What Will Kill Your Start-Up The Fastest?

by Jeanne Sachs EVP of Biz Dev at Atomic Reach

Not fun to think about, is it? And knowing what not to do (and why) is just as important if not more important than what to do.

There is some amazing insight available on why some start-ups thrive. One of my recent favorites (though the article is not recent) is an article written by Marc Andreessen about what is most important for a start-up – people, product or market. Click this link The Only Thing That Matters to read it. I think it’s valid now more than ever.

What I want to share here is some of my experience around working for companies/start-ups that succeeded and those that failed. And in particular I want to cover one of the key strategic flaws that was the cause of a company’s ultimate demise.

One story is about a company that succeeded and thrived and one about an unfortunate and surprising failure. The reason one succeed and one failed involve in the same principal – understanding and truly listening to your customers.

Back in 2007 I was fortunate enough to get hired at MTVN Digital not long after they formed the division and has acquired some strategic digital media assets. My role was to help grow the revenue for a brand MTVN had acquired through Atom Entertainment called Addictinggames. It had a fairly sizable audience of young men at that point in time (7 million unique visitors a month) yet it had little to no revenue and hardly anyone had ever heard of it. It was essentially a casual games aggregator, it had a terrible UI and it was anything but advertiser friendly.

My job and that of our team was to figure out how to turn a “frog into a prince”.
We had a tiny team (especially by MTVN standards) split between New York and LA (sales) and San Francisco (product development and marketing). The first 3 months were brutal for everyone. We got little to no interest even with a desirable demo and sizable audience. We had no choice but to do A LOT of listening.

We heard similar feedback from brands consistently and we continually communicated what we were hearing and learning from the marketplace with our product and marketing team. At the same time the product team was also digging deeper into what users wanted (and didn’t) and where the casual gaming market was heading. We had a close-knit team and we worked closely together. Our communication was open and constant and we held nothing back. No one was afraid to speak his or her mind and everyone contributed.

Due to listening, communication, discussion and teamwork we were able to positively iterate the product, UI, marketing and brand story based on marketplace insights so that it met the needs of both of our “customers”. There was no pride of ownership, there was nothing sacred and everything was under scrutiny. We continually iterated all of the key elements by listening, synthesizing and then evolving based on what we learned from both of our “customer” bases and the changing marketplace. We grew the business and the revenue exponentially in record time. It was a “home run”. Addictinggames became one MTVN’s most successful digital acquisitions. And it was a ton of fun.

After MTVN I went to DailyCandy to oversee sales and sale marketing. I was so excited. What a great brand. I was a huge fan. It was nearing its 10 year anniversary, it had recently been acquired by Comcast and it was doing well after coming off a tough post recessionary year. When I interviewed the plan was to invest in the brand and build on what came before. I saw enormous possibilities and potential growth for the business. As you may know, DailyCandy is now shuttered. So what happened?

Comcast purchased DailyCandy right before the recession hit at top dollar. To extract the value and recoup the investment there were aggressive revenue goals coupled with limited financial investment flexibility. In addition, the marketplace was changing rapidly in every way. And DailyCandy stuck its “head in the sand” and continued to stick to what it always did the exact same way even though everything was changing around them.

Everyone was hesitant to talk about what we were hearing from our partners, the marketplace, and our audience. There was a feeling that we need to extract maximum value from the product (as it had always existed) due to the acquisition plan, in spite of huge changes around us. And when it became clear we needed to evolve “or die” we found ourselves crippled by a) being way too “late to the party” and b) the handcuffs brought on by the acquisition plan. Ultimately DailyCandy was never able to overcome this critical misstep.

DailyCandy originally succeeded because they did what we did at Addictinggames and they ultimately failed because they stopped. They stopped listening, they stopped evolving and they stopped innovating.

The moral of this story is you can never ever stop listening or stop innovating and iterating based on what you learn from your audience and the market. Business history continues to fill with failed or failing companies (big and small) that die because they did just that.

There is a song by The Cure and another by Warren Zevon titled “I’ll Sleep When I’m Dead”. I think that’s a perfect analogy for what will kill a start-up (and even big companies) the fastest. You cannot rest, “sleep”, stop listening, iterating and evolving if you want to survive and thrive. If you do, well you know how that story ends.

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