Ask HN: What are some of your failed startup experiences and lessons learned?
I work for a small startup and although it’s been going well so far, I’m sure that a lot of you have thoughts on what can make or break a startup. Or share advice that can help drastically improve the experience working at a startup.
Really just want to have a good experience and learn from your journeys.
I’ve worked at 5 startups, 6 if you include late stage startups.
Of those 6, 3 are still operating (including the one I started 2 years ago and am still working on).
2/3 failures were a result of failure to achieve PMF, which ultimately caused the fundraising to run out. The other failure was due to a huge fish entering our space running us over (FB) and forcing a fire sale to a buyer.
Of the 3 still in existence, one has a strong PMF and is nearly or completely profitable. The other merged with a another company in a similar space and created a behemoth (a name brand company many would know), though they were never profitable they had huge PMF and a large chunk of the audience in a huge market. My current company is looking like it’s going to fall into the failed to find PMF category, but we’ll see what we can do.
- No or very limited product validation. Company built a product before talking to customers
- No clear value proposition or business use case
- Underestimated the challenges of an R&D problem
- Founders that do not understand the difference between R&D and product development... which leads to R&D problems on a product schedule
- Lack of domain expertise - This applies across the entire organization. Founders come from an unrelated background. Engineers who've never built products in that particular domain. Marketing team not familiar with the product / have never marketed in that domain or unfamiliar with the customer base
- Lack of adequate funding
- "Bad" or "dumb" money, the wrong kind of investors. This could be a post in an of itself. Toxic jerks who make your life a nightmare. Strategic investors who want to drag you in a different direction
- Lack of support from manufacturers
- Being too early - Product (drone related) ready but regulatory environment years away from accepting
- Hiring engineers that are too junior. Startups are not a place for on the job training IMO
- Founders that literally bring nothing to the table
- Indecisive leadership - Constant flip flopping halts product development, burns out the engineers
- Opaque, non transparent leadership. Culture of secrecy, mis/distrust. Lies to investors
- Stubborn founders unwilling to believe what their tech people tell them
- Hiring sales people too soon / Sales led leadership. Product market fit still being discovered and a sales guy comes across an opportunity that is not product related and is a distraction to the product team. Your product "follows" what brings in the commission for the sales guy
- Externalities / bad luck. Hard to build global distribution channels when a pandemic hits.
Trying to create an incrementally better version of an established product that already exists and is used by the target market.
Of course the founders think their version is not incremental but revolutionary, but the customers who know and use the incumbents every day see an incomplete knock-off.
Marketing/Sales is basically everything. People would be doing everything but marketing and acquiring users, and this of course led to the downfall of the startup.
Every failed startup I've been a part of (2 of 3) went under because the founders didn't have a valid business model or weren't able to market the product, or both.
Same. It was also obviously not working for at least 18 to 24 months before the failure. In the most recent case, the founder was stubborn, wouldn't pivot, kept trying to put lipstick on a pig. The technology worked, the business model didn't.
Having seen how some startups operate, I'd say the biggest issue is marketing &sales. People get dragged into unimaginable depths of technical stuff just to avoid anything related to sales. Companies with complex tooling and processes can't figure out basic marketing plan or establish a sales process that is replicable across the board.
I've worked at 3 different startups, which were all unique.
The first found good product/market fit and, though not profitable, had a solid customer base and a good technology. Founders were also knowledgable and well-connected in the space. On the negative side, the CEO lacked experience and was related to the principal of our main funder, and company debt load steadily grew over time as hiring and expansion outpaced growth. The dotcom crash also happened at this time. The company eventually exited (acquisition) with C-level getting retention packages from the acquiring company, and with shares worth zero dollars.
The second startup was the opposite. It was small and scrappy and had only taken $20k in seed money before becoming self-sustaining. We only grew as fast as we could afford to and never took any additional funding. While this was great from a financial perspective, it meant zero to no growth after several years. The founder wasn't looking for an exit, and enjoyed a nice income from the business. It's still going after 18 years.
The last one was also interesting. I rose to executive level there. We struggled with a long history (a few previous pivots before I joined) and funding that was on an ongoing, monthly basis. There was no cash pile to manage or be strategic about. We also had some trouble finding product market fit, but eventually found it, but lack of ability to market effectively, which greatly limited growth. The CEO also had a vision for the company that differed from the rest of the executive team, so when we eventually identified and pursued a strategy that led to our eventual acquisition, we had to half-ass it (i.e. couldn't fully reorient the company on it), which ultimately led to a reduced valuation when we were acquired. Again, stock was worth zero, but the main investor gave everyone in the company a cash bonus based on longevity and role, plus compensation from the acquiring company meant those remaining (everyone but sales and marketing) essentially got 20-30% raises. (that company's stock tripled after the acquisition, so everyone effectively got 50-100+% more out of the deal).
What did I learn from all of that? It's important to go into a startup with goals in mind. I wanted to learn, play a big role in a company, build cool stuff, and work with cool people. The nature of startups is often that if you want to do something, you can do it, because there's no one else. I learned an amazing amount in my day. My goal wasn't to get rich, so I viewed anything positive as a bonus, really. That said, things go better when the culture is one of working collaboratively with each other, vs. being adversarial. There should be a strong vision about goals for the company (lifestyle, exit, etc) and the product. Most of all, learn all you can about all of the things, and you'll be well set up for future experiences.
For me its been hiring and working with those that are not able to make the "leap" toward working in a startup. This mainly comes from folks that join a startup after being at a larger org for some time.
What I observe happening is that they cannot think 3 dimensionally, or do not want to wear many hats (which is now required of them in start up life).
This manifests itself in them not wanting to work as hard as others, or unable unwilling to break old habits. Which can be disastrous as every minute counts in a start up.
Also, Fail to Plan, Plan to Fail
- No clear value proposition or business use case
- Underestimated the challenges of an R&D problem
- Founders that do not understand the difference between R&D and product development... which leads to R&D problems on a product schedule
- Lack of domain expertise - This applies across the entire organization. Founders come from an unrelated background. Engineers who've never built products in that particular domain. Marketing team not familiar with the product / have never marketed in that domain or unfamiliar with the customer base
- Lack of adequate funding
- "Bad" or "dumb" money, the wrong kind of investors. This could be a post in an of itself. Toxic jerks who make your life a nightmare. Strategic investors who want to drag you in a different direction
- Lack of support from manufacturers
- Being too early - Product (drone related) ready but regulatory environment years away from accepting
- Hiring engineers that are too junior. Startups are not a place for on the job training IMO
- Founders that literally bring nothing to the table
- Indecisive leadership - Constant flip flopping halts product development, burns out the engineers
- Opaque, non transparent leadership. Culture of secrecy, mis/distrust. Lies to investors
- Stubborn founders unwilling to believe what their tech people tell them
- Hiring sales people too soon / Sales led leadership. Product market fit still being discovered and a sales guy comes across an opportunity that is not product related and is a distraction to the product team. Your product "follows" what brings in the commission for the sales guy
- Externalities / bad luck. Hard to build global distribution channels when a pandemic hits.
Of course the founders think their version is not incremental but revolutionary, but the customers who know and use the incumbents every day see an incomplete knock-off.
The first found good product/market fit and, though not profitable, had a solid customer base and a good technology. Founders were also knowledgable and well-connected in the space. On the negative side, the CEO lacked experience and was related to the principal of our main funder, and company debt load steadily grew over time as hiring and expansion outpaced growth. The dotcom crash also happened at this time. The company eventually exited (acquisition) with C-level getting retention packages from the acquiring company, and with shares worth zero dollars.
The second startup was the opposite. It was small and scrappy and had only taken $20k in seed money before becoming self-sustaining. We only grew as fast as we could afford to and never took any additional funding. While this was great from a financial perspective, it meant zero to no growth after several years. The founder wasn't looking for an exit, and enjoyed a nice income from the business. It's still going after 18 years.
The last one was also interesting. I rose to executive level there. We struggled with a long history (a few previous pivots before I joined) and funding that was on an ongoing, monthly basis. There was no cash pile to manage or be strategic about. We also had some trouble finding product market fit, but eventually found it, but lack of ability to market effectively, which greatly limited growth. The CEO also had a vision for the company that differed from the rest of the executive team, so when we eventually identified and pursued a strategy that led to our eventual acquisition, we had to half-ass it (i.e. couldn't fully reorient the company on it), which ultimately led to a reduced valuation when we were acquired. Again, stock was worth zero, but the main investor gave everyone in the company a cash bonus based on longevity and role, plus compensation from the acquiring company meant those remaining (everyone but sales and marketing) essentially got 20-30% raises. (that company's stock tripled after the acquisition, so everyone effectively got 50-100+% more out of the deal).
What did I learn from all of that? It's important to go into a startup with goals in mind. I wanted to learn, play a big role in a company, build cool stuff, and work with cool people. The nature of startups is often that if you want to do something, you can do it, because there's no one else. I learned an amazing amount in my day. My goal wasn't to get rich, so I viewed anything positive as a bonus, really. That said, things go better when the culture is one of working collaboratively with each other, vs. being adversarial. There should be a strong vision about goals for the company (lifestyle, exit, etc) and the product. Most of all, learn all you can about all of the things, and you'll be well set up for future experiences.
What I observe happening is that they cannot think 3 dimensionally, or do not want to wear many hats (which is now required of them in start up life).
This manifests itself in them not wanting to work as hard as others, or unable unwilling to break old habits. Which can be disastrous as every minute counts in a start up.