What can we learn from a London startup that burned through $21 million without making a penny in revenue, before crashing into bankruptcy.
I don’t know how much of this story at BusinessInsider is true but it’s instructive to pull out and learn from the lessons since they apply to many other startups regardless.
Lesson 1 – Ploughing $ millions of other people’s money into digital ads as the ONLY means to acquire users is a recipe for disaster.
Lesson 2 – Partying in Ibiza and having a threesome in the room next to your team who you forced to sleep in tents in the office so they can work round the clock is going to make them hate you and leave you.
Lesson 3 – As CEO, taking a unilateral decision to perform a major pivot, behind the back of the team and the board will piss everyone off and make them want to leave.
Lesson 4 – Burning cash on first class flights, expensive offices, tour buses, extravagant parties and Michelin meals before you’ve earned a penny in revenue will make it more likely you’ll run out of runway in no time.
Lesson 5 – Not sharing growth goals with the tech team risks running out of capacity to scale and so pissing off your users who will leave and not come back.
Lesson 6 – Shouting, screaming and throwing baguettes at your board and team members is setting yourself up for failure.
Lesson 7 – Taking 100% of your $21 million in funding via a single investor who calls himself Captain Magic is like putting all your eggs into one dodgy basket.
Lesson 8 – Not having a CFO or even an accountant is plainly reckless.
Lesson 9 – Paying yourself a salary of over £200,000 as CEO before you’ve earned a penny in old-fashioned revenue sets a really bad example.
Lesson 10 – Not telling your users you’re shutting down is impolite and bad karma.
I have no idea if Fling really did any of this but I hope others find these lessons useful in any case.
Mark Suster gives advice on how to “decrease your odds of failure in a startup“. Start by answering these questions: 1) What is your total addressable market size? 2) What type of market are you entering: fragmented or controlled by a few dominant players? 3) What are the strengths and weaknesses of your competitors? Those susceptible to The Innovators Dilemma are ideal. 4) What are your unit economics? For example, how much will it cost to acquire a singe customer? What are their alternatives and how much do they pay for them today? What price will they pay you – and why? 5) Why should anyone want to become a customer of yours? 6) What’s the history of your target market? Who’s tried and failed before and why?
An Entrepreneur Mindset
James Altucher shares the 11 factors that led to him finally succeeding with his 4th business.
Bots & Banking
Ron Shevlin is concerned that banks’ head-long rush into building bots as a means to differentiate their customer experience won’t work. In essence: 1) They’ll try and force the wrong types of interaction through bots, and 2) they fail to appreciate the best reason to deploy a chatbot. It’s not about cost reduction or revenue growth. It’s not about the technology per se but what you do with it. Here, here.
VC’s Are Not Your Friends
Steve Blank tells us a story to illustrate why VC’s are not our friends. Take heed.
Start Talking With VCs Well Before You Need the Money
Elad Gil explains why if you want VC funding, then you need to start building a relationship with them 6-12 months before you need the money.
Financing Growth with Debt
Martin Macmillan cautions against the pitfalls of taking a debt-based approach to financing growth as opposed to giving equity away.
Banks Shouldn’t Copy Startups
Pascal Bouvier, Aldo de Jong & Harry Wilson explain why “large companies trying to innovate like a startup… represent[s] the worst of both worlds: throwing mud at the wall, slowly and expensively.”
Banks Are Losing The Digital Race
McKinsey take snapshot of how three key sectors are progressing with digitalisation. 3 points stick out for finance: 1) Fintech has encroached into more than 30 areas. 2) Incumbents will either need to compete head on or use their financial muscle to move into adjacent markets. 3) Banking and insurance remain below average on McKinsey’s Digital Quotient score by industry.
Even Goldman Sachs Is Being Eaten By Software
“At its height back in 2000, the U.S. cash equities trading desk at Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left.” 45% of trading is now done electronically and machines are replacing “a lot of highly paid people” as well as back-office clerical workers.
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