The Startup Trough of Sorrow
The media loves to glorify the startup world, making high growth companies like Airbnb and Wag seem like founders’ paradise. The reality is that startup momentum is often thwarted by changes in core team personnel, product defects, or a misunderstanding of the target market. This halt in momentum goes by many names, some calling it “the struggle”, but Paul Graham best describes this as the “Trough of Sorrow”.
The term itself insinuates that all hope is lost, and for some, it is. But deciding the end of the road is all up to the entrepreneur. The ability to adapt and persevere is what separates good startups from great, scalable companies.
What causes a company to enter the inevitable Trough of Sorrow? Many issues arise from poor team and customer management, particularly for first time founders. Gary Teh, founder of GetData.IO, admitted his mistake of bringing on an ex-schoolmate as a co-founder to his project. After entering an incubator in Singapore, the two went separate ways due to differences in vision. The mistake originated in Teh’s eagerness to bring on someone largely because he knew the person. It’s important to build a team that complements your skillset and understands the vision of your project; otherwise, future fallout is inevitable. Hopes for the project turned positive after Teh met his friend’s roommate, who was interested in gathering Real Estate data. His new partner helped him quickly realize the code infrastructure he built was unsuitable for scale. After spending 2 years updating and improving his code infrastructure, the project began to gain traction, and the team saw increased volume to the site.
While experiencing a trough of sorrow comparable to the Midwest, according to Joe Gebbia, the founders of Airbnb decided to go to New York and face their target market head on. What started off as a project to take more professional photos of the listed homes turned into an epiphany moment for the company. Gebbia would have conversations with his customers and discover that features on the site that were designed to take 3 clicks were extremely difficult to navigate. After making the required changes to the website, the founders saw a spike in sales from existing customers. Where many entrepreneurs would have given up, Joe Gebbia and his co-founders persevered. Something as simple as customer discovery is what saved Airbnb and turned it into the $25 billion company it is today.
The most significant spiraling factor for entrepreneurs in the trough of sorrow is self-doubt. If Gary Teh and Joe Gebbia didn’t truly believe in the value their projects provided to society, they would not have persisted. It would have been the end of the road for both entrepreneurs. A commonality between the two founders is the negative feedback they received from investors and incubator mentors. While Teh was in the Singapore incubator, the head of the program was convincing him that the project was going nowhere, and that it wasn’t worth any more time and effort. Luckily for Teh, he persevered for another six months and met his new partner a short time later.
As for Airbnb, the founders spoke directly with 15 notable angel investors, of which only eight met with them for coffee, but all rejected their idea. In fact, a comment on Tech Crunch illustrated many concerns of investors in the industry: As soon as the company scales, they will have issues with those who steal and murder and ultimately fail. Luckily, through a clever marketing campaign selling cereal, a “Visa” funding round, and customer discovery, Airbnb’s founders escaped their self-doubt and turned the company around.
So how do you avoid the Trough of Sorrow? Unfortunately, this stage of a startup is inevitable. However, there are methods one can take to lessen the impact of this difficult time. First, garner enough retained earnings to cushion the impact of a stagnation in sales. This will allow you to hone in on the real issue and not worry as greatly about your cash flow burn rate. Next, limit your product or service offering to what you do best. Start with a niche product that delivers the most value. Refining this offering through market research and development can help deliver more value to your target segment. Lastly, believe in your idea and avoid an immediate strategic pivot. Not every problem requires a major change in strategy. Sometimes the solution is as simple as relentless determination and surrounding yourself with a team that understands the company and its customers.
For all founders currently in the Trough of Sorrow, keep fighting for your idea and know your customer better than they know themselves. With that mindset, your company will make it to “the promised land”.
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