[HN Gopher] Ask HN: What made your startup fail?
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Ask HN: What made your startup fail?
Just wanted to pose this question to anyone who has the experience
of starting up a startup/business from scratch or that worked in
one for a longer time until it failed. In retrospect - what do you
think was the most significant factor that made it fail? Bad market
research? Wrong product design? Engineering failure at executing
properly?
Author : margorczynski
Score : 46 points
Date : 2023-02-05 20:02 UTC (2 hours ago)
| chrismsimpson wrote:
| Google getting in the space just as another raise was in train as
| well as a problem domain that required fast, asynchronous and low
| latency communication but was written in unoptimised single
| threaded Ruby.
| pkoird wrote:
| I think at the end of it it's primarily always the same reason:
| didn't have customers.
| margorczynski wrote:
| I would agree but there's almost always a root cause for that -
| bad marketing, sales or simply not grasping the market needs
| and or simply ignoring the fact that there's no market need for
| what you're building (simply no interest or maybe already
| entrenched competition where you do not offer nothing unique to
| sway their client base)
| muro wrote:
| I worked at a startup making a (ps3 and xbox360) AAA game. It was
| bought up by a company specializing in buying multiple smaller
| game companies and then taking investment from larger investors.
| It would use the money for another small company, increased the
| valuation and do another investment round. At some point, it all
| collapsed, the owner going to jail.
|
| If it didn't collapse due to financial mismanagement, we would
| fail due to our own incompetence :)
| ecshafer wrote:
| isn't the cost of a AAA game too high for a startup without
| solid financial backing from a publisher anyways?
| onion2k wrote:
| That's an easy one - we didn't go to market early enough and
| couldn't get customers because we tried to build the perfect
| product. My co-founder and I raised a decent series A off the
| back of a good demo, and then we spent 18 months trying to build
| the product we wanted to solve the pain we had (managing
| requirements in medium projects). We coded for about 14 months of
| our 18 month runway, and when we eventually talked to customers
| they were reluctant to risk projects on a new management app. It
| really could be a textbook example of getting everything wrong in
| a startup. It was a lot of fun though.
| jokethrowaway wrote:
| Damn, I'm thinking of starting to work on something similar. I
| made a prototype 15 years ago during a software engineering
| project at uni and I've been shocked to see how crappy
| requirements management is in the real world compared to my toy
| project.
|
| The pain is definitely there: people in the companies are
| chasing 5 years old documents, engineers are wondering what's a
| bug and what's a feature and who the hell approved what.
|
| While I don't think it's unicorn material, I think I can
| convince some PMs to get approval for a 50-100$ monthly spend
| on the company credit card.
| onion2k wrote:
| I still believe it's an app that people need. The problem is
| entirely that no one actually wants to admit they need it, or
| spend time populating the app, or risk what might happen if
| the app doesn't solve the problem. Those are huge barriers to
| overcome.
|
| Building the app is actually quite straightforward. Getting
| people to use it is the hard part.
| abadger9 wrote:
| I have a (currently inactive) consulting company that was
| clearing 40% above my senior software engineering salary in the
| sf bay area. Eventually the stress of getting a company's
| treasury dept's to pay on time to cover my contractors and I
| induced so my stress that I developed GERD (also known as heart
| burn). The money was great, and I was single at the time so I had
| a lot of great experiences with the extra cash. The company is
| inactive now but I still own it and get requests from clients a
| few times a year, I'm pretty busy with married life now though I
| would probably do it again full time in the future and sell it
| off to a big 4 consulting firm (which is what a family friend of
| ours did for $XX million).
| monero-xmr wrote:
| I joined this startup during the 2015 AI bull run that was doing
| chat bot for transportation - you talk to a chat bot and it would
| order you flights, hotels, rental cars, etc.
|
| Side note - what's so funny about the current buzz around ChatGPT
| is that everyone is forgetting that tons of companies were funded
| to create chat AI interfaces backed in 2014-2016 and all of them
| went nowhere! A lot of it was kicked off by Zuck announcing that
| FB Messenger would be the future of e-commerce which threw fuel
| on the fire. But I digress.
| https://techcrunch.com/2016/04/12/agents-on-messenger/amp/
|
| The company raised huge money, like $100 million in a few quick
| rounds, despite no revenue and few users. The product launched,
| no one liked it, then everyone just fucked around all day for
| like 5 years until it was acquired for no money. I left after 12
| months because it was a joke despite "big names in AI" working
| there and a semi-famous co-founder.
|
| What became very obvious was that an imperfect chat robot was a
| terrible way to book something as essential as flights and
| hotels. Eventually it became a self-automated flow where the chat
| bot was basically a flow chart, and then eventually that was
| abandoned and it became a clone of all the travel booking
| websites and apps.
|
| I would be very, very leery of AI right now - I lived this story
| before and you'd be amazed at how efficient a few button clicks
| are vs. trying to explain exactly what you want to a robot.
| Finding paying customers is an open question even for the biggest
| names. AI seems more like a feature than a product to me, but
| time will tell I suppose.
| unraveller wrote:
| it's different this time, this time the user knows they want a
| chat interface to start.
| yumraj wrote:
| Sarcasm ?
| nitwit005 wrote:
| The customers for chatbots were often support companies
| already doing web chat. They wanted a chat interface, as did
| their customers. The bots just didn't perform well enough.
| anotheraccount9 wrote:
| My angels were part of a questionable group. I checked with the
| RCMP (that was in the 90s), and, without giving much details,
| they strongly suggested I leave the group. I was hardly making
| any money at the time and was working like a horse. When I
| announced I was leaving, my investors offered me $300000 right
| away, no question asked. I left anyway, as the atmosphere was
| already strange and toxic. No regrets, as I was also burned-out.
|
| Edit: I was very young, inexperienced, and was literally learning
| on the go. Totally set to fail.
| electric_mayhem wrote:
| Speculative infra investment certainly didn't help.
|
| But I finally gave up because too many clients had a bottomless
| appetite for services and seemingly limitless capacity to ignore
| contractual payment terms.
| chewxy wrote:
| TLDR: ran out of runway, stakeholders from clients moving on all
| at the same time.
|
| Longer story: I ran a startup that did natural language data
| analysis (kinda like what people are trying to do now with
| ChatGPT). You could ask it a question (via email or command line)
| and it would return its analysis. It could do a variety of
| statistical analysis and could explain the results in words (tho
| not as well as a finetuned ChatGPT could do today).
|
| Technically it was strong. And I'd say way ahead of the curve. A
| few things caused the failure:
|
| 1. Spending too much time keeping one potential cash cow instead
| of finding more clients. Having failed a few prior startups, we
| (cofounders) were obsessed with getting and more importantly
| keeping clients. This led us to build integrations for clients.
| One integration was particularly absurd: the "database" that they
| wanted to connect to is a PowerPoint file on a SharePoint server.
| Specifically the tables on particular slides. We spent way too
| much time building custom integrations
|
| 2. Running costs were too high. We had developed a sorta
| "staggered on-line" training scheme. Each client had its own
| model. Monthly costs per client reached $2000 per month. But with
| one of the clients we absorbed the costs because they were a
| potential cashcow (same client as above)
|
| 3. The main stakeholder at this potential cashcow left the
| company to found his own startup, leaving no one else to advocate
| for my product. At the same time the two other clients decided it
| was way too expensive to having not enough of an impact on the
| business.
|
| Thus, we ran out of money. Good news is that Gorgonia
| (https://github.com/Gorgonia) was born from this. I'm still
| working on the framework for deep learning today
| satya71 wrote:
| Selling to people without ability to pay. Not solving a big
| enough pain.
| ucm_edge wrote:
| Insufficient profit. Had a startup based around an depreciating
| asset that we held and rented out. Costs recovered in three years
| and then two years of profits before asset was sold for the last
| bit of money.
|
| We were profitable on each individual asset we had to the tune of
| about 6.5% return after five years. Not profitable as a company
| though. Costs were fixed though (about 80 people in an office) so
| if we could have gotten more capital to buy more assets we would
| have become profitable. No one wanted to wait five years to get l
| 6.5% back in the midst of a bull market. So we failed to raise
| and died.
| _448 wrote:
| I don't have a startup. But I have seen and heard that most
| startups fail due to cashflow problems.
|
| Fun info, just yesterday I came across the term "cockroach
| startup" something like "unicorn startup". Cockroach startups are
| those that survive and thrive financially no matter what the
| economic conditions are. And they do that by being conservative
| with their expenses and manage their cashflow very well.
| buro9 wrote:
| Built a great product, but didn't focus on selling it.
|
| Essentially stayed in my comfort zone of engineering and product,
| rather than going out of my comfort zone of sales.
| mikesabat wrote:
| This is why my startup failed.
|
| I will add to this, that when I conceived and built the product
| myself (with dev help of course) I took product shortcomings
| more personally. It's always a delicate balance between finding
| customers that will buy the existing product vs. taking the
| roadmap suggestions from potential customers. If you are
| managing the product and the sales there is also emotion/pride
| involved.
|
| Probably a good reason to have different people focused on
| sales and product.
| er4hn wrote:
| Same mistake that I made. Should have been focusing on my weak
| points from day 1.
| bfrog wrote:
| People disagreeing within the company on sensible comp killed
| one, a failure to target a large enough market for another, and
| finally another disagreement on direction where I left.
|
| Arguably the last startup I was in hasn't failed but... it's not
| really growing from my purview either, they failed to entice the
| IC employees to stay with stock or sensible bonus payouts. Almost
| everyone not a "vp" left.
|
| Were I to go for another startup I'd start it myself, start small
| with minimal time investment and throw the line in the water for
| paying customers. Basically I'd do it solo I think. With a
| product I know I'd personally want to pay for and use.
| codybontecou wrote:
| What's stopping you from pursuing your own startup?
| berkes wrote:
| Obvious. But not mentioned yet: lack of product/market fit.
|
| In another case: local government imposing a regulation scheme on
| crypto-related projects that we couldn't meet. Not because we did
| scetchy stuff, but because the regulation scheme required
| rediculous budgets, corporate setup (specialized risk and
| compliance departments and officers and all etc) all on a startup
| that was running under EUR3000/month.
| destitude wrote:
| Non-technical management making technical decisions and too much
| management.
| jokethrowaway wrote:
| We never managed to sell it to a lot of people. We were selling
| direct, even door to door at some point. Cost of acquiring a new
| customer was too high and bringing in very little.
|
| Our investors contacts turned out to be pretty bad and just
| wasted our time with unrelated mini projects (some of which they
| didn't pay) and we never managed to sell them the actual product.
|
| In hindsight we had to figure out a different sales pipeline eg.
| try to offer a revenue shares to other actors in the market who
| had access to our target market.
|
| We built a nice product for the time and one of the biggest
| companies in the world bought one of our competitor which was
| very very similar. The timing was ok, the product was there, we
| lacked in sales.
| didip wrote:
| It was making money, but it was a slow burn. Customer acquisition
| is too expensive and the average restaurateurs did not understand
| technology.
|
| Now, 12 years later... I saw what I built done by others on every
| restaurant. We were simply way too early.
| margorczynski wrote:
| Thanks for sharing. I think in investment there's a saying
| "being too early is no different than being wrong" - people
| don't understand that aside from having a great product if the
| timing is wrong it won't work.
| nitwit005 wrote:
| I wouldn't assume all those apps in restaurants are making
| money. As you said, cost of acquiring customers is high, and
| the restaurants have multiple options now.
| barbarr wrote:
| We built and _then_ tried to find a market, rather than the other
| way around.
| marssaxman wrote:
| I did too much engineering and not enough management, and we
| never managed to ship the damn thing.
|
| Also, I have learned that I hate thinking about money, and would
| rather just give things away for free; if I would have to create
| a business around an idea to make it happen, that's a good sign
| that I should find a better way to spend my time.
| jmtulloss wrote:
| I stopped working on it
| adastra22 wrote:
| Founder infighting.
|
| Thinking that if we built the best technical product, the
| customers would naturally come to us.
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