Don’t Get Too Excited Yet, You Might Fail After the Party!
Having worked and consulted for many startups, I’ve noticed one thing that is beginning to look like a norm among startup founders which makes most startup fails after “being successful” which is actually meant not to be so. This is something you might now want to hear as i will be talking about some reasons for business failure after Potentially Succeding.
I asked one of my clients in the UK few questions;
- how is his product is being received by his target market?
- What is the feedback of his early customers?
- Are his potential customers hungry for what the team is selling?
Well, his Responses where all superb and sounded positive. But then, I noticed the data from the answers he gave me weren’t from extended demography. It’s more or less some close/tiny generic stats which he is using to judge the vast of his audience.
Let me not go into details of my chat with him, but then, I want you to understand that business validation, both of the broader vision and the early product itself has to be a key focus for any aspiring entrepreneur reading this.
You should understand that testing your product and getting specific feedback is the only way to know if the company you’re building is on the right track or another hyped product wasting its time and waiting to fail after it’s perceived as successful. However, even for seasoned founders who understand how vital market validation is for their product to succeed in the market, it can be all too easy to get distracted chasing the wrong kind of validation especially at the early stage of starting off.
The best companies are always the ones that go out there to get real feedback from potential customers before product launch.
Not all pre-product launch validation is created equal and as such, very important that founders differentiate between real validation and vanity “wins” business validation that do little more than make you feel good. Most of these fake business validations will come from people you know.
Below are the reasons why you will fail after succeeding.
Be Aware of These Business Traps That Leads To Failure
- All your startup friends say your product is cool – Reasons for business failure
A large number of new startups in Nigeria are created in heavily concentrated markets like Lagos, Nairobi, etc which can make it difficult to find unbiased feedback from potential customers outside the echo chamber.
I have seen founders chasing the feedback they want to hear, often from peer entrepreneurs within, who will be excited by a piece of technology but obviously won’t be the ones who end up buying and using it as real customers.
Most startup founders just go ahead and create a product based on the trend they see around, then ask for an opinion about the product from their friends which most times, will give them positive feedback based on emotions.
These founders gather the validations from their friends and launch into the market only to face the harsh reality of failing even too early than expected.
To their belief, they have an amazing product, which in turn makes them feel successful and eventually failing when they launch out.
The best way to go is of taking it directly to potential customers in the market who will specifically tell you what they do and don’t like, this way, you will have a real market picture of what you’re up to.
- Not all customers are born equal – reasons for business failure
Understand that not all your customers are equal. While doing your product validation for a supposed global business, you should avoid the menace of getting your data based on your local demography.
Reasons being that the factors that affect customers in the United States is different from the factors that affect African customer behavior and do every demography.
Most founders while carrying out their feasibility study for their startups, build long lists of customers in their home market that may or may not have the same set of needs as Nigeria.
For instance, the SAAS product tends to perform better outside Nigeria while consumer products perform better in Nigeria.
The customer behavior of Nigeria cannot be used to propose the possible business outcome of users in the United States and the UK when your company is set to expand.
While your local demographic validation may present your startup as potentially successful, you will eventually fail if you try to use the same data upon expansion.
You will have a hard time selling to investors and foreign customers on a product that has only been validated by unfamiliar brands in a small domestic market.
Related: 10 Causes od small business failure
- Corporate guidance – reasons for business failure
Large corporations are never tired of looking for the next cutting-edge technology that will propel their next phase of growth. This is why countries like the United States, Israel, with its deep talent pool in AI, IoT, cybersecurity, etc., have become hotbeds for corporate innovation labs for many startups to lie on.
But then, simply being in the innovation hub is often not enough by itself to give a long-term success.
Let’s come down to Africa.
Lagos remains the largest Tech hub in West Africa, but trends and products from Lagos alone do not determine the success of a startup.
While in the hotbed of businesses, don’t get too comfortable thinking you’re going to win, you must make considerations for sketches outside the hotbeds.
- Winning! You just raised Some Capital – Reasons for business failure
Trust me, when I say raising millions of dollars from VCs is not always the best move to make when launching a business, I mean every bit of it.
This is very true especially for SAAS startups, education and consulting, Marketing and agency businesses, and high priced products like (transport and logistics, real estate and construction, etc) I will leave the detailed argument to this for another post.
Most entrepreneurs are just after creating a product and going for a VC funding.
That I will never advocate.
Here is a tweet from Jason Njoku, Iroko TV’s CEO regretting running a VC backed business and having a strong grounds never to start or run a venture-backed startup again.
As grateful and fortunate as I am for the opportunity with @irokotv I will probably never start or run a venture backed startup again. My emotions can’t handle it. More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost https://t.co/QgUrO9gzeo
— JasonNjoku (@JasonNjoku) January 12, 2019
Here is one of the responses from Docolumide on Jason’s tweet.
This thread is why I had long come to the conclusion that any founder in Africa, in this age, raising >one VC institutional round—or building his venture in such a way as to NECESSARILY require >one VC institutional round—genuinely, doesn’t know what he’s doing. https://t.co/RRiEowWDNM
— DO (@docolumide) January 12, 2019
Even raising a sizable round from VCs can be a form of fake momentum, because it makes you feel successful already without real customers.
If this is or have been your case before, you will agree with me that it takes serious discipline not to get carried away with the large cash stacked up in your bank account forgetting investors will come to ask questions of what you have done with their money.
Let’s also learn some from Sahil Lavingia, the CEO of Gumroad who recently shared a story of how wanting to build a Billion-dollar company almost made him a failure….
Glad the mission for Gumroad have changed from building a Billion dollar valued company to focusing on solving and improving the lives of the sellers and eventually making the company recover and grow after laying off 75% of his staff.
There are more seed funds out there than ever before. Valuations and deal sizes at the seed and Series A stages continue to climb. What this truly means is that bets on the success or failure of a startup are being made earlier in the life cycle of the company.
That fact that A VC chooses to invest in your company at an early stage does not mean your startup has reached the promised land. VCs are not your customers, and while the capital they provide is a critical means to further the development of the business, it does not replace getting real validation from and selling to the target market which is the only determining factor of the success of your company.
Consider reading this tips from Samuel Ossi on how to survive business failure.
Conclusion
In the end, I will leave by saying A business without customers is as good as no business, no matter how good it.
Winning a competition or getting on a top 10 list is not success and should not validate you, you need to focus on your customers and meeting their needs, else, you will head to your downfall after all the celebration.
