5 lessons I learned from a startup failure
Some statistics say that over 90% of startups fail within the first five years. Some put this number at 70% over two years. However, I know for sure that my startup 100% failed. I created an app that allowed backpackers to connect with each other and chat. It was designed to help solo travelers find other solo travelers and locals around the world. However, it did not go well with travelers or anyone for that matter. It was a big blow to my ego but — what do you know? — there were lessons to be learned.
When I told my colleagues and friends that I was quitting my business, everyone asked me why that was the case. I find the phrasing of this question wrong. They should instead ask me what this failure taught me. One belief that got me through all that was that in failure too lies success. So I sat down multiple times and looked back at my journey to find out what I did wrong.
Instead of giving up, I started researching about other startup failures. I read stories about Jeff Bezos, the founder of Amazon, and Reid Hoffman, the co-founder of LinkedIn. It was incredible to know how they too struggled immensely in the beginning and rose back from their failures. I found valuable lessons from the Paolo MacCallum, CEO of NamoBOT, a name generating tool. The founder, after messing up several startups, used all the knowledge from previous experiences to bounce back with a new idea.
Here is what I had to learn from these individuals and my own experience:
1. Have Enough Capital
Apparently, I am not the only one who did not have enough money to successfully start a business. According to an analysis by CB Insights, the second biggest reason for startups to fail was running out of cash. Your finances should be well figured out before going into business.
When I first came up with my startup idea, I did not think my finances through. Fundamentally, I was my own sponsor from the very beginning. I thought the savings I had would be enough to launch my startup and they were. However, a few months down the road I was struggling with money.
Owing to the lack of cash, there was only one thing left for me to do, and that was to compromise on the most essential things. I had to lay off two people from my already small team. It was super hard to pay the rent for the workspace.
MacCallum suggested that I should have arranged money for at least a year of operations. There are avenues for startups to find money thanks to lending organizations and crowdfunding. This is how he got his funding for his startup.
2. Keep it Cheap, and Offer Discounts
It is super hard to make any profits during the first few months of any business. Same was the case for me. However, I wanted to make money, so I kept the prices at a level that would make me a profit faster. Consumers, on the other hand, are always looking for the cheapest stuff.
High prices are not really helpful when you are a startup, especially in a saturated industry. What I needed to do instead was offer my service at cheaper rates and give out coupons. Introductory discounts can help bring in more customers. I realize that when it was too late.
According to MacCallum, instead of worrying about making profits, I should have been more concerned about getting the word out there and just sell.
3. Not Every Advice is the Right Advice
When it comes to startups, many people think they are experts. They throw a few numbers at you, cite some successful examples and bam, they are experts. On the contrary, what my experience taught me is that you need to filter out all those advices and recommendations. It is crucial to consult people and pick their brains but carrying it out is on you.
Think carefully before you change your mind because someone said something. In the end, it is equally important to listen to your gut. After all, startups are all about defying the odds. If you are just going to play safe, it is not going to cut it.
4. You Cannot Do Everything on Your Own
At first, my startup was a one-man team. I was my finance guy. I was the developer. I was the tester. I was the business developer. I was the one who picked the lunch. Needless to say, it was too much to take on. This is directly related to the fact that I had little money. I was afraid to hire anyone because I simply could not afford it. I did not seek much help from my friends either.
When you want to build something big, you need a lot of hands. I am sure Taj Mahal was not built by one person. Unlike my startup, Taj Mahal to this day gets millions of visitors. The problem was that I took on tasks that I was not even great at. That was a big mistake.
When meeting potential investors, it was me, myself and I. Paolo MacCallum, said that instead of doing it all on your own, there should have been someone with more experience and a knack for communication to better explain the product.
And I realized that he was right since it did not work out great for me as I had too much on my plate.
5. Accept When Your Startup is Failing
It takes courage to accept failure and I, for one, lacked that courage. For the longest time ever, I was not even convinced that my startup is just not picking up. This had a domino effect, and things only got worse from there. Clients dropped out, money stopped flowing in, and there was a serious dearth of good ideas.
The fact is that startups do fail all around the world. Many times it is because of your own mistakes, while other times it is circumstances that are beyond your control. Regardless, one should never give up and look back to learn valuable lessons. You only learn from experience and the things you learn yourself from failure stay with you for life. Once you know enough, there is no one stopping you from finally succeeding.