Yes, gibbon’s five failed. Even though I am still convinced that our vision of providing very specific, high-value recommendations for users of what to do in their spare time was a great one, we did a lot of things wrong and did not manage to create enough growth and traction.
There are thousands of blog entries out there about why a startup from the respective founders failed. So why do another one? First of all, it’s always helpful to summarize the reasons for oneself so that you’re sure you will not end up making the same mistakes again. Second of all, I will present the lessons in a special format that may also be helpful to you. I plan on doing my following blog entries in a 7±2 format keeping them short and concise. So if you don’t want to know the background story, only read the bold text. You can use this list regularly to double check if you’re on the right track. At least that is what I am trying to do from now on. 🙂
1) Do you know in which stage your startup is and behave accordingly?
Determine in which stage your startup is and derive what is important right now. That’s the thing you should focus on. For example, it makes no sense getting more and more Facebook likes for your product/service when you don’t know yet if your solution is solving a problem of a potential customer (see premature scaling). Even if some of these marketing efforts seem to come at a low price, they are taking away valuable time and money you could be spending on activities that are way more important in your current stage. Remember that time is your scarcest resource when doing a startup.
2) Do you have a working customer feedback loop?
To avoid the trap of falling in love with the solution you have in mind, you need to establish a working customer feedback loop. The emphasis here being on the word working. We at gibbon’s five talked a lot with users (B2C) and customers (B2B) also in the form of structured interviews but did not have a working feedback loop meaning the feedback never really made it back into our product. Ask yourself what was the last thing a customer told you that had a measurable impact on your product or service.
3) Is your team sharing the same vision and goals and can you transport this vision to your customers?
I sometimes had the feeling that we at gibbon’s five were not walking in the same direction mostly because our vision was too broad to start with. We wanted to build a product for everybody in many situations. This not only makes it hard to align the team, it also complicates communication with your customers. Ask yourself: can you explain your product in one tweet? Do people understand your product? Do all team members have the same vision/goal in mind? Is this vision understood and shared by your customers?
4) Do you know your customer very well?
Especially in the beginning you should focus on a small and very specific group (early adaptors) and you have to know them very well in order to make point 2 and 3 possible. At gibbon’s five we always wanted the product to be for (almost) everybody with the exception of being limited to Munich. Everybody is very bad. Marketing to everybody means you are marketing to no-one.
5) Do you have a working growth engine? Do you know how to get the next 10 customers?
After having achieved a product/market fit you need to figure out how to grow. While our answer to this in the beginning was the very naive “A good social media product grows virally by itself.” approach, this is usually never the case except for a very few examples. There are many good marketing approaches. Find a specific and working one for your product or service, get your key metrics working and improve, improve, improve!
6) Can people easily remember your name and tell their friends about it?
At gibbon’s five we had a lot of discussions about our name. While it definitely is a creative name, being different from all the other German startupando names and our logo gained a lot of attention, I still think it is a bad name for two reasons. Firstly, it does not convey at all what the product is about and secondly it is very hard to comprehend and remember. There were many times when I had to spell our name to people in order for them to understand. When choosing a name, try to make it easily comprehensible and it should relate somehow to your product. I know that the second criterion is questionable because there are many counter examples out there. However the startup market has become so dense that when I come home from a running startup exhibit, I’d rather remember runtastic than Wahoo Fitness.
7) Do you have more than an idea how to earn money with your product or service?
At gibbon’s five we always had many ideas but in the end we did not even come to the point of trying out any of them because we did not have enough users on the B2C side. You should have more than an idea on how to earn money and ads are definitely not always the best solution. While writing a big business plan with a detailed financial analysis is definitely not my recommendation, doing a small plausibility check with the business models you have in mind is a good way of finding out if there’s the chance of it working at all and finding out about which pricing models to try out.
7+1) Do you know when to change your funding mode?
We bootstrapped gibbon’s five all the way and since we had neither a product/solution fit nor a proof that we could earn money with our product this was the right way to go. However our general approach was still wrong because we tinkered around for way too long. You should try to do one of the two following approaches: Proof that your product is a solution to a real problem and that somebody is willing to pay (enough) for it. If you also have a proof for a working growth engine but you need money to do it, get venture capital. If you can scale without getting external capital because you’re already earning enough money, follow that approach. Be sure to know which way to go as fast as possible.
Please be reminded that these reasons were my personal reasons why I think gibbon’s five failed. Of course they are based on a lot of discussions and feedback within our team. However they are not the main reasons why startups fail in general, even though there is probably a big overlap. One of the main reasons, which does not apply to us, is failure because of the team. As a team we have always been functioning quite well and we are still together looking for our next project to apply our lessons. A couple of words about the team: create a cross-functional team, choose your teammates very carefully and form a founder team of 2-4 people. Not more!
Last but not least. Like almost all startups, we barely ever had technical problems in our way and tech was definitely not part of the problem.
I’d highly recommend the following books:
– Running Lean, Ash Maurya
– Value Proposition Design, Alexander Osterwalder and Yves Pigneur