garbage money.

> Ended up in an acquihire for garbage money.

Congrats! Your startup didn't fail. ;) Seriously, an acquihire for not enough money is sooo much more valuable a story than we lost everything and died...

I don't blame you. It's super hard to balance vision and market pull.

We hired too much too early. We didn't measure the impact of employees on our revenue so we had more people working on the product but we where not growing with it. Then, we took too long to fire those people or find ways to make the structure work.

Apple store changed their terms of service. We were lucky pre-launch and haven't invested too much time. Another startup with 6 people (future competitor?) closed their shop shortly after.

Is this Apple retail store or the App Store?

App Store. 6 years ago they announced a better search for apps and disallowed alternative search engines.

Sorry to hear that. This happened to a friend's startup too :(

Far more startups die of suicide than homocide and that was true of the last startup that I worked at, which I’ve written about here:


I've been at a number of failed startups. Here are some of the things that hurt or eventually killed us. Note that these can apply to projects within large companies as well. YMMV.

* We changed business models so our customers became competitors. How many ways do you depend on your customers? Is it just sales, or is it marketing too? Will your new customers really be able to replace your old ones? What is the transition plan?

* We always delivered what we promised and sometimes more, but late. Our competitors under-delivered but always on time. How sensitive are your customers to features vs timelines? Have you separated your features so you can deliver _something_ on time? Or is it all-or-nothing?

* The parent company/major investor had a bad year and shut down our funding. They were so big, that had been unthinkable. How diverse are your funding sources?

* After shutting down, we stayed together trying to resell what we had developed. We found an apparently interested large company and really tried to get them to fund our continuation. They were just playing us along, trying to learn what we knew about the market, then they released a competitive product that was inferior to what we had in development before the shutdown. How much do you know that your investors don't? Are you sure you want to tell them?

* The parent company/major investor decided our project was actually really cool and decided to move management back to the mothership, where they were pretty clueless about our market. That killed morale in our office (because it wasn't our project anymore) and slowed down decision making immensely (mothership was overseas). How much do you know that your investors don't? Do they appreciate that?

* We gave away too much for free. The freetards complained the most and required the most customer support and education. Very few of them converted to paying customers. When will a customer be forced to decide if your product is right for them? Why will they leave your free plan? Is your free plan free for you?

* Those that did convert only stayed with us through the middle part of their growth cycle. Once they got big enough, they also had enough money to hire an internal team to perform our service for them, believing that this would cost no more and lead to more control. Are your customers going to grow with you and are you going to grow with them? How? Why won't they leave when they get big enough?

* We spent our balance sheet on lawsuits instead of marketing or product development, defending a feature customers liked but was not core to our business. Why are you in court instead of on shelves?

* We saw the coming trend to run application software in a browser, 20 years too early. We based our product on unproven technology which we had no ability to improve ourselves (included hardware and software), and our prices were not competitive with the current technology. Despite this, we did have positive press and some sales. What, exactly are you selling, and why would anyone buy it? Can you find a practical compromise between your big vision and what people want to buy now?

* We were one company with two orthogonal products. One product was easy to understand and visually attractive -- it got all the press. The other was invisible, extremely powerful, but hard to explain to a broad audience. This made the company feel unbalanced, with razzle-dazzle that didn't lead to sales of the more valuable product. How do your products support each other?

A lot of it is luck and executing on the roadmap and pivot if the feature fails.

My question to the startup experience HN crowd is: What would be the right questions to ask before joining a startup to gauge the success and failure possibilities in the future?

> executing on the roadmap and pivot if the feature fails

You answered your own question. Are they smart enough to make a solid plan and execute it? Are they smart enough to not miss a beat when their solid plan inevitably goes off the rails? Is the leadership humble enough to behave like this? Are they confident enough to be transparent about it? These are my personal metrics. There is no predicting the future, so I assess how the leadership handles making mistakes. The rest is just market statistics.

We couldn't raise money on time and our CEO was not the best at sales and hiring.

Made the mistake of doing hardware. Support issues convinced me to fold early on. Stick to software, all it costs is time to fix.

Instead of hiring two developers to pursue our ideas we should have hired one developer and one sale/marketing person.

To quote PG: "startups don't fail, founders give up"

If something's not working, then it isn't "giving up" if there's opportunity cost.

Because 60 % of the people were managers?

Whereas this may be a common reason for failure, we failed because we were all engineers. Nobody with management/sales experience on the team!

I'd love to hear what an ideal ratio is? Somewhere between 10-25%?

Depends on if you have team leads, that generally "manage and steer" with general autonomy of a larger manager or director. I'd say 10-15%, past that it's cruft.

The strength of the leadership and managers is really a key component of how much % is required.

The ideal ratio is the one that makes sales and products.

No product market fit. Poor cashflow management which caused us to run out of money before finding PMF.

Undervaluing marketing.

Welp, we raised too much money and didn't live up to expectations. When I say didn't "live up" I mean we realllllyyyy didn't hit those numbers. It was a downwards spiral from there...

We were butchered by a patent troll in the 90s. Back then they weren't so known or hated.

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