Why most startups fail… and here is how not to

By Brett Commaille

Every couple of days we hear about a new start-up jumping onto the public stage with much fanfare. After that they’re a bit like a pimple in the middle of your forehead — every time you open your eyes it’s all you see.
But then one day, for no specific reason… it’s gone.
“Anyone know what happened to whatchamacallit?” After some enquiry, we’ve got a handful of rumours with a bucket of spin. All we know is: “it’s over”. Truth is, most of the time, it’s one or more of the same basic reasons.
There will always be those special individuals who find exceptional ways to kill their business — like setting fire to mom and dad’s garage and destroying the code (and backups). But the majority of startups fail in far more mundane ways. Being in the venture capital game for a number of years, I’ve seen it all. Here’s a number of key reasons I’ve seen startups fail… and here are some ways to avoid them:
1. Not understanding the user: Your plans are based on what you think the user wants, and maybe you even have a few buddies who thought that was cool. Make sure you take the time to find out exactly what the user wants and how they like doing things. Be careful about telling them how they should act, this usually backfires.
2. To in love with the tech: You love adding features — “Wouldn’t it be awesome if we could also let them Skype with the dead?”. You’re building an elephant, but haven’t tested any of it. Maybe users only need the trunk. Keep it to the core and market-test before you go wild on features. Getting this wrong has massive knock-on effects.
3. Launching to slow: If you’re building that elephant, you’ll keep holding back on the launch until everything is perfect. So it’s never fully ready or tested and now the competition has hit the market with a good basic solution. So keep it lean, get to market fast and add functions as user demand warrants it.
4. No real sales strategy: Capturing 20% of the market is not a strategy! Who will the first customers be? How do you reach them? What does it require to close the deal? How many sales people do you need to do this? What will the sales number look like based on all of this. Brush past this and you will have drastically overestimated your revenue.
5. Market too small: It’s easy to pick a niche that doesn’t seem too challenging. Remember you may face competition, even in that niche, and end up with a potential market which is just too small to support a sustainable business. Make sure your market is big enough and growing.
6. Basic copycat: Enter the many thousand Groupon clones around the world. Working international concepts have been launched successfully locally, but only if you’re the first to do it locally. Doing this into a busy market because you see the current players making tons of money is a sure recipe to burn cash and stay small. I learnt this far too well, having launched a super cool sunglasses brand … one of hundreds in the market (just before a recession too – damn!). We sold some of course, but the big boys in the market sold millions. Might as well have sold Chappies on the Metro. Be different, not “the same but better!”
7. Fast burner: You ramp up your costs as you grow a big developer team to match those massive revenues you expect. The revenues don’t happen and you’re suddenly burning money faster than a new MP planning Gala dinners. Again, get into the market with the basic product and start generating revenue. When the conversion metrics show you’re getting it right, then you can grow the spend.
There are more reasons why startup businesses fail, but these are the most important. Bear them in mind and you may avoid some of the most common pitfalls. Of course, the easiest way not to fail, is to not start. Fortunately you’re not scared, (else you would have closed your browser after seeing the word “start-up”) — and now you’re just a little a little more likely to make it.
Good luck!

Kenya races ahead of SA to provide varied media menu

By Francis Mdlongwa

A mobile phone company is hurriedly assembling editors and journalists to staff its digital media content distribution hub; a 24-hour television network has been launched both online and offline; and nearly half a dozen private television stations have sprung up.

Welcome to the ‘new’ Kenya. It’s good news for Kenyan audiences, though not necessarily for the incumbent traditional media houses.

The East African nation is quietly racing ahead of South Africa -- long regarded as Africa’s leader in economic, political, military and other fields -- in providing a rich and varied media menu to audiences.

Kenya’s largest mobile phone group, Safaricom, has started hiring editors to comb through local and foreign media to “localise and customise” news stories and information for its mobile subscribers, who, according to the firm’s half-year financials to September 2009, were 15 million in a country of 40 million people.

Could Safaricom be thinking of extending its news service to include deploying its own journalists to cover stories within Kenya and in neighbouring countries? Watch this space.

A new private television station, Kiss Television, which describes itself in Facebook as the “hypiest new TV station in Kenya”, went on air late last year to provide non-stop, 24-hour music for Kenya’s huge youthful audiences.

Operating both offline and online, Kiss serves up a diet of the latest hip hop sounds, rhythm and blues, soul and gospel music. Viewers and listeners phone in or SMS the station or go through the net to select a music video of their choice, which then automatically queues up to play, like the juke box of yesterday’s good, old world.

As well as relying on advertising, Kiss Television’s business model is based on sharing phone-in revenues with its telecoms partner.

Safaricom’s bold entry into journalism and of Kiss TV into the broadcast sector are but only the latest signs of a rapidly growing and dynamic media industry in Kenya since the 1990s liberalisation of the broadcasting and telecoms sectors there.

Safricom’s action in particular has many editors of Kenyan newspapers, radio and television stations worried because it potentially raises significantly competition for audiences among media firms in an already highly segmented and hyper-competitive market.

As David Maingi, head of corporate affairs at Nation Media Group (NMG), the largest media group in East and Central Africa as measured by market capitalisation and media presence in that region, told foreign journalists visiting Kenya recently:

“Kenyan editors are scrambling in all directions searching for answers as to what to do next, wondering about the impact on their media of Safaricom’s entry into the journalistic content market. No one can tell yet what it will be… but we have already been losing a sizeable slice of our market to the current heightened competition.”

As well as the state-run Kenya Broadcasting Corporation, which owns radio stations and a television service, Kenyans now wake up to watch around seven private television stations, most of which broadcast 24 hours across the nation, and to listen to several dozen radio stations, also run by private capital.

The competition for audiences is already stiff and it seems certain it will get tougher in the coming days, weeks and months.

The television stations range from K24, owned by Kenya’s emerging media tycoon and Nairobi University journalism graduate Rose Kimotho; to Nation Television (NTV) and Kenya Television Network (KTN).

NTV is owned by NMG, publishers of the once best-selling Daily Nation and several other newspapers, and KTN is owned by Kenya’s Standard Media Group, which also publishes several newspapers, including the daily Standard.

The news-driven television stations are modelled along the lines of the Atlanta-headquartered Cable News Network and the BBC World Television Service.

But I was most impressed by their fiercely-independent and balanced news, and their well-researched and packaged in-depth news analyses which would be the envy of many people “Down South” and elsewhere around the world. More so in today’s world which is largely dominated by “sound-byte” journalism that gives little meaning and context to the news!

One indicator of growing competition among media is the fact that the daily circulation of the Daily Nation is now around 100,000 versus 200,000 five years ago, Maingi said, noting the big negative impact of the internet and of several media companies that have sprung up in Kenya.

“Through research, we are constantly trying to understand why we are losing these readers,” he said.

“The internet has obviously had a huge impact because it offers free news, but we must re-position ourselves and constantly re-evaluate and renew ourselves if we are still to be the most desirable media leader in this region.”

While it is arguable whether a majority of “monied” Kenyans have access to the internet, it is clear that its advent, combined with new “sensationalist” newspapers which Kenyans brand the “gutter press”, plus new radio and television stations, has significantly raised competition among media for segmented news audiences.





One of the challenges for NMG – indeed for most media around the world– is for the group to work out whether it can make more money out of advertising by going totally online, as the Christian Science Monitor in the US has done, or continuing to serve its audiences with a fuller package offline.

Experience so far from the US shows that newspapers which have moved part of their content online are getting an average of only 12% of their advertising income from this platform – this is despite the fact that most American audiences are online (A year ago, South Africa’s Mail and Guardian reported that its online edition was contributing around 15% of total income).

Of course, the situation in Africa is vastly different, with most audiences and advertisers still relying on the hard-copy editions of newspapers.

In the developed world, advertisers have not exactly followed content online, partly because the advertisers themselves can now go direct to customers using both online and mobile solutions.

One other key lesson for traditional media in the ‘age of discontinuity’, to quote C Christensen, is that they must not willy-nilly jump onto the bandwagon of the digital media platforms, throwing away all the good work which they would have done in the past to be successful.

Yes, they need to experiment and innovate with digital media and never be left behind, choosing what works for their media firms and market. But they need to do much more to perfect their core business (eg being a market leader in investigative journalism or in financial markets reportage) which would have fuelled their success.

Whatever platform media firms choose to use, audiences will still require content that is highly relevant to their needs and wants, is exclusive and helps to improve their lives and is presented accurately, truthfully and in a fair and balanced manner.

Yes, because of the migration of large segments of audiences to digital platforms, especially mobile, it is crucial for a media firm to be present there to experiment with how it can innovatively serve audiences while also making money.

South African media, especially print, should learn a lesson or two from their Kenyan counterparts. One of these is that South African newspapers should take bold steps to prevent a situation like that of the Daily Nation, whose circulation has halved in just a short five years.

There is also a lesson for South Africa from the mushrooming Kenyan media. South Africa needs to move faster in liberalising its broadcast sector so that more players can come in, not just to make the numbers but to add value and diversity in content in a rapidly fragmenting industry.

Sixteen years after South Africa’s freedom, the country south of the Limpopo still has just two main national broadcasters, a development which severely limits audiences’ choices.

Although pay-TV broadcasting licences have been granted to several companies, we are yet to see these come alive and offer a diverse range of content and programming which fosters healthy competition and hopefully gets the nation truly engaged in discourse about how it wants to live and to be governed.

Indeed one could argue that most South Africans can hardly afford to have access to pay television, so there is a need to open up the broadcasting sector to more free-to-air channels for the general public.