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Executive Republic
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We love a good entrepreneurial success story — entrepreneur as protagonist overcomes obstacles and builds a thriving, successful company (and become wealthy while doing so). We want to hear about, learn from and even replicate what they’ve done.
However, this survivorship bias is problematic. Jason Cohen of Smart Bear Software does a nice job articulating this issue stating:
"The fact that you are learning only from success is a deeper problem than you imagine … drawing conclusions only from data that is available or convenient and thus systematically biasing your results."Luckily, the startup community often courageously shares their stories — even when things don’t end well.
This list was compiled by ChubbyBrain and was suggested by Founders @Fail.
This article originally appeared at ChubbyBrain. Copyright 2013.
Failure #1: "I had the Next Big Thing: Condom Key chains"
Excerpt: There was no doubt about it: I had discovered The Next Big Thing. Like Edison and the light bulb, like Gates and the pc operating system, I would launch a revolution that would transform society while bringing me wealth and fame. I was about to become the first person in America to sell condom key chains.
Failure #2: "We took on Mint.com and lost"
Company: Wesabe
Author: Marc Hedlund
Excerpt: Even before we launched, we heard about other people working on similar ideas, and a slew of companies soon launched in our wake. None of them really seemed to get very far, though, and we were considered the leader in online personal finance until September 2007, when Mint launched at, and won, the first TechCrunch 40 conference.
From that point forward we were considered in second place at best, and they overshadowed our site and everyone else's, too. Two years later, Mint was acquired by Intuit, makers of Quicken (and after Mint's launch, the makers of Quicken Online) for $170 million. A bit less than a year later, Wesabe shut down.
Failure #3: "We thought, 'We'll attack this problem a few years before Microsoft and Oracle notice it and recognize it as a problem.'"
Company: ArsDigita
Author: Philip Greenspun
Excerpt: For roughly one year Peter Bloom (General Atlantic), Chip Hazard (Greylock), and Allen Shaheen (CEO) exercised absolute power over ArsDigita Corporation. During this year they
- Spent $20 million to get back to the same revenue that I had when I was CEO
- Declined Microsoft’s offer (summer 2000) to be the first enterprise software company with a .NET product (a Microsoft employee came back from a follow-up meeting with Allen and said “He reminds me of a lot of CEOs of companies that we’ve worked with… that have gone bankrupt.”)
- Deprecated the old feature-complete product (ACS 3.4) before finishing the new product (ACS 4.x); note that this is a well-known way to kill a company among people with software products experience; Informix self-destructed because people couldn’t figure out whether to run the old proven version 7 or the new fancy version 9 so they converted to Oracle instead)
- Created a vastly higher cost structure; I had 80 people mostly on base salaries under $100,000 and was bringing in revenue at the rate of $20 million annually. The ArsDigita of Greylock, General Atlantic, and Allen had nearly 200 with lots of new executive positions at $200,000 or over, programmers at base salaries of $125,000, etc. Contributing to the high cost structure was the new culture of working 9-5 Monday through Friday. Allen, Greylock, and General Atlantic wouldn’t be in the building on weekends and neither would the employees bother to come in.
- Surrendered market leadership and thought leadership
Failure #4: "We would’ve spent another three months head down developing it, without a business model or any way to keep paying the rent.. and Facebook would just end up ripping it off."
Company: RiotVine
Author: Kabir
Excerpt: It’s not about good ideas or bad ideas: it’s about ideas that make people talk.
And this worked really well for foursquare thanks to the mayorship. If I tell someone I’m the mayor of a spot, I’m in an instant conversation: “What makes you the mayor?” “That’s lame, I’m there way more than you” “What do you get for being mayor?”. Compare that to talking about Gowalla: “I just swapped this sticker of a bike for a sticker of a six pack of beer! What? Yes, I am still a virgin”. See the difference? Make some aspect of your product easy and fun to talk about, and make it unique.
Failure #5: "Twitter stole my thunder"
Company: Nouncer
Author: Eran Hammer-Lahav
Excerpt: Nouncer wasn’t an easy idea to explain to people 2 years ago, especially since microblogging didn’t exist yet. Twitter, Jaiku, Pownce, and other services were introduced while Nouncer was being developed. The new services made it easier to explain and communicate the idea, but at the same time took away the first-to-market opportunity as well as added competition, and raised questions about the business plan.
As Twitter received more attention, clones showed up everywhere. My decision was not to compete with a new and already crowded space, but to find a different angle. I decided to focus on scalable technology, making a bet that once Twitter and others will get popular, there will be a real need for that kind of technology by other players...The business decision to focus on technology and avoid building a consumer application had a significant impact [on the eventual failure].
Failure #6: "My billion dollar idea was described as "tired" and "annoying'"
Excerpt: Then came the coup de grâce. The first article mentioned starts like this:
I spent an hour on the phone yesterday with yet another entrepreneur who imagined that the future revolved around the “eHarmony for Jobs.”(The idea was tired a couple of years ago.)
I couldn't help but almost chuckle a little bit in embarrassment. My
Failure #7: A Build-Your-Own YouTube/Yelp, etc. had issues with money, traction, team, and vision
Company: BricaBox
Author: Nate Westheimer
Excerpt: I can tell you most of this decision [to close BricaBox LLC] revolved around issues of money, traction, team, and vision: the four essentials of a successful startup. I think it’s fair to say that a startup deserves to live if it has good quantities of at least three of those four things, and BricaBox is now out of all but one of them.
Failure #8: There were a lot of mistakes with research, picking teams, office space and money
Company: Boompa.com
Excerpt: While there are many documents on the web covering this subject, most are written after the fact of success and don't provide the "holy shit, we just quit our jobs" perspective that is going to be common with anyone who doesn't have the contacts to get involved with VCs. A year from now this story will either be a testament to our methodology or an embarrassing reminder of all the mistakes we made.
Failure #9: They gave away a service for free, and ran out of cash to pay the bills
Company: Xmarks (company seems semi-dead given recent pledgebank setup)
Author: Todd Agulnick
Excerpt: For four years we have offered the synchronization service for no charge, predicated on the hypothesis that a business model would emerge to support the free service. With that investment thesis thwarted, there is no way to pay expenses, primarily salary and hosting costs. Without the resources to keep the service going, we must shut it down.
Failure #10: "We made deadly cultural and strategic mistakes"
Company: EventVue
Authors: Josh Fraser and Rob Johnson
Excerpt: Our Deadly Strategic Mistakes:
- Tried to build a sales effort too early, with too weak of a product after initial financing
- Waited too long to address the “nice to have” problem
- Went after enterprise sales model with a non-recurring, small price
- Didn’t make eventvue self-serve to let anyone come and get it
- Didn’t focus on learning & failing fast until it was too late
- Didn’t care/focus enough about discovering how to market eventvue
- Made compromises in early hiring decisions - choose expediency over talent/competency
Failure #11: "We didn't pivot fast enough, we didn't love it enough, we had too many founders, and we made a lot of other errors."
Company: YouCastr
Author: Ariel Diaz
Excerpt: We started the company because we liked the idea and wanted to do something entrepreneurial. We weren't in love with the idea or market we were going after, and weren't core users of our product. We worked really hard getting it off the ground despite this, but it made it more difficult to sustain the energy and to understand the best product choices.
Failure #12: "We delivered on technology, but we sorely lacked in maturity of management skills"
Company: IonLab
Author: Swaroop C H
Excerpt: Second, as one of my friends observed, I talked to about 7 people (both acquaintances and friends) whose judgment I trusted. 3 of them sympathized and agreed with my decision and 4 of them admonished me and asked me to “hang in there.” You know what was the clincher? The first 3 had done startups themselves and the latter 4 had not. The latter 4 did not really understand the context, even though they meant well and are intelligent folks.
Failure #13: "We made the mistake of focusing on engineering first and customer development second"
Company: Devver
Author: Ben Brinckerhoff
Excerpt: Most of the mistakes we made developing our test accelerator and, later, Caliper boiled down to one thing: we should have focused more on customer development and finding a minimum viable product (MVP).
Our mistake at that point was to go “heads down” and focus on building the accelerator while minimizing our contact with users and customers (after all, we knew how great it was and time spent talking to customers was time we could be hacking!). We should have asking, “Is there an even simpler version of this product that we can deliver sooner to learn more about pricing, market size, and technical challenges?”
Failure #14: "Our idea wasn't bad, we were just too slow and focused on the wrong things"
Company: Kiko
Author: Mahesh M Piddshetti
Excerpt: An AJAX calendar is not fundamentally a bad idea (I think we, Google calendar, 30boxes, calendar hub, and many others prove that). I don’t think we were doomed from the beginning; I just think we were too slow at times, and focused on the wrong thing at times. I think Kiko is still a good idea that can yield a lot of value to its users, but I won’t be the one to take it there.
Failure #15: "No one was working full-time, we lacked marketing skills, we screwed up our chances of getting bought, and our business model sucked."
Company: Overto
Author: Pawel Brodzinski
Excerpt: The thin line between life and death of internet service is the number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately none of us were skilled in that area.
Failure #16: "We had too much PR, too much money, and no customer relationships."
Company: Monitor110
Author: Roger Ehrenberg
Excerpt: While we certainly made more than seven mistakes during the nearly four-year life of Monitor110, I think these top the list.
- The lack of a single, “the buck stops here” leader until too late in the game
- No separation between the technology organization and the product organization
- Too much PR, too early
- Too much money
- Not close enough to the customer
- Slow to adapt to market reality
- Disagreement on strategy both within the Company and with the Board
Failure #17: The founders butted heads, and their motivation disintegrated
Company: NewsTilt
Author: Paul Biggar
Excerpt: None of these problems should have been unassailable, which leads us to why NewsLabs failed as a company:
- Nathan and I had major communication problems
- we weren’t intrinsically motivated by news and journalism
- making a new product required changes we could not make
- our motivation to make a successful company got destroyed by all of the above
Failure #18: "If your idea starts with "We're building a platform to..." and you don't have a billion dollars in capital, find a new idea. Now."
Company: Diffle
Excerpt: If I were to do another startup, I'd be stuck with it for the next 4-10 years, it'd have to be profitable within about 2 to avoid running out of money, and this is all in a very uncertain economic climate. And I have no cofounder, so I'd be doing everything myself until I could afford employees, and then I'd have to build a company culture. There's no fun in that - I might be able to pull it off and get rich, but it'd eat up all of my twenties, probably all my friends, and possibly all my sanity. Not worth it
Failure #19: "We forgot to sell"
Author: Stephan Schmidt
Excerpt: So the most important thing is to sell – a fact lots of startups forget. And we did too. After much thought it comes down to these six reasons why we failed (beside the obvious one that the VC market imploded when we needed money and no one was able to get any funding):
- We didn’t sell anything
- We didn’t sell anything
- We didn’t sell anything
- The market window was not yet open
- We focused too much on technology
- We had the wrong business model
Failure #20: If you're an entrepreneur or investor considering content, think again
Company: PlayCafe
Author: Mark Goldenson
Excerpt: I would advise any entrepreneur or investor considering content to think twice, as Howard Lindzon from Wallstrip warned us. Content is an order of magnitude harder than technology with an order less upside; no YouTube producer will earn within a hundredth of $1.65 billion. This will only become more true as DVRs and media-sharing reduce revenues and pay-for-performance ads eliminate inefficient ad spend, of which there is a lot. The main and perhaps only reason to do content should be the love of creating it.
Failure #21: "For starters, we didn't validate our startup idea"
Company: SMSnoodle
Excerpt: Discuss your startup idea with not only friends,but also other people who are quite strangers to you. I promise you will definitely learn a lot here.The concept of your idea getting stolen is 99.99% impossible.Visit barcamps, hackerspace, geek terminals and bounce your ideas to different people.
We failed to do this step and hence overestimated the Singapore market.
Failure #22: Trouble with hiring, timing, and frugality is a double-edged sword
Company: Untitled Partners
Author: Jordan Cooper
Excerpt: Our hope was to aggregate demand around works of art being sold through the existing channels in the $70B art market, and then to enable our customers to cooperatively purchase and own the art they loved. On March 9th, we made the difficult decision to shutdown the Company and return almost 50% of the capital we raised to our investors.
Failure #23: Money comes between people and everyone over-estimates their own company contributions
Company: Cryptine Networks
Author: Andrew Fife
Excerpt: No matter how close of friends, how much you trust each other or how good your intentions are, money comes between people and everyone over-estimates their own contributions. Furthermore, founders become highly emotional about their companies. Thus, the process of negotiating taking back stock from founders is not rational and inherently very difficult. However, vesting schedules reduce the difficult negotiation to simply and mechanically exercising the companies pre-agreed right to repurchase stock at the price it was issued. I foolishly let myself fall into the “it won’t happen to me” trap but no startup gets it right on the first try and theses hiccups often lead to changes in the team. Believing that any startup won’t have to deal with stock vesting issues is totally unrealistic.
Failure #24: "I didn't quit my day job soon enough"
Company: SubMat
Author: Laurent Krentz
Excerpt: My philosophy was to get as far as possible with a small seed round. To do this, I thought keeping my day job would allow to spend the money wisely on product or marketing actions. Wrong. Quit your job (if you can), and get down to business. Period. You need to be dedicated to your project, meet people, talk about it, code and hack this sh*t out of it. At the end of the day, I was doing both things wrong: my day job, and my startup.
Failure #25: "It was hard to admit the idea wasn't’t as good as I originally thought or that we couldn't’t make it work"
Company: Imercive
Author: Keith B. Nowak
Excerpt: For one, we stuck with the wrong strategy for too long. I think this was partly because it was hard to admit the idea wasn’t as good as I originally thought or that we couldn’t make it work. If we had been honest with ourselves earlier on we may have been able to pivot sooner and have enough capital left to properly execute the new strategy. I believe the biggest mistake I made as CEO of imercive was failing to pivot sooner.
Failure #26: "Raising money on flat growth was nearly impossible'
Company: Meetro (aka Lefora)
Author: Paul
Excerpt: We could have gone about trying to fix Meetro but the team was just ready to move on. Raising money on the flat growth we had was nearly impossible. Plus I knew that in order to keep the tight-knit team we had built together, we needed to shift focus for sanity sake. People (myself included) just felt beat up. We knew that fixing these issues would involve a complete rearchitecturing of the code, and people just weren’t excited about the idea enough anymore to do it right.
Failure #27: "As the product became more and more complex, the performance degraded"
Company: eCrowds
Author: David Cummings
Excerpt: As the product became more and more complex, the performance degraded. In my mind, speed is a feature for all web apps so this was unacceptable, especially since it was used to run live, public websites. We spent hundreds of hours trying to speed of the app with little success. This taught me that we needed to having benchmarking tools incorporated into the development cycle from the beginning due to the nature of our product.
Failure #28: "The founder made a virtue of having no business model"
Article: Hubris, ambition and mismanagement: the first post-mortem of RealTime Worlds
Company: RealTime Worlds
Excerpt: Dave Jones made a virtue of having no business model for APB. He said “if a game is built around a business model, that’s a recipe for failure.”
Bullsh1t.
...The story of RealTime Worlds is one of ambition, arrogance, mismanagement and hubris. It will haunt that games industry for a very long time.
If it changes the way that we develop, finance and publish games, that will be fantastic for the industry.
If it leads to idiotic calls for government tax credits to “rescue” the best funded games developer in the UK, it will be a disaster of epic proportions.
Note: This post-mortem is not by the company and so is unlike others in the list and is quite editorial (warning).
Company: RealTime Worlds
Excerpt: Dave Jones made a virtue of having no business model for APB. He said “if a game is built around a business model, that’s a recipe for failure.”
Bullsh1t.
...The story of RealTime Worlds is one of ambition, arrogance, mismanagement and hubris. It will haunt that games industry for a very long time.
If it changes the way that we develop, finance and publish games, that will be fantastic for the industry.
If it leads to idiotic calls for government tax credits to “rescue” the best funded games developer in the UK, it will be a disaster of epic proportions.
Note: This post-mortem is not by the company and so is unlike others in the list and is quite editorial (warning).
Failure #29: "Knowledge is a tricky thing to sell, because even experts disagree on some answers"
Author: Rob May
Excerpt: But the more we moved down the path, the more I realized the complexities involved with selling answers. Knowledge is a tricky thing to sell, because even experts disagree on some answers. What’s worse, most people think they know more than they really do. Look at how many idiots think they know stocks, or programming, or even business. Nearly everyone thinks they can give good management tips. It is difficult to sell something so… confusing, and we realized it would lead to problems down the road. Yahoo, and most of the other sites, fix this by having people vote on the best answer, but we couldn’t post answers in public because that would take away our residual incentives. And anyway, I’m not convinced in the “wisdom of crowds” for anything beyond general knowledge. It doesn’t work for domain specific stuff.
Failure #30: "Hyper-local is really hard. It takes a lot of work to build a community"
Company: Backfence
Author: Mark Potts | Mark Glaser
Excerpt: Hyper-local is really hard. Don’t kid yourself. You don’t just open the doors and hit critical mass. We knew that from the jump. It takes a lot of work to build a community. Look carefully at most hyper-local sites and see just how much posting is really being done, especially by members of the community as opposed to be the sites’ operators. Anybody who’s run a hyper-local site will tell you that it takes a couple of years just to get to a point where you’ve truly got a vibrant online community. It takes even longer to turn that into a viable business. Unfortunately, for a variety of reasons, Backfence was unable to sustain itself long enough to reach that point.
Failure #31: "Finances were an issue, so was our failure to execute"
Company: Sedna Wireless
Author: Rajiv Poddar | Kamla Bhatt
Excerpt: Finances were just one part of the story. The other part was that we failed to execute our own plans. Both external factors (e.g. the hardware ecosystem in India) and internal reasons (e.g. the expertise of the team) played a role. With money it would have lasted a bit more longer.
Failure #32: "We exposed ourselves to a huge single point of failure called Facebook"
Article: Couldery Shouldery
Company: Lookery
Author: Scott Rafer
Excerpt: We exposed ourselves to a huge single point of failure called Facebook. I’ve ranted for years about how bad an idea it is for startups to be mobile-carrier dependent. In retrospect, there is no difference between Verizon Wireless and Facebook in this context. To succeed in that kind of environment requires any number of resources. One of them is clearly significant outside financing, which we’d explicitly chosen to do without. We could have and should have used the proceeds of the convertible note to get out from under Facebook’s thumb rather to invest further in the Facebook Platform.
Company: Lookery
Author: Scott Rafer
Excerpt: We exposed ourselves to a huge single point of failure called Facebook. I’ve ranted for years about how bad an idea it is for startups to be mobile-carrier dependent. In retrospect, there is no difference between Verizon Wireless and Facebook in this context. To succeed in that kind of environment requires any number of resources. One of them is clearly significant outside financing, which we’d explicitly chosen to do without. We could have and should have used the proceeds of the convertible note to get out from under Facebook’s thumb rather to invest further in the Facebook Platform.
Failure #33: "ChubbyBrain: Unusual name, unintelligible product"
Company: ChubbyBrain
Excerpt: For lack of a better analogy, we were trying to build Yelp for investor-backed startups and middle-market private companies. In your mind, replace the thousands of local businesses on Yelp with private companies and layer on some wiki elements and you’ll have a decent idea of what we were envisioning: a place where people can find and provide information about private companies/startups, and also review them.
Awesome idea, right?! WRONG! Where the heck are we going to get all the data on these companies?!
And one of our all-time favorite fail tales:
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