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5 signs your startup is screwed

JR Raphael | Jan. 5, 2016
The founders of failed startups share lessons learned along the way -- and signs of impending doom they wish they'd spotted sooner.

Other founders found themselves facing an about-face with Facebook, like Lookery -- a marketing company whose currency revolved around social network data.

"We exposed ourselves to a huge single point of failure," co-founder Scott Rafer muses. "Predictably and reasonably, Facebook acted in their own interest rather than ours."

Rafer says his startup "could have and should have" used its resources to establish some level of independence instead of investing further in Facebook's platform -- a similar sentiment to the one expressed by PostRocket, a company that set out to help customers reach more fans in Zuckerberg's virtual backyard.

"We should and could have done much better in bringing you a reliable product that expanded as quickly as the landscape of Facebook marketing changed," co-founder Tim Chae confesses. While informing customers of his company's demise, Chae actually suggested they turn to Facebook's then-new analytics service as an alternative, saying the product "blows any other service out the water" -- a perfect summary of the danger associated with trying to fill a hole in an existing service.

Even if a startup doesn't get shut out entirely, trying to keep up with a fickle step-parent's evolving requirements can take significant resources -- which is especially challenging when funding is limited. Social media marketing firm Argyle Social cited that factor in its failure, as did song sharing service This Is My Jam.

The single point of failure can even come from a detail as seemingly innocuous as search: A startup called Tutorspree put all its consumer-attracting eggs in the basket of search engine optimization -- and when the tides one day turned, it found itself lost at sea without a life preserver in sight.

"We were single channel-dependent, and that channel shifted on us radically and suddenly," co-founder Aaron Harris explains. "There is a chance that a single channel can grow a company very quickly to a very large size, but the risks involved in that single channel are large and grow in tandem with the company."

You don't have to be a scrappy startup to sense the danger in that arrangement.

 

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