Why start-ups fail
At Holland Startup, we do anything to make our start-ups successful. There are many factors that influence success. From the noughties on, many new media companies became the Next Big Thing. These were original concepts, catering for large customer bases. But somehow, many of them ended in failure. But for what reasons? I will list a couple of the most remarkable stories. These near Steve Jobeses made the mistakes, so we don't have to.
In 1999, George Shaheen started Webvan. With his website he aimed to deliver groceries to the American public. It seemed like a solid plan. The public loved home deliveries and the promise to deliver the goods within 30 minutes made it even better. So Shaheen started carving out his plans. He estimated that by the year 2004, 35 per cent of the American public would buy its groceries online. That's a hell of a lot logistics! So he started investing in warehouses, fleets of trucks and enough computers to last for a long time. Finally he opened up his shop. And guess what? His customers never came! So by 2001 the company went bankrupt. Nowadays, Amazon has blown new life into it as its grocery shopping branch.
And have you ever heard of Pay By Touch? I hadn't heard of it either! It's a shame because John P. Rodgers really struck a goldmine when he started the company back in 2002. The company built biometric sensors that allowed users to pay with just one swipe of the finger. The technology was regarded as the future of payment. Within a year the company had raised 340 million dollars. But the fame and fortune caused Rodgers to derail. He was accused of domestic violence, drug abuse and taking company money for personal use. Investors pulled out one by one. One of them said he was "worse than a drunken sailor". And then the drunken sailor finally went down with his ship. Later, UBS securities, the company that stepped in as an investment banker, admitted they hadn't screened their rockstar CEO properly. Apparently Rodgers had been involved in various shady deals before he ever founded Pay By Touch.
And then there was Altavista, remember? In the mid-nineties the company was among the leading search engines. It was the new era of the internet and all new media companies had to figure out how to generate revenue from something as -freely available as- the internet. Altavista was stuggling with this too. They had built a dominating service but failed to recognize opportunities to earn money. In 1998 they were the first service that offered e-mail for free but that wasn't enough. Three years later, a small company called Google launched its search engine. Soon, they took over the market and became the leading search engine. Altavista was bought by Yahoo and died officially when they pulled the plug ten years later. Google initially struggled with inventing a revenue model too. But where Altavista couldn't think beyond free e-mailservices, Google came up with its Adwords.
So what can we learn from these brilliant services but poor results? You have to proof your concept. Be realistic about your goals, work hard, invest but don't overdo it. And make your company a business, not just a service.
Robbert Jan Hanse