Over the past few years, there has been an increased interest in startups. Long gone are the days of traditional businesses, as the current generation is more exposed and well-informed. Nowadays, there is more of a social acceptance towards entrepreneurs and with the right set of skills and drive, startups can be successful. There are tons of startup success stories, but what about those that failed? Here are a few lessons you can learn from failed startups around the world.
Image credit: The Digital Reader
Backed with an artfully straightforward concept, Fuhu designs and sells high-tech toys for children. Their best-selling product to date is the android-based learning tablet Nabi which is a combination of hardware, software services, and accessories, giving kids an immersive and engaging educational experience. Although the company could not overtake the other big-name tablet competitors, it still dominated the market and topped Inc.’s list of the fastest growing company two years in a row. Fuhu’s secret to success is the ability to break out from a single product offering. When a product is tied to other additional products, it will most likely uphold long-term success.
You would think that a company with an early success was destined for greatness, but it came crashing down when it hit Whitewater in 2014. This is a common occurrence for rapid-growing businesses where at some point the organisation must face complex issues.
After the success of the original line of tablets, the introduction of Fuhu’s new DreamTab flopped severely. Along with that, the company faced a dispute with their supplier Foxcoon from racking up close to USD $100 million of unpaid bills. In 2016, the company filed for bankruptcy.
What happened? Inc.com spent hours interviewing the founders and found out how the seduction of success led to overconfidence and unnecessary risk-taking decisions. While it was important to push, they pushed too hard to go big and was unable to gain from it. Another thing that led to their downfall was the inability in keeping track of their spending and lending which cause them to owe Foxconn tens of millions of dollars in addition to what it already owed for the DreamTab. This problem can be avoided if they implemented a supplier capacity management software and staff that would keep track of their supplies and funds.
Image credit: LinkedIn
Many entrepreneurs decide to venture into the startup world as they were inspired by success stories, just like how Pardeep Goyal was. Being unhappy with his current job after having just returned from the United States, Goyal recruited his brother-in-law and started discussing about setting up a business. As education is a billion-dollar industry in India, they wanted to provide a solution relating to school. They also believed that this industry would translate into big profits as a child’s education is the second largest expense for parents.
The idea for ERP (enterprise resource planning) tool was developed soon after. Named SchoolGennie, their product was an online software managing everything related to school, such as fee payments, inventory, communication with parents, etc. They had everything an ideal startup would need: an office, money in the bank, a hiring policy, and a co-founder with 10 years of recruitment experience.
Everything was going smoothly until unforeseen problems began to arise. To begin with, they fired their junior developer due to his poor performance. With just four people left in the team, they completed their first version of the product and was ready to market it out.
Soon after, they lost their only designer as he took off with their laptop that contained the products designs. Adding on to their dilemma SchoolGennie’s sales were not up to targets though it cost lesser than their competitors. By the 11th month of its founding, the startup ran out of money and wasted Rs15 lakh (USD 22,000). That was the end of SchoolGennie.
Nevertheless, Goyal learnt some valuable lessons through this costly experience. First and foremost, Goyal admitted they misused their funds on unimportant aspects. This was evident as they spent a huge sum of money setting out a physical office when they did not need to. He should have spent the money on things that could translate into more sales or leads instead. If the source of your customers is from the online space, Goyal recommends that you should invest your resources in areas such as content marketing, sales deck, and sales pages.
Off the bat, the startup had a great team of ambitious, multi-faceted, and highly enthusiastic individuals. The company targeted the education industry in the Swazi market with a plan to revolutionise schools across the country with their product. They were so swayed by the fact that they could bring in a revenue of R19.2 million (USD 1.4 million) a year without a product at hand.
After months of working out their million-dollar project, reality came creeping in and the company encountered a number of difficult challenges until they had to call it quits. What happened? The founder, Benjamin said they did not have a deep honest retrospection of their product until they realised it was not working out and it was still very far away from their desired outcome.
The lesson? Validate the product idea with customers. The world startup world might look glamorous and a quick way to make a buck but little did you know hundreds of hours of research is done to validate the true demand of a product and how to market it right.
Every entrepreneur should learn to embrace failures because it teaches us things that aren’t taught elsewhere. No matter what business you plan to do, it will not be easy. But once you experienced the taste of failure, I will guarantee that it will make a huge impression on your future endeavours.
This article was written by Jillian Cheong & images compiled by Jeremy Chew from iPrice Group.