Ask HN: My startup has basically failed. What now?
I've been working on a startup for ~9 months (as the technical cofounder) in the event tech space (B2B tradeshows) and I'm pretty sure we've failed to do anything productive (find product/market fit, find a problem/solution fit, learn anything valuable, etc.). We still have ~100k left but the main investors/advisors (from the 220k friends/family/fools round) pretty much feel like it's time to pull the plug. My personal opinion is that that's the most responsible thing to do (return money pro-rata) but there are simultaneous voices (paradoxically same investors) pushing to keep going (continue running pilots, building out the team [we just finally found a bd cofounder], crafting a pitch for a seed round). I don't know what to do since in my understanding we've failed at the most important thing: finding product/market fit. others on the team (advisors) believe that that's not the case and we can keep raising based on negative results.
re pilots: we got 5 pilots (some paying some not) by basically being persistent and doing really really high touch sales. two of them ran this week and they were miserable failures (for every reason from poor marketing/education to last minute catastrophic product failures). absolutely all of the metrics skew heavily towards 0.
i realize i'm being vague and maybe there's not enough detail in the post to give substantive advice but regardless any would be appreciated.
228 comments
[ 3.7 ms ] story [ 255 ms ] threadYes, things failed but at least you know more about the market, how to (not) build things, etc.
Consider pivoting into a similar area using your newly gained skills instead of shutting down. Also, if investors feel like the money should continue to be spent, that's a business decision and you shouldn't feel bad about it (unless they are super ignorant of business and invested for emotional reasons. If so, then educate them and it's their decision in the end).
Best of luck!
You mentioned that 1 or more customers in the pilot are paid-customers. If someone is paying you, either they are forking out the money in the hope that you're going to solve a problem for them or they are forking over the money for other reasons (ex. as a favor to you or due to past relationship.)
Do you understand why the paid pilot customers were willing to pay you?
...i've been the sole full-time founder for 9 months. i have worked every single day of those 9 months (doing everything - sales, customer success, investor relations, product). i am not deterred by work - i am deterred by the prospect of burning money chasing a delusion. the users didn't adopt for the same reason every users of every other advertising channel fail to engage: no one likes overt ads.
0. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...
I should really write a follow up on this post as things have improved quite a lot here in Australia in regards funding. It is still difficult, but there is a startup ecosystem developing here.
yes that is probably a succinct way to express it
if you can get a lot of attendees to willingly use the app, the event organizers will follow. They might even knock down your door demanding to pay you $ for a chance to be your customer
if you get the event organizers to sign up, but the attendees don't use the app, then the event organizers will leave
so it would be best to focus on signing up attendees first? aren't they 100x more important then convincing the event organizers? just a thought.
I'm leaning out on a limb here, but if this means what I think it means, you have developed some app that tradeshow visitors are asked to install to reap some benefits that don't interest them. If that's kind of what you are doing, pull the plug now. People don't use that kind of thing.
>People don't use that kind of thing.
is exactly one of the key hypotheses that needed validation/falsification. what we are facing now is whether we really falsified it given poor marketing/education on the part of the organizer.
Edit: or find something else that benefits the visitors?
What does your app look like and what pain point is it trying to solve?
This is why event apps tend to suck -- they're designed to appeal to people who aren't going to use them. To be successful, you have to actually figure out what users want _and_ convince your customers that you know better than them. This is incredibly difficult.
Also, organizers generally aren't invested in promoting your product. They buy your product in the hope that it will magically make their event more successful. It takes a lot of one-on-one training and coaxing to get most of them to participate. This is an extremely support-heavy market, and thus labor-intensive. Even as a startup, you rapidly end up needing dedicated customer support staff.
Also also, as it seems you discovered, there are a ton of pitfalls with building a product that is intended to be used by large groups of people, all at once, in a time-sensitive context, in a single enclosed environment, on their variously capable mobile phones. That makes failures nearly always catastrophic, and it erodes the average experience as well -- there's always people with some sort of bizarre cheapo phone that breaks in obscure ways, and those people also complain loudly and frequently.
2.) Selling to a customer that must then sell your product to its customer is at least an order of magnitude harder, and may be one of the hardest tricks for a new business to pull-off successfully.
Simply put, you don't have the branding to convert the end customer nor the control over that second sales process. Compounding this is that your product is not a priority for your direct customer and is not mission-critical to them in addressing their actual priorities. Thus, they will not engage nearly the focus required to address item 1 above in selling your product to its customers (i.e. end-users).
This last point can't be stressed enough. As entrepreneurs, our products are our focus and we tend to project that priority onto others.
The only way this model will work is if:
a.) The product is extraordinarily compelling/valuable to the end user in the same sense as would form the basis for building any viable business
AND
b.) The product is easy for your customer to sell to the end user in a frictionless manner (easy to communicate, requires no onboarding or support from your customer, etc.)
AND EITHER:
c.) Your product were mission-critical to your direct customer (preferred)
OR
d.) There was an immediate value to be had for your customer from introducing the product to the end user (monetization, good will, etc)
It seems that you have achieved only b (perhaps) and d in this equation, and then only to varying degrees. If you cannot pivot to solving the other variables then you should shut it down now.
[1] https://craft-conf.com/
Did you end up going to some conferences? There are serious problems with many conference apps. Even AWS Re:Invent's app had major problems this last year.
If you're wanting someone to do something (like download an app), you need to motivate them to do. This isn't about marketing. It's about delivering value.
Is your app currently only delivering value to the organizers and not really much for the users?
yes i've been to ~1 conference per month since that post. would've gone to more but someone's gotta build the product right?
>Is your app currently only delivering value to the organizers and not really much for the users?
this is my stumbling point and it's a serious one because building a useful app for attendees is almost like building a fun app for consumers - you have to delight not just deliver value.
the former is harder because it is totally outside of your control, and the latter is way easier because it is almost entirely within your control.
have you thought of other tech solutions that can address the pain point? e.g. put ipads across the trade floor, with the app already installed, so you don't need to ask users to install anything. Or provide a $3 free coffee deal for every person that uses the app, as a marketing promotion? basically some other out-of-the-box way to solve that pain point that you spent so much effort to find
i would say, don't give up so easily because it sounds like you solved the hardest part (finding the pain point), and you are held up on the easier part (coming up with a technical solution). The tech part can always be adjusted on your end to meet the pain point somehow.
My B2B startup focused on government clients, and we’re about to close a deal that took 2 years to close. Many times in that period I wanted to quit, but believed it was better to keep moving forward.
Only you know your business and market fit, and if you think it’s run it’s course then fold, otherwise fight a little longer and work with the success you’ve had so far.
I'm not OP, but how?
Are you excited about the space? Do you think you are uniquely able to contribute? Do you still think the market is there?
If your answer are no to all or most of the above, it sounds like maybe you should close up shop. I think returning VC money is dumb. Returning friends & family might be worthwhile.
substantially? hard to tell. he is hungry, and smart enough (from what i can tell), but he's no magician (who is anyway?).
>Are you excited about the space?
no. we are not building tesla-spacex-oculus. it would be very hard to be excited about b2b tradeshows. i am excited about potentially building a successful business.
>Do you think you are uniquely able to contribute?
not as of yet.
>Do you still think the market is there?
yes.
>I think returning VC money is dumb. Returning friends & family might be worthwhile.
there is no traditional vc money. it is only fff money.
If the market is simply tradeshows, then surely there is many ways to pivot in this market?
There you go. Quit. I'd wage my life you wont make it. The only way to do something amazing is to love what you're doing.
I worked in the technology side of large B2B events for about 10 years and there are certainly people who get really excited about B2B events!
You don't have to LOVE your product or industry but you've got to be interested in the industry and believe in your product. Being disinterested in the industry is a big disadvantage. Most people coming up with ideas or solutions are deeply involved in their industry and interested enough to spend a lot of time thinking about it.
Right now you have a team and funding. That's normally really hard to setup i.e. persuading people to join you to start a company and get funding. Take what you have and run with it. You might need to change the product or dump it all together.
If you do choose to go forward, the fact that you have failed so far is not relevant. You had pilots. They failed. You know why. Dig deeper into the causes of the failures. Fix them. Get feedback from the customers, and fix the product. Fix the operational issues. And try again.
That is no different than the actions you would have taken from a successful pilot -- to listen to the customers, evaluate what happened, improve on it, and do it again. Iterating on a product is a process that doesn't end. You always take a step forward, no matter where you are today, and you end up in a better place in the future.
Whether or not to walk that path is completely up to you.
If the alternative is to get a cushy job at Google... spending a lot more time failing to run a company is often a bad idea for all involved. I personally spent a decade of my career trying to run a business, and it turns out? I'm just not very good at running a business. Had I worked regular jobs during that time, while living on what I lived on? I'd have enough money to retire at this point.
You need to be mindful of your opportunity cost... sure, if you are management material, you can probably pull some of your experience running the failed company into your next job. If you are looking for an individual contributor job, though? Running a business that only did okay looks to future employers a lot like unemployment.
https://www.saastr.com/if-youre-going-to-do-a-saas-start-up-...
Also watch the CEO of Segment talk about their journey to product market fit.
https://www.youtube.com/watch?v=_6pl5GG8RQ4
this is exactly the lecture that crystallized for me the problems i'm facing (i watched it last sunday). we (full-timers) have no product market fit and we (advisors/investors) are simply plowing ahead (and have been for months) trying to figure out whether that's actually the case or whether we're simply failing as novice entrepreneurs (bad at sales, bad at messaging, etc.)
So they aren't like most startups who generally start their 24 month period with a lengthy period of product development.
Reputation of course involves things such as your past work experience, your past VC experience, past outcomes, who you've networked with that might refer you to an investor, and so on. This is largely about what you've done and how it forms the opinion of others.
Qualifications is what skills you possess, what you've accomplished, your education, your personal history, etc. This deeply ties into reputation. You can claim to be the greatest programmer ever, that's going to be incredibly difficult to verify for most venture capitalists, most basically won't bother attempting to verify it: they're going to judge you by reputation, partially in tandem with your claims.
“We talked to 15 friendly CIOs at mid sized banks, and they all said that pen theft was a top three problem for them in 2018, they plan to budget up to $30k to solve it in 2019. We are pretty sure we can build RFID pen tracking systems for under $100 per pen, but we haven’t figured out how to price it for our market. I do know two bank branch managers who are willing to run beta tests.”
I mean, that’s still a dumb idea, but you can get started putting numbers around something without running down the whole 24 month clock. And usually most of the risk is in the product market fit, not in your tech team’s ability to create pen trackers.
Edit to add: now, if you integrate blockchain into your pen trackers, and have an ICO for pencoin, then this is totally fundable. Mid sized retail banks are definitely looking for a way to spend money on blockchain.
Those are the two options everyone always has. If you're not doing one or the other, I don't know what the hell it is that you're doing at all, and sounds like neither do you.
A more meta point - you need to know what your life is about, instead of going by what's 'responsible', or whatever else. You need to know what it is you're doing with your life, then you won't be in emotional turmoil, because there won't be success or failure, just steps along the path.
Keep asking yourself why, why, why, and find what is the real root cause. Do you want to do something else? Are the failures you've had demoralizing? Do you think it's impossible to fix the product? Is your market smaller than initially expected?
Look up the EOS methodology, or read the book Traction by Gabriel Weinberg, it’s a good read with lots of helpful tools.
Ultimately if you like your team, want to do something to change the world, have the support of your backers, perhaps do some services consulting and sell your time for money.
This approach will give you income, and at the same time you can start noticing problems in your clients you can help them solve with a product.
It’s the easiest way to get started, and the revenue provides you a longer runway. The client logo’s and case studies help with your credibility too.
this has occurred to me
1. 9 months isn't long enough, as others have said. There are exceptions, but those are the exceptions. I can't think of any startup in recent history truly reaching product/market fit within its first couple of years. Facebook, I guess. It's not abnormal for it to not happen years out. pmarca's material on it suggests this, as well.
2. You not only raised money very early, but you raised it from non-professional investors, as far as I can tell, so you're un-nerved about losing their money, while they want to push you to turn their thousands into millions. Raising more money at this point is only going to exacerbate everything you're going through.
3. High-touch sales are absolutely the norm in B2B. Your efforts are a good thing. If you take a lot of the typical YC advice at face value, you'll be lead to believe that you should be measuring your conversions, etc, and having a nice hockey-stick shaped growth curve. This is absolutely not going to be the case for a B2B company on month 9, unless they've struck platinum. There was a startup school segment where Kevin Hale (IIRC) advised the founders not to measure sales, since they'd likely be in the single digits for the first year and not yield anything meaningful. Instead, you should be measuring your own outreach. Any other metric is going to be close enough to zero to be meaningless at this stage. Your product is going to be crappy, your presentations and pitches are going to be awkward and sloppy.
At the end of the day, you have the best idea of your chances for survival. With what you've mentioned so far, there's promise, but it'll be up to you to make it happen. Even if you stick it out for a year or two longer, the odds, of course, are still against you.
On top of that it sounds like you're pretty smart and business focused but you aren't hugely passionate about the problem you're solving.
I would probably advise you to go away and find a different problem to solve; one that you're more passionate about and one where the economic model stacks up. If you've got a good team of people then you can probably leverage that to become successful in a new space.
2. Check that you can imagine yourself spending next few years doing what you are doing, just even more harder
3. If so, double down, as suggested above ask why, why and why. If needed, pivot.
Given your statement above, there's really no question beyond this point. You promised riches and success to family and friends and it is not currently looking like you will do that, and their message is "stop please before its all gone". Do so.
If you still have money and it is from family and friends then stop right now - on Monday (tomorrow) and give back all that you can. If you burn the rest of that cash then for the rest of your life those relationships will exist for you only in the light of that money. It would be different if the money you had was from an angel or VC who are taking calculated risks.
Your family and friends relationships are worth infinitely more than any startup.
You should instantly kill all business costs, go get a job, and continue marketing what you have built on the side.
We don't know whether OP pitched it this way to friends and family, but I sincerely hope he did.
Get in and talk with the Pilot companies - be straight up and honest, ask them if it’s really solving a problem for them or if it’s just a nice to have. Ask what their true pains are.
Monitor your run rates and have contingency plans for dealing with what happens if funds get low.
If you’re worried, talk to your cofounders and make sure you’re communicating properly. Express your concerns.
If you truly want to quit, then you can do that but it will have consequences as well.
Startups can be hard, but the rules are simple. Find a problem and solve it.
If you're interested in a full time salaried CTO position at a recently funded VR startup (cofounder level entry, but salaried/optional equity), message me at charlie@zannorman.com
You have zero confidence in your own product.
So yes, shut this down as gracefully as possible.
Taking on the entire world is hard enough even if you do believe in your product.
>... in my understanding we've failed at the most important thing: finding product/market fit
They built something, sure, but the technical cofounder believes it has very little/no utility. That's telling.
Per his OP, the technical founder has not explicitly stated whether he believes that the product has zero utility. Rather he's saying that he found out (from data I suppose) that there is no product market fit for it.
Splitting hairs IMHO.
https://www.google.com/search?q=don%27t+fall+in+love+with+yo...
i do believe in the problem though