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How To Set Your Startup Up For Failure

Khadem Mahmud Yusuf | Image by DrinkEntrepreneur Dhaka
Khadem Mahmud Yusuf | Image by Drink Entrepreneur Dhaka

Most startups go out of business in their first year. While there are hundred different small reasons behind a failure, it often boils down to one or two key reasons. According to Keith Rabois, “90% of the time consumer Internet companies fail for one reason: Inability to acquire and retain a substantial number of users”, and to Bill Gross of Idea Lab it is ‘wrong timing’.

The general takeaways here is that startups fail when they fail to offer something that their customers want during the time they are offering it.

In a recent interview with the Future Startup, serial entrepreneur and founder of PBCL, Khadem Mahmud Yusuf, echoes the same precaution for startup founders.

I worked for 4 companies in Silicon Valley. I think the best company I worked for was iReady Corp. At iReady, we were given absolute freedom to innovate and implement

We were coming up with incredible ideas and innovations. The culture and working environment at the company were great. There were golf courses inside the building and the cubicles were turned into mini-golf fields. We used to stay at the office even at nights. It was a dream job for any engineer.

I worked there for 2 years and enjoyed every bit of my time. But the company shockingly went bankrupt after 2 years and we were laid off.

This was a great lesson for me. I realized that innovation is not everything rather innovating something that people use is the most important thing.

There was a lack of product-market fit for the innovation we’re doing. The products were innovative but way ahead of time. Later, a company named Farvey made a toy which was quite inferior to what we were making but it was a super-hit.

A great idea does not win all the time. It only wins when people understand it and use it. Many of the technologies we use today took tens of years to come to today’s position. As Danielle Morrill of MatterMark illustrates: “I think timing of *market* is more important than the product itself [….]. Why did Webvan fail where Instacart is succeeding? The market is different 20 years later, because of a bunch of exogenous factors that Webvan couldn’t control. But Webvan couldn’t survive long enough to take advantage of them.”

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