Startup FAILS: learning from the mistakes of others

The great American entrepreneur Henry Ford said “The only real mistake is the one from which we learn nothing.”  All startup founders should be familiar with the sting of making mistakes, but how much attention do we pay to the mistakes of others, those cautionary tales we should all heed to avoid the same pitfalls?

Aside from following the splashy headlines after a public failing – think GigaOm, Twitpic, Gowalla – there are several research tactics you can use to compile important lessons, and learn about your competition. 

CB Insights published this fascinating post-mortem on 146 failed startups. In addition to linking to the details on each company’s end story, there is value in seeing the repeating trends amongst the companies listed.  Business media abounds with Top 10 lists for why startups fail, but this kind of representative sample from CBI is incredibly useful for identifying mistakes amongst companies in your same market niche.

For more information on privately held companies, the local business journals are an invaluable source for interviews with company leaders. These publications are often able to glean valuable details on the growth or missteps of startup darlings which would be otherwise ignored by national media. The Business Journals, Inc. covers over 40 metro US cities.

Look for publicly traded companies in your industry. You'll find regular updates on the health of the company at their investor relations website (Google: Company name investor relations). Here you’ll find a digital copy of the “Glossy” annual report, often containing a SWOT analysis and audio files of the quarterly analysts calls – phone discussions between the C-suite and financial analysts on the current challenges and opportunities facing the company.

Another place to look for competitive clues is in SEC filings, particularly regarding the challenges faced by recent IPO companies. The S1 filing, which can be found on the SEC website includes discussion of executive personnel, management challenges, legal issues, risk factors and regulatory concerns.

Every startup will experience bumps in the road, but how those bumps are handled will ultimately determine whether the company survives intact. Performing a survey of how similarly positioned companies handled their bumps can lend crucial lessons in survival and a roadmap to success.

I just started my startup so why would I pivot?

Anyone who has founded a startup can tell you. It’s a roller coaster.  Expect the unexpected.  Make a plan B, and C and probably D too.

One of the most critical skill sets for a startup founder is agility. It can be difficult, especially when you’ve poured your heart and soul and personal savings into your big idea. But often times, the most successful founders are the ones who were willing to make necessary adjustments, either in the product or the business model. This is the pivot.  This is the moment when you acknowledge and act to chart a new course.  So how do you know when it’s time to pivot?

There’s no perfect answer, but conducting a bit of market and competitor research will often reveal important pivot points.  Most pivots arise from gaining a piece of competitive intelligence that invalidates a prior assumption. For example, have you made assumptions about your market size being larger than it really is? Have you made assumptions about the age or habits or disposable income of your buyers? Have you made assumptions about the likelihood of being granted a patent?

Here are three real life examples we’ve seen recently:

1.     The founder made an assumption that her customers would be predominantly Millennial generation because the product would be sold through online channels. After we researched her market segment, we learned that in fact, buyers in this category of ecommerce were almost evenly split between Millennials, GenX-ers and Baby Boomers.  The research opened up two entirely new verticals to market towards and provided more detailed definition to the market size.

2.     The founder made an assumption about the most compatible retail outlet for his product, a “fit food”.  When we researched the market segment, we could see that the grocery market was saturated, but the open opportunity was distribution through sporting goods stores. The likelihood of capturing market share was far greater with the less obvious channel partner.

3.     The founder made an assumption about the adoption of his product by government agencies as the primary sales channel.  However, the research showed the inefficiency of landing contracts with those agencies in relation to the sales pipeline necessary to hit investor growth targets. The decision was made to pivot to private contractors for the initial go-to-market strategy and develop a secondary long play for government agencies.

In each of these cases, the research invalidated an assumption the founder had made regarding his or her market segment or primary buyer.  But by analyzing and accepting the research, each was able to make a critical pivot to their startup and undoubtedly improved their chance of success.

Bizologie’s Top 5 Takeaways from Denver Startup Week 2015

1. RTD takes you there. In a city known for cleantech startups, the array of public transport and light rail were the perfect companion for a week of connecting with the tech community. While most events were within walking distance of the Chase BaseCamp, Denver’s excellent transport saved many weary feet throughout the week.

2. Funding is within reach.   An event called VC for Breakfast offered direct access to a large and representative group of venture capital and private equity partners from the Denver area.  Once the panel of 15 VCs were introduced, the individual conversations began in earnest. This was a rare opportunity for entrepreneurs to engage a broad swath of the VC community in one open environment, a real benefit to startup founders who may not otherwise have a proverbial foot in the door.

3. Beer is your business partner. With Startup Week following right on the heels of the Great American Beer Festival, showcasing 154 Colorado craft breweries (and hundreds more from around the country), this plentiful libation lends local flavor and a laid back atmosphere to networking events. Beer is big business in Colorado and the breweries themselves are great examples of entrepreneurship to learn from.

4. Free business advice. Mentor sessions are typically a standard part of these kinds of events – local business leaders, bankers, attorneys, CPAs and seasoned entrepreneurs volunteer their time to meet 1 on 1 with attendees, offering years of collective wisdom and expertise.  I watched as one determined pair of startup cofounders made their way around the room meeting with every single mentor on hand, soaking up invaluable business advice.  With mentor session scheduled throughout the week, a tenacious entrepreneur could gain eight hours of free advice.

5. Social has support.  Social media can be one of the trickiest aspects of growing a startup business, especially if you don’t identify as part of the “digital native” generation.  Denver Startup Week offered several informative sessions with panels of social media, traditional media, marketing and public relations experts. They covered best practices and cautionary tales related to a wide spectrum of online engagement with customers, employees and stakeholders.

After wrapping it’s fourth year, Denver Startup Week attracted a record 11,000 registered attendees, proving this startup ecosystem is thriving and vibrant. If you didn't make it to the event this year, be sure to mark your calendar for 2016!

Three Key Business Plan Resources

People often conduct business research with the intent of using it to inform a business plan.  So where should you visit on the interwebs to find a good business plan how-to? 1.  The United States Small Business Administration has a thorough guide that walks you lists the major component of within a business plan, and if you need to bounce your plan off a sounding board, they can help you find a mentor too.

2.  In terms of sheer volume, Bplans.com offers hundreds of free sample business plans across most industry categories, making the odds reasonably good that you will find a comparable plan to give you inspiration.  Unfortunately their sample charts and financials are largely for show, unless you actually shell out money for plan-writing software that holds your hand througout the process.

3.  The Center for Business Planning has a selection of winner plans from the prestigious Venture Labs Investment Competition (formerly the Moot Corp Competition) which is hosted by none other than UT Austin.  While the companies are not necessarily real, the time and effort invested by the student compeitors certainly are, making this twenty-some-odd series of plans worth reading.

Note: As you're perusing the plans' intro page, it may not be readily apparent that links to the rest of the plan are available through the small blue Table of Contents box at the bottom of the page (see pic).

3-Day Startup

The last weekend in March, I and three of my colleagues from the UT-Austin School of Information had the distinct pleasure of volunteering as business research mentors at Austin 3-Day Startup (3DS), an educational event that gives college students ranging from freshmen to Ph.D. candidates a crash course in entrepreneurship. The idea behind 3DS is simple: the best way to learn entrepreneurship is to start a company.  The event takes place over the course of a fast paced, caffeine-fueled weekend.  In the course of about sixty hours, team members get an introduction to all of the trials and tribulations associated with starting a company (3DS board member Bart Bohn once humorously referred to this experience as “facilitated contact with reality”).

The structure of the event is simple:

• Teams form Friday night, hone their ideas and start building prototypes.

• Saturday, the teams take to the streets to perform primary customer validation—3DS is insistent that teams answer Rob Adam’s critical question: “If you build it, will they come?”

• Saturday night into Sunday morning, the teams have time to tweak their ideas based on the feedback they received from customers (or, in some cases, start over from scratch!).

• Finally, Sunday morning, 3DS participants prepare for the apex of the event—a chance to pitch their ideas to an audience of seasoned entrepreneurs and investors (This year’s mentors included start-up superstars Gary Hoover and Joshua Baer among others).

Throughout the event, 3DS teams benefit from the guidance of seasoned entrepreneurs, investors and tech wizards who volunteer as mentors.  These mentors offer real-world advice and perspective on the company-formation process.  They help the young entrepreneurs in training ask the right questions and identify legitimate market pain points to which they need to respond.

This semester’s 3DS-Austin mentors included a group of business research gurus from UT-Austin’s School of Information (iSchool).  Myself, Becca Havens, Stephen Kuperman and Kamran Varahramyan (by way of the Department of Electrical and Computer Engineering) spent two sleepless nights with 3DS teams helping them answer crucial research questions during the first two days of the event.  The questions we fielded ranged from “how can you make money with crowdsourcing?” to “what are the business hours of every restaurant in Austin.”  By the end of the 60-hour event, we had helped the majority of the teams answer some of the tough questions that all entrepreneurs face: How big is the market?  Who is my competition?  How do we make money with this idea?  When the dust settled and the teams presented their ideas on Sunday night, our impact was evident in the clear and well-researched information in their presentations.

The success of this semester’s Austin 3DS teams validates the important role information professionals play in business and entrepreneurship.  Today, we face a flood of information, all of which has to be located, retrieved, organized, visualized and preserved.  This reality is especially stressful when you’re trying to start a viable business in 60 hours!  Luckily, as my colleague Stephen Kuperman remarked to one team, navigating the information flood “is what we do, and we’re really good at it.”

Ryan Field is an MS candidate at the University of Texas at Austin School of Information and a research analyst intern at the Austin Technology Incubator.

Wired on Public High Techs

Last week Felix Salmon, a Reuters blogger writing for Wired Magazine’s Epicenter website, published a thorough and well-done article called For High Tech Companies Going Public Sucks.  It investigates, with several examples, how the act of becoming publicly traded can consequentially destroy a high tech startup’s business model. The story touches upon, among other things, the history of the IPO’s impact on high tech companies, why going public might be irrelevant to those companies that already have VC capital, and how conflicting  interests from either VC or general-public investors results in a struggle for short-term profits over long-term best practices.

It ends on a positive note though, referencing potentially new SEC legislation that would change the tipping point at which a company would need to publicly sell its equity.  This one’s definitely worth the read if you follow the industry.  It almost makes me feel sorry for Mark Zuckerberg.  Almost.

Trends Magazine

If you’re, oh say a VC firm, and therefore trying to stay- not just abreast but ahead- on the business frontier, then Trends Magazine is a good place to start.  According to its About page, the Trends editorial staff of business experts, have a secret sauce of, among other things, “tips, inside information, privately distributed reports.”  bizologie sure likes the sound of that! The publication’s Economic Outlook reports take big-picture looks at primiarly our country, while its Research Library covers a range of relatively more focused topics like investments, nanotechnology, and energy.  A couple of particularly tantalizing article titles include, “A New Trajectory for Moore’s Law” and “Solving the Global Water Crisis Moves Beyond the Technical Feasibility Stage”.

Of course only the introductory paragraphs are free, but we wouldn’t leave you bereft right after telling you all about the magazine.  For those with limited pocketbooks, or perhaps those needing only the occasional article, the good news is that Trends is a current subscription in the Business Source Complete database, which as we have mentioned before, is likely freely accessible in your vicinity.

Venture More Than A Guess

Want to know which industry sandboxes the venture capital firms are playing in?  Then download a MoneyTree Report, a three-part match made in free-data heaven among PricewaterhouseCoopers, the National Venture Capital Association, and Thompson Reuters.  Every quarter Thompson Reuters surveys the VC institutions on their cash-for-equity investments in growing private companies, and then PricewaterhouseCoopers packages the data with a neat bow and puts it online for the enjoyment of all. You can download the most recent quarterly report which gives aggregate trends and analysis, and you can custom search historical data by factors including region, industry, financing sequence, etc.  If you want data from the current quarter at the company-name level, the site prompts you to cough up your information on a registration page, but that seems like a small investment when considering the potential for information return.

P.S.  It’s easy to overlook the News block at the bottom of the MoneyTree homepage, but it has a small selection of articles with exciting titles like, “US technology M&A insights 2011”.

Casual Friday: Live Purchasing

In case you needed another way to spend your free time, here’s one interesting way: live purchasing.  The Zappos.com website has a Real-Time Order Map that it dubbed Mappos, which allows you to see what individuals (kept anonymous of course) are ordering in real time all over the country.  You gaze at a map of the U.S. as images of merchandise, pointing to an originating city, pop up on the screen for several seconds before winking out.  If you feel so inclined, you can even vote thumbs up/down on the merchandise that was purchased, though Zappos doesn’t detail how that feedback is used.  Not only is Mappos addictive to watch, but it arguably exemplifies the oldest selling ploy in the book, aka, “Everyone’s doing it.” They are not the only company to have employed technology to track live purchasing.  In an excellent Vogue article from the June 2010 issue called “High Clicks,” Sarah Mower interviewed Natalie Massenet, the founder of swanky luxury clothing etailer Net-a-Porter, a company which also tracked live purchasing behind the scenes, and presumably still does today.  Mower had the following to say about Net-a-Porter's live purchasing system:

“…The whole office is wired for sound and video. Everyone in the company here, in New York, and the distribution centers can see what's selling, when, where, what the turnover is. Go look at the screens.  They're mesmerizing.

Positioned in the sight lines of every desk, they display a visual of Google Earth, and every time someone makes a purchase, a Net-a-Porter bag pops up on the location. On the screen above, the shopper's order is pictured, along with how much she spent, where she lives, and a running tally of the day's takings. It's 11:00 A.M. London time now, and someone in Yekaterinburg, Russia, is buying towering $1,200 Fendi shoes. In NYC where it's 6:00 A.M. a woman drops $3,600 on Isabel Marant. A pair of $1,290 Bottega Veneta sandals is being ordered up in Athens (though the country's nearly bankrupt); a plunging, multicolored $600 Melissa Odabash swimsuit is going to soccer-wife country in Altrincham, Manchester.”

Needless to say, it seems that live purchasing could serve multiple functions, acting also as an ongoing morale-booster for employees who sell and process merchandise.  It will be interesting to see the extent to which this trend catches on and evolves in the future.

FedEx + Me My Story: Austin

Everyone has heard the FedEx lore: "FedEx started with nothing but one really smart undergrad, one really good term paper and one really big dream." Now they are helping other small start-up companies with the FedEx + Me program piloted  in Austin. The FedEx + Me My Story: Austin project spotlights companies that exemplify Austin's innovative spirit. Each round the 5 companies that get  the most votes are spotlighted in a professionally produced video promoting their business. On May 18, one deserving participant will be awarded the grand prize of a $5,000 grant to help them grow their business.

They are posting videos from round 3 soon so check back and there are a couple more rounds of voting left for new companies. Here's one of the videos:

Love to see FedEx supporting entrepreneurs in Austin, can't wait to see what city they pick next!

C200: The Committee of 200

The C200 is an exclusive membership association of 400 of the world’s most successful women entrepreneurs and corporate leaders representing over 100 industries in the US, Europe, Asia, Canada and Latin America. C200 members employ more that 2.5 million people and generate more than $200 billion in annual revenues. C200 co-sponsors one-day Outreach Seminars for women MBA students. Seminars rotate among the nation's top business schools, and at the seminar they award C200 Scholar Awards to enterprising first year women MBAs enrolled at the hosting school. At the Outreach seminar held in Austin with the University of Texas McCombs School of Business the day was about empowerment and success of women. Lynn Utter the President and COO of Knoll North America served as the keynote speaker and kicked off the program by discussing her work and how she took a big risk with the support of her family to make a major move to Knoll to take on more responsibility and lead an entire organization. The program focused on entrepreneurship, leadership,  climbing the corporate ladder, business negotiations, and being a successful women in business. Here are some words of wisdom from the day:

• There is nothing wrong with being ambitious
• Get an expert to do what you can't
• Hire people smarter than you
• No matter what the offer, negotiate
• Be passionate about what you do
• Know more about your company/industry/competitors than anyone else
• Reward innovation and the money will follow

My favorite quote of the day was from Gay Gaddis President and CEO of T3. Gay's mother used to tell her that "a kick in the pants is step forward."  Thank you ladies for inspiring us all!

Estrogen Based Entrepreneurs

Bizologie is proud to be a new member of Estrogen Based Entrepreneurs. Jill Murphy started the Facebook page after writing a blog post about the challenges of the entrepreneurial/creative life. One of her friends, Sara-Mai Conway, reposted it on her page with a note about how she was going through the same thing as well. At the same time, Jill was launching My Close Strangers and another friend Bess Eckstein was starting At Your Service. Jill thought that Estrogen Based Entrepreneurs would be an excellent way to connect women who were working on new ventures so they could commiserate, share info, support each other. What a great idea and a super way to  meet some awesome entrepreneurs!

Jill is embarking on quite an adventure with her My Close Strangers project. Over the next 18 months, she will be walking, biking, driving, and flying to coffee shops, restaurants, and bars across the country to sit down with as many of her US-based Facebook friends as possible. She is interested in learning "how to be a good neighbor in a world where neighbor is being redefined in real time." We hope to meet Jill on her travels.