There are many reasons why startups fail, and sometimes it’s a combination of factors that lead to that failure. In the competitive landscape of high-tech startups, having a promising idea isn’t enough.
From bad timing, and shifting economic conditions to lack of market appeal and poor management, startups face many challenges to becoming sustainable. A lack of differentiation, or unique value, from existing products, and market readiness are also among the reasons startups fail. Below, I’ll cover some notable examples of such companies, and list the key takeaways entrepreneurs need to avoid similar mistakes.
When I Wintessed a Startup Fail Due to Lack of Unique Value
Helisys, Inc., a public company, was one of the pioneers in 3D Manufacturing and I served on its board of directors for several years. It was once one of the fastest-growing high-tech firms in Los Angeles. Manufacturers such as Boeing and General Motors used their technology. But Helisys manufactured 3D prototypes, not working objects. They did this by gluing cross-sectional layers of the target device. In the early 1990s, a host of new 3D manufacturing technologies were introduced, including:
- Fused Deposition Modeling
- Stereolithography
- Digital Light Processing
- Selective Laser Sintering
- Multi Jet Fusion
- Selective Laser Melting
- Direct Metal Laser Sintering
- Electron Beam Melting
- Material Jetting
- Binder Jetting Hybrid Manufacturing
- Continuous Fiber Reinforcement
These competing technologies limited the market opportunity for Helisys. They no longer offered a unique value or superior product.
This is one example of why startups fail due to lacking a unique value. Though the market was there, they failed to adapt to the changing technology and increased competition.
Why Startups Fail: A Lack of Unique Value from the Start
Some other examples of startups failing due to lack of differentiation, or unique value, are listed below. Yet, unlike Helisys, these companies didn’t have unique value or differentiation in the first place.
Some of these summaries were created with the assistance of ChatGPT.
1. Juicero: High-Tech Juicer Lacking Unique Value
Juicero introduced a high-tech juicing machine designed to press pre-packaged fruit and vegetable pouches, aiming to offer a convenient health solution. However, it was soon discovered that the pouches could be squeezed by hand, rendering the expensive machine unnecessary. This lack of differentiation led to poor market adoption and the company’s eventual shutdown.
2. Jawbone: Health Tech Without Differentiation
Jawbone started as a pioneer in wearable technology, producing Bluetooth headsets and fitness trackers. Despite raising nearly $1 billion, the company faced fierce competition from Fitbit, Apple, and other players. Jawbone’s products lacked differentiation and failed to dominate any specific segment of the health and fitness market.
Adding to this, instead of carving out a unique niche, Jawbone tried to compete on too many fronts, from hardware design to app development. The result was a series of product failures, cash flow problems, and eventual liquidation in 2017.
Market Readiness: Another Reason Why Startups Fail
In my last blog on the topic of why startups fail, I covered economics and timing, which included a lack of sufficient infrastructure. This lack of infrastructure also affected the companies listed below. But a main contributing factor here was also market readiness, and ultimately, unique value. The products were either too expensive due to a lack of sufficient and affordable infrastructure, or they simply didn’t provide a unique value to potential customers.
Three Examples of a Lack of Market Readiness
1. General Magic: The Precursor to the Smartphone Era
In the early 1990s, General Magic set out to create a personal communication device that would revolutionize how people connect and share information. Despite assembling a team of talented engineers and visionaries, the company faced challenges due to the limitations of the technology available at the time. The devices were expensive, and the infrastructure to support such advanced communication was not yet in place. Consequently, General Magic couldn’t achieve commercial success. However, many of its innovations laid the groundwork for future technologies, and several alumni went on to play pivotal roles in tech giants like Apple, Google, and eBay.
2. WebTV (MSN TV): Bridging Television and the Internet
Launched in 1996, WebTV aimed to bring internet access to television screens, targeting users who were not familiar with computers. While the concept was forward-thinking, the technology of the time couldn’t deliver a seamless browsing experience on TV screens. Limited bandwidth and low-resolution displays hindered usability, leading to the service’s decline and eventual shutdown in 2013. Today, with advancements in internet speeds and smart TV technology, streaming services and internet-enabled televisions have become commonplace, validating WebTV’s original vision.
3. Vreal: Virtual Reality Streaming Platform
Founded in 2015, Vreal aimed to create a platform for users to interact with content creators in virtual reality. Despite securing significant funding, the company struggled due to the nascent state of the VR market and the high costs associated with VR hardware. The limited adoption of VR technology at the time made it challenging for Vreal to build a sustainable user base, leading to its closure.
What Can We Learn from These Startup Failures?
So, now that we’ve seen some examples of how and why startups fail due to the challenges of clear differentiation and market readiness, what can we learn from this?
We know that pioneering a new product category requires more than just a visionary idea. To be viable and sustainable as a startup, your product also needs an ecosystem capable of supporting its functionality and user experience. Your product also must offer a unique value and differentiation from existing available products.
Also, market readiness is as important as technological innovation. It’s necessary to evaluate whether consumers are prepared to adopt new technologies and whether the cost of entry is feasible for the target audience.
Key Takeaways on Lack of Unique Value and Market Readiness
- Assess whether your product has a clear value proposition, and that there is differentiation from existing, or competing products.
- Ensure that the existing technology can support your product’s requirements effectively and affordably.
- Determine if consumers are ready to embrace your innovation, and that the value is worth the price for your target market.
- Consider whether launching now is optimal or if waiting for technological advancements could improve your product’s chances of success.
- Being willing to analyze and adapt to changing markets, competition, and shifting technologies.
- Focus on solving real problems, rather than relying solely on technological innovation.
- Understand existing solutions and identify gaps your product can fill uniquely.
By learning from these examples, startups can more effectively align their groundbreaking ideas with current technological and market realities. This allows them to better position themselves to stand out from their competitors, offering unique and valuable solutions that appeal to their target market.
If you need more resources for information and tips on creating viable sustainable and sustainable startups, please review my blog.
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