How some startup founders dig the grave of their own startups with their wrong mindset.
November 12, 2016
We get to hear success stories of many startups every day but we don't normally remember the failed ones. A lot of startups come and go every day in India and across the globe, many fails and a very few become successful. Often, we don't ask why a particular startup failed. Was it because of funding issues or the product was not that good or maybe the founder/s did not have enough knowledge of their market? The reasons are many for a startup failure but we do not ask if the founder/s have a mindset that is needed to successfully launch and run a startup.
In my over 13 years of experience, I've seen most of the companies I've worked for flourish while one startup gave me the biggest learning of my life. This particular company was the only company that shut down. Not because the product wasn't good or it didn't have enough funds to run it. It failed because the founders did not have the right mindset that is needed to run a startup. They started a company merely because one of the founders was super passionate about the product. He also had funding support from an angel investor. But what he lacked was the understanding of the target market and what gap is he is filling with his product. The product was developed without spending time in collecting feedback on the concept. If you are getting into starting your own venture then the first rule to get into it is to ask yourself 'What problem are you solving with your product?' But if that one thing is missing from your mindset then your startup is going to go down the same road as a majority of startups in India or anywhere across the globe, which is, 'the untimely death of your startup'.
Here's the timeline of the company I was working for:
2012: The founder no. 1 conceptualized the product
2012-2014: The product which was a SaaS based product designed for hospitality industry remained in development for almost 3 years.
2015: First round of funding ($ 2 Million) raised through an Angel Investor who also joined the board as one of the directors. Founder no. 1 gets the position of CEO whereas the founder no. 2 becomes the COO. Both also become directors of the company. A Director of Sales is also appointed to take care of PAN India market.
September 2015: Product was formally launched and I joined this company to take care of the sales efforts in the northern Indian market.
November 2015: Founder no. 1 was made to step down as the CEO & Director of the company after one of the senior female staffs accused him of molestation. This is when the founder no. 2 became the face of the company but all decision-making powers remained with the founder no. 1
December 2015: Unaffected by these troubles, we continued our sales efforts and added a substantial no. of clients while gathering feedback on the product at the same time.
January - March 2016: Tension between both the founders grew much bigger and the fight for authority became prominent around this time. With the growing number of clients, feedback and their requirements from the product also grew. These were basically some features that were critical for their business without which our product was incomplete for them and was not as per the needs of our target market. As sales, we collected those requests and passed it to the founders. It is also during this time when the founders decided to develop a mobile app for the product and it was scheduled for a launch in February which did not happen. Our competitors were growing big by this time as they understood the need of the market and delivered quickly.
April 2016: The feud between both the founders grew much deeper and as a result founder no. 2 (the COO) decided to step down as well. With this, the organization became literally an orphan but it was decided that the founder no. 1 will now run it without having any powers on papers. Basically, by the end of April, we did not have any CEO, COO and Director of Sales and all that remained was a team of 20 employees and the COO along with the Investor as Directors on board. As sales, we were instructed by the founder no. 1 to tell any client who asks for more features in the product to "F*** Off".
May - July 2016: During this time founder no. 1 continued to make a fool out of everyone, especially the investor that the product enhancement is happening and development of the mobile app is of utmost priority for him. Also, during this time he was successful in convincing the investor for more funds but outsourced 80% of the development work in spite of having a full-fledged team of developers in-house. The in-house tech team was given the work to develop 3 different products by the founder no. 1 which were his personal projects that he did not want the investor or anyone else within the organization to know about. Basically, he outsourced the whole development and made the in-house tech team work on his personal projects and by doing that a huge part of investment was wasted, which the investor was unaware of. Salaries for the entire sales team were restructured in June without any written communication or prior information and tech team was paid overtime for working on his personal projects from that money.
August 2016: Around this time, the investor got to know about the other personal projects which were being developed on his investment. By August, the number of clients fell from 300+ to single digit due to lack of important features in the product and because of all the false promises we made to them. This fall started to happen in February and within 6 months we were sitting with only a handful of clients. This is when the investor (also being the director) decided to stop the operations and shut down the company for good.
The biggest reason I see for this company's failure is that the main founder lacked a mindset that is needed to run a company. I'm an advocate of setting the foundation right before building the end product which is normally a thumb rule for anything that you start. If you have a great product, deep pockets, and a superb team but lack a solid foundation than your venture is bound to collapse. If you do not value your customers and fail to take their feedback seriously, your company will fail eventually. This is what happened with my company as well and ultimately it died. He had the idea of a great product and was really passionate about it but if the product is developed without understanding what is needed by your target market and what is that one problem you're solving for it then you are bound to fail. This is what happens when you jump into startup bandwagon without developing a mindset for it. One thing which is very important in launching and running a startup is "Things change and you need to adjust accordingly". It is very important that you keep enhancing your product rather than believing that what you have built is enough for making your startup a life-long success.