WTF Is This Post About?
It’s really more of a reminder to me.
Often writing a piece like this you remind yourself what it is that you need to do and not do to be successful.
This resource, or list, is aimed at anyone who is at an early(ish) stage with their business.
Assuming that you’re involved with a Startup, and not simply starting a business, we can be sure of one thing: creating a successful Startup (i.e. ideally a “unicorn”) is difficult. If it was easy then we’d all be the 99% working for the 99% that never quit.
I think we’re all in agreement that having a successful Series A upwards startup’ is just as difficult in Hong Kong as it is anywhere else in the world, but it doesn’t matter where you live and work, there are some central truths when it comes to ways that you might kill your startup.
So, What Gives?
I came across this interesting graphic and it quite succinctly describes 20 Ways That Can Kill Startups. They are:
#1 There’s No Market Need
Yup, you can’t polish a turd. Many startups, not just in Hong Kong, are failing because they are addressing a problem which doesn’t really resonate with users. Having an easy way to easily open your caviar jar isn’t really a problem and nor should you bother creating an MVP for it and spending investors cash on it.
#2 You’ve Run Out of Cash
This applies to all businesses, not just startups. Most businesses fail at this, it’s not just a startup thing. In Hong Kong, you’d think that the place is flush with cash but securing it in a timely fashion kills dozens of startups each year. Startups typically fail because they run out of cash not just when they are underfunded, but when they receive too much and spend it recklessly. The lesson here is to think, behave and act with constant conservatism whilst being bullish and brave with campaigns and being able to pivot your business.
The truth is, if your founder is spending out of control it is likely because it’s not their money, i.e. a sign of a terrible leader.
#3 Not The Right Team
Lack of motivation, expertise or common vision can all contribute to a startup’s undoing. The startup world is not the place where you give your cousin or friend from High School a break. Aim high, recruit the best and you’ll get the best. Expect to pay for market competitive salaries because often the sorry state of play is that if you offer peanuts and you get monkeys. We’ve all seen this too many times.
Do not employ immature inexperienced kids, no matter how “big they speak” – always, always employ experience. Ageism is non-applicable in the startup world.
#4 Get Outcompeted
A combination of details (such as all of the above and below points) can lead to a competitor acting faster and with greater ability to pivot. Most fast and aggressively is key here.
#5 Pricing/ Cost Issues
Getting your prices (subscription model pricing) is vital. Price too low and you look ghetto and/ or your cheapen your product. Aim too high and you’ll just scare your initial users away. The subscription model is highly relevant here because in many cases a startup that seeks revenue via a monthly or annual subscription can typically suffer from high churn owing to the freemium or ‘free trial’ dilemma.
#6 Poor Product
Focus on the product and everything else will follow. There’s a nice saying by the founder of LinkedIn:
If you are not embarrassed by the first version of your product, you’ve launched too late.
Whilst it is true that a crap product can work with amazing growth marketing, it is somewhat unusual. It is far more typical to fail your startup because you’ve got, simply, said, a ‘half-baked’ product. Ironically this might seem to fight against the concept of an “MVP” however the key point here is that an MVP should at least absolutely work.
#7 No Business Model
Personally, I hate business plans and making them. They drive me nuts and I can’t stand the boring nature of them. What I’m more interested in is the discussion, (mental) planning and execution of the idea. In your team, you’d be a dumbass not to have someone who is anally focused on creating meticulous plans; not least for investors to take a look at.
A great idea is not enough. Founders should have a monetization plan from the beginning.
#8 Shitty Marketing
A great product will not (typically) market itself. Sometimes you need an amazing growth hack or to get lucky with a slashdot effect (if you’re a tech product) but the bottom line is that you need to employ creative minds that understand your customer persona and profile.
#9 Ignore Customers
This one is key.
Listen, listen some more and then listen again – listen to everything your customers have to say. The key thing to do here is to execute a Net Promoter Score (NPS) to see what they’re saying about your product. Sure, some might say that metrics like the NPS is a waste of time, the truth is that if you don’t talk to your customers then you’ll learn zero. Engaging with your early adopters is gold. Think of the Stripe example which is very often touted.
#10 Get Your Timing Spot On
This one doesn’t really apply to all startups but it’s certainly worth including in this write-up, that is: launching too quickly or too slowly can be equally detrimental. Remember that having, for example, great SEO and not launching could be a disaster because all you’ll be doing is alerting your niche to your product or service.
#11 Losing Focus
Alas, this one is very common. Changing visions and ideas can create fatigue with employees and investors. Everyone within the organization must be able to accept situations when they might be wrong and accept changes.
#12 Disharmony Between Your Team & Investors
Sure, you need to demonstrate and execute a return for your investors but it is often a mistake to blindly follow their lead: be brave and assertive and you’ll do much better in the long term.
#13 Pivot Gone Bad
Being able to pivot, and pivot easily and fast is critical to the success of a startup. It’s very common for a startup to twist and turn in its model but if the team is not all onboard with the pivot, or if the pivot is not articulated and explained correctly then there will be problems ahead.
#14 Lack Of Passion
Clearly, this one needs no explanation. If there’s no passion within the team, especially the founder(s) then it is absolutely time to jump ship.
#15 Bad Location
Being in the right geographical location is key to the success of a startup. Thankfully, Hong Kong is well suited to a pool of talent but by no means are we in the best city to launch a startup. FinTech and Blockchain technologies might be strengthening in Hong Kong but I am sure we’d all agree that London and New York would have a better talent pool?
#16 No Financing or Investor Interest
Lack of financing and investor interest either says that your product does not have a “product-market fit’, or, that your business simply isn’t perceived as being scalable.
#17 Legal Challenges
This one is quite flattering. Typically any form of disruptive startup will create noise that will upset incumbent businesses and industries. Think of Uber and Airbnb and you get the idea of how legal challenges can break a startup. The answer is to get a good solicitor and try to predict what competitors are going to do when faced with your awesome solution to their problem.
#18 Don’t Use Network/ Advisors
If startup founders do not use the connections of their investors, as well as their own, then they might lose traction and any of the above issues can creep in and sink the startup.
Startup founders often have poor work/life balances and find it difficult to manage both which can cause burn outs. The solution is to try and work smart, outsource as much of the “generic” stuff as possible and stop micro-managing every aspect of your startup. Have faith in others and delegate. Do not be “in your business” but manage it instead.
#20 Being Stubborn
Accept that your model might not be working and pivot: see #13 above. A nice example is the Airbnb classic growth hack which was their acceptance that the “breakfast” bit of their overnight staying model was not working (‘bnb’ for those that don’t know is an abbreviation for ‘Bed and Breakfast’; which is a common term in the UK and USA). The Airbnb founders discovered that their initial users weren’t interested in the breakfast bit of the model, so, they dropped it.