Newstilt

Launched: April 2010

Shut Down: July 2010

Founders: Paul Biggar, Nathan Chong

Funding: Seed funding (Y Combinator)

Newstilt was a journalism startup that operated for only 3 months after launch (or 8 months from being founded). The Newstilt concept was to provide a set of online services for professional news journalists to build their own brands and content networks (e.g. services such as web site design, content management and syndication, advertising, etc). It was conceived as a means to provide a sustainable business model for online journalism.

Co-founder Paull Biggar wrote a lengthy blog post titled “Why we shut NewsTilt down“, which provides detailed and insightful commentary into why the company failed. Along with my own thoughts and input from several other analyses, the reasons for NewsTilt’s failure and the lessons that can be garnered are distilled below.

Why NewsTilt failed

There were quite a few factors suggested that contributed to NewsTilt’s downfall, but they fall under a few major categories: 1) poor execution, 2) lack of industry understanding and passion, 3) problems between founders and 4) lack of investment.

1. Poor Execution

The idea behind NewsTilt sounded good in theory and generated a fair bit of enthusiasm, but poor execution helped to derail the company. There were a few key components behind the poor execution:

a) Not delivering the core features that would have attracted journalists – NewsTilt promised alot of features to journalists, but then didn’t deliver them. This may not have been a problem if the promised features were incidental, but even the most important features weren’t provided. For example, one of the core promises was that NewsTilt would help journalists build their own brand using their own domains, but this was inexplicably cut from the minimum viable product “in order to make the launch date”. Instead, NewsTilt hosted all the content in its own website, barely differentiating itself from other news organisations. This was understandably perceived badly by the journalists and content eventually dried up.

b) Overpromising, but not delivering – this seems to be a recurring theme with NewsTilt. They promised the journalists their own platform, promised to do the promotion and marketing for the journalists and then promised a bunch of technical features that were never implemented. The problems probably weren’t the promises themselves, but rather the capacity to fulfil them. In each case, NewsTilt either didn’t have the expertise or the resources to actually deliver on the promises.

c) Re-inventing the wheel – NewsTilt decided to build the entire platform from scratch, rather than using commercial or free software components (e.g. WordPress) that people were already familiar with. This turned out to be a mistake, as their limited resources were sucked into building the common platform instead of developing the core features.

2. Lack of Industry Understanding and Passion

Neither founder knew much about the news industry or journalism in general, and Paul Biggar admits that neither of them really even cared. This contributed to a number of problems including a lack of understanding of who the customers were and what they wanted to read and choosing the wrong journalists. Moreover, Paul didn’t even use the product himself and wasn’t particularly passionate about news and journalism. As a result, both founders were completely ignorant as to how they could actually deliver on their promises.

3. Problems Between Founders

Paul Biggar alluded to “communication problems” with his co-founder Nathan Chong, which resulted in them having disparate visions of NewsTilt. Living in different cities didn’t help their communication problems either. The co-founders hadn’t worked on any projects prior to NewsTilt and found their relationship stressed from the very beginning.

4. Lack of Investment

NewsTilt received only seed funding from Y Combinator (around $50k) but what they needed was alot more investment capital so that they could pay the journalists and give them incentives to write. Their scope was far too ambitious to be implemented on a bootstrap budget and it was likely bound to fail without further funding to pay for the content, development and marketing costs in order to build the audience and gain traction.

Lessons Learned

  1. Make sure the minimum viable product (MVP) includes the core features that will attract customers (or contributors in NewsTilt’s case). Ensure that the MVP delivers on the key promises of the product.
  2. As a corollary to 1), work on the core features that will differentiate your startup. Where possible, try not to re-invent the wheel by using standard third-party packages.
  3. Industry knowledge or at least passion for the subject is essential. As NewsTilt have demonstrated, trying to start a business in an industry you don’t care much for is not likely going to end well.
  4. Co-founders should have some past experience working together and should have a good rapport. It’s often said that being startup co-founders is like being in a marriage and therefore personal compatibility and a strong relationship is a must.
  5. Once you alienate your customers or contributors, it’s a long road to winning back their trust. NewsTilt managed to alienate both their contributors (by not delivering on promised core features) and customers (e.g. requiring Facebook integration and launching without any content).
  6. If the scope of your startup requires large amounts of funds to build traction, then you need to either secure funding or reduce your scope.
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We didn’t fail, we just showed that it didn’t work

An interesting and optimistic take on startup failure by Boris Veldhuijzen van Zanten, founder of The Next Web and Twitter Counter. The gist of the story is that Boris and his team developed an idea for some anti-spam software that ultimately didn’t work out. That’s not a particularly novel story by itself, but the interesting part is how they framed it – as a successful “dis-proof of concept”.

What is admirable about the story is that Boris and his team conceived an idea, developed it, tested it and then let it go when they realised it didn’t work. In other words, they failed fast. Having taken on investor money, they could have tried to keep developing the software or even pivot, but they chose to honestly explain the situation to their investors, return the leftover money and move on.

Unfortunately, the evaluation of most software startups isn’t so cut and dry. In this particular example, Boris had an idea that could be assessed solely on its performance, i.e. it either works or it doesn’t. But for most startups, the metric isn’t if the software actually works, but if people want to use it and perhaps more importantly, are willing to pay for it. Therefore it’s more difficult to decide when to let a startup fail; for a startup founder, it becomes a question of judgement and opportunity cost – is it worth our time to keep persisting with this or are we better off just doing something else?

Skribit

Launched: December 2009

Shut Down: July 2011

Founders: Paul Stamatiou, Calvin Yu

Funding: Seed funding (Georgia Tech Edison Fund)

Skribit is a tool to help bloggers cure their writer’s block by crowdsourcing post suggestions. Readers get what they want to read and bloggers get ideas and a sense of what topics are popular with their audience.

As co-founder Paul Stamatiou puts it, “Skribit provides bloggers and readers with a unique form of interaction. Bloggers put our widget module on their blog and readers may suggest (anonymously or through an account) article topics through it. Readers can also vote for these topics. However, the widget does not just show the top 5 post suggestions. There is an algorithm behind it that displays suggestions that are hoppin’ based on recency, number of votes and a few other factors.”

Why Skribit failed

From their shutting down announcement, the official explanation is that Skribit only appealed to a niche group of bloggers and wider traction wasn’t forthcoming. Thus the team decided to move on to other things.

A look at some of the blogs that used Skribit offers some further clues as to why they weren’t getting any traction:

  1. Skribit widget blog integration – the widget is quite unobtrusive and could have been mistaken for another comment form, chat box or contact form. Differentiating the Skribit widget more clearly as a suggestion box and also providing information to users about Skribit may have helped (but it’s certainly a fine line between unobtrusive and garish).
  2. Bloggers themselves seemed to taken a laissez faire approach to using Skribit. They installed the widget and just let it go. In some cases, bloggers didn’t even install the widget and added only a vague “Make a suggestion” type link. Perhaps they needed to push Skribit more heavily in their blogs, but ultimately, if a new service requires that much active marketing by customers, then it’s probably going to struggle.
  3. There are many social media options for bloggers and new ones appearing all the time. For some bloggers, Skribit may have just gotten lost in the many available widgets and applications
  4. Some bloggers pointed out that the Skribit widget was code-heavy and slow (at least in the early versions).

Moreover, the business model seemed a bit suspect to me. Skribit employed a freemium model with a free basic account and a PRO account for $24.95 per year allowing for unlimited blogs, unlimited suggestions (normally limited to 15 active suggestions on the free account), suggestion moderation and widget customisation. Skribit never revealed the number of PRO account subscribers they had, but I can’t imagine that it would’ve been too many given the PRO features really aren’t very compelling.

Overall, from a complete outsider’s perspective, the Skribit team seems to have been too ambitious in their expectations¬† – they wanted a big win in a crowded space of social media applications and tools. The service was popular enough amongst bloggers although it may have taken Skribit a longer time to differentiate themselves from other services. The business model was also probably in need of a workover. While Skribit could still work as a side project, it appears as though the team ran out of both funding and interest.

Wesabe

Launched: November 2005

Shut Down: July 2010

Founders: Marc Hedlund, Jason Knight

Funding: $4.7M

Wesabe was a personal finance management web app that allowed users to track their spending and help them manage their finances. There was also an element of data mining and analysis where Wesabe would use the data collected in aggregate and offer suggestions to the users.

By Co-Founder and CEO Marc Hedlund’s own words (from “Why Wesabe lost to Mint“), Mint overshadowed Wesabe almost from its launch in September 2007 (10 months after Wesabe). Wesabe eventually folded after running out of cash and not generating enough revenue to continue.

Why Wesabe Failed

Ultimately, Marc Hedlund puts the failure down to user experience, the key difference between Wesabe and Mint:

  1. Mint used a third-party financial data scraper and aggregator (Yodlee) while Wesabe tried to make their own, which wasn’t nearly as good.
  2. Mint focused on making their service as user friendly as possible (e.g. automatic import, categorization, editing, etc), essentially allowing the user to do as little work as possible, while Wesabe focused on tools and other features.
  3. Mint’s site was better designed

Another takeaway was the difference in the marketing spend of the two companies; Mint embarked on an agressive marketing and user acquisition campaign while Wesabe “spent almost nothing”.

Some other reasons that were floated for Wesabe underperforming vs. Mint:

  1. Branding – the name Mint was superior and led to better brand recognition. The value of the name is debatable, but may have been factor on top of the usability differences (not least because it was easier to remember and spell).
  2. The value of blogging – Mint were continuously blogging about topics in personal finance, often with very popular infographics, which no doubt helped to build their brand.
  3. Targeting the right audience – Mint purposely targeted an audience of middle-aged men and “soccer moms” who were neither financially or technologically proficient.¬† The argument was that Wesabe (and other personal finance apps) were directed at those who were already financially / technically aware and ultimately Mint’s target audience was just bigger.
  4. iPhone app – Mint had one, Wesabe didn’t (at least not to begin with)

There is more post mortem discussion at Hacker News.

Lessons learned

  1. Focus on user experience, make your product as easy to use as possible.
  2. Use third-party applications and packages for things outside of your core business (don’t re-invent the wheel)