Ask HN: Why did your business fail?
One day I would like to try to build a business. There is lots of information how to do it good, which to some extent come with survivorship bias. But we can also learn from mistakes. So could you tell me: Why did your business fail?
27 comments
We had a generous (no upfront fee) franchise agreement with a US-based partner, much bigger than us and for whom we were developing a UK-oriented version of their training products while also working on the main US version.
They also agreed to fully fund a major marketing campaign in the UK.
Under the franchise agreement, we'd only have to start making paybacks when our level of business hit a certain level of profitability.
Marketing funds were delayed for 'reasons' and we forged ahead using our own cash - a mixture of business and personal.
We soon had sufficient market penetration to hit the kickback level so we had to start making payments to our partner - but they were still dithering about the marketing money.
Then business began to slow and, to cut a long story short, marketing assistance was withdrawn and we discovered that the US partner was directly approaching our customer base, despite us having a territorial agreement.
The US partner company then adopted the stance that they were much bigger than us so we'd have no chance at litigation.
Now trading while insolvent, we had no option to fold the business and lay off about 8 staff.
They also agreed to fully fund a major marketing campaign in the UK.
Under the franchise agreement, we'd only have to start making paybacks when our level of business hit a certain level of profitability.
Marketing funds were delayed for 'reasons' and we forged ahead using our own cash - a mixture of business and personal.
We soon had sufficient market penetration to hit the kickback level so we had to start making payments to our partner - but they were still dithering about the marketing money.
Then business began to slow and, to cut a long story short, marketing assistance was withdrawn and we discovered that the US partner was directly approaching our customer base, despite us having a territorial agreement.
The US partner company then adopted the stance that they were much bigger than us so we'd have no chance at litigation.
Now trading while insolvent, we had no option to fold the business and lay off about 8 staff.
Somewhat similar stories. We partnered with a customer to form a company that would serve their market and we formed a JV to sell it to other companies in their space. They were the investor. We brought strong domain expertise and technical skills.
We provided a budget and timeline. They gave us half the budget we requested (amounting to half the people) and still had us stick to the original timeline. We invested our money to hire others because we believed in the product and potential. They subsequently cut our budget by almost half again and we painfully managed to maintain our team.
When we were ready to start selling the product, they effectively used the hostile contract we had agreed to. By threatening to dissolve the company, they pulled the business away from us while trying to coax us into being employees instead of owners. We didn't come to an agreement and after a long and difficult process, the whole thing ended, we laid our team off, the software never saw the light of day, and our collective time and money was wasted.
Lessons: - Listen to your gut. - A hostile contract lays out how someone can screw you over. Ignore it at your own peril. - Don't optimize prematurely.
We provided a budget and timeline. They gave us half the budget we requested (amounting to half the people) and still had us stick to the original timeline. We invested our money to hire others because we believed in the product and potential. They subsequently cut our budget by almost half again and we painfully managed to maintain our team.
When we were ready to start selling the product, they effectively used the hostile contract we had agreed to. By threatening to dissolve the company, they pulled the business away from us while trying to coax us into being employees instead of owners. We didn't come to an agreement and after a long and difficult process, the whole thing ended, we laid our team off, the software never saw the light of day, and our collective time and money was wasted.
Lessons: - Listen to your gut. - A hostile contract lays out how someone can screw you over. Ignore it at your own peril. - Don't optimize prematurely.
completely not true. if they want to spend big on lawyers they can go ahead, sounds to me like a clear breach of contact, open and shut case any lawyer would gladly take and they will end up paying for fees as well.
of course there's no "justice" you still lose a lot, but you don't give up for nothing, may end up with some compensation.
of course there's no "justice" you still lose a lot, but you don't give up for nothing, may end up with some compensation.
I’ve had a few failed and a few successful ventures. Every time I have failed, it was due to tunnel vision caused by a poor work life balance.
Now I hardly work at all, but am far more successful than I was while working 80 hour weeks. Making sure to be well rested keeps my mind clear and I make substantially better choices as a result.
Keeping time available to experience the real world outside of my immediate existence is tremendously beneficial. When I am on no artificial clock, I can experience how other people live their lives at their own pace, and what you can learn from them is often surprising.
Now I hardly work at all, but am far more successful than I was while working 80 hour weeks. Making sure to be well rested keeps my mind clear and I make substantially better choices as a result.
Keeping time available to experience the real world outside of my immediate existence is tremendously beneficial. When I am on no artificial clock, I can experience how other people live their lives at their own pace, and what you can learn from them is often surprising.
Interestingly, the time I succeeded, I did 100 hour weeks. However, I think working long hours was a mistake. For one thing, it encourages bad habits - if you're working double the time, you should be bringing in another co-founder or employee. My co-founder helped me a ton with the tunnel vision, but I should have just taken a step back and looked at the right things.
This resonated with me. I frequently get caught up in tunnel vision and miss the forest from the trees. And then the worlds moved on and I unintentionally spent too much time on the wrong activities. Its happened enough times that I’m confident I won’t make the mistake again (hopefully that is ingrained wisdom by now)
We're on a path to failure. Our product is mostly simple. The need is there. The market is excited and interested. If we don't fail though, I will be shocked. We have a non technical founder who fashions himself the VP of Engineering and is, in fact, a micro managing narcissist. He has no engineering experience at all.
In facytt, I don't think he has any management experience either. He doesn't understand the work we're doing, holds people hostage until they explain it in a way he thinks makes sense and makes engineering decisions by fiat, using his personal anecdotes as evidence. He is the worst kind of leader and no one at the executive level is willing to actually do anything about it. He doesn't trust anyone, except those willing to humor his nonsense and even they don't trust him.
Before you ask, I stay because the team is great and if we don't fail, the upside is early retirement in grand fashion level returns.
Before you ask, I stay because the team is great and if we don't fail, the upside is early retirement in grand fashion level returns.
That is one very good question. As always, a combination of things. First, there was funding. Bootstrapping allowed for one pivot, and that one was more or less dead kn arrival due to a combination of timing (finding e-commerce logistics clients in September is hard) and Covid (people were too busy to carw about new stuff). I could have seen the need for a pivot earlier so. But the, being a solo founder means you only have that much bandwidth. I had to focus, and the one project I had lined up (enough to keep me and a future co founder alive for almost a year, plus the very realistic option of long term business) fell through, as mentioned, in September.
My mistake was to stick with plan A too long, I could have pulled the plug earlier but didn't. Usually I don't gamble, there I did.
And I realized that, despite wanting to start my own thing for years, I cope less with financial insecurities than I thought. A stead paycheck is nice, especially when it means that I don't have to care about every business aspect.
I also underestimated how hard the idea was to sell, and how active and well funded the competition was. I had one shot to get a first big enough customer to make it worthwhile. I missed. The pivot came too late. It was a possibility from day one so, so I pulled the plug on the whole thing in time, and more importantly in budget.
My mistake was to stick with plan A too long, I could have pulled the plug earlier but didn't. Usually I don't gamble, there I did.
And I realized that, despite wanting to start my own thing for years, I cope less with financial insecurities than I thought. A stead paycheck is nice, especially when it means that I don't have to care about every business aspect.
I also underestimated how hard the idea was to sell, and how active and well funded the competition was. I had one shot to get a first big enough customer to make it worthwhile. I missed. The pivot came too late. It was a possibility from day one so, so I pulled the plug on the whole thing in time, and more importantly in budget.
I did pick an area where customers don't want to adopt new tech. Software for farmers anyone? And it was not just my error in picking this exact field, there are struggling competitors with millions and millions of VC money and YC stripes and no winners in sight.
Not all niches, no matter how big, are created equal. I would try to either find something with raising tide or place where potential customers are actively searching and buying what you have to offer and will profit from it.
Not all niches, no matter how big, are created equal. I would try to either find something with raising tide or place where potential customers are actively searching and buying what you have to offer and will profit from it.
This is something I'm coming to realize. Bad customers who don't know what's good for them means you're going to have a bad time as a business if you want to actually add value to their lives.
An example of of "bad" customer is someone who pays money for quantum healing or crystal healing. You could create a product that they'll buy, but that product is snake oil.
An example of of "bad" customer is someone who pays money for quantum healing or crystal healing. You could create a product that they'll buy, but that product is snake oil.
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Mostly because, without us really thinking about it, implicitly it was predicated on the premise that the founders would remain largely unemployed for about 6-12 months.
Even through we were looking for work.
And so when most of us found jobs in that time noone really had energy or time for this stuff on the side.
We explicitly determined one day a week to work on this. And kept it up for a while even after people got work. I was the first to get work and for a while (maybe 3-6 months) I was putting in 5 days on my day job and then 1 more on this. At some point I quit and formally gifted my share of assets to the other founders (it wasn't really much, we each put in like $100 at the start). I think it was fully wound up about a year later. Paid back most of a small arts grant we hadn't managed to spend to the NFP that gave it to us.
We explicitly determined one day a week to work on this. And kept it up for a while even after people got work. I was the first to get work and for a while (maybe 3-6 months) I was putting in 5 days on my day job and then 1 more on this. At some point I quit and formally gifted my share of assets to the other founders (it wasn't really much, we each put in like $100 at the start). I think it was fully wound up about a year later. Paid back most of a small arts grant we hadn't managed to spend to the NFP that gave it to us.
We thought that we could cut the middle man between us and our clients. And we were confident that our clients would come to us.
We realized that without that middle man installing and promoting our products, our sales would plummet to a unsustainable level.
No matter what new guizmo we could duck tape to the product.
We realized that without that middle man installing and promoting our products, our sales would plummet to a unsustainable level.
No matter what new guizmo we could duck tape to the product.
I made some prototypes for this device, researched food literature, raised money from Project Ara, did lab experiments, and then found out quickly through a survey that no one wanted to buy this device at a $200 price. So much for that LLC and prototype. Plus even if people did want this device, there were many possible variables inside someone’s fridge that could affect the sensor reading. E.g. volume of container, cooked/raw food, age of food, other food. We closed the business shortly after that survey. All the iPhone pictures are mock-ups. I didn’t spend actual money making an app. Phew
https://www.eatsafedevice.com/
https://www.eatsafedevice.com/
You can do this for a $30 price point if you optimize your components.
I spent too much time reading HN as opposed to running my business :)
Tbh what’s worked best is when I’ve been focussed. Doing many things at once has mostly been the root cause of businesses failing.
Tbh what’s worked best is when I’ve been focussed. Doing many things at once has mostly been the root cause of businesses failing.
Mine hasn't completely failed, yet, but it is where it is because of not shipping.
I have a thing and it mostly works, but it's not good enough for people to use, let alone to buy, and I'm not sure how to get it there. The more time passes, the more I move on mentally and emotionally.
I need to ship it, but I don't know how, so it's just in limbo now, and one day it may likely just be over. I'm not running out of cash or anything, I'm just not moving forward.
I have a thing and it mostly works, but it's not good enough for people to use, let alone to buy, and I'm not sure how to get it there. The more time passes, the more I move on mentally and emotionally.
I need to ship it, but I don't know how, so it's just in limbo now, and one day it may likely just be over. I'm not running out of cash or anything, I'm just not moving forward.
Justin Kan's recent Tweet on why Atrium failed is good.
I had a telematics prototype long before cars had screens. I over marketed it and got caught up in the coolness factor of what I was doing (got slashdotted a few times).
I basically gave away everything I was working on and how I was doing it on my website just for clicks and comments.
(This was 2000-2005, dashboard linux/dashpc).
I basically gave away everything I was working on and how I was doing it on my website just for clicks and comments.
(This was 2000-2005, dashboard linux/dashpc).
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I didn’t take to much into account the climate risks. A category 5 hurricane hit and goodbye businesses (2 lost).
I’ve been searching for a cofounder ever since.
Also, looking to buy businesses. Email me (profile).
I’ve been searching for a cofounder ever since.
Also, looking to buy businesses. Email me (profile).
What businesses and how did the storms ruin them?
1. Software shop & consulting
2. B2B hardware and service (sell install all kinds of electronics)
2. B2B hardware and service (sell install all kinds of electronics)
Were the offices physically destroyed?
Yes and no power / internet for (many) months meant there wasn’t an option to ride it out.
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