Lessons learned from 10 failed startup ideas
kristapsmors.com
kristapsmors.com
Even those who form a team and raise money are doing this. It's not just the bootstrappers. For instance, I can name 3-4 people in my admittedly tiny sphere who had an idea, raised significant amounts of money, built a product, promptly failed, then pivoted multiple times before running out of cash.
It's as if starting a business has become so easy, that it's easier to just do it and see what happens rather than invest any kind of time and effort in researching the market first. This shoot-first-ask-questions-later attitude is spurred along by stories of huge multi-billion-dollar companies being born out of half-assed "so what now?" pivots. (See Twitter.)
In my experience, it's ok to do this once or twice because in your first at-bat, you don't know what you're doing anyway, so stopping to assess a market is just a waste of time. Put a year or two into something, get a feel for how it's done, and if you don't turn into Mark Zuckerberg (home run on first shot), you'll be better prepared to assess the validity of future projects. (That said, the best of my 4 businesses was the first, so there are exceptions.)
While I admire his entrepreneurial spirit, the author of this article (and his partners?) seem to have taken the "shoot first" philosophy a bit too far. 10 startups in 7 years seems extreme to me. The optics of it, from a potential investor's perspective, seem negative, too.
Unfortunately this advice doesn't apply well to a lot of consumer, ad-supported startups , but it would apply well to this guy's "modest"(nobody's ever given me $250k for anything) success (GroupScript).
More of argument against consumer startups than against this principle.
I have done it on the enterprise side, though, and the experience wasn't all bad. I built a face recognition system to spot TV reporters on the air and auto-tweet. It was a "neat"-enough idea that I was able to get 3 TV stations to run pilot programs. In the end, even though it doubled traffic to the TV stations' live streams, it turns out they barely make any money that way and unflattering screen shots irritated the reporters. You can argue that I should have researched harder up front, but if 3 different top-15 TV groups representing 125+ stations were willing to try it out, it wasn't far off. It was close enough to a big score and took so little time (1 year) to iterate, it was worth the try.
http://en.wikipedia.org/wiki/Mark_Zuckerberg
To what are you referring?
Also to take an example from the article how would one accurately assess demand for a 10 language flash gaming site without building it?
definitely some interesting stories and some ballsy attempts - albeit that there was probably too much focus on opportunistic copy / pasta ideas and capitalising on Latvia's lack of search competition, rather than meaningful value creation.
Given your energy, I'm certain you will create something big someday.
1) He is willing to share his experiences which I think is brave and should be applauded.
2) He is obviously learning hard won lessons which I think are the best kind. I certainly learnt more from my business failures than successes.
3) Based on his HN comments he seems to have had two successes out of 12 tries (assuming 10 failures mentioned in the blog plus the 2 other tries that are still alive). I think this isn't too bad.
4) He has a location disadvantage. Sure you can argue that the Internet levels the playing field but I don't quite buy it. I don't know for sure but I suspect that Latvia's tech start-up community is nascent compared to other geographic locations. I argue that start-up culture and knowledge are highly valuable and while the Internet can help to transmit this I believe that, "being there is everything".
If I would throw in my two cents in I would kindly suggest to this entrepreneur to:
1. Keep going and maintain momentum
2. Build up a network and start finding complementary team members, and
3. Focus on hard/valuable problems.
Thank you for the tips.
The way I would go about it is:
Start talking to potential customers. Find out how painful and valuable the problem is. Find out if they are currently using some other solution to the problem (your competitors).
Approach an industry organisation, if there is one, and talk to them about the problem, who has any existing or new solutions and find out if they have market research from their members.
Just a comment about the above two points, you don't have to pitch your specific solution to the problem but I would still leave the door open when you are talking to people and say something like, "if I were to come up with a solution that would do (insert features and benefits) would you be interested in talking further?" If the problem just isn't perceived by your customers to be painful or valuable then I would move on.
Now assuming the pain is sufficient and a solution is valuable then start looking at the economics of the business and start 'building the market.' What I mean by that is start with some assumptions about customer characteristics, for example demographics, and start putting some numbers together in terms of total market size. Try to do this from different angles and use different assumptions.
Then start playing around with what you think your cost and profit structure would look like with different business models. Think about what your cash burn rate will be and what sort of adoption you will need to hit a 'cash neutral' and break even scenario.
Then start applying this to your 'whole of market' model that you did before and start thinking if it makes sense. Do you need 1% or 0.0001% of the market to start adopting your solution? What might it cost to acquire those customers in terms of time and money? Start thinking about how that relates to hitting your 'cash neutral' and break even scenario.
Take a step back. Does this make sense? How much work is involved? How much capital are you going to need to achieve this? Then multiply that by say 4-5 times to give you a margin for error.
Now start thinking about post 'cash neutral' scenarios where you are capturing different rates of the market. How much do your costs ramp up? What is your marginal profitability? What does this equate to in terms of return on capital? If the returns are low then forget it. Investors want you to return their capital plus a big fat profit. If you don't think you can grow a big enough pie so you can get a slice of it that will satisfy you then forget it and find another opportunity.
If things look like they are stacking up well and you got a good story to sell to investors then good luck. Raising money is a bitch. Assuming you manage to get enough then things get harder because you will now have to execute within the cash 'runway' you have been given and well the rest at that point is up to you, your team and luck.