Playing Stupid Games: Lessons Learned from a Declining Startup
Learnings from watching the decline of a startup that I used to work for. "Play stupid games, win stupid prizes."
Have you ever wondered why some startups fail despite having raised millions in funding? Well, I recently found out firsthand when a former colleague told me that the startup we used to work for had laid off its entire engineering team. This came as a shock to me because the startup had raised around 56 million dollars in funding, grown from 30 to over 100 employees in just a year, and even had a fancy office in the center of the city.
As I pondered on what had gone wrong, I listened to an episode of the Y-Combinator podcast on The Secret of Setting Smart Goals by Michael Siebel and
. A line in the episode struck a chord with me "Play stupid games, win stupid prizes." It dawned on me that the startup I used to work for had been playing stupid games, and we had won stupid prizes as a result.What stupid games did we play?
To start with, we had been focusing on the wrong metrics. Our goal was to grow new users in our main and up-and-coming markets, but we had fallen into the pitfall of counting downloads as new users without measuring the actual number of active users or even how many had gone through the registration process. We were excited about the number of downloads we had received from our ads, but we weren't tracking active users closely enough to know if the users we acquired were actually using the app. As a result, we had a misleading number that looked like we had a lot of users.
Our company culture also fostered excuses when we didn't hit our goals. It's almost impossible to hit all our goals 100%, but it's okay to set goals and not hit them. However, when people start making excuses, it's not helpful. Instead, we should own up to our mistakes and reflect on what happened, why it happened, and what's next.
We also seemed to be chasing after the "most" of something - most money raised, most employees, most beautiful office. We had raised 56.8 million dollars in our Series B round, four times more than a similar-sized competitor who was way more profitable. We were scaling up our company fast, expanding to more countries and creating new product lines. However, we were scaling on something that wasn't working because we had focused on the wrong metrics. Even though we were getting a lot of users in our main markets, we still hadn't figured out how to monetize.
What stupid prizes did we win?
Budget cuts, layoffs, closing offices, and running out of cash. Just before I left the company, we were cutting budgets on marketing, software products, and some company benefits. It was a signal that the company was probably not doing so well financially. After I had left, the new product I worked on was discontinued, and people who worked on that product were laid off. Moreover, the company had started closing down offices too. Now, they've laid off most of the engineers, and others have converted to contractors.
Final Thoughts
It's no secret that running out of cash is the number one reason why startups fail. However, I didn't expect it to happen so fast given the amount of money that we had raised. Despite all of this, I am grateful that my former company gave me a chance when I had just graduated from college and gave me a lot of room to grow. It's just unfortunate that a series of wrong choices and decisions eventually led to the outcome we see today. On the bright side, it's a great learning experience and something that I will remember for a long time.
In conclusion, startups need to focus on setting smart goals that are specific, measurable, achievable, relevant, and time-bound. They should avoid chasing after the wrong metrics, fostering excuses, and always trying to be the "most" in things that are not important.