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Achieving startup success is challenging, leading to numerous tales of shuttered businesses, bankruptcies, and legal battles. Yet, the common question often posed is 'What percentage of startups fail?' instead of probing into "Why do startups fail?".
In this post, we will investigate the reasons behind pre-product market fit startup company failure stories.
By dissecting the journey of startups through the perspectives of Product-Channel Fit, Channel-Model Fit, and Model-Market Fit, we seek to understand why startups fail by providing a detailed analysis of the complex interplay they engage with in their respective markets.
As Marc Andreessen’s puts it, "In a great market—a market with lots of real potential customers—the market pulls product out of the startup." This stands as the initial and yet unparalleled definition of Product-Market Fit.
When a startup is not able to find Product-Market Fit, it either dies or pivots. In this post, we are looking at the stories of the startups that eventually died.
Could a strategic pivot have rescued their business? That remains an unanswered question.
We share these stories to inspire startup founders, helping them build resilient businesses and lower the startup failure percentage.
We hold profound empathy for founders who invest considerable effort into developing and expanding their startups, only to then graciously share their retrospectives with the world following their ventures' conclusion.
Thank you to all those great people who have contributed to the startup world. We sincerely hope that these failures have been their guiding light in your next ventures.
Disclaimer: The insights shared here are formed from analyses and interpretations of public domain information, including founder post-mortems and official press releases. We aim to enrich these discussions with direct quotes from founders whenever such comments are available to us.
A sincere thank you to the incredible team at OpenAI for providing us with the language models that have empowered us to conduct this thorough analysis.
Startup Company Failure Story of AskRobin
AskRobin, an Estonian FinTech startup founded in 2017, aimed to provide fair credit solutions to the underbanked populations in Latin America.
AskRobin's inaugural offering was a Financial Education chatbot, designed to demystify the complexities of financial concepts for its users through engaging, easy-to-digest advice. This innovative approach not only made finance more accessible but also rapidly attracted over 200,000 users within its first month. Recognizing the evolving needs of their customer base, AskRobin then strategically shifted its focus towards providing lending services, aiming to more directly address the financial challenges faced by its users. This pivot underscored the company's commitment to adapting its services to meet the most pressing needs of its customers.
Despite securing partnerships with over a hundred lending companies and nearly reaching 2 million customers, the company faced significant challenges, ultimately leading to its closure.
As per the company’s founder and CEO Rain Sepp,
“We partnered with over a hundred lending companies to get the fairest credit to our customers. But something we never really achieved was a strong product market fit – not strong enough to allow us to stand against the storm, anyway.”
A Look at AskRobin's Story through the Lens of Product-Channel Fit
Was AskRobin successful in achieving 50% growth in a certain distribution channel?
While the exact figures or specifics regarding a 50% growth achievement in a distribution channel were not detailed, the initial success of the chatbot could imply significant growth metrics in their digital engagement channels.
If AskRobin's digital marketing efforts were behind this surge in user engagement, it's plausible they experienced substantial growth rates in these areas, possibly nearing or exceeding the 50% mark in user acquisition or engagement metrics within these digital platforms.
The focus on a financial education chatbot as the entry point for user interaction also highlights a strategic choice to prioritize accessible, low-barrier channels that align with the habits and preferences of their target demographic. This choice suggests a nuanced understanding of Product-Channel Fit, where AskRobin tailored its product delivery to the online and mobile-first preferences of its audience.
A Look at AskRobin's Story through the Lens of Channel-Model Fit
Was AskRobin successful in folding its business model to fit the needs of at least one distribution channel?
Assessing Adaptation to a Distribution Channel
The success of AskRobin's chatbot in engaging users indicates an effective use of digital channels to distribute their educational content. The engagement with these channels likely provided valuable insights into customer behavior and preferences, which in turn influenced their business model pivot towards lending services. This shift shows AskRobin's responsiveness to market demands and distribution channel effectiveness, aiming to more directly meet the financial needs of their users.
Business Model Adaptation
The transition from a financial education platform to a lending service can be seen as a strategic alignment of AskRobin's business model with the distribution channels' capabilities and the target audience's needs. By integrating lending services, AskRobin leveraged the established trust and engagement within their digital channels to offer more substantive financial products. This shift suggests a form of business model adaptation to fit the digital distribution channel's capabilities and the underserved market's requirements for financial services beyond education.
Average Startup Company Success Rate is less than 5%
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Conclusion and Reflection
While explicit evidence of a 50% growth metric in a particular distribution channel or a detailed account of business model folding to fit a distribution channel's needs was not provided, the strategic pivot and operational decisions of AskRobin indicate a concerted effort to align their business model with the distribution channels that effectively reached their target audience. This alignment, focused on leveraging digital engagement to expand their service offerings, demonstrates AskRobin's attempt to adapt its business model to the evolving needs of its users and the capabilities of its most effective distribution channels.
A Look at AskRobin's Story through the Lens of Model-Market Fit
Was AskRobin successful in capturing a good enough portion of the market?
Market Capture and Expansion
The rapid user growth and engagement with the chatbot suggest that AskRobin was successful in capturing the interest and attention of its target market initially. This success demonstrated a clear demand for financial education and potentially for the lending services AskRobin pivoted to offer. However, capturing interest through a financial education platform and converting that interest into active users of a lending service are distinct challenges.
The transition to offering lending services was a strategic move to address a deeper layer of the market's needs. Yet, we are lacking specific details on user adoption rates, loan volume, or growth metrics for the lending side of the business to arrive to a conclusion.
Challenges to Sustained Market Capture
Despite the promising start, AskRobin's eventual shutdown indicates challenges in maintaining or expanding its market capture to a sustainable level. The difficulties mentioned, particularly around the impacts of the COVID-19 pandemic, suggest external factors heavily influenced their market position. Moreover, the inability to achieve a strong enough product-market fit for its lending services likely contributed to challenges in retaining and growing its user base in the competitive fintech landscape.
A Look At Startup Failures Through The Lens of Product-Market Fit: AskRobin's Story
The initial user interest and engagement show that there was a market demand for AskRobin's offerings. However, the company's closure reflects the complexities and difficulties in fully capturing and retaining a substantial market share, especially in transitioning from financial education to providing financial services. One question appears here; was it a premature decision to start lending?
The scenario of AskRobin underscores the importance of not only identifying market needs but also effectively adapting and scaling solutions to meet those needs over time.
In the end, AskRobin's story is a testament to the entrepreneurial spirit, marked by the pursuit of innovation and inclusivity, and the sobering realities of striving for impact in the tumultuous FinTech landscape.
Startup Company Failure Story of Kinly
The saga of Kinly, an app designed to foster intimate family connections in a digital space, encapsulates the highs and lows of the startup world. Developed by Don Smithmier and his team at GoKart Labs, Kinly promised a sanctuary from the clutter and privacy concerns of mainstream social media, offering a platform where families could share and stay connected in a secure and private environment. Despite its promising premise and the initial enthusiasm it generated, Kinly's journey from a bright idea to its eventual discontinuation offers profound lessons on innovation, resilience, and the harsh realities of the tech industry.
As per the company’s co-founder Don Smithmier,
“By postponing the investor challenge, we also postponed — and thereby ignored — the distribution challenge. And Kinly is dead because of it.”
A Look at Kinly's Story through the Lens of Product-Channel Fit
Was Kinly successful in achieving 50% growth in a certain distribution channel?
Kinly, described as a "Facebook for Families," had a clear value proposition and targeted a specific user demographic. This product vision effectively addressed privacy concerns and the desire for a focused communication channel.
Initially, there appeared to be a strong Customer-Solution Fit as evidenced by the app's ability to drive family sign-ups and achieve over 50% of new family sign-ups using the app daily.
This metric suggests that Kinly was successful in engaging its target audience. However, the challenge lay in reaching its intended audience and ensuring the platform was easily accessible and adopted by families, a critical aspect that ultimately impacted its viability.
As per the company’s co-founder Don Smithmier, the issue with distribution was the lack of marketing budget:
“We knew Kinly needed a large marketing budget to drive awareness and adoption, but we chose to kick that can down the road.”
A Look at Kinly's Story through the Lens of Channel-Model Fit
Was Kinly successful in folding its business model to fit the needs of at least one distribution channel?
There surely was a shortfall in Kinly's ability to adapt its business model to fully leverage its distribution channels. While the initial marketing efforts showed promise, the decision to delay seeking investors and the reliance on a part-time leadership for go-to-market strategy introduced significant constraints.
This decision-making reflects a misalignment between the channels used to promote Kinly and the business model's capacity to support and capitalize on these channels effectively.
Additionally, the lack of committed, full-time leadership coupled with inadequate funding to address distribution challenges compounded the issues.
A Look at Kinly's Story through the Lens of Model-Market Fit
Was Kinly successful in capturing a good enough portion of the market?
Kinly faced a critical hurdle in capturing a substantial market share, pivotal for its survival and growth.
Despite having a product that resonated with its initial user base, the app failed to secure the necessary funding and marketing push to expand its reach and sustain its presence in the market.
This failure points to a lack of model-market fit, where the business model did not successfully capture and grow its market share in the competitive and saturated app market. Kinly's story underscores the essential need for startups to not only identify but also effectively capture and serve a significant portion of their target market.
A Look At Startup Failures Through The Lens of Product-Market Fit: Kinly's Story
Kinly's journey from inception to its eventual shutdown offers vital insights into the complexities of building a great business reminding us once again why startup success rate is so low.
Despite having a promising product and initial traction, Kinly struggled to align its product with effective distribution channels, adapt its business model to these channels, and capture a lasting share of the market.
The failure of Kinly serves as a poignant reminder of the importance of addressing key Fit metrics early and robustly in the startup lifecycle. Additionally, this story comes with many lessons for startup founders;
Be realistic about the leadership effort required to operate a business
Not every business model is good for bootstrapping
Always be on the lookout for investment if your business model depends on end-user acquisition and requires marketing investment
Startup Company Failure Story of Wingocard
Wingocard, a teen-focused financial literacy app, embarked on a mission to integrate younger generations into the mobile, cashless economy while fostering financial independence and education. Founded in Montreal in January 2020 and launched with much fanfare in May 2021, Wingocard managed to secure $3 million in seed funding across two rounds. Despite its promising start and engaging over 75,000 teens with its innovative platform, Wingocard announced its closure set for May 18, 2022 leaving behind a narrative of ambition, engagement, and an unfulfilled mission.
As per the company’s co-founder, CTO and VP product and engineering Salvatore D’Agostino,
“Towards the end of 2021, Wingocard was looking for interested investors to keep us going on our mission. Unfortunately, we were unable to close a round of funding.”
A Look at Wingocard's Story through the Lens of Product-Channel Fit
Was Wingocard successful in achieving 50% growth in a certain distribution channel?
Wingocard adeptly identified a significant need in the market—enhancing financial literacy among teenagers. By providing a mobile banking solution that connected teens directly with financial services, including a Visa debit card, the app promised a practical toolkit for financial education. However, Wingocard faced a big challenge of effectively reaching its target audience. There may be several underlying reasons that prevented Wingocard from reaching its target audience and broadening its userbase as below;
The product's alignment with its delivery channels—primarily digital and word-of-mouth—raised questions about whether these were sufficient to sustain and scale the user base needed for long-term success.
Despite a strong start with a substantial waitlist and a notable engagement rate, maintaining momentum and expanding its user base proved challenging.
Wingocard's rapid development and deployment of features such as direct deposits, instant money transfers, custom dashboards, and a referral program demonstrated a strong commitment to creating a comprehensive product that met the needs of its teenage audience and their parents. However, the effectiveness of these features in attracting and retaining a substantial user base depended on the channels used to promote and deliver them.
The reliance on a referral program as a significant growth mechanism seemed to be a risky decision as the company needed to leverage broader, more diverse channels for market penetration.
A Look at Wingocard's Story through the Lens of Channel-Model Fit
Was Wingocard successful in folding its business model to fit the needs of at least one distribution channel?
We do not have enough evidence to answer this question with either a bold YES or NO however there are strong signals to say that Channel-Model Fit was there.
The business model of Wingocard hinged on seamless integration with existing financial systems and providing value-added services to its users. Participation in Visa’s Fintech Fast Track programme was a strategic move to facilitate this integration.
Wingocard might have employed all or a few of the money generating practices of fintech apps i.e. interchange fees, subscription fees, partnership revenue, in-app puchases.
Although we do not have information on the customer acquisition cost (CAC) of Wingocard, we can estimate the cost to be in the lower end of the ARPU-CAC spectrum as the company was depending on a low-cost acquisition channel which is referrals.
A Look at Wingocard's Story through the Lens of Model-Market Fit
Was Wingocard successful in capturing a good enough portion of the market?
We do not think so, as the company decided to cease its operations in a few years after two seed funding rounds.
The failure to secure additional funding suggests that while the product met an immediate need, the broader market conditions—including investor confidence in the scalability and profitability of such a specialized service—were not favorable.
Wingocard's value proposition was clear, addressing a gap in the market for teen-focused financial services. Yet, the broader market dynamics, including competition from established financial institutions and other fintech startups with similar offerings, posed significant challenges.
A Look At Startup Failures Through The Lens of Product-Market Fit: Wingocard's Story
Wingocard's story is a testament to the complexities of launching a fintech product aimed at a niche market. Despite a well-defined problem space and a product that resonated with its intended audience, the startup struggled with the critical aspects of scaling, securing investment for continued operation, and navigating a competitive market landscape.
Wingocard's journey underscores the importance of not just innovation and product development but also strategic planning in securing financial backing and addressing market challenges head-on.
While possessing a clear product vision is beneficial, it becomes less impactful if it isn't paired with effective customer acquisition and financial stability. Simply adding new features without a strategic purpose can lead to development efforts that, despite their innovation, may not contribute to the overall success or sustainability of the product.
The closure of Wingocard, while unfortunate, serves as a valuable learning opportunity for future entrepreneurs in the fintech space, highlighting the need for a balanced approach to product development, customer acquisition, market engagement, and financial sustainability.
Average Startup Company Success Rate is less than 5%
Find out how our startup coaching practices can get your startup out of the 95% majority
Conclusion: A Look At Startup Company Failures Through The Lens of Product-Market Fit
The stories of AskRobin, Kinly, and Wingocard exemplify the harsh reality that, regardless of a startup's initial promise or innovative approach, its success hinges on finding and maintaining a strong alignment with market demands.
These cases highlight the necessity for startups to not only innovate but also to continuously adapt and align their products with the evolving needs of their target market.
Achieving Product-Market Fit is thus the cornerstone of startup success, serving as both the foundation and the guiding star for navigating the complex and often turbulent journey of bringing a new product to market. Marc Andreessen's principle that the market pulls product out of the startup underscores this pivotal challenge.
For early-stage founders, remember: achieving Product-Market Fit is challenging but crucial for success. Every startup that failed is an opportunity for their founders to learn from their mistakes and build even better businesses in the future. Stay resilient, adaptable, and focused on aligning your product with market needs. Your determination is key to transforming challenges into victories.
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