Reddit’s monthly roundups of new companies is a great place to find new products, clients, partners or tools. That is if you’re checking the current month’s list. If you’re going back in time to check out the companies that introduced themselves to the public a year ago, you’re in for a different experience. Take a batch of 10 new companies from any part of the list and you’ll discover there’s a good chance that half of them are already dead.
Companies go out of business all the time, and the reasons are quite diverse.
#1 Spending on marketing more than what the company affords
Martin Erlić of UDesign™ wrote a Medium piece about whey their company failed and he mentioned they’ve spent $4,000 on videography that had zero impact on their revenue. He realised after his startup failed that they should have used the money to pay for a full-stack developer that would have helped them finish the actual product instead of investing in marketing.
“Looking back, that extra $4000 would have made a world of a difference. If we had hired smart, we could have had a full stack developer working full-time for another 4 weeks at that rate. That was basically our death knell.”
#2 Selling something people don’t want
Ivaylo Kalburdzhiev had the idea of building and selling “the world’s first” racing wheel for full-sized iPads, named KOLOS. Kalburdzhiev got the idea after he saw a 9gag picture in which someone taped a smartphone to a round neon to create a DIY racing wheel for their tilt game. Only after he got a bank loan, Kalburdzhiev actually bought an iPad and downloaded some tilt games. He was trying to solve a problem he didn’t even had. There were no paying customers for his product.
“From my modest experience, I’ve learned that just because you’re building something, doesn’t make it worthwhile for customers.”
#3 Poorly chosen market
Of course, usualy this is one of the things entrepreneurs realise after they had to close shop. Željko Švedić started a cohousing project in Zagreb, and the success of his MVP made him believe the business will be a hit. He knew people in Scandinavian countries and the United States liked cohousing, and all signs pointed to success. He struggled to find enough people to fill all the rooms he wanted to sublease. He had to declare the Zagreb Cohousing project a failure and move out of the house he rented.
Tara Hunt, entrepreneur and senior digital strategist, had some wise words about getting it right from your first try:
Most of us don’t have big wads of cash and time to burn, so we have one shot and then we have to figure out how to pay the rent and feed ourselves. And those who achieve success in one shot are just as lucky as they are admirable. And those who don’t believe that are either privileged (have time and money to figure stuff out) or amnesic.
