I’m Lucky My First Startup Failed

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I’m Lucky My First Startup Failed

A successful startup isn’t necessarily a startup you’ll enjoy building

I’m Lucky My First Startup Failed
Photo by Ben White on Unsplash

My first startup was in the events industry. Concerts, sporting events, broadway shows… those kinds of things. The startup was a miserable failure (a story for another article), but, in retrospect, I’m incredibly lucky it failed. If it had been successful, I would have spent years doing work I hated.

When I launched that first startup, I didn’t understand that different types of products force different types of business models, which, in turn, force entrepreneurs to do different kinds of work. Simply put, I chose to build a business that needed me to do a type of work I didn’t enjoy (and wasn’t particularly good at). You can avoid the same mistake by understanding a fundamental principle of product development that, as a young entrepreneur, I didn’t know.

To explain this principle, let’s start by imagining you’re a huge fan of BTS. I know, it’s a weird hypothetical for an article about entrepreneurship, but just go with it for a moment: You’re a huge BTS fan, and you just found out the K-pop heartthrobs are on their way to your city. How exciting!

Assuming you’ve got enough disposable income, you’re going to buy tickets as soon as possible because you know millions of fellow BTS ARMY members will be buying theirs. If you don’t buy immediately, you don’t get tickets. (Or, you pay inflated prices on the secondary market).

This is an example of an expiring product. The product’s limited availability forces consumers to buy it.

But, OK, you probably already understand the dynamics of sold-out events. Let’s consider a less popular performer like, say, American Aquarium. For the record, I have no idea who (or what?) American Aquarium is. I assume it’s a band. I found it listed as performing at a concert venue near me in a couple days, and, unlike a BTS concert, the show isn’t sold out.

Even though American Aquarium isn’t as popular as BTS, their tickets are still an example of an expiring product. That’s because my opportunity to (conveniently) see American Aquarium perform vanishes as soon as their show starts. If I’m a consumer who maybe-sorta-kinda likes the band, I have to buy the tickets before the concert. In other words, the expiring nature of the product compels my consumer purchasing decision.

To appreciate why this matters, compare buying concert tickets with buying a new water bottle. Unless my water bottle breaks, I’ll never need to buy a new water bottle on any sort of urgent timeline. Heck, even if my water bottle breaks, I can surely avoid dehydration by drinking water from a glass.

Water bottles, as a result, aren’t expiring products. They’re evergreen products. If I don’t buy a water bottle today, I can still buy it a year from now, and it will work just as well.

This distinction between expiring products and evergreen products is important for people interested in building startups because your company is going to have a product. It’s either going to be an expiring product or an evergreen product (or on the continuum in between). Do you know which type of product is more likely to help you build a successful business?

OK… that was a trick question. The truth is, deciding whether to have an expiring product or an evergreen product isn’t really a case of better or worse. Instead, the two options have tradeoffs that impact customer acquisition. Because of this, entrepreneurs don’t need to worry about which one is objectively better or worse. Instead, they need to understand the respective impacts of different types of products on the customer acquisition process in order to make sure their skills align with the needs of the types of companies they’re building.

To demonstrate those challenges, I’m going to explain how they relate to my current product, which is my podcast. No, you don’t need to listen to it (though you should!). All you need to know is it’s a podcast where I share interviews with successful tech founders telling the stories of how they built their companies. For example, the founder of Etsy talks about building Etsy, the founder of Kickstarter talks about building Kickstarter, and so on.

These interviews are examples of “evergreen” products. By that I mean the story of Etsy’s founding doesn’t change, and it doesn’t expire. You can listen to my podcast episode with Etsy’s founder today or five years from now, and its content will be equally relevant.

In contrast, think about the thousands of sports-themed podcasts in the world. Those podcasts are expiring content because a podcast discussing a team’s big victory over its rival won’t be nearly as relevant two months after the game.

These distinctions impact how audiences consume podcasts. Imagine, for a moment, you’re subscribed to my podcast and also a podcast about your favorite sports team. If we both release an episode at the same time, which episode will you listen to first?

The sports podcast, obviously. That content expires. If you don’t listen to it quickly enough, the information will become irrelevant.

In contrast, if you don’t listen to my podcast immediately, no big deal (not for you, anyway). You can listen later. The content will be just as relevant then as it was on the day it was released.

As an entrepreneur trying to grow my audience by getting you engaged with my podcast, the fact that you’ll listen to your favorite sports podcast before listening to mine creates a big problem. Specifically, lots of things can happen between the moment we release our competing episodes and however long it takes for you to finish listening to the other one. Maybe your favorite sports podcast publishes another episode. Maybe you find a new podcast to listen to. Maybe you stick a q-tip too far down your ear and lose your hearing..

Whatever the case, without any forcing mechanism to make my product urgent, some percentage of subscribers will never listen to my episodes simply because life gets in the way before they have an opportunity to do so.

With this in mind, think back to that concert tickets versus water bottle example I shared previously. Which type of product would you rather? Something that forces people to buy (i.e. a product with a built-in expiration date) or something that allows people to stall and, potentially, never buy (i.e. a product that delivers a consistent value no matter when you buy it)?

As someone with an evergreen product, I can tell you that the idea of having a product with a built-in forcing mechanism seems extremely attractive.

But it’s not all bad news for evergreen products. They also have some big business model advantages. If we look, again, at my podcast, its evergreen content means people who discover it today can listen to and enjoy episodes I released years ago. The same thing won’t happen for a sports podcast focused on current events.

In the case of a company selling a water bottle, if someone doesn’t buy the water bottle today, the company can still sell the same water bottle next week or next month or next year precisely because water bottles don’t expire. The same will be true for you if you’re an entrepreneur with an evergreen product. Once you’ve got a supply of them and an effective distribution process in place, you can take a two month vacation and keep making sales.

In contrast, imagine you’re running a company that relies on expiring products like, say, the earlier example I described of a concert venue selling tickets. The moment the American Aquarium show starts at your music club, any unsold tickets are worthless. Because of this, in order to keep making money, you have to keep getting new acts (i.e. developing new products) or you’ll have nothing to sell. This creates a repetitive cycle of constant product development.

When I was an entrepreneur launching my first startup, I didn’t understand this distinction. As a result, I built my first startup around expiring products. That’s not necessarily a bad type of business, but it didn’t match my skill set. I’m terrible at constant, repetitive product development cycles. I like to create things once and then move on. As a result, running my first company was miserable, and, luckily, it ultimately failed.

Not all entrepreneurs are that lucky. In fact, I’ve met plenty of them who hate the type of work they have to do for their businesses. If you’re not careful, you could find yourself in the same position. To avoid it, you need to understand that different types of products inherently create different kinds of work. Neither type of work is objectively better or worse, but they will be personally better or worse for you.

Do you know what types of work you’re good and bad at? Do you know what types of work you enjoy and hate? Most importantly, do you know if the type of startup you’re working on will create a type of work you’ll want to be doing for the next decade? If not, you’d better figure it out before you get stuck building a company you hate.

Go to Publisher:

Entrepreneur's Handbook – Medium


Author: Aaron Dinin, PhD