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Pawel Brodzinski on Software Project Management

Lessons Learned: Startup Failure Part 1

Some time ago we closed down Overto – startup I was involved in. It was a failure – pretty obvious thing since we’ve closed the service. Since we learn much on our mistakes I think a reliable analysis why the business have failed should be valuable for you. For the beginning things we screwed.

No one working full time

From the very beginning we knew none of people engaged is willing to leave their daily jobs to commit fully to the startup. We thought we’d able to run internet service after hours. To some point that was true. As far as nothing bad was happening with the servers and the application it was all fine. We were working on new features when we had enough free time. Problems started when we faced some issues with our infrastructure. We weren’t able to resolve issues on the fly and had several downtimes. You can guess how it influenced user experience. That also backfired on service development since we had to focus on current problems instead of adding new functionalities. Lack of person working full-time and being able to deal with maintenance and bug fixing was the most important reason of failure.

Catching the market

That’s partially a consequence of the previous point. Since we spent majority of our limited time on trying to keep the service running we weren’t able to catch the changing market. We needed to cover new areas to move the application to another level but we couldn’t complete ongoing development. The whole project stopped in beta version and for users it didn’t look like anything was about to change.

Lack of marketing skills

Thin line between life and death of internet service is a number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately no one of us was skilled in that area. Even worse, no one had enough time to fill the gap. That would be another stopper if we dealt with the problems mentioned above.

Business model

We hadn’t checked very well a business model we set up on the beginning. We were surprised a couple of our features weren’t as unique as we’d initially thought. Ironically that wasn’t a big problem since we had a bunch of ideas how to adjust the strategy in a new situation. Anyway, you should plan to change your initial business model.

Screwed chance of selling the business

After we’d decided we won’t be able to maintain the service in the long run we had a chance to sell it. To make a long story short we screwed negotiations starting with way too high price. We thought more about how much work we put into the project than how much it can be worth for potential buyers. Things are worth as much as one’s willing to pay for them, no matter how long it took you to produce them.

Waiting too long with final decisions

I think that one is a bit sentimental. Since the service was our child we were reluctant to make a decision about closing it faster and limit losses. We’ve been tricking ourselves thinking that everything would be fine while we couldn’t get the application back to work properly.

Second part of lessons learned from startup failure

Whole Entrepreneurs Time series.

in: entrepreneurship, software business

5 comments… add one

  • Paul Marculescu January 22, 2009, 2:36 am

    This kind of posts are true gold for startup entrepreneurs. :)
    Thanks for the advices, Pawel.

    What kind of service did Overto provide?

    You mention that you were spending the majority of your time trying to keep the service running.
    What were the causes of so frequent or long downtimes?

  • Pawel Brodzinski January 22, 2009, 4:29 am

    Overto was an auction aggregator. Since in Poland eBay was rather weak and we have strong local uction platform we thought there soon will be at least two big auction platforms. This would make a place for a service which aggregates information from different platforms to deliver more comprehensive results to users. That’s a very brief story of Overto birth.

    And about problems – there was a lot of data to gather. There are a few millions new auctions weekly in Poland. We were doing some time-consuming processing on gathered data so there wasn’t a big time buffer we could use. With each downtime (the website worked but with no actual data it didn’t make much sense to use it anyway) we had to wait until a backlog is cleared. Chances were good that by this time we had another issue to deal with – a bug in the code, on of auction platforms changing structure of their data, simple hardware malfunction or running out of disk space.

    Once you enter the firefighting mode it’s quite hard to sort things out.

    And thanks for warm words about the post. There will be some more soon.

  • Joanna Grzywna March 6, 2009, 3:46 am

    I think that the biggest mistake was the disproportion between the amount of technical people (only one developer) and business-oriented people in your team (all others).

    When everyone is a manager, no one is a worker.

  • Pawel Brodzinski March 6, 2009, 4:18 am

    I can’t agree on that one. We had a developer, a tester and support engineer, an administrator and product manager. And yes, all of us had managerial functions in our daily jobs, but it wasn’t connected in any way in our roles in the startup. If it worked that way downshifting would never work.

  • Anup Prakash July 5, 2013, 1:32 am

    how did you do the marketing? how to get clients? I am also wanting to set up a firm.. Would certainly help.. Your suggestions would certainly help.. how get the first project..

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