17 ms·

Why our startup failed

115 points by kaelig 12y ago

gregd 12y ago
Because there isn't an ounce of usable information above the fold on a 27" screen?
- deleted 12y ago
  [deleted]
  - chill1 12y ago
    I don't know if answering snark with more snark is the answer. He/she did have a valid point after all, even if it was delivered obnoxiously.
    - oncletom 12y ago
      Yep you are right for the snark. Still, "valid point" is very subjective. I'll think about it, yet I do not have any improvement in mind to preserve space, breathing and readability.
    - josefresco 12y ago
      Pretty sure (guessing) this guy's blog UI isn't the same site/UI as his failed startup.
      - chill1 12y ago
        I didn't say it did. I was agreeing with the point that this particular site wastes a ton of vertical space with its headers.
        josefresco 12y ago
        My apologies, I replied to the wrong thread. The parent commenter I was intending to reply to, was implying this.
  - jacquesm 12y ago
    One reason you can add to your list of reasons for failure: poor response to user criticism.
- reboog711 12y ago
  I've seen a lot of "blog/articles" use the same approach. It is bizarre isn't it? I've never seen a company do that, though.
  - gone35 12y ago
    To be fair, it seems the site is his personal blog as well [1], well before he started the homonymous company. It's still a garish design anti-pattern, nonetheless. All this baroque excess of late with gigantic fonts in the name of "space" and "readability" really needs to stop. [1] https://oncletom.io/ https://oncletom.io/
    - oncletom 12y ago
      Oh I understand better the critique now: yes it is my personal blog (the initial startup website does not exist anymore). I refreshed the design recently (like, 2 weeks ago). I used http://lamb.cc/typograph/ http://lamb.cc/typograph/ with a "Le Corbusier" scale to calculate the font size, the paddings and margins etc. So the size does not come out nowhere, it has been made for readability and as my eyesight decreased, I found the change much welcome… I will try to find a good balance to end up your sufferings ;-)
      - gone35 12y ago
        Nice, thank you for the reference to the typography tool you used [1]; I didn't know about Le Corbusier's proportions. The discussion in [1] on "vertical tempo" is interesting because I think that is precisely the problem with your site. Your body font size is large but within currently fashionable standards [2] at around 10 words or 60 characters per line; but the headings and subheadings are so huge they are breaking the vertical flow of the page. On my iPad, for instance, it currently takes me an unreasonably long 27 (!) full screens to scroll down to the end of the article, not counting the header (another full screen) nor the comments section. And often the subheading alone occupies the entire screen. With such huge disparity between body and headings size, it makes little difference whether both sizes come from the same proportional scale or not: the sheer size difference is perceived as out of proportion nonetheless. [1] http://lamb.cc/typograph/ http://lamb.cc/typograph/ [2] http://practicaltypography.com/line-length.html http://practicaltypography.com/line-length.html
exelius 12y ago
This sounds like a pretty typical trajectory for a failed startup: CEO dreams big, encourages sales guys to chase big fish through the commission structure, but meanwhile the big fish demand more features, guarantees, complex contracts, etc. than 15 smaller customers would. I've seen it happen quite a bit; and it's one of the biggest (and most common) mistakes that B2B software startups make. An early-stage company really needs two things from its customers: cash flow and feedback. It's fine if you don't make any profits, but you need revenue coming in the door to get future rounds of funding. It's fine if your revenue per customer is lower than you would like. Small customers are great at both: price it low enough to start that it's not a huge business expense for them, and you will be able to deal directly with the people who will use the system. If they have a problem, your product guys will know and be able to relay it to development. Big customers often get you neither. They require lengthy contract negotiations that will rack up thousands in lawyer's fees from your side before you bring in any revenue. They ask for features that aren't core to your product and are likely years down on your roadmap (think LDAP authentication, customer admin functionality, audit logs, etc.) Again, these have to be developed before they sign a contract and before you see money. If you actually manage to get them into a production environment, they're much less likely to give you actionable feedback. tl;dr: B2B software startups that target big contracts are much more likely to fail because the market dynamics of chasing after big customers will increase your burn rate while diverting your sales team's attention from smaller fish.
- danielweber 12y ago
  Yes, I've heard (and experienced) most of this. It's still good to hear it again, though, and being from another country we can learn that some mistakes are universal. EDIT: Joel's Camels and Rubber Duckies[1] is essential reading for how hard it is to sell enterprise software. Price it free, cheap, or dear. Not to say that there is no hope in selling to enterprises, because lots of people are very successful doing it, but you need to know how hard it is before you start. [1] http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
  - oncletom 12y ago
wiradikusuma 12y ago
"0.5M€ in January 2012 from french public investors" how did you do that? (4-5 months after incorporation)
- laurentoget 12y ago
  i think public investors means the government in this context.
  - ricricucit 12y ago
    that's what i've assumed
- oncletom 12y ago
  Very good question! The process has been initiated way before (a year before actually). It took 4 months to get the money because the business plan and everything has been made for the company launch. Think of: 1. 2010: the project initiated with the preparation of the business plan with public funding in mind; 2. september 2011: the company launched because the funding project has been audited and validated, which means 99% chances for the funding to be approved; 3. january 2012: the money has been unlocked. Does it make sense?
pkorzeniewski 12y ago
It's beyond me how a startup can drain 500K€ in 6 months.. Yes, he gives some details where the money went (mostly flushed down the toilet), but I just can't understand why a startup, that is generating little to no revenue, waste so much money.
- oncletom 12y ago
  Yep this is crazy. I think this is tight to the personality of the guys allowing the expenses. In that case, the "I want to make sure you don't need my money" investor advice makes a lot of sense: they want to make sure your head is not going to burn because of the euphoria effect. Yesterday you had 0, today you have millions. On another scale, you have people unable to manage a daily budget. This is the same on a (wrong) business scale. But agreed, this is lame.
- ricricucit 12y ago
  83k euro/month burn rate it's definitely a lot for a startup, but i KNOW it can be like that or even worse.
- mikeryan 12y ago
  500K isn't that much money if you're not supplementing it with revenues. 11 salaries burn cash fast if you're paying market rates, even if paying 5k per month per employee then just on salary costs you only have 10 months of runway. Thats nothing. This team should have been leaner and product focused with that 500k and their goal should have been a product that they could spin into a second round of funding.
  - oncletom 12y ago
    The top salaries were roughly 3K€ per month. Officially and speaking for myself. Without the detailed accountancy we can only speculate about it. We built a working software using Node.js and Chrome Extensions in less than 3 months, to reach that second stage of funding. As our baseline was not clear, our market not proven and probably because of the investors suspicions, we never got an answer (well he had: "we'll see later"). I forgot to mention this product was based on scientific research about graph theories and user behaviours in an established society. From science to market, another challenge as one needs to distinguish the scientific interest of a feature vs. a sellable feature on a business market.
hartator 12y ago
First thing to do: Recognizing your own failure. You seem to charge solely the CEO for the failure of the company and you may be right. But you can't be the number 2 of a company and not taking your part of responsibility. Does your innovation was truly disruptive? Maybe not. Do you provide awesome products that make customers' eyes cry? Maybe not. In you area of work, you seem to be in charge of products and research. Where are the results of the research? Where are the products? Where the open-source projects? You seem to forget why you got money, time and public subsidies. You seem to forget to explain why you guys were disruptive. Your only fault cannot be to not confront the ceo sooner. Again, failure is okay. Do not worry.
- nickstinemates 12y ago
  Agree. Proper grammar and editing of your own content also might help.
  - hartator 12y ago
    Sorry, I have made some corrections. (English is my second language) Do you see anything else?
    - keithpeter 12y ago
      You are communicating a difficult lesson very well. Do you want me to copy-edit the text? I can do this later Wednesday evening (UK time zone)?
      - oncletom 12y ago
        Are you proposing to copy-edit the blog post? If so, this is kind and much appreciated :-) If you have a GitHub account you can directly edit the content through the following URL, and propose your changes. > https://github.com/oncletom/oncletom.io/blob/master/source/_posts/2014/why-our-startup-failed.md https://github.com/oncletom/oncletom.io/blob/master/source/_...
mgkimsal 12y ago
"One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company." And yet, in most companies I've worked in, management rarely takes on board any observations from low-level plebs - how could person X even begin to understand the complexity of our org? They're only the call center worker, or IT grunt, or delivery person, or receptionist, or accountant, or... The prospect of company success/failure has been at the root of most of the issues I've tried to raise with management at places I've worked at. I went from a failed venture of my own to a small company a year later. They were making some of the same operational mistakes I'd made a year earlier. I tried (tactfully) to raise these points, and was rebuffed. 9 months later the company laid off half the employees (guess which half I was in?) and they folded a couple years later, from what I recall. tldr - many company owners won't take input from lower-level employees. Is there a connection between failure rates and the openness of owners/managers?
joewee 12y ago
Can I ask, what is the meaning of the name "oncle tom" to you? Curious why you choose that name.
- kjackson2012 12y ago
  I came in to say this. "Oncle Tom" translates to "Uncle Tom" in English, and in the US it has an extremely derogatory meaning towards African Americans. It's essentially a "black man that sold out to the White Man". The name choice probably wasn't motivated by this, but it's an unlucky choice if the goal was to grow in North America, similar to the Chevy Nova, which in Spanish was equivalent to "No Go".
  - CanSpice 12y ago
    That coupled with the header graphic on this post (graveyard with what's probably Jesus on a cross but could be misconstrued to be a lynching) gives me all kinds of uncomfortable feelings.
  - pessimizer 12y ago
    The startup was "Dijiwan", though.
  - Patrick_Devine 12y ago
    It's from a book Uncle Tom's Cabin[1] by Harriet Beecher Stowe who was staunchly antislavery. In Europe it was very popular, and there was even an U-Bahn station in Berlin called "Onkel Tom's Hütte"[2]. Also, the story of the Chevy Nova in Spanish has been debunked many times[3], but for whatever reason it's a nice story and keeps getting retold. I suppose it's like JFK allegedly proclaiming himself a donut, coincidentally also in Berlin. I do agree with you though that it's probably not a great choice for a name, if only because people in the US will be hypersensitive and might completely misconstrue the meaning. [1]: http://en.wikipedia.org/wiki/Uncle_Tom%27s_Cabin http://en.wikipedia.org/wiki/Uncle_Tom%27s_Cabin [2]: http://en.wikipedia.org/wiki/Onkel_Toms_H%C3%BCtte_%28Berlin_U-Bahn%29 http://en.wikipedia.org/wiki/Onkel_Toms_H%C3%BCtte_%28Berlin... [3]: http://www.snopes.com/business/misxlate/nova.asp http://www.snopes.com/business/misxlate/nova.asp
ricricucit 12y ago
Thanks for sharing this. I could have written almost the same article, but probably my english would have ruined it. Good luck with your next project!
- oncletom 12y ago
  "Glad" to read this. Obviously my English can be improved. I hope people are not bleeding too much from their eyes ;-)
dkyc 12y ago
It sounds like a combination of two rather common startup mistakes: Not making something people want (enough), and spending raised money too fast. Side note: I think the font size is way to big on this page.
AznHisoka 12y ago
Read the entire article. Still no clue what this company did/does other than a few vague buzzwords like "web graphs". Maybe that's why it failed.
- roma1n 12y ago
  This. A thousand times this.
- Toine 12y ago
  This is exactly the comment i was looking for.
- oncletom 12y ago
  Yep that was not the point I wanted to express (what did the company do). I shallowly explained it as well: we hardly described our own product, making it difficult to read from a market perspective. As a sentence: Web opinions miner and network of influences analyser. As an example: national market study on insurances based on expressed opinions on the Web, collected in two days, classified and weighted on various criteria relative to the business requesting the study. Hope it helps.
- snorkel 12y ago
  Classic example of not understanding the customer. It's selling analysis to marketing departments don't have the time, budget, or expertise to act on this kind of broad analysis.
LukeB_UK 12y ago
This is unreadable on mobile. You get about 3 sentences before you have to scroll again
- oncletom 12y ago
  Oups sorry about that. What is your device config? Because so far I tested only on a Nexus 5.
  - LukeB_UK 12y ago
    Nexus 4 using chrome.
  - spigoon 12y ago
    I have the same problem. I have an iPhone 5.
balls187 12y ago
The tl;dr: is pretty great, but could be genericized: One should not ignore {{blank}} and issues of a company because it is not their job. It can eventually deprive them from any future in that company. While there aren't enough resources for founders to continually second guess each other, and duplicate efforts, it's everyone's job to ensure the company succeeds.
josephschmoe 12y ago
The startup violated rule #1: Never do anything for free, especially if it costs you money to do it. Not to mention the total lack of honesty within the company.
- snorkel 12y ago
  It's really hard for a young startup to turn down big potential customers, so offering the first taste for free is reasonable, but it's equally important to then quickly discontinue the free trial and leave that customer wanting more.
arbuge 12y ago
This seems to be why it failed in only 6 months: >>We had 2 marketing officers, 2 business developers, 2 strategy analysts, 1 researcher contractor and 4 developers when operating at full speed. ...with just 500,000 euros in the bank from the capital raise. A good rule of thumb is for raise to allow for 18 mos runway given the burn rate, approximately.
keithpeter 12y ago
"I never had access to the accountancy results" Disclaimer: I work as a teacher and have done management committee work in the UK voluntary sector; charities housing coops &c. Pretty tight regulation. Isn't having monthly management accounts (cash at bank, income, expenditure, liabilites) sort of basic? Am I being naive?
- oncletom 12y ago
  We agree this should be the case. And eventually bank account reports should be available to anyone in the company as long as the details do not create a possible business threat. On the other hand, I requested the account details but never got access to them. What do you do when you insist and get nothing? At some point you stop asking. Considering the structure we had in the company, I am not sure there were legal obligations for the company to deliver the accountancy reports. If the CFO and CEO do not want to share the information… I never found a legal way to oblige them to do so. The CEO owned 52% of the company. Aka `root` access to the machine. Maybe I am wrong on that part, feel free to add anything I have missed (I do not pretend to know everything, I just wish I would have know all that sooner).
  - keithpeter 12y ago
    OK, I may have misunderstood quotes like this... "The tension between us (the cofounders) eventually arose and grew. I paid less attention to ours conflicts because I felt it was useless to waste energy." I took 'cofounder' to mean an ownership stake. Therefore at least as regards my limited experience, a seat on 'board' and therefore access to management accounts. Were you an employee? (I'm the one volunteering to proof read the blog post, so its best if we are clear).
    - oncletom 12y ago
      Yes I had shares in the company. Technically, there were two companies: - a holding where the cofounders owned shares as of 52, 30, 12 and 6 percent. This company had no business activity and no employee. I owned 6 percent of its 100K capital; - a startup which was 100% owned by the holding, sharing the same CEO. I was employee and paid by this company (well, "paid"…). I had a vote decision in the holding, not the startup. And for some reason I had a reason not to work anymore for the startup (including being fired when we think about it), I would have to sell my shares. If you want to evict someone, this is a great system. Also, the 12% shares were held by the spouse/partner of the CEO, creating a 50/50 balance which let all the power in his hands, whatever the scenario is. That is a reason why fighting was useless. And making a viable platform was more a chance for us to get funded, to have an external observer who could eventually rectify the power balance.
restless 12y ago
I guess everyone in this industry goes through a company like this.sooner or later. I once had this CEO, who was gifted with speech.Looking back in shame, i cannot believe how trustful I and all the other were, the alarmsigns were there all along still we couldn't or didn't want to see it. Anyway I found some got friends in this time,still doing projects with some of them. I just lost 8 month of my time,so I guess it is ok, since it gave me some experience. Anyway nowadays I check first before jumping in with full force.
programminggeek 12y ago
So they spent money foolishly, hired too much, and assumed that the gravity of business expenses didn't matter? That sounds like most failed businesses I've seen or heard. If the basic economics of a business don't work, it will fail eventually. You have to make more money than you spend. If you can't do that you don't have a business, you have a very expensive and time consuming hobby.
pouzy 12y ago
Being french and living in the US, I have a question: Do you feel like the french system (hard to hire/fire, etc) helped in that failure ? And do you feel like if you had started outside of Europe, you could have raised 10x what you did and maybe found a what to become sustainable ? (even if you say that you don't need money)
- oncletom 12y ago
  Interesting question, as it is a regular debate with the US/FR startup ecosystem. Hiring is longer than harder: I already knew and contacted directly some of the engineers I wanted to hire. I also used GitHub and requested candidates to apply through a Pull Request (https://github.com/Dijiwan/Jobs https://github.com/Dijiwan/Jobs). I am not based in the US, and if I had to hire people there, I do not have enough step back to judge if I could have successfully operated the same way I did. Most of all, the engineers hiring process was rather 1) an individual trust, 2) a cultural fit (we share the same values) than a "I want the most expensive guy on Earth". I value the individuality of people equally to their skills. I think this is harder to achieve in a more money-driven environment. Not being located in Paris but rather in a chilled out city like Bordeaux created an emphasis on the "we want to work and enjoy a good work/life balance". Working on the grass, at the coffee or a nap on the river bank while being able to have a 100% JavaScript codebase when it is your favourite language, this has no money equivalence ;-) We had more problems with other roles, but I assume it is because we were not clear enough on the expectations and for the reasons explained in the blog post. Hiring is a lot of paperwork. Firing is a lot of paperwork. Jobs are sacralised in France and this is normal from an historical point of view: people fought for that. A lifetime full time job was the Nirvana of the Industrial Revolution. Hiring someone should be a huge responsibility is most businesses: you not only deal with money but with individual's life. So you need to make sure you generate enough revenues to hire someone. It is an ethical debate, and cultural. I do respect individuals, whatever role they have in the company, and I want them to be able to be happy at doing it, even if it is not their dream job. What was stupid on the business plan is the "hirings objective". They preferred us to hire 8 average engineers rather than 4 excellent ones. At a bootstrapping stage, I bet on reliability and efficiency. It is easier to scale conversations with 4 people rather than with 8. What I think is wrong in the french public investment is they care too much about job figures and not enough about the company sustainability. Whereas I think in the US, investors care too much about the money and probably not enough about people (this is how I perceive it through the Internet lens, so certainly there is a bias in my opinion). CEO are still perceived as bank robbers and slave masters. We like national companies to succeed but we hate so much people earning money. Maybe because there is an unfair wages balance between "high value" profiles and other people. I wish it could be easier to be trained at creating companies, to be promoted and to be educated at creating a successful business. For this, I think US are way better than us. To market and to define a product as well, the US are far better than us. We did not more money: we needed to make more money. We might have needed more money in the US, simply to scale with the salaries expectations (and to provide benefits, which are provided by the government here in France through the tax payer system; it linearise the cost over the entire country rather than creating an auction system for equal benefits coverage). The failure we had was human: wrong persons at the wrong place making wrong decisions (including myself, except I think I did my leading job well; the cofounder one has been my weakness). The failure we had was a product design: we had a super powerful tool and we did not know how to sell it, and we had the wrong persons to sell it. We were pretty lucky (and probably worth it) to get that much funding. It took us one year (a year you have to fund on your own because you need to pay your bills meanwhile) to get it anyway. And investors have been fooled by some of the founders as we did. So no, I do not believe the french system helped: we had access to free legal support. The only lie we discovered is a continuing contract in France does not protect that much when your employer is not able to pay you. In that case, you are prisoner of a system rather than protected by it. This is wrong. I do not know if it provides all the details you expected to have, so feel free to question me more about that :-)

115 points by kaelig 12y ago

gregd 12y ago

Because there isn't an ounce of usable information above the fold on a 27" screen?

deleted 12y ago
[deleted]
- chill1 12y ago
  I don't know if answering snark with more snark is the answer. He/she did have a valid point after all, even if it was delivered obnoxiously.
  - oncletom 12y ago
    Yep you are right for the snark. Still, "valid point" is very subjective. I'll think about it, yet I do not have any improvement in mind to preserve space, breathing and readability.
  - josefresco 12y ago
    Pretty sure (guessing) this guy's blog UI isn't the same site/UI as his failed startup.
    - chill1 12y ago
      I didn't say it did. I was agreeing with the point that this particular site wastes a ton of vertical space with its headers.
      - josefresco 12y ago
        My apologies, I replied to the wrong thread. The parent commenter I was intending to reply to, was implying this.
- jacquesm 12y ago
  One reason you can add to your list of reasons for failure: poor response to user criticism.
reboog711 12y ago
I've seen a lot of "blog/articles" use the same approach. It is bizarre isn't it? I've never seen a company do that, though.
- gone35 12y ago
  To be fair, it seems the site is his personal blog as well [1], well before he started the homonymous company. It's still a garish design anti-pattern, nonetheless. All this baroque excess of late with gigantic fonts in the name of "space" and "readability" really needs to stop. [1] https://oncletom.io/ https://oncletom.io/
  - oncletom 12y ago
    Oh I understand better the critique now: yes it is my personal blog (the initial startup website does not exist anymore). I refreshed the design recently (like, 2 weeks ago). I used http://lamb.cc/typograph/ http://lamb.cc/typograph/ with a "Le Corbusier" scale to calculate the font size, the paddings and margins etc. So the size does not come out nowhere, it has been made for readability and as my eyesight decreased, I found the change much welcome… I will try to find a good balance to end up your sufferings ;-)
    - gone35 12y ago
      Nice, thank you for the reference to the typography tool you used [1]; I didn't know about Le Corbusier's proportions. The discussion in [1] on "vertical tempo" is interesting because I think that is precisely the problem with your site. Your body font size is large but within currently fashionable standards [2] at around 10 words or 60 characters per line; but the headings and subheadings are so huge they are breaking the vertical flow of the page. On my iPad, for instance, it currently takes me an unreasonably long 27 (!) full screens to scroll down to the end of the article, not counting the header (another full screen) nor the comments section. And often the subheading alone occupies the entire screen. With such huge disparity between body and headings size, it makes little difference whether both sizes come from the same proportional scale or not: the sheer size difference is perceived as out of proportion nonetheless. [1] http://lamb.cc/typograph/ http://lamb.cc/typograph/ [2] http://practicaltypography.com/line-length.html http://practicaltypography.com/line-length.html

exelius 12y ago

This sounds like a pretty typical trajectory for a failed startup: CEO dreams big, encourages sales guys to chase big fish through the commission structure, but meanwhile the big fish demand more features, guarantees, complex contracts, etc. than 15 smaller customers would. I've seen it happen quite a bit; and it's one of the biggest (and most common) mistakes that B2B software startups make. An early-stage company really needs two things from its customers: cash flow and feedback. It's fine if you don't make any profits, but you need revenue coming in the door to get future rounds of funding. It's fine if your revenue per customer is lower than you would like. Small customers are great at both: price it low enough to start that it's not a huge business expense for them, and you will be able to deal directly with the people who will use the system. If they have a problem, your product guys will know and be able to relay it to development. Big customers often get you neither. They require lengthy contract negotiations that will rack up thousands in lawyer's fees from your side before you bring in any revenue. They ask for features that aren't core to your product and are likely years down on your roadmap (think LDAP authentication, customer admin functionality, audit logs, etc.) Again, these have to be developed before they sign a contract and before you see money. If you actually manage to get them into a production environment, they're much less likely to give you actionable feedback. tl;dr: B2B software startups that target big contracts are much more likely to fail because the market dynamics of chasing after big customers will increase your burn rate while diverting your sales team's attention from smaller fish.

danielweber 12y ago
Yes, I've heard (and experienced) most of this. It's still good to hear it again, though, and being from another country we can learn that some mistakes are universal. EDIT: Joel's Camels and Rubber Duckies[1] is essential reading for how hard it is to sell enterprise software. Price it free, cheap, or dear. Not to say that there is no hope in selling to enterprises, because lots of people are very successful doing it, but you need to know how hard it is before you start. [1] http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
- oncletom 12y ago

wiradikusuma 12y ago

"0.5M€ in January 2012 from french public investors" how did you do that? (4-5 months after incorporation)

laurentoget 12y ago
i think public investors means the government in this context.
- ricricucit 12y ago
  that's what i've assumed
oncletom 12y ago
Very good question! The process has been initiated way before (a year before actually). It took 4 months to get the money because the business plan and everything has been made for the company launch. Think of: 1. 2010: the project initiated with the preparation of the business plan with public funding in mind; 2. september 2011: the company launched because the funding project has been audited and validated, which means 99% chances for the funding to be approved; 3. january 2012: the money has been unlocked. Does it make sense?

pkorzeniewski 12y ago

It's beyond me how a startup can drain 500K€ in 6 months.. Yes, he gives some details where the money went (mostly flushed down the toilet), but I just can't understand why a startup, that is generating little to no revenue, waste so much money.

oncletom 12y ago
Yep this is crazy. I think this is tight to the personality of the guys allowing the expenses. In that case, the "I want to make sure you don't need my money" investor advice makes a lot of sense: they want to make sure your head is not going to burn because of the euphoria effect. Yesterday you had 0, today you have millions. On another scale, you have people unable to manage a daily budget. This is the same on a (wrong) business scale. But agreed, this is lame.
ricricucit 12y ago
83k euro/month burn rate it's definitely a lot for a startup, but i KNOW it can be like that or even worse.
mikeryan 12y ago
500K isn't that much money if you're not supplementing it with revenues. 11 salaries burn cash fast if you're paying market rates, even if paying 5k per month per employee then just on salary costs you only have 10 months of runway. Thats nothing. This team should have been leaner and product focused with that 500k and their goal should have been a product that they could spin into a second round of funding.
- oncletom 12y ago
  The top salaries were roughly 3K€ per month. Officially and speaking for myself. Without the detailed accountancy we can only speculate about it. We built a working software using Node.js and Chrome Extensions in less than 3 months, to reach that second stage of funding. As our baseline was not clear, our market not proven and probably because of the investors suspicions, we never got an answer (well he had: "we'll see later"). I forgot to mention this product was based on scientific research about graph theories and user behaviours in an established society. From science to market, another challenge as one needs to distinguish the scientific interest of a feature vs. a sellable feature on a business market.

hartator 12y ago

First thing to do: Recognizing your own failure. You seem to charge solely the CEO for the failure of the company and you may be right. But you can't be the number 2 of a company and not taking your part of responsibility. Does your innovation was truly disruptive? Maybe not. Do you provide awesome products that make customers' eyes cry? Maybe not. In you area of work, you seem to be in charge of products and research. Where are the results of the research? Where are the products? Where the open-source projects? You seem to forget why you got money, time and public subsidies. You seem to forget to explain why you guys were disruptive. Your only fault cannot be to not confront the ceo sooner. Again, failure is okay. Do not worry.

nickstinemates 12y ago
Agree. Proper grammar and editing of your own content also might help.
- hartator 12y ago
  Sorry, I have made some corrections. (English is my second language) Do you see anything else?
  - keithpeter 12y ago
    You are communicating a difficult lesson very well. Do you want me to copy-edit the text? I can do this later Wednesday evening (UK time zone)?
    - oncletom 12y ago
      Are you proposing to copy-edit the blog post? If so, this is kind and much appreciated :-) If you have a GitHub account you can directly edit the content through the following URL, and propose your changes. > https://github.com/oncletom/oncletom.io/blob/master/source/_posts/2014/why-our-startup-failed.md https://github.com/oncletom/oncletom.io/blob/master/source/_...

mgkimsal 12y ago

"One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company." And yet, in most companies I've worked in, management rarely takes on board any observations from low-level plebs - how could person X even begin to understand the complexity of our org? They're only the call center worker, or IT grunt, or delivery person, or receptionist, or accountant, or... The prospect of company success/failure has been at the root of most of the issues I've tried to raise with management at places I've worked at. I went from a failed venture of my own to a small company a year later. They were making some of the same operational mistakes I'd made a year earlier. I tried (tactfully) to raise these points, and was rebuffed. 9 months later the company laid off half the employees (guess which half I was in?) and they folded a couple years later, from what I recall. tldr - many company owners won't take input from lower-level employees. Is there a connection between failure rates and the openness of owners/managers?

joewee 12y ago

Can I ask, what is the meaning of the name "oncle tom" to you? Curious why you choose that name.

kjackson2012 12y ago
I came in to say this. "Oncle Tom" translates to "Uncle Tom" in English, and in the US it has an extremely derogatory meaning towards African Americans. It's essentially a "black man that sold out to the White Man". The name choice probably wasn't motivated by this, but it's an unlucky choice if the goal was to grow in North America, similar to the Chevy Nova, which in Spanish was equivalent to "No Go".
- CanSpice 12y ago
  That coupled with the header graphic on this post (graveyard with what's probably Jesus on a cross but could be misconstrued to be a lynching) gives me all kinds of uncomfortable feelings.
- pessimizer 12y ago
  The startup was "Dijiwan", though.
- Patrick_Devine 12y ago
  It's from a book Uncle Tom's Cabin[1] by Harriet Beecher Stowe who was staunchly antislavery. In Europe it was very popular, and there was even an U-Bahn station in Berlin called "Onkel Tom's Hütte"[2]. Also, the story of the Chevy Nova in Spanish has been debunked many times[3], but for whatever reason it's a nice story and keeps getting retold. I suppose it's like JFK allegedly proclaiming himself a donut, coincidentally also in Berlin. I do agree with you though that it's probably not a great choice for a name, if only because people in the US will be hypersensitive and might completely misconstrue the meaning. [1]: http://en.wikipedia.org/wiki/Uncle_Tom%27s_Cabin http://en.wikipedia.org/wiki/Uncle_Tom%27s_Cabin [2]: http://en.wikipedia.org/wiki/Onkel_Toms_H%C3%BCtte_%28Berlin_U-Bahn%29 http://en.wikipedia.org/wiki/Onkel_Toms_H%C3%BCtte_%28Berlin... [3]: http://www.snopes.com/business/misxlate/nova.asp http://www.snopes.com/business/misxlate/nova.asp

ricricucit 12y ago

Thanks for sharing this. I could have written almost the same article, but probably my english would have ruined it. Good luck with your next project!

oncletom 12y ago
"Glad" to read this. Obviously my English can be improved. I hope people are not bleeding too much from their eyes ;-)

dkyc 12y ago

It sounds like a combination of two rather common startup mistakes: Not making something people want (enough), and spending raised money too fast. Side note: I think the font size is way to big on this page.

AznHisoka 12y ago

Read the entire article. Still no clue what this company did/does other than a few vague buzzwords like "web graphs". Maybe that's why it failed.

roma1n 12y ago
This. A thousand times this.
Toine 12y ago
This is exactly the comment i was looking for.
oncletom 12y ago
Yep that was not the point I wanted to express (what did the company do). I shallowly explained it as well: we hardly described our own product, making it difficult to read from a market perspective. As a sentence: Web opinions miner and network of influences analyser. As an example: national market study on insurances based on expressed opinions on the Web, collected in two days, classified and weighted on various criteria relative to the business requesting the study. Hope it helps.
snorkel 12y ago
Classic example of not understanding the customer. It's selling analysis to marketing departments don't have the time, budget, or expertise to act on this kind of broad analysis.

LukeB_UK 12y ago

This is unreadable on mobile. You get about 3 sentences before you have to scroll again

oncletom 12y ago
Oups sorry about that. What is your device config? Because so far I tested only on a Nexus 5.
- LukeB_UK 12y ago
  Nexus 4 using chrome.
- spigoon 12y ago
  I have the same problem. I have an iPhone 5.

balls187 12y ago

The tl;dr: is pretty great, but could be genericized: One should not ignore {{blank}} and issues of a company because it is not their job. It can eventually deprive them from any future in that company. While there aren't enough resources for founders to continually second guess each other, and duplicate efforts, it's everyone's job to ensure the company succeeds.

josephschmoe 12y ago

The startup violated rule #1: Never do anything for free, especially if it costs you money to do it. Not to mention the total lack of honesty within the company.

snorkel 12y ago
It's really hard for a young startup to turn down big potential customers, so offering the first taste for free is reasonable, but it's equally important to then quickly discontinue the free trial and leave that customer wanting more.

arbuge 12y ago

This seems to be why it failed in only 6 months: >>We had 2 marketing officers, 2 business developers, 2 strategy analysts, 1 researcher contractor and 4 developers when operating at full speed. ...with just 500,000 euros in the bank from the capital raise. A good rule of thumb is for raise to allow for 18 mos runway given the burn rate, approximately.

keithpeter 12y ago

"I never had access to the accountancy results" Disclaimer: I work as a teacher and have done management committee work in the UK voluntary sector; charities housing coops &c. Pretty tight regulation. Isn't having monthly management accounts (cash at bank, income, expenditure, liabilites) sort of basic? Am I being naive?

oncletom 12y ago
We agree this should be the case. And eventually bank account reports should be available to anyone in the company as long as the details do not create a possible business threat. On the other hand, I requested the account details but never got access to them. What do you do when you insist and get nothing? At some point you stop asking. Considering the structure we had in the company, I am not sure there were legal obligations for the company to deliver the accountancy reports. If the CFO and CEO do not want to share the information… I never found a legal way to oblige them to do so. The CEO owned 52% of the company. Aka `root` access to the machine. Maybe I am wrong on that part, feel free to add anything I have missed (I do not pretend to know everything, I just wish I would have know all that sooner).
- keithpeter 12y ago
  OK, I may have misunderstood quotes like this... "The tension between us (the cofounders) eventually arose and grew. I paid less attention to ours conflicts because I felt it was useless to waste energy." I took 'cofounder' to mean an ownership stake. Therefore at least as regards my limited experience, a seat on 'board' and therefore access to management accounts. Were you an employee? (I'm the one volunteering to proof read the blog post, so its best if we are clear).
  - oncletom 12y ago
    Yes I had shares in the company. Technically, there were two companies: - a holding where the cofounders owned shares as of 52, 30, 12 and 6 percent. This company had no business activity and no employee. I owned 6 percent of its 100K capital; - a startup which was 100% owned by the holding, sharing the same CEO. I was employee and paid by this company (well, "paid"…). I had a vote decision in the holding, not the startup. And for some reason I had a reason not to work anymore for the startup (including being fired when we think about it), I would have to sell my shares. If you want to evict someone, this is a great system. Also, the 12% shares were held by the spouse/partner of the CEO, creating a 50/50 balance which let all the power in his hands, whatever the scenario is. That is a reason why fighting was useless. And making a viable platform was more a chance for us to get funded, to have an external observer who could eventually rectify the power balance.

restless 12y ago

I guess everyone in this industry goes through a company like this.sooner or later. I once had this CEO, who was gifted with speech.Looking back in shame, i cannot believe how trustful I and all the other were, the alarmsigns were there all along still we couldn't or didn't want to see it. Anyway I found some got friends in this time,still doing projects with some of them. I just lost 8 month of my time,so I guess it is ok, since it gave me some experience. Anyway nowadays I check first before jumping in with full force.

programminggeek 12y ago

So they spent money foolishly, hired too much, and assumed that the gravity of business expenses didn't matter? That sounds like most failed businesses I've seen or heard. If the basic economics of a business don't work, it will fail eventually. You have to make more money than you spend. If you can't do that you don't have a business, you have a very expensive and time consuming hobby.

pouzy 12y ago

Being french and living in the US, I have a question: Do you feel like the french system (hard to hire/fire, etc) helped in that failure ? And do you feel like if you had started outside of Europe, you could have raised 10x what you did and maybe found a what to become sustainable ? (even if you say that you don't need money)

oncletom 12y ago
Interesting question, as it is a regular debate with the US/FR startup ecosystem. Hiring is longer than harder: I already knew and contacted directly some of the engineers I wanted to hire. I also used GitHub and requested candidates to apply through a Pull Request (https://github.com/Dijiwan/Jobs https://github.com/Dijiwan/Jobs). I am not based in the US, and if I had to hire people there, I do not have enough step back to judge if I could have successfully operated the same way I did. Most of all, the engineers hiring process was rather 1) an individual trust, 2) a cultural fit (we share the same values) than a "I want the most expensive guy on Earth". I value the individuality of people equally to their skills. I think this is harder to achieve in a more money-driven environment. Not being located in Paris but rather in a chilled out city like Bordeaux created an emphasis on the "we want to work and enjoy a good work/life balance". Working on the grass, at the coffee or a nap on the river bank while being able to have a 100% JavaScript codebase when it is your favourite language, this has no money equivalence ;-) We had more problems with other roles, but I assume it is because we were not clear enough on the expectations and for the reasons explained in the blog post. Hiring is a lot of paperwork. Firing is a lot of paperwork. Jobs are sacralised in France and this is normal from an historical point of view: people fought for that. A lifetime full time job was the Nirvana of the Industrial Revolution. Hiring someone should be a huge responsibility is most businesses: you not only deal with money but with individual's life. So you need to make sure you generate enough revenues to hire someone. It is an ethical debate, and cultural. I do respect individuals, whatever role they have in the company, and I want them to be able to be happy at doing it, even if it is not their dream job. What was stupid on the business plan is the "hirings objective". They preferred us to hire 8 average engineers rather than 4 excellent ones. At a bootstrapping stage, I bet on reliability and efficiency. It is easier to scale conversations with 4 people rather than with 8. What I think is wrong in the french public investment is they care too much about job figures and not enough about the company sustainability. Whereas I think in the US, investors care too much about the money and probably not enough about people (this is how I perceive it through the Internet lens, so certainly there is a bias in my opinion). CEO are still perceived as bank robbers and slave masters. We like national companies to succeed but we hate so much people earning money. Maybe because there is an unfair wages balance between "high value" profiles and other people. I wish it could be easier to be trained at creating companies, to be promoted and to be educated at creating a successful business. For this, I think US are way better than us. To market and to define a product as well, the US are far better than us. We did not more money: we needed to make more money. We might have needed more money in the US, simply to scale with the salaries expectations (and to provide benefits, which are provided by the government here in France through the tax payer system; it linearise the cost over the entire country rather than creating an auction system for equal benefits coverage). The failure we had was human: wrong persons at the wrong place making wrong decisions (including myself, except I think I did my leading job well; the cofounder one has been my weakness). The failure we had was a product design: we had a super powerful tool and we did not know how to sell it, and we had the wrong persons to sell it. We were pretty lucky (and probably worth it) to get that much funding. It took us one year (a year you have to fund on your own because you need to pay your bills meanwhile) to get it anyway. And investors have been fooled by some of the founders as we did. So no, I do not believe the french system helped: we had access to free legal support. The only lie we discovered is a continuing contract in France does not protect that much when your employer is not able to pay you. In that case, you are prisoner of a system rather than protected by it. This is wrong. I do not know if it provides all the details you expected to have, so feel free to question me more about that :-)