IdeaAutopsy: Is there a business idea that you brought to life before that failed? Jared Kugel: Before starting WheelsNeedDeals.com I was trying to start a social network for car enthusiasts ...
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Joel Downs regrets not raising sufficient capital
Idea Autopys: Is there a business idea that you brought to life before that failed? Please describe it.
Joel Downs: There have been a couple, but the latest was a company that was founded to revive magazines that had gone out of print and bring them back to life as lean, profitable websites that were editorially-driven but heavily augmented with user-generated content.
We raised money and got the business off the ground, building a team, a platform that could be used across all the sites, and acquiring our first magazine brand which had a 20 year-old history. We rolled out a site for that brand, and it generated a lot of excitement among customers who remembered the magazine and had been loyal to it, and it saw consistent growth of 10% month-over-month.
2. Why do you think it failed?
Despite encouraging growth in the site, we found it very difficult to raise money to continue the business, and eventually had to fold it up. A business with this model requires significant capital in order to acquire the magazine brands, and their associated back content. Many magazine publishers were not eager to give up their brands, even the “dead” ones at reasonable prices, so once we bought that first brand, we were unable to invest in more.
We approached VCs, confident in our model and the growth that we were seeing, but our model was actually not VC-friendly. VCs are looking for businesses that can grow exponentially because they need all of their investments to have the potential of 10x+ returns within a few years, because most of those investments will fail, so they need the wins to be BIG wins. Our model had the potential to be a very solid business, but it didn’t have the explosive growth prospects that they were looking for.
Also, to reach profitability, the model required that we share personnel and technical resources among the brands, so we were cash-flow negative when only operating a single brand. In this situation, we had limited runway in which to raise more funds to acquire more brands.
3. What did you learn from it?
There are two things we could have done differently, and I think either could have made us successful. If we had found a funding source in the beginning that was sufficient to let us acquire at least 3 brands, we would have realized the efficiencies of the model and been able to continue operating without relying on uncertain additional rounds.
We also could have adopted a model of licensing the magazine brands, so we would need less cash upfront. The brand owners would have been more willing to work with us because they would be able to see some upside in the case of our success, rather than watching their former brand become popular again without them.
4. What are you doing now?
My new project is Degree3, and we provide Q&A Communities for websites. I founded Answerbag.com, the first social Q&A site on the Internet (and still third largest) which was acquired by Demand Media in 2006, and now with Degree3 I am helping sites harness the power of social Q&A to help their visitors, reduce support costs, and build loyalty with their customers.
We’ve seen niche Q&A sites like StackOverflow.com and Quora work well because they are focused on communities of expertise, and we are bringing Q&A directly to existing communities across the Internet, so people can seek knowledge from experts, share what they know, and be recognized for their positive contributions.
We have a free Q&A plugin, and we have just launched a premium plugin with Instant Search, Comments, an FAQ Builder, Whitelabeling, and other features suitable for larger blogs and SMB sites.
Tomazo.com’s Niki Scevak’s failed real estate agent analytics solution
IdeaAutopsy: What was the idea that you brought to life that failed?
Niki Scevak: We created an online analytics solution for real estate agents that helped them benchmark their performance and win clients.
Why do you think it failed?
The problem with analytics businesses in areas where there are a lot data is that you can lose yourself in lots of pretty graphs and interesting segmentations. But it leads to paralysis because there is so much data. It’s so important to tease out the actionable insights and the actionable points of information and ultimately we didn’t do a good job of that.
What did you learn from it?
Make drugs not vitamins. Solve really painful problems clients are having rather than trying to make their life a little nicer.
What are you doing now?
Tomazo is a marketplace of landing page designers. We help online marketers and site owners increase their conversion rates on their most important pages.
PaperAct’s Gil Hidas regrets not knowing the travel industry better
IdeaAutopsy: What was the idea that you brought to life that failed?
Gil Hidas: The Real Race – make reality TV your reality. The real race is (was) a luxury adventure trip based on the amazing race television show. See http://www.therealrace.com/ We did 3 amazing trips and featured on national television http://video.au.msn.com/watch/video/brisbane-real-race/xsomf1k
Why do you think it failed?
Putting bums on seats. we wanted to operate as a boutique company. We should have join forces with large national/international player to push us from a marketing point of view. We spent lots of $$ to get each customer, which probably could have been done better and smarter with an alliance.
What did you learn from it?
Learn the industry. We were getting into an industry (travel) which was lacking in invitation due to relatively low barrier to entry and very low margins.
What are you doing now?
Back to technology and innovation! PaperAct – Electronic Filing Cabinet (yes, in the cloud)!
- Everyone is doing filing (whether they admit it or not).
- Everyone struggles with filing!
- Document storage and collaboration solutions don’t have ‘real’ filing functions (such as reminders, paper clipping, stapling etc).
The PaperAct EFC is a state-of-the-art online filing solution that lets you store, organise and access all your documents from any device anywhere in the world.
Consolidating your online and offline filing systems, PaperAct EFC incorporates everything from your paper documents to your important emails, attachments and faxes, securely filing all your documents in the cloud so you never have to waste time or money searching through filing cabinets again.
PaperAct is now in beta and has thousands of users (mainly from the USA and Australia). To learn more or start acting on your paper go to www.paperact.com
P.S. with PaperAct you can scan directly to the cloud from a scanner connected to your windows PC!
Leandog’s Zee Spencer learns he’d do better next time with a co-founder
IdeaAutopsy: What was the idea that you brought to life that failed?
Zee Spencer: Which one? I’m a master of failed ideas 
. The most recent idea was an idea called 401Change. It was intended to help people find things they can do to help make the world just a little bit better every day.
Why do you think it failed?
It failed for a couple reasons. First, I didn’t pivot. Instead, I just listened to a bunch of people and tried to follow all their advice, which resulted in my not caring about the project anymore. Development stopped as I tried to reconcile what other people thought my app *should* do and what I thought its purpose was. Then it never started again.
What did you learn from it?
I learned quite a bit about my own personal motivations and workflow. I learned that I really need to work with people. Working on something on my own often winds up with me revealing my OCD/perfectionist tendencies and spending too much time making something ‘perfect’ when it should just have been good enough.
What are you doing now?
Right now, I’m a product development coach at a small company called Leandog. I help people learn how to make things that matter, as well as how to know when to/not to change direction.
“You have to be a tough cookie to realise a new idea” Cronsync co-founder Jakob Lipps
IdeaAutopsy: What was the idea that you brought to life that failed?
Jakob Lipps: I was sweet nineteen years old when I started “Linie X” (Bus line X) – a party service for party people. They come, pay, take place in the bus and are taken to cool clubs around Stuttgart (a city in Germany where Porsche comes from) on Saturday night for party hopping. I had deals with these clubs that my guests get free access to the place and other benefits. The guest therefore could have a cool night out, meet and get to know the other party hoppers in the bus and have a lot of fun.
Why do you think it failed?
I was simply to young and unexperienced, had only very little starting capital and did not know enough about marketing and negotiation techniques. In addition I had too high expectations towards the party guests, the clubs and the success of the idea.
What did you learn from it?
It is really hard to start a business. You have to be a tough cookie to realise a new idea and make it happen. It takes even more energy and discipline to keep it going and growing. And you have to be realistic in what is possible and what not. I had a lot of fun, too and get to know many different people. However – it was also really hard to admit to myself that I failed. This is an important experience, because it grounds you and makes you stronger for future activities.
Failure…. grounds you and makes you stronger for future activities.
What are you doing now?
Together with my friend and colleague Knut I have founded an internet communications agency in Berlin named “Kontrollfeld – agency for binary media”. We have very cool clients and a lot of fun at work. And our business is doing well. We have launched a new product called cronsync – a web based time tracking and invoicing tool for small and midsize businesses in the service industry. cronsync was actually developed for the internal use at Kontrollfeld. We wanted to improve our time tracking and accelerate invoicing procedures. To find an appropriate solution, we screened all existing time tracking and invoicing products and found out that they were either easy to use, but too superficial for what we needed, or way too comprehensive and complex. So we started to create our own solution which was supposed to be „just right“ for our purposes. Many of our business partners started to be interested in this solution and we made it available for them. As the feedback was very positive, we made the decision to offer it as a software as a service and call it Cronsync.
BitesizeIrishGaelic.com co-founder pivots their idea early and effectively
What was the idea that you brought to life that failed?
BitesizeIrishGaelic co-founer Eoin: Several years ago, I wanted to make a tool to teach people the Irish language. I quickly settled on the idea of a 30-day email series. Each day would be a “bite-sized” plain text email teaching you a bit of the language.
Why do you think it failed?
I explained the idea to others, and it quickly became obvious that you want to at least listen to the language being spoken in order to learn it. That’s an obvious feature, but I charged ahead in any case! Keep in mind, this was for absolute beginners who wanted to learn something, not language fanatics who only needed grammatical explanations. I hadn’t thought through who would be using the service and how they would interact with it. I was working on the marketing site, and was excited about the little graphics I could design along the “bite-sized” theme. It probably took me a couple of months before I started to accept that the original feedback about emails was true.
What did you learn from it?
Don’t set your sights on one single implementation idea. There are plenty of variations of a service you could come up with, and some might be more useful and popular than others. Don’t build your product first. Write down the idea. Describe it distinctly in one sentence. Then test is out (such as on Google AdWords), as Tim Ferris describes in the 4 Hour Work Week. Build a prototype quickly, and get customers fast. If they like your idea, they’ll stick with you. They’ll understand that you’re at the beginning, and they’ll give you the best direction. Listen to them. Listen hard!
What are you doing now?
Bitesize Irish Gaelic is actually the ‘successor’ of the failed email idea above. It’s for learning the Irish language online. And sound is now its most popular feature 
Bellstrike.com co-founder’s ill-fated adventure into used cars
IdeaAutopsy: What was the idea that you brought to life that failed? Dodd Caldwell: Well, you know how CarMax will buy your car even if you don’t buy from them? That was what I was going to do – just buy cars. Then I’d resell them at wholesale auctions. The difference was that I was going to let people upload all of the info on their cars online, then I’d evaluate that information, and email them a quote. Then I’d send drivers to pick the vehicle up and deliver a check. This way people wouldn’t have to live near a CarMax or go to the hassle of taking it there to get a quote or sell it.
Why do you think it failed? A lot of reasons. For one, I didn’t have a lot of domain experience in the auto industry so I lost some money on cars that I overpaid for. Because of a couple of those experiences, I tended to quote low which meant that I had a small percentage of customers who accepted the quote. That then drove my acquisition costs very high – I had to advertise a fair amount because car buying isn’t exactly the most talked about, viral activity. To cap it all off, I asked for a ton of info online and not everybody was persistent enough to fill it out and upload all of the required photos.
What did you learn from it? Try to start a business that won’t entirely rely on paid advertising to bring in customers. Operate in a market where I have some domain knowledge. And make web software ridiculously simple to use so people don’t get frustrated.
What are you doing now? About a month and a half ago, I launched Bellstrike. Bellstrike lets US based nonprofits setup an attractive, donation-enabled website in about 1-2 minutes. Dodd is on Twitter at @doddcaldwell, as is Bellstrike at @bellstrike.
Mark Koester, Developer, Entrepreneur and CEO at Language-Corner.org
IdeaAutopsy: What was the idea that you brought to life that failed?
Mark Koester: Like most people involved in startups today, I’ve had lots of business ideas. I suppose I’ve also had the same evolution from “cool ideas” mentality to a more critical perspective towards “worthwhile investing time in”-type ideas.
What I mean by this, when we all start out in startups and talking about new business, it’s really easy to get that energizing feeling for “cool ideas” that we say to ourselves “just have to work.” I had a number of those by myself and some with friends and colleagues. They are great, because they help you churn ideas and start to think about possibilities and to plan out strategies. One or two of these even got taken far enough to invest in research and prototyping. Having not much experience makes it hard to cut the “cool” from the “substantial” ideas that can make a business.
One of the more seemingly sustainable ideas I ended up bringing to life was starting a Language School in China. For anyone familiar with Asia and China, language schools have a lot of consumer capital passing into them. Big names like New Oriental show how much market potential there is for a school. I live currently in Chengdu, China, which far enough away from Eastern China that there is less competition compared with cities like Beijing and Shanghai.
Initially, we were three foreigners–one Australian, one Korean with Chinese nationality and myself, an American. This mix of international faces and language skills were good for starting a school. We invested in a prime location for our school in central Chengdu and started to map out possible curriculum. We decided to focus on some lesser taught languages like Korean, French, Spanish and Chinese for foreigners while also looking to teach TOEFL and IELTS classes for student studying abroad. I built a website for advertising our classes and about learning in general. But as the initial stages were fairly easy several things blocked our path.
Why do you think it failed?
Starting a school failed for us for several reasons.
- We didn’t realize initially how protected the educational system is in China. While it is possible to get the proper license, it isn’t easy or cheap and requires more than just the right paperwork.
- We didn’t realize how much it would cost to get a single student. Indeed Chengdu is not the most competitive market, but it is still competitive for education and study abroad. Even though we could get a license, it was going to be incredibly expensive to advertise and recruit our students. Essentially it came to a question of investment for potential return. At our size of school, we couldn’t really compete with the large, language school chains, so we were forced to go the “cheap” teaching route. Even at that level, it wasn’t clear how could survive investing in getting one student when we wouldn’t be able to charge enough.
- We didn’t realize how much other schools were investing. As foreigners and language teachers and learners, we assumed that teaching quality and the background of the teachers would be enough to give us a certain advantage. Unfortunately, our so-called advantages didn’t matter when you consider other schools were investing in either giant teaching factories or the top of the line locations and premium everything. It was clear that a small school just didn’t have much of a chance as a real business. Maybe as an individual teacher functioning without a license and serving individual and small groups could survive, but a real business would be tough.
After several months investing, recruiting and working, it was clear this wasn’t a business that would have much return for the amount of hard work to run it.
What did you learn from it?
I learned that it’s important to have someone who is experienced with the terrain (in our case Chinese educational environment) when starting a business. Even though parents and students we talked to thought our idea would work, they weren’t really familiar enough with the real context to offer a real perspective. So make sure you find someone who knows what they are talking about. In China, this is hard because sometimes people talk like they do know when in fact they don’t.
I also learned that you need to find your niche. While there are plenty of businesses that manage to follow a “tried and true road,” for me and for disruptive businesses, you need to aim at potential targets instead of already tried targets.
I also learned that my real passion was internet, technology startups!
What are you doing now?
I’m currently running and building an online learning site called Language-Corner.org We started in January 2011 with a simple idea to make it easier for teachers to manage classes with some online learning resources. We built a group space with some initial learning tools and have slowly been improving our collaborative learning spaces. Teachers from around the world are currently using the site to manage their students and classes and make learning more interactive and better. It also frankly saves teachers lots of time! Recently, we are preparing to launch our “learning market” where teachers and students can meet online for learning. Instead of trying to form classes with students in your area, you can post a class and get paying students from all over the world to meet together. We’ve been building a real-time learning with live video and text chat and a shared whiteboard. We hope to launch this in the coming weeks!
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Darren Jensen – Founding Partner of UpstartHQ.com
IdeaAutopsy: What was the idea that you brought to life that failed?
Darren Jensen: I made a product called AdFlickr and the site was available at adflickr.com (not running anymore!). The tagline for the site was “An archive of all advertisement artworks in the world”. I suppose a similar site would be Ads of the World (http://adsoftheworld.com). The difference with AdFlickr and Ads of the World was:
- AdFlickr’s aim was to archive all types published ads all the way back since the dawn of, well, ads, and showed the link between the ad and where and when it was published
- Ads of the World is more of a community of ‘fresh of the printing press’ ads and has a direct connection with the artist and agency
AdFlickr provided an index and search functionality to scour through the ads by publication, business, type, published date etc. There were also feeds that could be subscribed to as well as a newsletter, forum, blog and other bits and pieces to help engage a user base.
Why do you think it failed?
There are several reasons why this failed, I think. Here are the main ones:
- The project was partly an experiment in offshore development – I decided to outsource the development of this product to a tech company (even though I could build this myself). The reason was to see what it would be like to take a back seat from the technical side of things and drive this product as a non-tech business owner. I wanted to experience what it would be like from a customer point of view when working with a tech consultancy.
- I produced a real big spec that outlined everything I wanted the site to do and more and I sent this out to various web agencies around the world. The reason this contributes to the failure is because having such a large spec that included anything and everything for the site meant that the project was not lean and therefore there was little room for pivoting additionally, large specs means that the prices coming back were large (+$10K)
- I opted to go with the lowest cost bid. I went with a company in India because they quoted about 60% less than those from USA / Europe. Unfortunately, for me the company was very badly run and the code they produced was absolutely terrible.
- I took a back seat on the tech side – this was part of the experiment anyway, but a major (if not the major) reason for failure. Basically, one of the first things I asked for was to write the application in Rails but they insisted to use PHP. They said because maintenance costs would be higher. Sure that is probably true, but I was going to maintain it and I know Rails, not PHP. Anyway, they convinced me to let them use PHP mainly because I thought that if these guys don’t yet know Rails they will make a real bad job of this so better to let them stick to what they know best. However, it turns out that they don’t know PHP either! During the building effort it was constantly a case of them saying, “Finished” and then I check the site and find 20 things missing + 20 bugs. Then they would say, “OK everything is fixed now as per your last email”, then I would check and 20 things that were working before are now broken. This horrible cycle went on for many months!
- The code was a real mess - still leading on from the ‘experiment’ when they finally had the site working and they handed the code over to me, my first maintenance task arrived which was to move all the artwork images to S3. This took me 4 days of my time! I could not believe what I saw as well!! They had written the entire functionality of the site in one PHP class! There were deeply nested if statements (and dragons) everywhere! Real, real nightmare but I plowed through it nevertheless.
- My stubbornness to keep their sh***y code – well I paid for it, damn it! Actually, I should have just closed my eyes, cut my losses and re-written the site in Rails. It would have taken me less time to do that than to make very basic changes to the site. Perhaps adflickr will be online again but this time in Rails, on Heroku and written by yours truely. Watch this space!
- Getting content for the site was expensive and time consuming – I needed content for the site. I chose magazine ads first since they were easily accessible. However the processing of dividing the magazine pages into content and ads and then uploading / entering in the details of the ads was a lot of work. Sure I wrote scripts but it still requires a human to tell the difference between an article and an advertisement. I did this myself for a few months but the monotony of it drove me mad, so I hired a data entry firm in Cambodia to do it for me – but that cost money, more money and I was running down my budget for this project and already spent too much. Additionally, managing the data entry team was also time consuming.
- Not being too clear on the legal issues of doing this – occasionally, I would get a cease and desist letter from a big law firm that was representing another big firm to say that they did not want me to publish their ads. This caused additional stress for me with this project and as a result it just started to weigh me down! Of course, I could add something to the site to automatically, remove any ads from said company but given the state of the code, it was just not appealing to do that either!
What did you learn from it?
Write very small specs if your tendering or no specs at all! Follow the Lean Startup principal instead, define Stories in BDD style, use online Agile Project Management tools like Upstarthq – sorry shameless plug here , if your non-tech, be careful out there – there may be dragons! Finally, an old classic, know when to cut your losses!
, if your non-tech, be careful out there – there may be dragons! Finally, an old classic, know when to cut your losses!What are you doing now?
The latest project I am working on with two other guys is Upstart. It’s our own startup that we are building here in Cambodia. It’s essentially an agile project management tool that focuses on Kanban and BDD. It’s also extremely collaborative and very easy to use. It’s the “lean mean agile machine” as we like to call it. We are building it ourselves (obviously!) and using lean (obviously!) and we are already in Beta. Go on, give it a try: http://upstarthq.com
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