Three Mistakes That Sunk Your Start-Up

Posted in: Digital marketingLast update: 20/05/16

Whenever I see a bombastic title like the one above I expect to read a sensationalist prescription devoid of content. So, to keep this article on an even keel, and to avoid any distracting detours, I’ll focus on the example of a project I set up in 2005 called nuestraporra.com. It was a platform for running betting pools online and it lasted just two years. After carrying out a digital autopsy of NuestraPorra, I realized that its failure was down to three main mistakes which I have kept at the forefront of my mind ever since.

1) Not listening to the market

Your start-up has to solve a real problem. When I created NuestraPorra I believed that betting pools on paper were an anachronism. I was sure that once users realized the benefits of online betting pools, they would all come running to NuestraPorra. I was so convinced of my idea that I didn’t pause to reconsider even for a moment. In fact, I just outlined the idea to my business partners and we immediately set to work programming.

Did we solve a problem? The truth is that we didn’t even go to the trouble of consulting betting pool users. It seemed like a good idea to us so we just went ahead with the project.

To avoid acting blindly it’s important to find out as soon as possible if your idea has a prospective market. Share your idea with your potential public as soon as possible. Keep an open mind and be serene in the face of criticism. Sometimes we are so enamored of our own idea that we become defensive when someone questions its validity, when in fact, we should take the opposite approach. The perspectives of our potential users should serve as a point of reflection, helping us to refine our ideas or even reconsider whether to go ahead with a project. As the experts always say: listen to your market.

 

2) Not having a business model

Another problem for NuestraPorra was that we didn’t know how to make money from it. Our intention was to obtain as many users as we could, reasoning that we could start thinking about placing advertising or charging users after we’d reached critical mass. But that is not a viable business model – that is simply improvising and hoping that Lady Luck will come knocking.

Although we make much of the digital nature of such start-ups, the fact is that the economic principles which govern online businesses are the same as those for any business: revenue must exceed expense.

It’s true that in the past few years we’ve all heard stories about massive investments and companies finding great success despite having no clear business model and not invoicing a single euro. It’s hard not to be dazzled by such fabulous tales, but it’s important not to lose your perspective; such cases are exceptional and should therefore be treated as little more than interesting anecdotes. My suggestion to anyone setting up an online project is to be very clear about what you are selling, and at what price, from the start, instead of waiting hopefully for your business to attract millions of users before making such considerations.

 

3) Over-programming

In 2005 everybody was talking about Web 2.0. We were excited about the technological paradigm shift that this development would occasion, so we decided to create an online betting pool which had everything: a betting pool generation engine; automatic address import; private areas; comments; chat. The programming took much longer than we’d anticipated but we didn’t mind, reasoning that the better we made our product, the more users it would attract.

However, in postponing the launch we were also delaying our reality check. It was only after almost a year of development that we found out that NuestraPorra was of no interest to anybody. If we’d focused primarily on the key features we could have reached the same conclusion much sooner. We could have saved resources, time and energy.

Above all, when starting a project from scratch it is essential to focus on the features that represent the differential value of your proposal. Everything else can be considered decorative. Once the project has genuine – and preferentially paying – users their feedback on your business will provide you with information about which features you need to add, modify or eliminate.

 

Man always trips over the same stone twice

In 2008, one year after NuestraPorra, I started a new digital project. Halftomato.com was a networking website designed to help users meet new people. It didn’t even last a year. I made the same basic mistake: not having a business model. But that’s a story for another day.

If you’d like to talk about your idea for solving a real problem, and you have a business model that’s clear and focused on a limited number of features, you can find me manning the helm of www.easypromosapp.com at carles@easypromosapp.com.

Article originally published in Cataluña Económica

-Carles Bonfill-

CEO Easypromos

 

Carles Bonfill

Easypromos CEO and co-funder

Publication date: 2016-04-25