Lessons From a Failed Startup

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I don’t usually follow startup stories, but I was intrigued by this one. With so much going for them – an interesting idea, interest from partners, interest from users, some PR, even some funding – they still had to fold.

And then I read Flowtab’s own account of how it went down. I am hardly qualified to criticize (but of course, I’m going to do so anyway), but some things leaped out at me. And these aren’t particular to this company (I don’t mean to pile on), but attitudes and activities I have seen in other startups as well.

Careless erosion of goodwill

Goodwill isn’t a trendy buzzword, but let’s talk about it anyway. Here are some of the tactics this company tried out.

Flowtab was an app that let you order drinks at bars. The founders spent months building the app, launched it on iTunes, and it was the #1 featured app for one week. But there was no service to back up the app. There’s no mention of how many people downloaded the app, but it must have been a good number. Many startups would be thrilled at having their app featured by Apple. But this one squandered their opportunity by letting users download an app they couldn’t use. That’s like having a big store launch, inviting customers, and then not showing up to open the store. If a thousand customers came to your door, that’s not a success. The fact that you couldn’t serve them is a failure.

One of the marketing tactics they seem proud of was using another brand’s employees to pass on their vouchers without the brand’s permission. The brand ultimately shut them down. The lack of respect for the other business is staggering.

Conflating technology with value

One thing I notice from the fringes of the startup world is that there is a reverence of “cool tech” and too little respect for value to customers.

Flowtab, too, continued to underestimate the value of the service behind the app.  At one big event, their servers crashed so orders piled up, and there was just one bartender to serve customers. Wasn’t it an obvious step to anticipate that their marketing would work and customers would come and make sure they/their partners could deliver the service?

Taking “short cuts”

They asked “friends to leave 5-star reviews” even though no one could actually use the app, since the service wasn’t live. So those 5-star reviews they got were fake.

When partnerships weren’t coming in fast enough, the company “hired a call center in the Philippines to call potential bars in San Francisco.” Sigh. A big, reputed brand can afford to do this, but the value of a startup is in being small and hungry and scrappy. Outsourcing an important function like sales (and that too selling to partners, not to users) seems so obviously a bad idea. Would you talk to a call center person who tried to interest you in a business partnership?

The easy way doesn’t usually lead you where you want to go.

Lack of focus

The company filed a patent, which the founders admitted later was a waste of time:

At this early stage in its corporate life, with only a few bars on its platform, and a user base in the hundreds, Flowtab spent and invested scarce resources into something that would eventually yield it nothing. (TechCrunch)

Their marketing activities included: “throwing events, hiring photographers and promo girls, organizing meetup groups, posting in-bar signage, running social media campaigns and setting up affiliate programs.” Experimenting is necessary in a startup, but they seem to have been doing all of this simultaneously. Why not focus scant resources (not just money but more importantly, the founders’ time) on one or two effective channels?

Even though they didn’t have enough traction locally, they tried to expand to other cities with a distribution partner. They even hired a local manager in a second city.

And yet, they did receive an offer for acquisition. They started talking to an Australian investor in February this year, and he made an offer in May, which seems like a reasonable time-frame (from what l hear about startup funding and acquisitions). But apparently “it was too late.” For what?

If the startup is dying because the founders declined acquisition (an acquisition they earlier seemed interested in), isn’t it dying because the founders gave up than from any other cause? Because they didn’t believe in the product and the business anymore?

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