Why the start-up Triangulate failed to go viral.

By now the metrics for the site were mixed. The user base was growing at over 40% month on month but user engagement was low, with only 27% of new users in California, the site’s target market, returning in the second week after they signed up. Also, there were no signs of the viral growth Sunil had predicted. He had anticipated that each new user would bring another 0.8 users with them. In reality, it was only 0.03 new users. And users were not buying the coins that allowed them to access additional services at the rate that had been expected. On average users were using 177 coins per month at a cost of one cent per coin, or $1.77, far below the $15.00 in the business plan. And to make matters worse most of the coins spent were those that users had received at no charge as part of their sign-up or other incentives.

The team developed plans to increase engagement, virality, and revenue. Excited by their plans they hired a Chief Technology Officer and  Chief Marketing Officer. Sunil planned to raise funds from a Series A round.

But his board had other ideas. An investor/advisor who had launched an online gaming company told Sunil “When virality hits, it happens within a few months and you have had a few months”

The board discussed rescinding the recent job offers to slow down spending and to increase Triangulate’s runway. It was time, once again to pivot, to change the business model.

Sunil described that board meeting as the worst day of his life, but the team regrouped. They brainstormed options for a new dating site. A feature of the Wings dating site that had proven to be popular, even addictive for some users was their “Rate Singles” feature. Originally meant to outsource the task of reviewing uploaded photographs for inappropriate content, the feature allowed members to rate the attractiveness of subscribers. Using this as a base they identified other ideas for new features that would make the site more social. In December DateBuzz was launched. The site allowed users to vote on parts of a user’s profile, their self-description, the movies and songs they liked, etc before viewing their photos. Sunil anticipated that delaying the viewing of photos would overcome one of the most common sources of dissatisfaction with dating sites, the level of interaction. This is driven mainly by the reaction to photos. Less attractive individuals do not get much attention, whereas the more attractive users get too much attention.

Based on the users’ rating of other member’s profiles, before seeing any photos, Triangulate’s software suggested matches that the user may like. Starting this way, less attractive users got more attention, while the more attractive still received enough attention.

DateBuzz had solved a major problem with dating sites, but it did not immediately take off. The site was seeded with users from its predecessor Wings but only about a third of these users actually transferred to the new site.

As well as online ads, DateBuzz tried unusual marketing tactics such as handing out fliers at railway stations.

The cost of customer acquisition was still $5 per user, the same as Wings.

By February 2011 Triangulate had $200,00 of cash in the bank and it was spending $50,000 per month. Its runway was down to four months and it did not have the funds for another pivot. In his book “The Lean Startup” Eric Ries does not define runway as it is commonly used, that is how long a start-up can keep going until it runs out of cash. He defines runway as the number of pivots, or changes in business direction, a start-up can complete before the money runs out. Each pivot costs time and money and with time running out each unsuccessful pivot eats into the company’s cash reserve.

CB Insights lists Pivots Gone Bad as the 11th leading cause of business failure. To learn more about this type of failure and how to avoid it, To listen to the podcast go to my podcast page, and look for Season 12 Episode 2. Or Ctrl & Click here for the transcript of the broadcast.

With only four months of cash left it was time for Sunil to seek further investment. He approached the same backers who had provided his seed money.  He was told “We love you as an entrepreneur, but we are not sure what is keeping you going. If you can share what gets you so excited, we will work something out” This soft refusal gave Sunil cause to think.

Triangulate had become a well-oiled machine. They had taken the best bits of their first dating site and developed a product that was changing the dynamics of the online dating industry.

But they had not found a way to acquire enough users. Virality could get them to the critical mass of users they needed to become successful. Dating sites like messaging apps or social media platforms require this critical mass. WhatsApp is successful because you can use it to message most. if not all, of your contacts. If only a few of the folks you need to message were on the site, you would seek an alternative. Dating sites need critical mass to improve the chances that a user will find a suitable date. People on a dating site are there to find a suitable match. They do not care how the algorithm works.  And never mind how clever the algorithm is, how well it can find suitable matches, if there are not enough users then it will not deliver the service subscribers desire.

Triangulate could try to crack the code that would lead the viral user growth, but time was running out. Sunil’s friends, who were entrepreneurs or VCs, were telling him that Triangulate was not going to be able to find Series A funding. An alternative was to sell the company and although Sunil came close to finding a buyer, he never received an offer. In March 2011 it was time to call it quits. Sunil shut down the company, paid his employees severance, helped all of them find new jobs and returned $120,000 of the $750,000 in seed money back to the investors.

Sunil achieved the graceful exit which would allow him to retain his reputation and his relationships. According to LinkedIn Sunil is now a founding partner at Ubiquity Ventures a VC fund with over $100 million under management.

The decision to shut down your start-up is an extremely difficult one. Strong emotions are at play, you have invested much into the venture. Your identity is closely tied to the business, its success or failure is your success or failure.  It is not surprising that looking back many founders say they waited too long to make the decision to quit. So as Jacinda Ardern put it when she resigned as New Zealand’s prime minister, they continue when there is not enough gas in the tank. Because they struggle to admit this to themselves they do not share their concerns with others. Employees toil on wasting their time on a lost cause. Money that could be returned to investors is spent in vain it the hope that a miracle occurs and the business is saved.

To summarize. Triangulate started out with the intention of being a superior matching engine to find suitable partners in many areas of life, such as job applications or university admissions. It was premised on three basic assumptions; that the engine would deliver better matches, that users would be able to detect the superior results the engine delivered, and that they would be willing to pay for it. These assumptions were not rigorously tested prior to the launch of the first business. Online dating was chosen for the first venture because it was ready for disruption and it carried a high risk of self-exaggeration.

By using a user’s digital footprint rather than their self-reported image the search engine should be able to deliver the superior matching service that Triangulate aimed to deliver.

  Unable to find an established dating service that was willing to partner with it, Triangulate launched its own dating service, Wings, using Facebook as its platform. The business failed to gain traction, virality was low, customer acquisition costs were higher than expected and income per user was fraction of the anticipated value. The business pivoted again, building on the best aspect of Wings to develop a website that overcame a major pain point of online dating, that photos carried undue weight in a user’s selection of a potential partner. This final business DateBuzz also had high customer acquisition costs and failed to gain critical mass.

In the next episodes, we will explore what we can learn from Triangulates’ lack of success and thus avoid making similar mistakes in our business ventures.

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: