Mapping Tech Startups

January 21st, 2013 by Reed Allmand

In today’s entrepreneurial landscape, investing in a tech startup is a risky business. More than 90% of tech startups fail. The reasons for these failures are as varied as the methods to success. Why do some startups succeed where so many others fail?

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Tech-Startup Successes

Successful tech startups have a few things in common. They each provide a service in high demand, they are generally created by educated professionals in the tech industry, and they’re each flexible enough to shift with changes in the tech climate.

Shopkick

This startup was founded in 2009 and launched its mobile app in 2010. The app was a bold, new way to deliver deals to customers at their favorite retailers.

The app’s designers created a customer-locating system more accurate than GPS. A small transmitter or a store’s existing music system were designed to emit an inaudible high-pitch frequency received by smartphone microphones. This frequency triggers the Shopkick app when a customer enters a participating store, and the app then delivers instant deals and discounts right to their phone.

Not long after the app hit the marketplace, its list of participating retailers began growing exponentially. Some of the Shopkick’s retail partners include: Target, Macy’s, CVS, Disney, Toys “R” Us, and many more.

Shopkick has received a slew of accolades including being named the 4th-most widely used U.S. shopping app in 2012 by Nielson.

Recently, Shopkick’s success is largely due to a partnership with Visa and MasterCard. The app offers users rewards at any location accepting Visa/MasterCard credit or debit cards.

LevelUp

In late 2011, LevelUp launched as a couponing service. After some months of decent growth, the company decided to revamp its app and executive staff.

The new app offering implemented a streamlined user interface which let users browse merchants by category, as well as their personal transaction history. This redesign also solidified the ultimate function of the LevelUp app.

This startup allows users to pay with their smartphones instead of their credit cards.

Additionally, users receive unique, first-time purchase discounts at stores and unlock more offers as they continue to shop at their favorite retailers.

As the app became more successful, the developers began implementing even more unique features, specifically geared toward users and businesses. LevelUp was the first mobile payment app to let users give to charity while they shop. On the merchant side, the app allows businesses to custom-design their own version of LevelUp, specifically geared toward their customer base.

Zynga

This company was created in 2007 by Internet entrepreneur Mark Pincus, who had suffered a fair number of successes and failures before founding the company.

Initially, Zynga was integrated with Myspace, but soon after switched to making games for Facebook. The company’s first title with their new partner was a small poker game which rocketed to success.

Pincus and his partner decided to invest in Mark Zuckerberg’s social media startup, Facebook, in 2007, just as it was beginning to take over the social landscape.

Since its inception, Zynga has generated $1.5 billion in revenue, largely from its successful partnership with Facebook. The games Zynga hosts on Facebook are immensely popular, especially Farmville. In fact, in 2011, all of the top five Facebook-hosted games were owned by Zynga.

These days, Pincus and company are very vocal about their goal of making Zynga synonymous with online gaming in the same way Google is with searching. As such, the company is constantly researching, developing, and releasing new titles in an effort to grow what was once a small, poker-pushing startup past EA (Electronic Arts) and other powerhouses of the gaming industry.

Tech-Startup Failures

The failures of tech-startups are multi-faceted. Some fail due to a lack of vision while others suffer from terrible timing. Ultimately, the one thing these failed start-ups share is a lack of foresight which might have saved their companies.

Tech Failure

Airtime

This online platform launched in June, 2012 at a star-studded release. Joel McHale of Community and The Soup fame, as well as Olivia Munn of Attack of the Show and The Newsroom were present to demo the new brainchild of Napster creators Sean Parker and Shawn Fanning.

The program works in conjunction with Facebook to let users video chat with friends. Users can also be paired for chats with strangers based on mutual areas of interest.

While everything about Airtime sounds like a recipe for a successful tech-startup, the devil is in the details.

For starters, the program took two years and $33.5 million in investment funds to come to fruition. Once Airtime finally launched, it was riddled with programming bugs.

Users also discovered Airtime employees were monitoring their video chats to filter inappropriate content. Because of the glitches in the programming and presumed user privacy intrusion, user numbers were far below early projections just months after Airtime hit the Internet.

To compensate for these failings, the company expanded Airtime to include Twitter compatibility, but was still slow to takeoff.

Myspace

The second of the social media giants was founded in August, 2003, but officially launched in 2004. Myspace’s success was rapid and unparalleled in its time. Only one month after its launch, Myspace had 1 million registered users. Five months after launch, that number had risen to 5 million. By July, 2005 Myspace was worth $327 million.

Myspace drew heavily on the design of Friendster, the Internet’s first big social media platform. By building on the successes and learning from the failures of its predecessor, Myspace was able to become the primary social networking site of the early 2000’s.

But Myspace’s glory would be short-lived. In October of 2006, 13 year-old Megan Meier killed herself due to bullying which occurred on Myspace. This event sparked a backlash of users and businesses criticizing the site’s loose policies.

As users began speaking out against Myspace, many of them fled to a new social media platform—Facebook. In April of 2008, Facebook brought in 115 million unique monthly visitors, the same number as Myspace. One year later, Myspace co-founder Chris DeWolfe stepped down as CEO of the company.

This event quickened the downfall and by January, 2011 Myspace had declined so much it was forced to release nearly half of its employees. In June of that year, DeWolfe publicly expressed disgust with the direction his former site had taken, right as the site was selling to Specific Media for $35 million.

The ultimate failings of Myspace are largely two-fold. On the one hand, Myspace was unable to keep up with the evolving desires of its users. On the other, many cite preference for advertisers over customers as the straw that broke Myspace’s back.

But Myspace isn’t resolved to being yesterday’s social network. In late 2012 the site relaunched under the stewardship of Specific Media and Justin Timberlake featuring a complete redesign. The new version implemented the photo-sharing utilities of sites like Tumblr and Pinterest. Following the relaunch announcement Myspace’s visitorship raised slightly only to level out in the following months. As of January, 2013 Myspace is the 138th most popular site in the U.S.

Friendster

How was Myspace in the position to become the foremost social network of its time? What happened to its predecessor, Friendster?

The creation of Jonathan Abrams, Friendster—the first large social media site—launched in early 2003. By the end of that year, the site had made $13 million. Myspace, which had largely built on Friendster’s code and functionality, began growing as the older site declined. By 2007, Friendster had gone from one of the most innovative ideas on the web to 13th among social networks.

By the end of the first decade of the 21st century, Friendster was largely irrelevant. On May 31st, 2011 the site erased users’ pictures, blogs, and more, effectively dissolving the site.

The truth at the core of Friendster’s failings is a simple one: the site couldn’t keep up with evolving social media practices. While users could generate profiles, there was very little functionality for users to interact with each other. Features like newsfeeds, a core component of Facebook, were completely absent from Friendster.

Although Friendster has vanished in the United States, there is hope abroad. A revamped version of the site was launched in Asia in 2011 and is growing rapidly.

There is no sure-fire method to success for tech-startups. But one can look at the practices of the past for indications on how to navigate this complicated landscape. The most successful tech-startups of the past few years are innovative, responsive, and adapt readily to the changes in their industry’s climate. Those that fail largely suffer from an inability to anticipate or respond to shifts in their customers’ desires.

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About Reed Allmand

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Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."

View all posts by Reed Allmand

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