Easy to start, hard to finish or about the death of startups
For 11 years now I have been doing web development and internet marketing. Was both on the side of the customer and on the side of the performer. With my own hands, I once designed, installed, programmed, tested, promoted, then managed projects, then taught others to do it, and now I invent them and launch them. The only thing that I have never done with my own hands is design. In other words, I didn’t just see the life cycle of a project from the inside, I participated in almost all stages of development, often in fairly large projects. And now, seeing the whole kitchen from the inside, I constantly observe the same reasons for success and failure. In this article I will try to tell you what I saw in 11 years of work and more than 100 startups that I touched on and how to create a big and successful project.
Before talking about success, let's talk about the causes of defeats, to be able to avoid them and thereby increase their chances of success. Relatively recently, a remarkable study was published about the top 20 reasons for startup failure . It seems to be described the obvious things that every entrepreneur thinks about in one way or another, but if you disassemble each item separately, you can find many interesting non-obvious facts:
The main problem here is that the entrepreneur sees the world through his prism of perception and is sure that he is right. Accordingly, he often runs after the idea of ​​blindly believing in it and not looking around, that is, as if doing the project not for the end users, but rather for himself.
')
This problem may have a very different look: this is a fundamentally wrong idea, and the lack of research at the start, and an attempt to make the most sophisticated product, which leads to its excessive complexity and non-acceptance on the market, and for so long development that the market changes and the product becomes unclaimed before its release.
Have you often seen new projects that left extra money for their launch? I think this is a very big rarity. The budget must be taken with a margin.
I have repeatedly seen how huge projects were designed, for the implementation of which there was no money and they were closed. The opinion that it is easy to find an investment is a myth. At best, you can find a very small amount for a significant stake in the company, and this amount is most likely still not enough.
Spending money right and left at the very beginning of the project is a common misfortune. For some reason, few people follow the principle of a “lean startup”.
Excessive savings, however, also does not lead us to the desired result. There were countless cases when a start-up tried to save on things that were not necessary to save on. The cost of one hour for the same specialist may differ by several times, and the quality will be dozens of times.
Internet projects are highly intelligent products, so people are the most important thing here. I would generally put the team in the first place, because the right people can handle almost any problem described.
Many times I saw how people were saved when they were chosen in terms of price, but not in terms of competencies. I'm not saying that you need to choose the most expensive, no. It is necessary to choose the most competent precisely in a particular narrow topic, and if you are lucky there will be 2 or more competent ones, then you will have to choose according to secondary parameters, including the price.
Often, we need not one specialist, but a whole team of specialists in a narrow field. Then the problem with the team turns out to be even more acute, because there are very few high-quality specialized teams, and to assemble a team from scratch is very long and risky. For example, in runet specialized teams in the development of eCommerce solutions only 5-7. In this case, it is easier to buy or rent a team.
The basis of a successful team is a triangle: a cool manager, a cool salesman and a cool techie. It is better to keep these people on staff, and the rest can be outsourced.
The market has long been saturated, there are very few free niches. First, you need to see if there are any projects with a similar idea. Because if there is, it will be extremely difficult to move the leader. I often saw how they began to make projects-copies of successful products. This is a very bad idea, almost doomed to failure. If you make a product with a similar idea, then you need a very good budget for implementation and marketing, as well as to think about how your product will differ and how it will be able to differentiate from competitors.
Still, there is often a mistake when people make a product without taking into account the possibilities of large players in the market. Make additions to existing ideas, as side services. This is also a very slippery path, because the existing project has users and resources to quickly implement such ancillary service as part of its product, which can simply kill all the efforts of a startup starter. So it is worthwhile to calculate this possibility.
For this reason, research is being done on competitors and the market at the start of the project, to which a lot of time is devoted.
This problem originates in the ignorance of the market and consumers. You can invest millions of dollars in a useful service, but the value of this product may be lower than its cost, therefore at this price no one will buy it, and at a price below it will not pay off.
Less often, there are cases when research is not carried out, at what price competitors are sold and the project “do not get into the market” at a price, although there are plenty of pricing methodologies in the modern world.
There is a well-known problem when they save on the UX / UI stage, they start with design or even with programming. I saw whole social networks that were programmed from scratch and had no design at all. This is hundreds of thousands of dollars thrown to the wind! For 11 years, I have not yet seen successful products that have managed to do without the design phase (UX / UI). Of course, “there is no TZ in the startup,” but even when working on flexible methodologies, it is necessary to design.
Or, the interface itself is normal, but the functionality is not enough. You should always do MVP, but you should not go too far and cut off vital functions.
Sounds weird, huh? But, nevertheless, it is a reality: many startups do not think at the beginning how they will earn, who will pay them how much, what they will pay for, etc. This is the so-called Customer Development stage. Make a startup for a startup.
We at the first stages of work try to work through this issue, it also lies in the design plane, although here we need expertise of those people who started projects and preferably not one. Understand how to monetize it. Most startups have a distorted perception of the business model, many people think that you first need to start a project, and only then it will be clear how to make money from it ... This is a mistake, you need to think about money right away.
On good, the cost of marketing should exceed the cost of development several times. In reality, most consider development costs and do not consider future marketing costs. For some reason, many people believe that the main thing is to launch a project and if the product is cool, it will not need to be sold and promoted. Yes, in general, history knows cases when a product promoted itself, without investing in marketing, but all these cases are an exception to the rules and all of them are connected with innovative products that did not have strong competitors.
Any new startup should have a marketing plan and cost calculations. It will be corrected and, probably, more than once, but the idea of ​​the channels and costs should be obtained as early as possible. I saw a lot of startups that run in competitive markets and almost did not invest in marketing, which led to very poor results. No less often I met innovators who did something very unique and new, hoping that the product would be interesting and clear to everyone. The market does not work that way. Most often, innovative ideas need to literally create a market.
Very slippery question, a double-edged sword. On the one hand, it is extremely important to constantly collect and process feedback from users. On the other hand, users do not always know how best and even do not always understand what they really want. But the fact that feedback needs to be purposefully collected is for sure. Further test and do as many iterations as possible. The more and faster iterations in the product - the more successful and faster it grows. Although it is worth remembering the words of the classic: "if Henry Ford listened only to users, he would grow faster horse breeds."
There are two variants of this problem: the product came out too early or the product came out too late. I often saw the second option when startups developed and licked their product for so long that the market simply changed, competitors appeared, user needs changed and the product simply became irrelevant by the time it was released. Less often, there is a case when a product is quickly developed and the market is not ready for it. Either the users have not changed their habits yet, or the technologies are too innovative, or there is not enough technical basis for its application. There are plenty of options, you always need to choose a middle ground and do everything on time.
The basic idea of ​​a startup almost always changes. Often startups even do a full restart of projects with new ideas. And when you make a project, you think through new functions and opportunities, you always want to make some secondary functions that “would not hurt” the project. And so a unique idea often acquires standard functions and begins to get lost in the midst of all this. In my practice, there was a project with a unique idea, which after having acquired the functions of an ordinary social network and the initial idea of ​​the project turned into a small block in the user profile. As a result, the entire project was thrown out and redone from scratch.
This, too, often happens, I have seen mostly disagreements with investors. A lot depends on the investor, which is why it is important to attract Smart Money - an investor who not only can give money, but who understands the features of startups and the market, can help with knowledge, acquaintances and other resources. Then it will be much easier to explain something to an investor.
Often, attract non-core investors who have heard about the "success of Facebook" and expect quick profits in excess of a startup. I saw a case when an investor came 3 months after the start of the project and asked where the profit was. What happened next when the founder replied that “there is no money” (c) it is better to tell in a separate article ...
No less often there are disagreements with the co-founders of the project. When one leader wants some decisions, and the other others. Startup resources are always lacking, especially for the implementation of key decisions from several managers at once. That is why it is important to divide responsibilities and somehow regulate relations, as well as agree on a possible exit from the project in case of disagreement.
Restarting the project (pivot) does not always go smoothly and successfully. It is important to do it in time if it is clear that the initial idea has significant problems, while there are still resources to restart. And, of course, correctly restart the project, because this is the moment when everything changes. I have seen several cases of restarting, when wrong conclusions were made from past failures and the restart itself was also made because of this incorrectly, as a result, the projects died.
It also happens that the idea of ​​a startup at some point ceases to please the creator. It burns out. Whether he has new opportunities, or the market turned out to be not as interesting as he initially imagined, or he just burned out. This is a human factor and I personally saw more than 10 projects that the creators simply threw in the process of creation.
We are talking about Internet projects, it would seem, everything can be done here remotely. But if we are, for example, in India, and we want to make a project for the US market, we need: legal support and local registration, understanding of the mentality and characteristics of consumers, accounts in local banks, live representatives for business meetings and much more. It is for this reason that American investors mainly invest only in those start-ups that are in the United States. Moreover, in 95% of cases the rule of “two hours” applies. That is, the team or at least the founder must physically be no more than two hours away from the investor’s office. And for the same reason, our startups designed for distant markets often fail.
This most often refers to innovative ideas that no one but the author can understand. Investments do not give under what they do not understand. Investors love to figure everything out. Once upon a time, the Google team went around the Silicon Valley and asked for $ 1 million in investments, but no one gave them, not understanding the idea of ​​the project. In the end, they agreed to give 100 thousand dollars one of IT entrepreneurs on certain conditions. I myself saw hundreds of crazy ideas for which I was looking for money, but I could not find it.
Not rarely, when the money is ready to give, but not in sufficient quantity.
Often there are legal restrictions, whether they are registered patents, copyrights to content or an unconscious violation of the rights of individual companies and the difficulties associated with this. I most often encountered copyright infringement. For some reason, start-ups often do not think that every text, picture or even idea has official owners who have taken care of protecting their rights.
Not everyone knows or wants to use their dating. In fact, a good entrepreneur should take every chance. “Buzz your ears” to all your friends, directly asking them to help at least with the dissemination of information, at every opportunity to remind you about your startup.
A common problem for those who work a lot. When you start a startup, everyone is always an idea, ready to work day and night, and this is normal. But if you do not keep a balance, you can get depressed and give up work. I myself had this, in the end I left to live in Asia for a while and recuperate.
Not everyone is ready to make significant changes to their ideas. Often, startups go to the end with the wrong idea, as a result, they run out of money, people leave, partners leave, and the startup dies. I have seen such cases is not enough: the idea does not work, but the founder still blindly goes forward.
All these stories described in the study, I saw in my own practice. And saw many times. The study itself only showed the percentage of probability. I think many startups who tried to launch at least one project saw a lot of stories similar to their practice and can confirm this in the comments, describe this pain. Most of the time I worked on the outsourcer side and only recently we also started developing our products, in parallel with outsourcing. Because I am tired of explaining to each client what to do and what not to make the project successful. Really want to listen and hear no more than 5-10%.
To make a successful startup is really difficult, especially in the field of Internet business, which is indicated by the remarkable research The RIP Report . But still, your chances can be significantly increased if you apply the simple rules described in this article and act wisely.
PS I invite you to your author course in the business school "Digitov": Internet project management - on the course I will teach you to professionally manage projects and, of course, talk a lot about startups.
PPS To receive our new articles before others or simply not to miss new publications - subscribe to the SECL Group's fan pages: Facebook , VK , and Twitter .
Original article: http://seclgroup.ru/article-20-reasons-why-startups-fail.html
Author:
Nikita Semenov
CEO
SECL Group Company
Before talking about success, let's talk about the causes of defeats, to be able to avoid them and thereby increase their chances of success. Relatively recently, a remarkable study was published about the top 20 reasons for startup failure . It seems to be described the obvious things that every entrepreneur thinks about in one way or another, but if you disassemble each item separately, you can find many interesting non-obvious facts:
No market demand (42%)
The main problem here is that the entrepreneur sees the world through his prism of perception and is sure that he is right. Accordingly, he often runs after the idea of ​​blindly believing in it and not looking around, that is, as if doing the project not for the end users, but rather for himself.
')
This problem may have a very different look: this is a fundamentally wrong idea, and the lack of research at the start, and an attempt to make the most sophisticated product, which leads to its excessive complexity and non-acceptance on the market, and for so long development that the market changes and the product becomes unclaimed before its release.
Out of money (29%)
Have you often seen new projects that left extra money for their launch? I think this is a very big rarity. The budget must be taken with a margin.
I have repeatedly seen how huge projects were designed, for the implementation of which there was no money and they were closed. The opinion that it is easy to find an investment is a myth. At best, you can find a very small amount for a significant stake in the company, and this amount is most likely still not enough.
Spending money right and left at the very beginning of the project is a common misfortune. For some reason, few people follow the principle of a “lean startup”.
Excessive savings, however, also does not lead us to the desired result. There were countless cases when a start-up tried to save on things that were not necessary to save on. The cost of one hour for the same specialist may differ by several times, and the quality will be dozens of times.
Wrong team (23%)
Internet projects are highly intelligent products, so people are the most important thing here. I would generally put the team in the first place, because the right people can handle almost any problem described.
Many times I saw how people were saved when they were chosen in terms of price, but not in terms of competencies. I'm not saying that you need to choose the most expensive, no. It is necessary to choose the most competent precisely in a particular narrow topic, and if you are lucky there will be 2 or more competent ones, then you will have to choose according to secondary parameters, including the price.
Often, we need not one specialist, but a whole team of specialists in a narrow field. Then the problem with the team turns out to be even more acute, because there are very few high-quality specialized teams, and to assemble a team from scratch is very long and risky. For example, in runet specialized teams in the development of eCommerce solutions only 5-7. In this case, it is easier to buy or rent a team.
The basis of a successful team is a triangle: a cool manager, a cool salesman and a cool techie. It is better to keep these people on staff, and the rest can be outsourced.
Competition (19%)
The market has long been saturated, there are very few free niches. First, you need to see if there are any projects with a similar idea. Because if there is, it will be extremely difficult to move the leader. I often saw how they began to make projects-copies of successful products. This is a very bad idea, almost doomed to failure. If you make a product with a similar idea, then you need a very good budget for implementation and marketing, as well as to think about how your product will differ and how it will be able to differentiate from competitors.
Still, there is often a mistake when people make a product without taking into account the possibilities of large players in the market. Make additions to existing ideas, as side services. This is also a very slippery path, because the existing project has users and resources to quickly implement such ancillary service as part of its product, which can simply kill all the efforts of a startup starter. So it is worthwhile to calculate this possibility.
For this reason, research is being done on competitors and the market at the start of the project, to which a lot of time is devoted.
Pricing policy (18%)
This problem originates in the ignorance of the market and consumers. You can invest millions of dollars in a useful service, but the value of this product may be lower than its cost, therefore at this price no one will buy it, and at a price below it will not pay off.
Less often, there are cases when research is not carried out, at what price competitors are sold and the project “do not get into the market” at a price, although there are plenty of pricing methodologies in the modern world.
User unfriendly product (17%)
There is a well-known problem when they save on the UX / UI stage, they start with design or even with programming. I saw whole social networks that were programmed from scratch and had no design at all. This is hundreds of thousands of dollars thrown to the wind! For 11 years, I have not yet seen successful products that have managed to do without the design phase (UX / UI). Of course, “there is no TZ in the startup,” but even when working on flexible methodologies, it is necessary to design.
Or, the interface itself is normal, but the functionality is not enough. You should always do MVP, but you should not go too far and cut off vital functions.
No business model (17%)
Sounds weird, huh? But, nevertheless, it is a reality: many startups do not think at the beginning how they will earn, who will pay them how much, what they will pay for, etc. This is the so-called Customer Development stage. Make a startup for a startup.
We at the first stages of work try to work through this issue, it also lies in the design plane, although here we need expertise of those people who started projects and preferably not one. Understand how to monetize it. Most startups have a distorted perception of the business model, many people think that you first need to start a project, and only then it will be clear how to make money from it ... This is a mistake, you need to think about money right away.
Weak marketing (14%)
On good, the cost of marketing should exceed the cost of development several times. In reality, most consider development costs and do not consider future marketing costs. For some reason, many people believe that the main thing is to launch a project and if the product is cool, it will not need to be sold and promoted. Yes, in general, history knows cases when a product promoted itself, without investing in marketing, but all these cases are an exception to the rules and all of them are connected with innovative products that did not have strong competitors.
Any new startup should have a marketing plan and cost calculations. It will be corrected and, probably, more than once, but the idea of ​​the channels and costs should be obtained as early as possible. I saw a lot of startups that run in competitive markets and almost did not invest in marketing, which led to very poor results. No less often I met innovators who did something very unique and new, hoping that the product would be interesting and clear to everyone. The market does not work that way. Most often, innovative ideas need to literally create a market.
Ignoring customer feedback (14%)
Very slippery question, a double-edged sword. On the one hand, it is extremely important to constantly collect and process feedback from users. On the other hand, users do not always know how best and even do not always understand what they really want. But the fact that feedback needs to be purposefully collected is for sure. Further test and do as many iterations as possible. The more and faster iterations in the product - the more successful and faster it grows. Although it is worth remembering the words of the classic: "if Henry Ford listened only to users, he would grow faster horse breeds."
The product came out on time (13%)
There are two variants of this problem: the product came out too early or the product came out too late. I often saw the second option when startups developed and licked their product for so long that the market simply changed, competitors appeared, user needs changed and the product simply became irrelevant by the time it was released. Less often, there is a case when a product is quickly developed and the market is not ready for it. Either the users have not changed their habits yet, or the technologies are too innovative, or there is not enough technical basis for its application. There are plenty of options, you always need to choose a middle ground and do everything on time.
Loss of focus (13%).
The basic idea of ​​a startup almost always changes. Often startups even do a full restart of projects with new ideas. And when you make a project, you think through new functions and opportunities, you always want to make some secondary functions that “would not hurt” the project. And so a unique idea often acquires standard functions and begins to get lost in the midst of all this. In my practice, there was a project with a unique idea, which after having acquired the functions of an ordinary social network and the initial idea of ​​the project turned into a small block in the user profile. As a result, the entire project was thrown out and redone from scratch.
Disagreements with investors / founders (13%)
This, too, often happens, I have seen mostly disagreements with investors. A lot depends on the investor, which is why it is important to attract Smart Money - an investor who not only can give money, but who understands the features of startups and the market, can help with knowledge, acquaintances and other resources. Then it will be much easier to explain something to an investor.
Often, attract non-core investors who have heard about the "success of Facebook" and expect quick profits in excess of a startup. I saw a case when an investor came 3 months after the start of the project and asked where the profit was. What happened next when the founder replied that “there is no money” (c) it is better to tell in a separate article ...
No less often there are disagreements with the co-founders of the project. When one leader wants some decisions, and the other others. Startup resources are always lacking, especially for the implementation of key decisions from several managers at once. That is why it is important to divide responsibilities and somehow regulate relations, as well as agree on a possible exit from the project in case of disagreement.
Unsuccessful pivot (10%)
Restarting the project (pivot) does not always go smoothly and successfully. It is important to do it in time if it is clear that the initial idea has significant problems, while there are still resources to restart. And, of course, correctly restart the project, because this is the moment when everything changes. I have seen several cases of restarting, when wrong conclusions were made from past failures and the restart itself was also made because of this incorrectly, as a result, the projects died.
Lack of dedication (9%)
It also happens that the idea of ​​a startup at some point ceases to please the creator. It burns out. Whether he has new opportunities, or the market turned out to be not as interesting as he initially imagined, or he just burned out. This is a human factor and I personally saw more than 10 projects that the creators simply threw in the process of creation.
Bad location (9%)
We are talking about Internet projects, it would seem, everything can be done here remotely. But if we are, for example, in India, and we want to make a project for the US market, we need: legal support and local registration, understanding of the mentality and characteristics of consumers, accounts in local banks, live representatives for business meetings and much more. It is for this reason that American investors mainly invest only in those start-ups that are in the United States. Moreover, in 95% of cases the rule of “two hours” applies. That is, the team or at least the founder must physically be no more than two hours away from the investor’s office. And for the same reason, our startups designed for distant markets often fail.
No interest from investors (8%)
This most often refers to innovative ideas that no one but the author can understand. Investments do not give under what they do not understand. Investors love to figure everything out. Once upon a time, the Google team went around the Silicon Valley and asked for $ 1 million in investments, but no one gave them, not understanding the idea of ​​the project. In the end, they agreed to give 100 thousand dollars one of IT entrepreneurs on certain conditions. I myself saw hundreds of crazy ideas for which I was looking for money, but I could not find it.
Not rarely, when the money is ready to give, but not in sufficient quantity.
Legal difficulties (8%)
Often there are legal restrictions, whether they are registered patents, copyrights to content or an unconscious violation of the rights of individual companies and the difficulties associated with this. I most often encountered copyright infringement. For some reason, start-ups often do not think that every text, picture or even idea has official owners who have taken care of protecting their rights.
Do not use dating (8%).
Not everyone knows or wants to use their dating. In fact, a good entrepreneur should take every chance. “Buzz your ears” to all your friends, directly asking them to help at least with the dissemination of information, at every opportunity to remind you about your startup.
Burnout (8%)
A common problem for those who work a lot. When you start a startup, everyone is always an idea, ready to work day and night, and this is normal. But if you do not keep a balance, you can get depressed and give up work. I myself had this, in the end I left to live in Asia for a while and recuperate.
Refusal of pivot (7%)
Not everyone is ready to make significant changes to their ideas. Often, startups go to the end with the wrong idea, as a result, they run out of money, people leave, partners leave, and the startup dies. I have seen such cases is not enough: the idea does not work, but the founder still blindly goes forward.
All these stories described in the study, I saw in my own practice. And saw many times. The study itself only showed the percentage of probability. I think many startups who tried to launch at least one project saw a lot of stories similar to their practice and can confirm this in the comments, describe this pain. Most of the time I worked on the outsourcer side and only recently we also started developing our products, in parallel with outsourcing. Because I am tired of explaining to each client what to do and what not to make the project successful. Really want to listen and hear no more than 5-10%.
To make a successful startup is really difficult, especially in the field of Internet business, which is indicated by the remarkable research The RIP Report . But still, your chances can be significantly increased if you apply the simple rules described in this article and act wisely.
PS I invite you to your author course in the business school "Digitov": Internet project management - on the course I will teach you to professionally manage projects and, of course, talk a lot about startups.
PPS To receive our new articles before others or simply not to miss new publications - subscribe to the SECL Group's fan pages: Facebook , VK , and Twitter .
Original article: http://seclgroup.ru/article-20-reasons-why-startups-fail.html
Author:
Nikita Semenov
CEO
SECL Group Company
Source: https://habr.com/ru/post/311894/
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