June 28, 2013
In the startup world, failure is cause for celebration. This is true for three reasons.
- Although not the preferred outcome, failure is a byproduct of risk taking. Taking risks is the only path to success.
- Celebrating failure reduces the attached stigma. Many fail to take action out of a fear of how it will reflect on them.
- Failure is synonymous with experience. As Thomas Edison famously said, “I have not failed. I’ve just found 10,000 ways that won’t work.”
That’s why, each Friday, we bring you a new story of an entrepreneur’s “failure”. Failure Friday is about helping you avoid common startup mistakes, it’s about squashing the stigma, and it’s about peering inside the minds of entrepreneurs who’ve achieved success because of their failures.
#FailureFriday: Convoluting UX and Mismanaged Cash Flow
My name is Jonathon Lunardi and I founded the Veteran Central platform. The original organization started two years ago and was incorporated as a for-profit company with a mission to provide online resources for Veterans and their families to be more successful in life. The company developed a robust online portal using Drupal and the domain name used was VeteranCentral.com. We achieved close to 4,000 registered users and $150,000 in revenues in 6 months time. The website and company were recently shut down due a number of mistakes and failures, which I am here to share. Failures ultimately are critical experiments that inform
Failure #1 – Product strategy shotgun approach. The beautiful thing about using an open-source PHP framework such as Drupal is the multitude of free plugins that are available to install and make available almost instantly to users. Our organization had a poor chain of command with these decisions and many times our developers would install plugins because various internal leaders asked them to do this. Since it was so easy to do, we had many various applications competing for attention on the site and not a clearly focused value proposition to the user. Looking back on this approach, it did teach us that simple is better and much easier for a startup to really hone in on how users want to use the website through targeted measuring and feedback loops.
Failure #2 – Cash flow management. Veteran Central quickly obtained $150,000 in revenues from family’s and friends’ businesses that wanted to see us succeed. The problem with this money was that it was not tied directly to value but more in a belief to see us succeed, which is more of a donation or charitable contribution. Our staff and vendors saw this quick infusion of cash as a sign that we were going to grow big, very quickly, which caused spending and staff compensation demands to get out of control. Our revenues were tied to a belief in our team and not in our product ultimately and then our team failed to deliver a product that could sustain similar revenue achievements. Jonathon Pirelli from Fortify.vc once said to treat cash like water in the Sahara desert. I wish we had followed that advice and not gotten caught up in our own momentum causing many unnecessary spending risks. It was fun while it lasted.
In the end we learned a considerable amount about product delivery needing to be aligned to specific customer needs and that ultimately the reason we received that money was because many of our givers were simply giving us a donation to a cause they believed in. We took all of the momentum we gained with our .com venture and now have created a nonprofit 501(c)(3) organization called the Veteran Central Foundation, which can be found out veterancentral.org. We are still on a mission to serve Veterans, but are focused on providing work-at-home, virtual job programs for Veterans and their spouses anytime, anywhere. The new venture has a much more realistic financial management plan in place and we are systematically executing as a controlled team to deliver donations, jobs to Veterans, and relationships with companies.
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