However, overcoming the cold start problem is deceptively difficult. Chen gives the example of Tiny Speck, the gaming company that would become Slack. Tiny Speck had everything going for it: a star team, an exciting launch, and $17 million from respected investors (including Andreessen Horowitz, where Chen works). He also invited a lot of people to try the game flaw. The problem was that people could not be persuaded to stay.
What is the difference between Glitch and Slack? For one thing, Slack’s timing worked: It anticipated the distribution of manpower and the need for scripted logs. But it also made use of small atomic networks. People joined teams, and when those teams learned about the product, they were more likely to continue using it. (The magic number, according to Slack, is when a team exchanges about 2,000 messages.) Later, the company grew by encouraging companies to embrace Slack across their entire workforce, threading many teams together into a unified workplace tool.
Of course, network effects alone cannot explain the success or failure of a startup. Slack was just one of many workplace communication apps with a similar idea; Not all of them had the same success. Chen admits, “For every successful launch like Slack, there are many failures, and they usually get stuck in the beginning.”
Both cold start problem And Anticipate failure The autopsy featured several failed companies, but it can still leave the reader in awe. Chen notes that some start-ups are achieving network impacts because they provide free, convenient, and easy-to-use services. Other startups succeed for the exact opposite reason: their products are exclusive, invite-only, and hard to get. Ananth, in his case studies, identifies problems in many startups without making a useful prediction to avoid those pitfalls in the future.
Another book from 2021 attempts to give a more comprehensive description of startup failure. Tom Eisenman, who has taught entrepreneurship at Harvard Business School for the past 20 years, surveyed 470 failed startup founders about why their ventures are heading south. Their responses constitute his writing, Why do startups fail?.
Eisenman rejects the idea that most failures are due to founders, and even criticizes venture capitalists for focusing too much on finding the “right people” who have grit, determination and business acumen. Instead, he suggests, failures often stem from a poor judgment of market needs, too rapid growth, and overly idealistic visions (all things, in particular, that venture capitalists encourage). Like any good business school professor, Eisenman comes with a wealth of case studies. He pays special attention to startups founded by his students – cases in which an autopsy appears almost subjective.
Why do startups fail? He offers six reasons why things go wrong, including neglecting customer research, finding the wrong stakeholders, and falling into a “speed trap” to grow at any cost. Eisenman asserts that these errors are avoidable. But most importantly, like Ananth, he advises founders to understand that failure is often part of the package. Toward the end of his book, he gives advice on how to deal with failure when it inevitably happens.
In today’s startup environment, raising money can be easy – what comes next is difficult. Will these books help startup founders or investors avoid disappointments? Perhaps, but in the same way that millions of health books have helped humans avoid disease. Diagnosing common causes of death is one thing. Learning to live healthier is another thing.
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