At a time where businesses around the world are closing their doors, furloughing their staff and relying on Government intervention to pay basic bills, it’s unlikely that anyone thinks this is a great time to launch a new start-up. Unless, that is, they’ve dreamt up a genius, new business model that will thrive in this demanding environment in which we now find ourselves. Drone deliveries don’t sound so preposterous now, do they?!
There will come a point in the future when entrepreneurs around the globe will be champing at the bit again for their first – or next – taste of success. Fully primed for action after this unplanned and unwanted hiatus from “business as usual”, they will unleash their ideas and products on the world before you can say “I hate coronavirus”.
With many enjoying more time on our hands than usual, now is a perfect opportunity to become better acquainted with how and why other businesses have failed before. Were they reckless with investor funds? Did they not know how to scale up? Did they over-sell and under-deliver? Let’s find out…
An oft-quoted aphorism in business circles is “Failing to plan is planning to fail.”
Everyone knows at least one colleague who has fallen foul of failing to plan. Perhaps they’re a self-proclaimed “ideas person” who suffers from an unfortunate inability to bring their ideas to life. Maybe they prefer the pressure of a deadline looming, only to fail to deliver when it matters most.
Sometimes, it is the simplest parts of a plan that are misjudged or missed off entirely that prove to be a brand’s downfall. Other times, it’s the complex web of lies and deceit that finally catches businesses out, leaving company owners with nowhere to go but down (or jail, if you’re Elizabeth Holmes).
1. LEARN THE LETTER OF THE LAW
Aside from the shocking tale of Theranos – which I have already explored in my blog What is Moonshot Thinking? – there are numerous other companies that have fallen foul of the Feds.
Take uBiome, for example.
In a Forbes article from October 2019, journalist Alex Knapp outlined the charges levelled against the health testing start-up:
In October 2018, microbiome testing startup uBiome was riding pretty high. Less than a month before, the company had announced a shift to more therapeutic products, raised $83 million in a venture capital round, and added a former Novartis CEO to its board.
Fast forward a year later: the company’s cofounders have resigned, it faces law enforcement scrutiny over its billing practices, it’s currently in bankruptcy proceedings, and it filed a motion Tuesday to move from Chapter 11 to Chapter 7 bankruptcy, which would mean liquidating its assets and shutting down.
Seemingly a lot can happen in year. Or a month for that matter – events since 1st March of this year can teach us that much.
In July 2019, Singulex - an East Bay blood testing company – closed its doors, laying off 71 staff members in the process. The closure came after the company paid a $1.25M fine in August 2018, following a whistleblower suit that accused the company of billing federal health programs for unnecessary blood tests that it pressured upon healthcare providers.
It should go without saying, but clearly some business owners need to hear it – keep ALL of your practices above board at all times. There’s no simpler way to avoid scrutiny further down the line than to follow the letter of the law from the get-go. Not clued up about copyright infringement? Ask someone who is. Unsure how to deal with poor-performing staff? Hire an HR specialist. It’ll save you from much bigger headaches in the long term. After all, no one likes to hear of businesses stealing ideas or mistreating their staff, deliberately or otherwise.
2. SPEND WISELY
In September 2019, TechCrunch published an article detailing the suspected downfall of DAQRI – a previously high-flying, heavily-funded AR headset startup based in Los Angeles:
DAQRI faced substantial challenges from competing headset makers, including Magic Leap and Microsoft, which were backed by more expansive war chests and institutional partnerships. While the headset company struggled to compete for enterprise customers, DAQRI benefited from investor excitement surrounding the broader space. That is, until the investment climate for AR startups cooled.
According to CB Insights:
(DAQRI)… found itself floundering after burning through investments in excess of $250M and acquiring 4 other entities. Internal sources cited difficulties common among forerunners in emerging industries, including competitors with extensive corporate backing and difficulties training users to use the technology.
Who’s to say precisely where the $250M of investment funds ended up, but that’s quite a pot of cash to burn through leaving DAQRI on the ever-expanding list of struggling start-ups.
Don’t seek to do too much too soon. Invest only in the essentials in the beginning (do your team really need souped-up iMacs, beanbag chairs and table tennis?), and build robust back-up plans just in case the proverbial hits the fan – as it has done for millions (if not billions) of businesses so far in 2020.
If you are lucky enough to receive investment – whether it be from business tycoons or your parents – make sure every penny works hard for you. No one else will do it for you.
3. PUT YOURSELF IN CUSTOMERS' SHOES
In 2018, Ticketmaster announced the closure of two of its online ticket marketplaces - GET ME IN! and Seatwave. Whilst any subsidiary of global conglomerate Ticketmaster can no longer be considered a “start-up” (or a failure in this case) there are still important lessons to be learned.
In their blog addressing the shutdown, Ticketmaster stated:
That’s right, we’ve listened and we hear you: secondary sites just don’t cut it anymore and you’re tired of seeing others snap up tickets just to resell for a profit.
All we want is you, the fan, to be able to safely buy tickets to the events you love.
In their place came Ticketmaster’s “Fan-to-Fan Ticket Exchange” - a portal on which to buy or sell tickets at the original price or lower.
In this instance, Ticketmaster made the call to move with the times to avoid being left behind. Leaving GET ME IN! and Seatwave live would have been an open invitation for competitors to swoop in and create a better user experience, taking Ticketmaster customers in the process. What better way to ensure retention than giving customers what they want? And directly?
Younger companies may have struggled to pivot in this way, choosing instead to throw further time, money and resources at the product that their blood, sweat and tears had built. Whether it’s a fancy looking website that doesn’t convert, or a service that isn’t as popular as it used to be, it’s vital to listen to your customers, to remain flexible and be open to change – even if it means taking a drastically different road to the one you had mapped out.