Behind every success story, you will find tails of defeat. Whether it be an embarrassing misstep or a drastic change in direction -- it's becoming evident that failure is an essential building block to success. So why is it then, that we analyze stories of success and shy away from woes of defeat? There's a lot more to be learned from those that didn't "make it" as opposed to those that did. In this post, we will analyze & summarise startups from various industries who failed to make it.
- SIDECAR
- QUIRKY
- rdio
- LEAP TRANSIT
- Move Networks
SIDECAR
Industry: Transportation
Aim : Affordable semi-private commute
Competed with : Uber
Failure Reasons:
Network effects eventually crushed them
Got outfunded by Uber → couldn’t keep up
Wrong focus (technical) & getting outfunded caused them to fall behind.
Network effects: The value of a network system is exponentially proportional to the number of users ON the network. Essentially, the more users using your network -- the more value to all the users. The more users you lose, the less value you offer.
Summary (Click to see)
Reason #1: Sidecar had a case of Featuritis
In terms of technical features -- Sidecar was actually in the lead. Sidecar was sporting several features that Uber hadn’t even implemented yet.
But all these bells and whistles actually turned out to work AGAINST Sidecar. While Uber allowed a passenger to hail a cab with ONE-CLICK, Sidecar’s filtering and selection process seemed like way too much work in contrast. When users were in a need for a quick ride -- they just leaned toward convenience: and Uber was the answer.
Reason #2: Sidecar got Strong-armed
They got out-funded…massively . Uber raised 8.7Billion dollars , to Sidecars 35million -- which seems like a measly amount in comparison. This allowed Uber to offer several discounts and farecuts in order to steal market-share. Sidecar just couldn’t keep up . Which leads us to the third reason they failed:
Reason #3 : The Network Effect crushed Sidecar
Now to get a good understanding of the “Network Effect” you need to know about metcalfes law, which states
Metcalfes law: The value of a network system is proportional, exponentially, to the number of users ON the network.
Essentially, the more users that are using your network -- the more value to all the users. The more users you lose -- the more VALUE you lose. Uber understood this -- and the race was on.
They were so relentless in gaining market share that They were willing to sustain $870 million in losses. The Network Effect was crushing -- Sidecar got pushed out the market.
Lessons To Be Learned: Ignoring growth in favour of product may be disastrous. Competitive environments differ. Some aren't as forgiving as others.
Learn from their Mistakes!
I'll be updating this list every week!
Stay Updated!
Lessons To Be Learned: Brand Positioning is crucial and often understated in the startup world.
