How to identify unsuccessful startups – When should you give up?
A guide to probably the most challenging decision you may need to make as a founder.
Sometimes, blind persistence can turn into an exhausting and useless quest, and this is especially relevant in the startup world – But, how do you know when it’s time to give up and shut down your startup? How can you differentiate great startups from unsuccessful startups?
In this article, I’ve compiled a few guidelines you can consider when you feel it might be time for such a move.
You miss 100% of the shots you don’t take. – Wayne Gretzky
This is definitely true in ice hockey. And it’s also painfully true when it comes to startups.
You can’t win unless you try. So, you try. You make mistakes, you fail, you fall – then you get up and move on chasing that dream, or that ambition, or that hunger.
But somewhere along the way, you start asking yourself: Have I invested too much money and time into this? Should I stop now? Should I have stopped long ago? What if I stopped too late?
But what if you stop too early? What if you try a thousand times and each time you stop a month into the process when it becomes tough? Or worse: what if you stop just a bit earlier than you should – just before that one test that would prove your idea is worth a billion dollars?
What should you consider when evaluating the possibility of unsuccessful startups?
1. Your team
This is an easy one. Are you having second thoughts regarding your co-founder? Or are you having conflicts, different visions, bad chemistry? Stop immediately. You can’t move on with problems like these.
At one point or another, your startup will die because of the issues between the founders, and it’s better if it’s sooner rather than later. Split what you have to split, share what you have to share, sell what you have to sell, and move on. Find another partner, find another idea to work on; this one is dead.
2. Pain Point & Value Proposition
Test the Pain Point and the Value Proposition. Start with this one and remember that the Product comes later.
1) You don’t need the Product for this. Fake the Product – a mock-up is enough. Talk to customers, ask questions, and listen. Don’t ask questions in the future tense; always use the past tense: What did you use for this or that? When was the last time you needed something for this or that? How much money did you pay for it?
2) Don’t test on friends or family. They will be kind to you – so kind that you’ll spend the next three years of your life working on something stupid because they wanted to support your endeavors. At this stage, you don’t need support; you need the truth. At this stage, it’s ok to give up on your startup idea if your assumptions are wrong. It’s ok to give up twice a day.
You should have a “no regrets” mentality – you haven’t invested that much time and money. Try something else! And always remember: there are only two things in this world that are in excess – money and ideas.
3. Your product
Another easy one. Never give up because you have problems with the product – not even if you try building your own black hole (keep reading and you’ll understand what I mean). You’ll probably have to give up because of insufficient funds, but you’ll never give up because of a short supply of dense matter.
Iterate. The product is never finished. It’s not a piece of artwork or a masterpiece; it’s like an animal, always evolving. So make sure that your product is in constant development. Evolving means adapting – adapting to the market, to the user, to the competition, to the world.
4. Find your market
When it comes to marketing, everything is quantifiable – it requires the algebra skills of a fourth-grader and the emotional unavailability of a hammer. You have conversion rates, bounce rates, click-through rates, customer acquisition costs, budgets, etc. Set up your metrics wisely and test, test, test.
But make sure that you have a structure in doing this: create a framework for testing, give yourself a strict deadline and a stricter budget, set milestones, and thresholds. Otherwise, it’s not testing; it’s just changing things blindly and shooting in the dark, wasting your limited resources for no result.
If you’re thinking of giving up on your startup because you couldn’t find a market for your product, then you should have stopped much earlier – it means you made a huge mistake somewhere on the way. Like that expensive Wi-Fi connected juice maker that was only able to squeeze a bag of already-made juice – Juicero went broke after raising $120 million, by the way.
5. Evaluate your competition
The only way you should close shop because of your competition is when they buy you out. Otherwise, even if you are in a red ocean, you should go on – I mean, you knew from the very beginning that you were in a red ocean, didn’t you?
6. Work on your business model
The search for a viable business model – that’s the very definition of a startup. Take this course by Steve Blank, it’s a mind opener.
Not finding a viable business model is the most valid reason you might ever consider giving up and shutting down your startup.
Take my advice if you’re a rookie: whatever company you think of starting up, do it with $10 and within six weeks. During the six weeks, move fast and try to test all your assumptions – again, you should have structure in doing it. Create a testing framework. Iterate. Adapt. Focus and Intensity. Move to another idea if this one doesn’t work. Be a machine.
7. Look for fundraising
Don’t give up until you’ve tried everything. Everything!
Get intros, pursue all leads, qualify all investors, follow up methodically, pitch fiercely. Use the feedback you get to improve your product, your marketing strategy, or your business model. Stop when you see no result, but only after you have no one else to call.
No regrets: you’re either a fool for getting to this point or way ahead of your time; either way, no pills will help.
Really? I mean, you’ve solved them all and you still have no traction – and that’s why you think of quitting?
You have a great product that comes with an attractive value proposition and satisfies a real need, your marketing engine turns every one dollar into two, your competition lies in the dust, and TechCrunch just published the news that you closed a $50 million round. All these and you got no traction?
The truth is that no startup ever shut down because of a lack of traction; they all died for not having a compelling product, for wasting marketing money, for having bad leadership, or for a thousand other motives. Traction is not one of them. Traction is the result of all these components. Lack of traction means that something else didn’t work.
Obviously, there are other reasons for which founders think of shutting down their startups: physical burn out, personal reasons, emotional fatigue, falling in love with a bigger opportunity…
Running a startup is a life choice. It requires dedication and commitment, and there are no rules set in stone that will take you smoothly from A to Z (but you can check our own book of rules here).
Running a startup tends to take from you more than initially expected. It can ruin relationships and families, waste fortunes, break friendships, destroy dreams, ruin health.
It’s not for the common folk – just for the brave ones not afraid of unsuccessful startups.
Do you think you have what it takes? Let’s talk.