Why our startup failed
In this postmortem from 2014, @kaelig candidly breaks down the dissolution of their startup, examining the fatal assumptions, misallocated resources, and market dynamics that led to its shutdown.
Core Principles for Independent Builders:
Early signals were often rationalized away instead of prompting an immediate pivot in distribution or pricing.
The psychological toll of running out of capital compounds operational friction in a solo or small team setup.
Key Antidote: Validate paying willingness before committing months to building sophisticated product features.
Community Debate Themes:
Community discussions on HN centered on identifying product-market fit early, avoiding vanity metrics, and the emotional recovery process after shutting down.
CATEGORY Postmortems & Failures →
HISTORICAL ERA Cloud & Mobile Era (2014–2019)
COMMUNITY SCORE 115 points
TOTAL DISCUSSIONS 93 comments
This sounds like a pretty typical trajectory for a failed startup: CEO dreams big, encourages sales guys to chase big fish through the commission structure, but meanwhile the big fish demand more features, guarantees, complex contracts, etc. than 15 smaller customers would. I've seen it happen quite a bit; and it's one of the biggest (and most common) mistakes that B2B software startups make.
An early-stage company really needs two things from its customers: cash flow and feedback. It's fine if you don't make any profits, but you need revenue coming in the door to get future rounds of funding. It's fine if your revenue per customer is lower than you would like. Small customers are great at both: price it low enough to start that it's not a huge business expense for them, and you will be able to deal directly with the people who will use the system. If they have a problem, your product guys will know and be able to relay it to development.
Big customers often get you neither. They require lengthy contract negotiations that will rack up thousands in lawyer's fees from your side before you bring in any revenue. They ask for features that aren't core to your product and are likely years down on your roadmap (think LDAP authentication, customer admin functionality, audit logs, etc.) Again, these have to be developed before they sign a contract and before you see money. If you actually manage to get them into a production environment, they're much less likely to give you actionable feedback.
tl;dr: B2B software startups that target big contracts are much more likely to fail because the market dynamics of chasing after big customers will increase your burn rate while diverting your sales team's attention from smaller fish.
"One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company."
And yet, in most companies I've worked in, management rarely takes on board any observations from low-level plebs - how could person X even begin to understand the complexity of our org? They're only the call center worker, or IT grunt, or delivery person, or receptionist, or accountant, or...
The prospect of company success/failure has been at the root of most of the issues I've tried to raise with management at places I've worked at. I went from a failed venture of my own to a small company a year later. They were making some of the same operational mistakes I'd made a year earlier. I tried (tactfully) to raise these points, and was rebuffed. 9 months later the company laid off half the employees (guess which half I was in?) and they folded a couple years later, from what I recall.
tldr - many company owners won't take input from lower-level employees. Is there a connection between failure rates and the openness of owners/managers?
First thing to do: Recognizing your own failure.
You seem to charge solely the CEO for the failure of the company and you may be right. But you can't be the number 2 of a company and not taking your part of responsibility. Does your innovation was truly disruptive? Maybe not. Do you provide awesome products that make customers' eyes cry? Maybe not.
In you area of work, you seem to be in charge of products and research. Where are the results of the research? Where are the products? Where the open-source projects? You seem to forget why you got money, time and public subsidies. You seem to forget to explain why you guys were disruptive.
Your only fault cannot be to not confront the ceo sooner.
Again, failure is okay. Do not worry.
I guess everyone in this industry goes through a company like this.sooner or later. I once had this CEO, who was gifted with speech.Looking back in shame, i cannot believe how trustful I and all the other were, the alarmsigns were there all along still we couldn't or didn't want to see it. Anyway I found some got friends in this time,still doing projects with some of them. I just lost 8 month of my time,so I guess it is ok, since it gave me some experience. Anyway nowadays I check first before jumping in with full force.
So they spent money foolishly, hired too much, and assumed that the gravity of business expenses didn't matter? That sounds like most failed businesses I've seen or heard.
If the basic economics of a business don't work, it will fail eventually. You have to make more money than you spend. If you can't do that you don't have a business, you have a very expensive and time consuming hobby.