Why Start-ups fail A Founder’s Reflections:
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.
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 would be able to provide the superior matching service Triangulate aimed to deliver.
Unable to find an established online dating site as a partner Triangulate launched its own dating site, Wings. When this business failed to become viable, Triangulate, pivoted to build another online site that built on the most successful features of Wings. This site, DateBuzz, also failed to gain traction. Unable to find additional funding the founder, Sunil Nagaraj, took the painful decision to close his business down.
Looking back Sunil could point to several reasons why Triangulate failed. His top two were choosing the wrong market and not talking to the right people. The choice of dating for Triangulate’s first target market, Sunil says was his biggest mistake. “I chose dating because I like pinpointing what makes people tick, it’s often not what people say. I also like making new connections between people. But our matching algorithm based on behavioral analytics ended up being unimportant to Wings and DateBuzz. An algorithm can be useful in a domain where people feel insecure about their ability to choose, for example, when selecting financial services. But if you line up five girls, I do not think I need help in picking the one I find most attractive. In reality, I probably do need help in picking the right one, but I am unlikely to admit this if I am an average person.
Sunil admits his initial assumptions about the potential for the “Wingman” concept to drive virality was wrong. He says “I’m not sure people want to recruit friends to help manage their dating” Sunil had assumed that each user could bring 0.8 additional users to his site, in reality, the number was 0.03. The fact that the site was built on a Facebook platform may have raised concerns among users who saw the platform as being too fast and loose with their data.
The dating industry is a challenging one in which to gain a sustainable competitive advantage. As mentioned in an earlier post you must obtain a critical mass.
Sunil explains this way: “The network effects are incredibly strong in dating. It turns out that people are very selective when it comes to dating. You need more than a bunch of 28-year-old men and women. To deliver suitable matches you have to factor in more characteristics and build critical mass in each combination. For example, you need a bunch of 28-year-old athletes without tattoos who do not use bad grammar.” Although Sunil does not mention it, it is in the HBS notes, you also need broad geographic coverage.
To get users Triangulate had to compete with established sites like Match. Sites like Match had driven up customer acquisition costs. Although these sites look like tech companies, they are massive marketing machines. Match spends around 70% of its revenues on ads, which is why everyone knows about it. Sunil says he made the mistake of thinking of Triangulate as a tech company that could succeed because it had a great product. But the algorithm did not deliver much if any, competitive advantage, and without a critical mass of users Wave and DateBuzz were unable to gain traction. Remember Zoosk which I mentioned earlier as a role model for Triangulate’s dating businesses? Zoosk was able to overcome these challenges by building on top of Facebook, just as Facebook was taking off. At that time Facebook ads were cheap. Triangulate launched too late to take advantage of that opportunity.
Not talking to the right people. Based on his experiences with Triangulate Sunil advises entrepreneurs “Do not listen to other entrepreneurs or VCs. Do not listen to your professors; talk to potential customers. What they have to say is worth 100 times more,” He says I didn’t spend enough time getting into customers’ heads to understand their needs around online dating. I ignored two questions many friends were asking, questions that reveal a lot about potential users’ needs. They asked “What would the profiling and personality analyzer say about me? And are there any hot guys or gals on the site? Sunil would insist the site was not about hot or not.
Sunil provides some very sound advice that all those considering launching a start-up should take.
He says “In retrospect, I should have spent a few months speaking to as many potential customers as possible before we started to code.”
He then warns us how difficult it is to follow this advice. He says “This sounds easy but it’s not; an entrepreneur wants to start building. Good customer discovery work requires you be bold enough to make a full-time commitment to a venture, but at the same time be open enough to actually listen to what customers are saying”
Sunil also felt he should have sought out some failed dating entrepreneurs to learn from their mistakes.
Understanding other’s motives:
Sunil recognizes that Triangulate was overly reliant on incentivized installation, especially when testing Wings potential for viral growth. Sunil says “We were gathering baseline data to measure Wings’ virality. We got those first free incentivized installations and those new users did whatever it took to get more free coins. They were incentivized to invite their friends, who were probably fake friends. As a result, Wings looked misleadingly viral due to those incentivized transactions”.
Failure to keep up with technology:
Sunil says things might have been different if any of the founders had an i-Phone.
Two of the founders had Blackberries, which did not support Apps and one founder had an old flip-phone. Date Buzzes rapid-fire voting on profile elements would have worked perfectly on a mobile phone app.
But the founders did not even consider building an App until late into the business’s life cycle.
Co-founder choices and employees.
Remember that Sunil fell out with his original cofounder over the role of CEO. Sunil’s partner suggested co-CEO roles and Sunil insisted on being the sole CEO citing the need for rapid decision-making. Looking back it would have been good to have a hustler on the team to manage Sunil’s visionary role Sunil says “It would have helped to have a cool business head, like Jack’s, when we were doing our pivots.
To learn more about Visionaries and Hustlers read this post about the importance of ensuring you have the right team. But even having both a hacker and hustler on the team does not guarantee success. As discussed during my review of the failure of Quincy Apparel where the founders complemented each other, one being a hacker, the other being a hustler. They did agree to joint CEO roles but still ended up disagreeing on the future of the business with one co-founder being forced out. You will be able to find those podcasts on your favorite podcast provider.
The other point that Sunil makes is again a key piece of advice for founders. He says he wished he had hired an office manager stuff to do the admin tasks that took up 30% of his time. As a founder or CEO you should do the tasks that only you can do, like setting the strategic direction for the company. And outsource the rest.
Sunil is sorry he lost his investor’s money but feels the experience was worthwhile. He developed a business that genuinely improved the online dating industry by getting users to vote on elements of a fellow user’s profile. He learned a lot , which has stood him in good stead as a VC as he understands how it feels to be an entrepreneur.
The business closed down gracefully, and Sunil did not upset his investors. His employees all got new jobs.
Why Start-Ups fail 