The history of tech is riddled with failures of epic proportions. Google glass anyone? But the most interesting companies are those that came close to failure and managed to turn things around at the last minute.
Here are 5 tech companies that nearly failed – and the lessons they can teach us about achieving success.
Reddit – the cuckoo
When you have the option of two restaurants, which do you book – the established one that everyone wants to eat at, or the new one that’s always empty? When Reddit first launched in 2005, it faced a problem that’s common for content sites – it had no visitors.
To get things going, Reddit’s co-founders – Steve Huffman and Alexis Ohanian – created hundreds of fake user profiles and used them to begin conversations on a range of topics. This made the site look far more popular than it actually was and helped them set the tone for the kind of discussion they wanted to see. Over time the fake user accounts were retired as real users took over.
By creating an atmosphere of success, genuine success followed. In February 2018, Reddit was the 3rd most visited site in the world, with over 234 million unique users a month.
The lesson learned? Sometimes you have to fake it until you make it.
Huffington Post – the butterfly
The Huffington Post was launched in 2005, but was initially regarded as a flop. Critics went after the poor quality of the content and the lack of original and hard-hitting material.
Founder Arianna Huffington had largely promoted the site by getting her celebrity friends to write content, but things really took off when ‘Huffpo’ opened its doors to regular writers.
Thousands of bloggers, drawn by the opportunity to raise their profiles, began generating original content for the site. With some heavy investment in search engine optimisation, readers poured in. Huffpo eventually earned a Pulitzer Prize for national reporting – which silenced the critics, at least temporarily.
In 2008, the Observer named Huffpo the most powerful blog in the world. And in 2011, AOL bought the site for $315 million, making Arianna Huffington editor-in-chief of its media group.
The lesson learned? Escape a constricting format by diversifying your offering.
Netflix – the phoenix
In 2005, Netflix had around 35,000 films in its collection and was shipping 1,000,000 DVDs by mail each day.
By 2011, they were attempting to join the broadband streaming boom by separating into two separate companies – one the legacy DVD-by-mail business and the other online. They tried to do too much too fast and put prices up to compensate, angering their customers. In the fourth quarter of 2011 alone, Netflix lost 800,000 subscribers. Their stock value plummeted.
Thousands of emails arrived from disappointed customers. With things looking bleak, CEO Reed Hastings put out a heartfelt blog post apologising and promising to fix his mistakes.
It worked. The stock stopped falling as fast and Netflix invested heavily in original content for its online service. They sold off their side projects and focused on providing quality content. In May 2018, Netflix had a market capitalization of $152.7 billion – making it the world’s most highly valued media and entertainment company.
The lesson learned? Refocus on your primary values and rise up from the ashes.
Airbnb – the camel
A lot of startups have to scrimp and save to get by initially, but Airbnb took it to the next level. Investors weren’t as interested in the room letting business as they are now, and founder Brian Chesky was living off cereal and struggling to pay the rent.
A week after launching the site, they had over 800 listings – but still weren’t making any money. In the middle of the 2008 elections, they created spoof cereal boxes featuring the presidential candidates and raised $30,000 – enough to keep them going a while longer.
After receiving endless rejections, the company was finally accepted into Y Combinator, a startup mentoring programme. Word got around about the company’s potential and they were soon receiving hundreds of thousands of dollars from investors.
These days Airbnb is worth over $38 billion and features over 4.2 million listings. The founders still live in the same flat they shared at the beginning – but they aren’t living off cereal any more.
The lesson learned? Success can take a while to arrive, so work as cheaply as you can.
Slack – the chameleon
Stewart Butterfield never set out to create messaging app Slack. In 2009, he launched games company Tiny Speck and started work on a game called Glitch. With developers split between the company’s US and Canadian offices, Tiny Speck created a team messenger app to consolidate all their communication in one place.
Millions of dollars and a failed launch later, it became clear that Glitch was a flop. The company let 30 people go and, with money running out fast, honed in on their invaluable messenger app. Butterfield refocused his team’s efforts and they became Slack.
Interestingly, this wasn’t the first time Butterfield had found success through failure. In 2005, his first games project failed – but a popular game function became image-sharing site Flickr.
By February 2014, Slack had 16,000 daily active users. By October 2014, they were worth over a billion dollars.
The lesson learned? Be adaptable and recognise where your value lies.
What does it all mean?
Sometimes it’s best to quit while you’re ahead. Sometimes you need to double your efforts. And sometimes you need to change what you’re creating entirely.
It all seems pretty conflicting, but one thing is clear – when your business is failing, you need to do something about it. How open you are to change could be the difference between failure and success.
Keep an eye out for early signs of failure but don’t panic if things don’t go entirely according to plan. If you have a strong product or service and stick to your core values, you have every chance of success. Just be ready to adapt a little to get there.
Join us at Design/Build/Market: Successes and Failures for more insight into building a successful startup.