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Lessons From the Front Line: Why Start-Ups Fail

27/09/2015 22:08 BST | Updated 27/09/2016 10:12 BST

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© FreeImages/Michaela Kobyakov

The energy, enthusiasm and hype of the Shoreditch and San Francisco scene could lead you to believe that working in start-ups means you are immune from the gravitational pull that so often brings big businesses crashing to earth when they try new things.

This is not the case.

Start-ups make at least as many mistakes as everyone else. You just don't often get to hear about them.

But we always learn more from what didn't work; from looking at mistakes of others; than we do from sanitized case studies of success.

Here's the view from the founders of three start-up failures on what went wrong.

Assumption dynamics

Yash Kotak, founder of Lumos, thought he could change the world through machine-learning electrical switches. He found out the hard way that physical product manufacturing is very difficult, that machine learning might not be as cool in reality as it is concept, and - perhaps most importantly - people didn't necessarily have a problem with their existing switches which didn't feature machine learning.

But what's the real lesson for entrepreneurs? Kotak talks about the need to really look at the assumptions behind your incredible product idea. What has to be true for your idea to take off? In the cold light of day, are these things likely to be true?

In Lumos' case, the key assumption was that machine learning was the x-factor. That it would make switches, such as light switches many times better.

When that turned out to be false, Kotak's start-up concept went down with it.

Wheel of fortune

After $50,000 and three years, Ivaylo Kalburdzhiev stumbled across a truth which evades many inventors. The fact that no-one has yet created the thing you have dreamed up could be for two reasons. Yes, the first might be that you are the all-seeing, all-knowing product genius on their way to global recognition. Or... it could mean that it's just not a good idea.

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Images courtesy of Ivaylo Kalburdzhiev

Kalburdzhiev's brain child was Kolos, the world's first steering wheel accessory for iPads. Showing great humility, the inventor admits a series of mistakes that led him down the garden path. Certainly not the least of these was moving straight to a detailed prototype created by an industrial designer. It might not have had the professional edge, but perhaps a plastic dinner plate and several lengths of gaffer tape could have shown Kalburdzhiev much more quickly that attaching a big bit of plastic to your iPad does not - in fact - make it more fun to play.

Yet this was just one of a series of missteps. Investors, friends and even the tech press re-assured the inventor that he was on to something. The catch, they didn't like the idea of product for themselves - they weren't iPad gamers. They were just happy to encourage the enthusiastic innovator. Always test with real potential customers, not armchair pundits. "I'm sure other people will buy your product" is code for "I won't".

Dinnr money

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Image courtesy of Michal Bohanes

Michal Bohanes started Dinnr - a business providing fresh ingredients for home cooking targeted at those too busy to shop. His number one lesson might sound simple but it took him a year and a half to learn it: make sure the problem you are trying to solve really exists. In his case, he made the fatal mistake of taking customers at their word:

"we committed the big mistake of presenting people with the idea and asking them if they liked it and would buy it. And when people said yes, we thought they meant 'launch it and I will buy'. In reality, they meant, 'I'm not entirely excluding the possibility that one day, when Ocado trucks run out of gas, supermarket doors get blocked by red-hot lava and restaurant waiters will, due to a mysterious leak of radioactive fumes emanating from commercial kitchen equipment, all be zombified and eat patrons' brains, yes, in that case I might be tempted to purchase a trial product from you. Once. Then I'll take a risk with the zombies."

Unless the problem you're solving is really keenly felt by your customer base, they will not buy your product, whatever they tell you in a focus group.

Now Michael recommends that you should only trust customers who are actually willing to make a commitment. So, at the end of your research interview, ask them to put their hand in the pocket and pay you for a product in advance. They've just said they would buy it, haven't they?

There are hundreds, if not thousands of these examples each year. Not only should we congratulate the brave entrepreneurs for giving it a try - when many wouldn't -, we should thank them for testing the minefield for those that follow and for openly sharing their stories.

Although we often hear stories of technical complexity, business issues and supply chain difficulties, over and over again, we simply find that the product didn't match what customers want. The biggest single lesson? Nothing beats concrete evidence of demand for your product before you invest in all the expensive stuff, like teams, buildings, and equipment.