Failures and breakthroughs – exposed, reflected, considered

Posts Tagged ‘Elegua

Devver and other thoughts on failures

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Till today, I somehow failed to know about the existence of Failure Magazine. Although most of articles I checked are quite long (like this article about “No Logo” of Naomi Klein that goes for 7 pages) there is much to read and learn about.

What I meant to write about was Devver, a maker of cloud-based tools for making Ruby developers more efficient (code testing, QC).

As one of co-founders, Ben Brinckerhoff, points out:

Most of the mistakes we made developing our test accelerator and, later, Caliper boiled down to one thing: we should have focused more on customer development and finding a minimum viable product (MVP).

They assumed they already got their MVP and focused on further developing their products at the expense of loosing touch with existing/potential customer base. He admits that:

Our mistake at that point was to go “heads down” and focus on building the accelerator while minimizing our contact with users and customers (after all, we knew how great it was and time spent talking to customers was time we could be hacking!).

As Devver focused and developed its accelerator product, it became increasingly sophisticated, eventually “resulting” in setup/configuration problems – the main put-off for many users. When this hurdle was found, they came up with a solution, but again failed to keep in touch with users, instead churning out new features.

Result? Two years and $500K later, the three tech-savvy founders had to fold.

As the saying goes, “don’t fall in love with your product; let your customers do so.

As an article in Business Know-How explains, “key factors that — if not avoided — will be certain to weigh down a business and possibly sink it forevermore”:

  1. You start your business for the wrong reasons (making money is the first one on this list)
  2. Poor management (sometimes management is too techy – case with Devver – or too business)
  3. Insufficient capital (lean startups must be able to avoid this trap)
  4. Location, Location, Location (one of factors that contributed to a temporary suspension/failure of my own startup Elegua)
  5. Lack of planning (this depends on a type of business, but many businesses change/evolve so much from their original vision/plan that they become unrecognizable)
  6. Overexpansion (riding on top of seed/series A capital, hiring frenzy)
  7. No Website (this is debatable – my second startup, GPDoors, has no website yet – I do get leads via WoM)
And even if you fail (as I did and surely will do in the future), remember that:
  • Failure is necessary
  • Failure reinforces the need for risk
  • Success can breed complacency
  • Failure means you’re not alone
  • Failure doesn’t necessarily mean something went wrong
  • Failure can emphasize process, not merely people
  • Failure broadens your thinking

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Suspending operations of the first coworking community in MENA

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You might remember from my earlier post that I started the first coworking community space in Egypt and the MENA region (with exception of Israel), Elegua, back in August 2009.

Ever since, we have been struggling to break-even, all the more given the unfamiliarity of the market with the concept and with many semi-alternatives such as Starbucks-style coffee shops with moderate Internet connections/quality.

Initially, our agreement was – I was doing it with an Egyptian friend of mine and a partner – that I will take care of the business side and he will be in charge of the logistical and day-to-day management of the company. It took few weeks for me to realize that, however professional and hard-working my friend was, he was not committing the time or brain work required to the company, especially considering the initial stage of our startup and the fact that we did not seek any venture capital, but decided to boostrap. We were both employed full time and Elegua was to be our side project, which we wanted to grow.

Our first stumbling block was to find a comfortable and affordable space in the central Cairo, or close to where many foreigners were living – our target were mostly young, class A/B foreigners, students, young entrepreneurs, techies, geeks. Anyone with a laptop, a need for high-speed Internet connection, comfortable and relaxing working environment and willingness to network with like-minded individuals was qualified. All the more so as there was no real competition, besides the coffee shops with slow and unreliable Internet connections and few Internet cafes (in downtown Cairo there are quite few of them but they all look ramshackle and none allows flexibility of using your own laptop/WiFi).

We did not conduct a proper market research. Instead, we relied on my gut feeling and my partner’s knowledge of Egyptian market and our collective perception that a co-working space would not even need to be sold out. It would be so intuitively appealing that everyone would go for it.

What were the results 7 months later?

Modest revenues (not close to break-even). Many people loved the idea, but not many were ready to brave the Cairo traffic in order to reach the place.We kept on hiring and firing few employees as none were qualified enough- due to lack of time we opted for friends and connections of friends: high turnover. Elegua fan page on Facebook has 200+ fans which failed to convert.

In brief, a failure, but a failure with lots of valuable lessons for me, and surely for my partner.

The main factors in our failure were (my view):

  1. Choice of partner/co-founder (my partner was more ready to commit in words/ideas but not in actions as it became eventually clear)
  2. Time/effort commitment (both I and my partner treated Elegua as a side project and did not allocate enough time and effort for its growth)
  3. The place (the choice of the place was crucial for such a business – though it was central but still not enough to attract the potentially interested)
  4. Missing market data (we did not realize at the time how popular, reliable and affordable the Internet USB sticks became – many preferred to sit at any chosen place and plug-in a USB stick rather then to displace themselves to a coworking space)

Maybe we were to much in a hurry and could have been a bit more patient and perseverant. But maybe not.  The time will show. In any case, I felt this was the right time for such a decision and as much as it was my original idea and closing it, even temporarily is not a joyous occasion, we decided to take this route.

I am moving on with my other project – more about that later – and will perhaps eventually reopen Elegua but with different offerings, another partner – in Egypt any company has to be 51% owned by an Egyptian, and I am not Egyptian – and in a different part of the city!

Written by Hayk

April 11, 2010 at 8:48 pm

3 startups +1 and 3 lessons +1

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The Entrepreneur magazine has asked three successful entrepreneurs to describe a scenario of doing things all over again if they had a chance. Below is their response.

Entrepreneur

Sunny Bonnell, 33, co-founder of Motto Agency, a brand and design firm in Myrtle Beach, S.C. Founded in 2003, the company’s year-end sales are projected to reach about $1 million.

Lesson Learned

“As a woman business owner, I would have reached out to organizations like Count Me In for Women’s Economic Independence a lot sooner than I did. They have helped me build our networks on a national level (i.e., establish partnerships with FedEx, OPEN from American Express and Dell) and given us access to mentorship, marketing opportunities and business resources.”

Entrepreneur

Anthony Mongeluzo, 28, founder of The Pro Computer Service LLC, an IT services company in Medford, N.J. He founded the company in 2002 and now has annual revenue in excess of $2 million.

Lesson Learned

“I would have treated my company like a real business and not looked upon it as a stepchild. I would have given it the same full effort every day and not wasted my energy from 9 to 5 with my employer grasping for a moment or two to sneak in a quick call to one of my clients.”

Entrepreneur

Kris Putnam-Walkerly, 40, founder of Putnam Community Investment Consulting Inc., a Cleveland-based philanthropy consulting firm for foundations and nonprofits. She founded the company in 1999 and projects 2009 revenue to approach $1 million.

Lesson Learned

“I should have conducted more regular financial analysis of the business early on to help me understand which types of services and clients were most profitable and to allow me to make more informed decisions as I grew.”

Personally, I am also still struggling with my own startup, Elegua, to have it gain sufficient traction, especially considering that I and my partner are on a bootstrapping mode till now. And we both fall into the “lesson learned” of the second entrepreneur,  Anthony Mongeluzo, above. My previous initiative, OpenCoffee Club Cairo, is also sort of put on hold, as the inaugural meetup didn’t attract a threshold number of local entrepreneurs, startup enthusiasts, VCs, techies and individuals interested. This reminds me as well to give it another push, as I also got a recent feedback to renew my effort. Hence:

Lesson Learned

Persevere, persevere, persevere. Perseverance, especially in cultures/societies with corresponding 0-market knowledge of or unadapted mentality to the ideas of the business initiative in question, it is vital to persevere and however steep a climb it might seem, there is always a societal learning curve, which, once the tipping point is achieved, will become self-sustainable.

Given its complete novelty and unawareness in the MENA region and in Egypt, I think I will give it another try.

What are your experiences and lessons learned?

P.S. I know it has been a long time since my last post. My own side projects and my work prevented my “blogging creative juices” from running. I will try to be more systematic henceforth.

Written by Hayk

September 26, 2009 at 12:14 pm