34% of startups fail due to lack of product-market fit. Learn how to avoid it for only $15!
InoVVorX was an app development company that both worked for clients and built their own projects. The business did it well for some time, having a team of 25 people, making $300k from their services, and raising $100k. However, their plans on working on their own products (too many of them) meant they started burning all the money and eventually had to shut down.
November 19, 2020
Sponsor Failory and get your business & product in front of +20,000 CEOs, startup founders, entrepreneurs, developers and marketers every month.
Do you want to grow your business? With GenM you can get free marketing from an apprentice as part of their training. The student will work 40 hours per month creating content, increasing SEO rankings, carrying out advertisement campaigns...
Want to take ownership over the growth of your business, but don't know where to start? Get 1-on-1 advice from vetted growth experts about your business.
NoGood is your on-demand growth squad, specializing in eCommerce, SaaS, and B2B brands. Ready to crush your 2021 growth goals? Schedule a call today!
A 5-minute read that's informative, witty and free? That's Morning Brew — the daily email that delivers the latest news from Wall Street to Silicon Valley.
I am an entrepreneur/programmer from Bangalore, India in my early 30’s. Currently, I am working as a people manager and running a couple of content-based websites.
InoVVorX was a web and mobile application development company that a friend and I started back in 2010. Our idea was to use the service based wing to generate enough revenue to build products.
I took up the role of the CEO, while my friend handled the duties of a COO. We applied no thought about our job duties while picking our designation. Today, it is a no-brainer that I should have been the CTO. But in any case, that had little to do with our failure.
After a rollercoaster ride, we shut the business down in 2016.
I started writing code back in my teens because I was always fascinated by it. The idea of starting a software company started somewhere in those days itself even though the details were fuzzy back then. After my studies in Computer Science, I took up a job in a software company. I did not want to jump right into starting a venture before gaining exposure to the industry.
While I worked at an organization for 2 years, I started developing web applications part-time for known people along with a classmate from engineering. That’s when we started crafting a plan to venture out on our own. Somewhere during that adventure, InoVVorX was born.
A word of advice here. If you’re thinking of a name for your company, please pick something that is simple to pronounce and straightforward to spell. No one gives a rat’s ass about the name of your company except you. We opted for a fancy name. Every time I met a potential client, I would mention, “I am from Inno-Works, I-N-O-V-V-O-R-X.” Even after that effort, people would still get the spelling wrong.
Anyway, we started InoVVorX as a service-based company, with a vision of building a web-based product. Back in 2010, raising investment at an early stage of a startup in India was an uphill task. Founders had to bootstrap and build the business to a certain extent before investors would consider putting in a small sum of money into your venture. Once you achieved reasonable sales and growth, the Series B funding had a lot of opportunities though. Today, that situation has changed drastically.
Both of us co-founders come from a humble background and we did not have a lot of cash in hand to run the expenses until a growth stage. The initial capital we pooled in came from the little savings we gathered from our 2-year job stint.
We knew that our only option was to find a way to generate revenue early. Since I had a strong background in programming and every business those days was looking for a website, we spotted an opportunity to fuel our business. We hired programmers at a reasonable cost and it worked.
We used the money to hire other team members required for sales, designing, admin work, and programming. As we gained clients, I focused all my effort on building products with a couple of team members while the others handled the service-based business.
Our plan was right on track.
Over the course of 5 years, we developed multiple products. For brevity, I will talk about two major ones.
MedZee - An end to end practice management solution for dentists along with the option for users to book appointments.
Doondoo - A business listing website with extensive details of businesses and gamification for end users. It was similar to Yelp, except that it wasn’t limited to restaurants or services alone. Our vision was to list every business no matter what the segment. The idea was to bring together comprehensive information about every brand in one place.
Coming from a strong technical background, building a product was the easy part. It took around 2-3 months each to build the first versions of MedZee and Doondoo. Given the sophistication of the products, that was a major feat that I am proud of even today. They were built over different timelines and expanded over time.
We managed to raise an early-round of small investment for MedZee. The other teams from the same investors were shell shocked at the pace we could develop products. So that was clearly our strength, and unfortunately, also the only one, which I will get to later.
Our service-based business was running side by side. We worked with eCommerce clients like Decathlon in India, Property Finder from the middle-east real-estate segment, and other industries from different countries. Here is a soft copy of our brochure for the service-based business. We reached a total team strength of 27 employees at one point.
NoGood combines open-minded creativity with a methodical, data-driven approach to find untapped growth opportunities for its clients. Specializing in eCommerce, SaaS, and B2B brands, we’ll help you crush your 2021 growth goals.
Technicality was our forte, so we resorted to digital marketing whenever possible.
We had a real gap in terms of our in-person sales and marketing skills. Call it lack of confidence, the reluctance of introversion, or the influence of laziness, both of us as co-founders had a major allergy towards meeting customers. To cover that gap we hired sales executives who would meet dentists in the city and get them on board. Our idea was to sell the application as a SaaS product.
The dentists were happy to use the appointment scheduling module because it drove revenue their way. But, the practice management side of the application was barely used because a bigger player with a much higher investment was dominating the market. Though our features were on-par, dentists were already using the other product. Migrating to ours would mean losing all their patient records.
We managed to bring over 900 dentists on-board and scheduled over 4000 appointments in a span of a year. These 900 users were spread across 5 different cities. Barring the city we were in, we never visited any dentist from any other location. We hired two passionate interns who signed them up along with their pricing details and photos using phone calls. They were working remotely while they managed to pull this off, so they deserve a round of applause.
For getting traction, we primarily used Facebook Ads and SEO. That was right in our expertise and we managed to iterate and experiment with different digital marketing options for conversions. Since the SaaS model was not working, we pivoted our monetization model and took a percentage cut for every successful appointment.
For Doondoo, we hired two junior resources for looking up information on the internet, as well as calling brands for data population. We listed thousands of businesses and I cannot recall the exact figure right now. At its peak, we had about 200K monthly page views driven by SEO. We tried different monetization models by contacting brands, but we had little success. Google ads worked reasonably well(~2K USD/month), but that was nowhere enough to scale and grow.
Here is our intro video about Doondoo. The quality seems laughable today, but given the tools available in 2012 and our limited skills/budget, we did a reasonable job:
To be honest, though we managed to drive a fair amount of traction for the two products, we were never in the right direction. We had many fundamental flaws in the way we ran the business.
With both products, we did not have a monetization model good enough to bootstrap the business. Also, we neglected our service-based business over time which meant that we were running out of money to manage our expenses. Whatever cash we had earned building websites and mobile applications was spent on bootstrapping the products.
We reached a point where we had trouble paying salaries and had to lay off people. We were trying to keep the business floating by generating service-based revenue on one side and raising investment on the other. And, we did neither effectively.
From there, it was only a downward spiral. We needed more people to generate revenue and we did not have enough cash in hand to pay them.
Our failure was due to an amalgamation of reasons. I will elaborate on the major causes:
Focus on too many things:
Our focus was all over the place. We were running a service business along with 2 different products. Each of them was registered as a separate company on paper. Overall, we did a mediocre job at all three.
Besides, shiny object syndrome was running strong within us. We wanted to grab every possible opportunity at success. I have only spoken about two major products in this article. A common mistake among entrepreneurs is to over-engineer products or develop something which isn’t a good product-market fit. Our blunders went much beyond that. We built several products simply because we had the technical strength to write code rapidly.
We built a platform for people to showcase their talent in video, audio, pictorial, and content form. We built a portal for short filmmakers. I even spent a month developing a Quora replica because it seemed cool to do. There are other smaller products that I cannot even recall today. None of these helped drive any revenue or visibility, but they took months of programming effort. If there was a trophy for combining technical ability with stupidity and wasting time, I would win it hands down.
We would build a product and not spend time nurturing it towards a path of growth. It was like planting seeds in different orchards and failing to nourish any of them before they even sprout.
We never gave the right areas of business the attention it needed. Had we focused on one business alone, we’d have done much better. I am not saying we would have turned into a Unicorn, but we would have headed towards a better outcome than we did.
Poor tracking of cash inflow/outflow:
We had no idea where the money was coming from and going to. We were caught in the spiral of doing things and we did not care as long as we had enough money in the account to handle expenses. We believed we could make it big and handle the accounting nuances later.
We must have spent a considerable amount of money on unnecessary expenses. The reason I say “must-have” is because I have no clue how much. When we sat down with the accountant for taxation each year, we’d pull our hair trying to figure out what each expense and revenue was for. All our transactions were clean and ethical, but we had little idea what went where.
In hindsight, that was the primary reason why we ran out of money. Had we watched our cash flow, we’d have a longer runway to sustain the business.
Lack of experience:
I started with the thought process that I already had the necessary skills to build a successful business. I never spent an ounce of my time learning from other people’s mistakes or understanding how successful ventures operated. I assumed I was smart enough to learn the required skills on the fly. In reality, entrepreneurship involves so many diverse aspects that you need to put in the time to build expertise by talking to other businessmen, reading books, researching other startups, and looking for mentorship.
Assuming you already have the necessary skills to become a successful entrepreneur leads to the death of startups. Unfortunately, most entrepreneurs assume they already have what is required to run a successful business.
Entrepreneurship is like having sex in the shower. It sounds fancy as a concept but when you try it yourself you’ll realize that neither is it easy to do it right nor enjoyable throughout like you presumed.
Failure to segregate responsibilities:
Though we had different designations, as co-founders, we both tried to do everything. I have gone on sales meetings, done the taxes, handled hiring, participated in designing, and involved myself in digital marketing. My cofounder took part in all those responsibilities too. Programming was the only exception which I handled myself. That was solely because he wasn’t a techie. If he was, I’m sure we’d had written boatloads of code sitting on the same table. All in all, we both delved into all possible areas without any ownership or accountability making the whole process a major mess.
Lack of a clear plan:
We had no clear vision as to where we were headed. Our only plan was, “We want to make it big.” We could not specify what “big” meant to us. We were doing things adhoc. If someone asked us what did we intend to achieve that year, we would end up scratching our heads. We focused on what seemed right at the moment instead of setting a destination for the future.
We were quick to pivot when things weren’t working, which was a good thing. But, again, we did not define goals for the pivot either. Our operations were like an empty boat in the river. We were flowing in the direction the current took us trying to find green pastures wherever we landed.
After we ran out of money, I took up a full-time job and continued running the business out of my pockets while my partner moved on. After another year, I realized that the business was going nowhere. So after 6 years, I shut down the business. The closure was a mere procedure. It felt like a lost long war which only had to be declared ended.
I had no regrets about the time spent on it. I felt no major emotions shutting it down because I knew that it was only a temporary pause for my entrepreneurship dreams.
Like I said before, we had no clear idea of how much we were making or burning. So, I cannot give you exact figures or monthly revenues. Overall, we must have burnt over $300k (USD) which was primarily earned from our service business, and another $100k in investment raised.
Since we bootstrapped most of the business, we barely lost $5000 each from our personal savings. I do not want to put a tab on the money we lost as opportunity cost over the years because that experience has taught me lessons that I would otherwise never learn.
The primary thing I would do is focus on one product. I would build a team where each person covered the weaknesses of other team members to form a strong cohesive foundation. I would refrain from involving in all possible aspects of the business, focus on my core areas, and encourage others to do the same.
I would chalk a short term and long term plan for the business without letting one of them dilute the other. And of course, I would expect someone in the team to track where each penny of the bank account is coming from and going to.
After my journey as a failed entrepreneur, I read a lot of books. My favorite is The E-Myth Revisited. I believe every entrepreneur must read this book before starting his/her first business.
The Lean Startup is another good resource for tech startups. The Hard Thing About Hard Things goes through the challenges in terms of thoughts and decisions that a startup founder faces.
A new entrepreneur must embrace ignorance and try to harness knowledge from any possible source. Today, you’ll find tons of insightful information from blogs, online courses, and books by clicking a few buttons sitting in front of a table. Assuming you already possess the skills or considering yourself too busy to learn is a recipe for failure.
You can find me on my blog, Productive Club. I write about productivity, time management, and decision making.
I have written a book called The Magic of 2 Seconds, which provides different tactics for making better decisions in just 2 seconds.
Invite us into your inbox and get immense learning and 80+ deals on tools to help you scale your startup (worth up to $50,000)!