Ask HN: Examples of startups that failed due to moving slowly? Conventional startup advice is to 'move fast' and 'pump out features.' Are there any startups that created a great new thing that was growing and then failed because they were improving too slowly? How slow is too slow? |
One was a search engine ahead of google in its category that would have been an ideal google acquisition target (in fact, google is still doing a poor job in their area of search.)
Another was a company that invented a key gaming technology, but was ahead of the market by a couple years.
In both cases the VCs forced them to make compromises to to the product to chase the current fads... rather than invest in the parts of the product that their customers wanted (and would have paid for.)
Both companies had identified markets that would be extremely fast growing and are today worth many billions of dollars, and in both cases, to date no company has really done what they did.... though the market has shifted to get by without them.
VCs focus on growth because it benefits them. Finding the market and addressing it benefits the company. IF the timing is off by a couple years, then its "too late" for the VCs. This was the case even though it was obvious that there was a massive market coming-- in both of the above examples, the hockey stick had started.
VCs would apparently rather have a $30M valuation in year 2 than a $1B valuation in year 6. The VC funds last 5 or 7 years, if I recall.
Discussion on a previous thread also suggests that Fogbugz suffered the same fate due to growing slower than Atlassian: https://news.ycombinator.com/item?id=920668
On a tangent, it's kinda funny how part of the "geek" community will complain about the big players dominating and ruining competition (Microsoft, Oracle, Apple, even Linux sometimes), but on the other hand anybody who doesn't completely dominate their competition is lambasted for being a failure...
[1] http://www.actian.com/products/operational-databases/ingres/
I last used FogBugz in 2008 and it's still my favorite bug tracker. I have used JIRA extensively and while you can configure it and add addons/plugins to it to make it do your bidding, it's just not a nice off-the-shelf solution without configuration (stuff that I usually don't have the access to do, and that I get tired of asking for).
Funny how this stuff works. I wonder how Fogbugz is doing today. I do understand they must have done well with the Trello stuff.
https://twitter.com/mikeyavo/status/223263315038711808
Side note - That was also the first time I understood the risk of putting content into a closed eco system that's using non open standards for data. <sad face>
Either they were moving too slow or announced new product too early (killing demand for the model they were actually selling). They went bankrupt before new model came out...
Apparently not entirely true, but that was the takeaway. it got a name: the "Osborne Effect"
Our company bootstrapped for the first 2.5 years before raising an angel round. This raises eyebrows. Some investors assume there is a problem if you are looking for a small round after so much time has passed. It's a rare stance to encounter, but something to be aware of.
(Personally, I'm proud of what we were able to accomplish before taking outside investment.)
That depends entirely on your financial structure, your product, and your own lifespan. If you never on-board investors and never depend on a loss-leader strategy for capturing market, you can small-business yourself from you mid-twenties to retirement and beyond. A lot of trade professions do exactly this sort of slow expansion; my neighbors is self-employed plumber and he's been routing tubs for the past two decades.
There are tons of them. You'll see a lot of responses that claim all of these companies didn't die due to moving slowly, but for other reasons - that will also always be true though, even in cases where a startup moved too slow. For example, Windows Phone was both backwards, and slow to match the iPhone once it became obvious consumers loved touch.
In many consumer spaces, it's: 'winner take most.' If your competition gets to critical adoption first, most of the time you're toast. So even if Gowalla was growing slowly, they were too far behind. If your competitor takes 60% of the market, you've previously been growing fast but are now growing slowly, and you're now down to 14% of the market - the outcome is most likely that your future growth will be extremely difficult, and eventually you'll burn vast resources just trying to acquire each point of market share thereafter. Microsoft and Google have both delivered rare, extremely expensive examples of this behavior over a long-term basis (in search for Microsoft and social for Google), funded by their prior dominant products.
Plaxo - lost to LinkedIn
Bebo - social media space became too crowded
Geocities - died of natural causes
Netscape - slow to adopt after v3
Circa 1995, many companies tried online retailing, but none of them could match the speed of Amazon, and so Amazon slowly won out over all of them.
MySpace lost to Facebook, partly by not matching what became popular features on Facebook, such as "The Wall".
And it's not just startups that fail due to moving slowly. The USA auto companies have been losing market share since 1960, partly due to their slow adoption of new techniques.
Toyota in the 1950s was a super nova of new ideas. They invented kanban and "just in time". Oddly, they got some of their best ideas from an American who could not get an audience in the USA:
"Interestingly, important elements of the Japanese production system were enhanced by the work of W. Edwards Deming, an American who developed a system of statistical quality control for the U.S. war effort during World War II. After the war, he was assigned to General McArthur’s staff overseeing civilian transition of Japanese industry, and introduced his system of quality control throughout Japanese industry, but especially in the automobile sector. Largely ignored in the United States after his return, his methods were only adopted by U.S. manufacturers after 1981 when he was recognized by Japan for his contribution to the country’s economic revival."
http://www.mbca.org/star-article/july-august-2013/putting-it...
Moore generalized this theory from actual startups, so he has lots of examples, but from decades ago (like apple and oracle when they were new). I'd think it would apply to today, just faster - though no one ever seems to cite it.
eg IBM lost RDB to Oracle, even though they invented it. Perhaps all the competitor's to pg's viaweb, who lost to it (note: they employed an expensive PR firm; it wasn't just lisp tech).
Your question is hard to answer, though, because it depends on where your funding is coming from. Part of your pitch for your business probably included an exit plan (if it didn't, then you should probably figure it out now). You need to get your business to wherever it needs to be to deliver that exit plan. Now you work backwards. What conditions need to be met to make that exit work? For a business that is built mostly on technology, what do you need to have in place to meet those conditions. Then you need to allow time to iterate your development because I can pretty much guarantee you that whatever you think you need now is almost certainly wrong. So you need to deliver early enough to allow yourself time to figure out what is wrong about it and what you need to do to make it right.
I've been in this industry long enough (and been with enough startups) to say that most founders don't understand what they are doing to the extent that they can make a coherent plan. Therefore they simply push to move as fast as possible and "pump out features". This is not necessarily a bad strategy if you are good at reacting to failure and adjusting your plan accordingly. The faster you fail, the more time you will have to discover what will succeed.
This strategy will only work for so long, though, and you need to be able to change your strategy at the correct time. This is very difficult and my experience tells me that most people get it very, very wrong. Sometimes even if the founder can do it, the people they hire to search the solution space (by banging out features one after another) are incapable of building a coherent product. To off-set this problem some startups adopt a demo-only strategy. Their goal is to build a disruptive demo and get bought out by one of the big boys (and probably buried). They have no intention of actually building a viable product. This can actually work well, depending on the prevailing economic environment and how scary you can make your demo.
If you want to build a sustainable business, though, my suggestions is to avoid the "pump out features" track (and the developers who are good at only doing that). Instead build more slowly with very strategic experiments and a very flexible code base (along with programmers who have experience building real products this way). If you can find the programmers who are able to do it, then you should have a higher rate of success. The "if you can find the programmers who are able to do it" part may be limiting, though. You may be forced to go the "bang out features and react to failures" route.
Not a perfect comparison given Lyft was founded 2 years after Uber and therefore was already at a disadvantage, but had they grown faster, they might have been able to overtake Uber's position.
In any case, the outcome of the Uber / Didi battle in China should be a great data point for this question.
This Google trends line is interesting: https://www.google.com/trends/explore#q=slack%2C%20hipchat%2...
Some startups forget that the first impression and cool factor still play a big role in creating a huge buzz about your app.
I preferred Skype instead of using Hipchat, that's how bad it was.
About Yammer, I wouldn't really put it in the same bucket as Slack, as it really tries to be a Facebook for your company, not a group chat.
Slack came very late and yet still managed to eat the others.
That seems like an argument against the idea that "being slow will kill you".
It's true though - Hipchat was caught napping. Atlassian backburner'd it at exactly the wrong time, and by the time they starting fixing things, it was too late.
This being said, Atlassian isn't really a 'startup' anymore. Hipchat is a side-product of a suite of gorilla products.
Really depends if your building a growth engine vs job creation machine vs small cash generator - that will dictate your approach to growing and funding and of course exit, or not.
What you are really asking is it possible to workout in real-time (no hindsight) what the optimal growth rate should be for each company and if this is always “as fast as possible”. This is very hard question to answer. My feeling is the optimal is more often than not close to the “fast as possible” level, but it will depend on the company and industry.
The more important question to answer is how can you work out what the optimal growth rate should be of any startup.
That is a gross over simplification of why MySpace lost to facebook. One of the main reasons I think MySpace lost was that they never seemed to have a grand vision like Zuck and fb seemed to have developed around '06-07. Not to mention, MySpace was an offshoot of a super shady marketing company, not a technology company. That became more and more apparent as MySpace suffered constant performance and security issues.
Then of course there was the user experience. Facebook was plain, simple, uniform and quick. Myspace...
-Click on myspace page
-Wait 10 secs for background to load
-Really loud obnoxious music is playing
-Animated page background starts going
-Quizzes load
-A wild photograph appears
-You can see an embedded youtube now - hit pause
-It wasn't the goddamned youtube making the noise, now you've got two things running you idiot
-Try and pause the youtube again
-page freezes
-audio player loads
-manage to stop everything playing
-have epileptic fit from background
-forget why you came here anywayYou're splitting hairs. They are both chat apps for crying out loud.
Slack grew as fast as it did because it got pimped to us by VCs and thought leaders and then wannabe thought leaders and down all the way to the bottom rung of the societal ladder. Great strategy by Slack but there is nothing special about it (the product).