When Startups Begin to Fail

This is the 3rd of a series of brief weekly pieces on the unfolding journey of a new incubator based in New Delhi: www.startuptunnel.com, @StTnL. Checkout earlier pieces in the series: Entering Startup Tunnel and What Makes an Incubator Tick?

by Aditya Dev Sood

6a00d8341c562c53ef01bb07d80aae970d-320wiPrashant and Ishita came to see me on Monday afternoon. We’re a bit uncertain at this point about our startup concept, Ishita began… Maybe you can tell that we don’t perfectly align on the idea anymore…? I could tell no such thing, so I just looked intently back at them as they continued. Basically, I would like to use the remainder of the incubation program to pursue another idea, said Prashant, having to do with music, which is what I’m really about. Ishita has several ideas up her sleeve that she’s considering, including the one we came in with.

And so it begins, I thought. We’d accepted eleven startups to the program. Ten got back to us saying they would join but then we realized with had a conflict between two of them who were both working in the social health space. We withdrew our offer to one of them, bringing the cohort down to nine teams. One cofounder bailed when he finally got around to reading the fine print of our contract, leaving us with eight. Or perhaps we’re back up to nine given that Prashant and Ishita now represent two startups? Or perhaps, more realistically speaking, we’re actually down to seven?

It’s really hard for me to tell you guys what to do, I finally said.

If you don’t see eye-to-eye anymore on what you want to do then there’s really nothing for it. You have to pursue what you want to pursue. If that means you’re going to work separately then I’m fine with that. But make steps towards building something, whatever it is, as soon as you can.

With Prashant and Ishita working separately, we now have five single-person startups in this cohort. That’s a proportion way higher than most people would be comfortable with. Many incubation programs won’t accept single founder startups because they’re perceived to be less resilient and fail more frequently. At the same time, any good founding vision usually comes from one single mind, who then brings others along for that journey, be they cofounders or early employees. There's always a team, but must it necessarily be a team of cofounders or will early employees do? I think we see more single founder startups in India than in the United States because of greater power-distance in this culture and because of the easy availability of technical talent. So single person startups don’t have to be the deal breaker that they are sometimes seen as in the States — so long as the founder is really invested in the guts of the product they want to make, they can also be successful. In fact, as Mukund Mohan has argued, single founder startups can avoid the internecine conflict that can be an altogether different cause for startup failure, and allow a single vision to be pursued in a more coordinated fashion. Overheads are also lower, and so long as funding arises to pay for early employees, the path to future success is not closed. At the end of the week Prashant debuted his new idea to the cohort, and many gave him a big thumbs up. It's not a shoo-in, but it's interesting, untried, and worth pursuing.

Prashant and Ishita weren't the only ones changing their minds this week. With two rounds of mentor pitching, several different kinds of feedback sessions and one-on-one reviews, this has been a tough couple of weeks for the cohort. Many teams are being forced to rethink their initial ideas and approaches in response to hard questions from our mentors and from other members of the cohort. One team discovered that their business concept was a non-starter given the existing regulatory environment. Another team realized that while their concept pitched pretty well, and even though they were picking up early users, their product was dead-on-arrival if they couldn't figure out how to get those users to interact and transact. A third team, working on a messaging app, is trying to decide how niche to go, and how to best customise the app's user experience for a relatively niche market.

All of our exercises, pitching sessions and peer feedback exercises have been about bringing the spectre of failure more clearly into focus. I think this is one of the signal benefits of any incubation program. Teams have had the opportunity to see other teams succeed and come to quick realizations about what they will have to change about their own way of working in order to ford the same hurdles. It’s not a given, of course, that every cohort will actually be capable of responding to the new realities they must quickly confront, in which case they must bob, weave and pivot to better align their goals, they capabilities and their product with one another.

Team, Dream, Machine, is the mantra my friend Marko recited to me out in the alps some years ago. It remains the minimum three point checklist for any startup that wants to remain in business and get to a respectable level of early stage funding. But expert opinion remains divided as to which of these matters more. One school of investors says it's all about giving money to smart people. Even if their initial idea is flawed, they'll eventually get the picture and change their idea — you never change the people. Another group will cites surveys showing that the number one reason that startups fail is that they are pursuing a product and business idea that really no one wants now, and in fact no one will never come to want later either. In this way of thinking, the people are not the critical differentiating factor, but rather the alignment of those individuals with lead users or niche consumers of the proposed product. If this alignment can improved somehow, the business viability of the startup can be substantially enhanced. This is in fact our own point of view as well, and it is also the reason we are spending so much time asking startup teams to draw and diagram their customers' journeys and to spell out different points of uncertainty and doubt. They can then focus on these areas of fog through new user inquiry and product definition.

The causes of startup failure will, of course, multiply determined. I'm afraid I haven't seen this more complex and sociologically-grounded view reflected in any Silicon Valley survey I've come across so far. These causes will have to do with the dynamics between team members as well as the many ideas and thoughts that string them together, as well as the product they end up making together. At each point there is the potential for new insights from the market to be included and for a better fit with reality to be effected. It's when teams are unable or unwilling to hear these signals that one should worry. If the team cannot make a habit of converting market challenges into product features and market strategies then there is nothing live here, just an inert idea with a ticking half-life that was probably partially misconceived to begin with. It's only when startups begin to become aware of how they are failing or missing the market that they really come alive to the mortal struggle they're already locked in, and begin taking steps towards success.

This is the 3rd of a series of brief weekly pieces on the unfolding journey of a new incubator based in New Delhi: www.startuptunnel.com, @StTnL. Checkout earlier pieces in the series: Entering Startup Tunnel and What Makes an Incubator Tick?