Hindsight 2.0: Lessons From A Failed Web 2.0 Startup

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Hindsight 2.0: Lessons From A Failed Web 2.0 Startup

 


Certain circles are buzzing with the news that Kiko is on sale on eBay. I first heard the news last week, but it wasn’t public until today so I didn’t want to write about it.

For those that don’t know who/what Kiko was, it was one of the prototypical Web 2.0 companies (a free online calendar with AJAX, written in Ruby On Rails and funded by Y Combinator). It doesn’t get much more Web 2.0 than that. I was actually present at the “coming out” party when Kiko presented at the local Web Innovator’s meet-up last year here in Cambridge (USA).

For those interested in tracking the eBay auction: http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=120021374185 (starting bid is $50,000).

Now, I actually like the people behind the Y Combinator companies . The ones I have met are smart, passionate, hacker types. As such, this article is not the Kiko guys from pursuing their idea. But, in my book, Kiko seems to have been a failure and it’s important to reflect for a bit and see what we can learn from it.

Lessons From The Death Of A Web 2.0 Startup

  1. Google Is The New Microsoft: Back in the day, lots of software companies made sure that their business models kept them out of the cross-hairs of Microsoft. They didn’t want to get stomped on. Today, though this is still the case in some sectors, Google is a much more formidable (and scary) competitor. Google has all the power of a multi-billion dollar company, but a lot of the nimbleness and energy of a startup. With Google’s introduction of Google Calendar, Kiko really didn’t have a chance with it’s original business model. Of course, they didn’t necessarily know this was coming, but if I had been them, I’d given this decent odds. That is, it shouldn’t have been that big of a surprise.

  1. Be Realistic: When original news of Google Calendar came out, the Kiko founders didn’t seem particularly worried. This is ok. You don’t have to look scared to survive. But you do have to be scared and make some adjustment in the light of an oncoming train. Chances are, there was something that could have been done with the Kiko business that would have shifted them away from competing with Google Calendar. They likely needed a small dose of reality.

  1. Factor In A Plan “B”: Lets say you’re calculating the expected value of your startup pursuit. The primary driver should be “Plan A”. That is, we have a small probability X of a large outcome Y. But, it helps to have a “Plan B”. That is, we also have a reasonably large probability Q of much smaller outcome R, should the need arise. This way, they could have made some money from the exercise. Some would argue that having a Plan B is a bad idea because it defocuses you from Plan A (burn your bridges and all that). If that’s the way you like to play it, that’s fine. I personally like to understand the tradeoffs and have some idea of a Plan B, if possible.

  1. Even With Web 2.0, Popularity Won’t Save You: Kiko had a fair amount of buzz when they launched. It’s not like they died because nobody heard of them and they lived a life of quiet desperation writing code in some far-off place. They were a Y Combinator company. They were one of the “chosen ones” by Paul Graham. They got a huge amount of visibility and free PR. They had a Google PageRank™ of 7. They likely got a bunch of registered users. But, nowhere in the eBay listing do I see a value associated to those assets (what they are valuing primarily is the domain name and the source code). I find that somewhat telling.

  1. Hindsight 2.0 Is Still 20/20: Of course, it’s easy for me to pontificate on how Kiko may have been doomed to failure from the beginning (and I personally thought it was). But, the reality is, I didn’t know what those guys had in mind and I have to give them credit for trying. I just wish all that talent had been spent doing something that was almost as fun and cool – but would have actually created something of value.


It’ll be interesting to see if anyone makes a bid (starting price is $50,000). I won’t be one of them.

Any other lessons you think we should all learn from this small example? The part that worries me is that I see nothing particularly anomalous about Kiko. That is, this is likely one of the early ones, but we’ll see a lot more.

Update:  For a more factual look at what actually happened (from an insider's perspective), please see Richard White's article.  Richard takes a much more in-depth look at the situation.  I plan to follow-up with an article next week that responds to many of the comments. 

Posted by Dharmesh Shah on Wed, Aug 16, 2006

COMMENTS

The thing is, purchase by Google is a common exit strategy among these companies. Paul Graham has stated his predilection for the build to sell model, so this is even more true for the Y-Combinator startups. A product or service that Google might be interested in purchasing, without it being something Google's already working on, is a teeny tiny target unless you're Sergey's drinking buddy. So saying "they ought to have considered this possibility" isn't really fair. Of course they did. In some ways, their idea was validated: Google certainly IS interested in a good online calendar. They just already had one that didn't suck. The real lesson here, IMHO, is the double-edged sword in hoping for acquisition by a company that's really got it together

In fact, this might make some less nimble (but more evil) companies better potential buyers. :) They're more likely to need to buy to catch up.

posted on Wednesday, August 16, 2006 at 6:11 PM by Ian Olsen


Well, I'm speculating here, but I don't know that the project ended up being what either the founders or the investors wanted. If they both think it's a success, than so be it -- I sit corrected.

Generally, when software assets are placed on the open market it is rarely a brilliant strategic move to capitalize on a major success. But, I could be wrong.

posted on Wednesday, August 16, 2006 at 7:32 PM by


I don't know about this post - there is an _aweful_ lot of speculation in how you connect what you're saying to the kids at Kiko.
Perhaps they realized after being at it for a while that they didn't really want to pursue it and it's that simple. Maybe they had to make a decision about whether they'd stick with what they loved: ideas, technology, programming and have to deal with sales and marketing wankers in order to move ahead. Maybe they have a new idea and can't pursue the both simultaneously. Who knows?

It's not that I disagree with the vast generalizations above, I'm just a bit skeptical that lessons can be learned when the connections between those lessons and the experience are pure speculation.

posted on Wednesday, August 16, 2006 at 7:45 PM by David Seruyange


David,

These are fair points. But, I would still argue that regardless of whether they simply changed their mind and decided they wanted to do something different, it doesn't change the fact that they spent a fair amount of their time and a little bit of other people's money pursuing this.

The only real "lesson" in the article (and even that is of questionable merit) is that it might help to actually consider the impact of events like Google entering your market.

I've got a bit of bias here, as I felt that they implemented a slick product -- but it might have survived had they made it available as an OEM offering to larger software vendors that needed calendaring capabilities. It always seemed more of a "feature" than a "company". But, that's just my opinion.

posted on Wednesday, August 16, 2006 at 7:55 PM by


The technology behind Kiko is good, but they simply don't have a working business model.

I suppose Kiko is worth the $50K asked at eBay or even a bit more if you consider the software itself. But if you look at it just as a business and oportunities, it is not worth much.

posted on Wednesday, August 16, 2006 at 8:20 PM by Boris Yankov


I find it hard to believe that Kiko had a PR of 9. Only very well known companies have a PR of 9 (microsoft, apple, etc being the few). Are you sure you got the correct number?

Kudos to Paul Graham for initiating Y Combinator in the first place :)

posted on Wednesday, August 16, 2006 at 9:15 PM by Jawad Shuaib


It could be an abomination. Who knows?

posted on Wednesday, August 16, 2006 at 9:21 PM by jsaltz


Jawad: My apologies. That was a typo. Kiko has a Page Rank of 7 (Seven). Article has been corrected. Thanks for pointing this out.

posted on Wednesday, August 16, 2006 at 9:40 PM by


I don't understand why they didn't try to monetize this with the existing user base. Even AdSense would get them more money in a year than what they'll get with the auction minimum. Unless several people are waiting at the wings to make last minute bids...

posted on Wednesday, August 16, 2006 at 9:48 PM by Joe


I don't get it -- Paul Graham is a lot smarter than I am and it just seems so incredibly obvious that a stand-alone online calendar is practically valueless, no matter how cool. I think Dharmesh himself in a previous post talked about barriers to entry, and if you can look at a site and say, "I can do that in a weekend," you don't have a worthwhile product.

Can anybody with 2 years of web development experience truthfully say that they couldn't put an online calendar app together in a long weekend? Perhaps it wouldn't be quite as slick or ajaxy, but it would likely be functional enough. If having a stand-alone web 2.0 calendar app suddenly became hugely profitable, we'd see 800 more within a month. There simply is no barrier to entry.

What is the horrible pain that Kiko made bareable? Why did they think they were more qualified to compete in this area when an online calendar app is clearly much more valuable as part of a software suite? Was plan A, B, and C selling out to Google?

posted on Wednesday, August 16, 2006 at 10:34 PM by Doug Bright


Doug: Not sure if Paul Graham is smarter than you are (since I don't know you), but I'm sure he's smarter than I am.

I think we may be overthinking the degree of influence over Kikio that PG had. I think his MO is more to find really smart, passionate hacker-types and give them modest funding to build a prototype and see what "sticks". In some cases it does, in some cases, it doesn't.

One of the things people like about YCombinator is that they are nowhere near as intrusive as VCs. They basically bet on the right people and let them do their thing.

Don't tihnk what happened to Kiko is really a reflection on PG's intelligence. Simply how they've chosen to play the game.

posted on Wednesday, August 16, 2006 at 11:03 PM by


There are at least two reasons PG could have invested in Kiko: 1) he was betting that it would be bought out by Google, Yahoo, or perhaps another big company, 2) He was investing in some talented people with hopes of collaborating with them in the future.
At the time he invested, the former probably had good odds, while the latter still has good odds. The founders of Kiko are still young, smart, ambitious entrepreneurs who have a good chance of making it big. if they do, it's likely that PG will get his share as an early investor.

posted on Thursday, August 17, 2006 at 12:20 AM by Daniel Patru


When the bubbles rise to the sky
And my heart goes out to leap for it
Thanks for telling me
Keep your feet on the ground

posted on Thursday, August 17, 2006 at 12:30 AM by Amit Kumar


You are making the same assumption that many companies make when faced with Gorilla competition. You focus on the competition instead of your market. Just because Google and Microsoft are so big doesn't mean that they automatically win. Focus on giving people what they want and they won't care about Google. Besides, Googles efforts in areas outside of search have hardly been spectacularly successful.

posted on Thursday, August 17, 2006 at 2:39 AM by Pete Best


Hmm. I should sell my Google Calendar account! :)

posted on Thursday, August 17, 2006 at 4:19 AM by James


Well I had a very long and well written :) post attempting to answer all your questions, BUT it appears the blog gods ate it when I hit post. (I got some error messages about missing fields and everything was blank).

So now you get the very short version (perhaps that's for the best):
1) You could always just ask any of us that were on the Kiko team, then you wouldn't have to make so many assumptions :)
2) We knew Google Calendar was coming. It had been in internal beta for over a year and not all the Googlers at the 'plex are good at keeping secrets
3) We failed to capitalize on our first mover advantage. We made some *poor* decisions in January that pushed our re-release launch from edit of January to the middle of March. Two things happened in the time: 30boxes launched and became the new calendar darling and gCal screenshots were leaked. Both meant we got very little airplay with our re-release (which is where I came in, I did the UI for that release).
4) Still after the gCal release we were in good shape according to conventional web wisdom (whatever that is worth). You could argue that with Google having a fancy AJAX'y calendar that other major players would want one as well. And with the #2 online calendar, 30boxes, not looking to be bought out then being #3 didn't look so bad.
5) As someone conjectured, this is more about developer/team fatigue with the concept moreso than there not being any economic future for the product. To have a successful online calendar you need to free all the people from Outlook calendar bondage. That requires a lot of work and a sales/marketing team.
6) If you want to build a successful online calendar just figure out a sane way to get those Outlook users out of their walled garden. Not easy, but I guess that's why not even gCal has done this :)

Rich

posted on Thursday, August 17, 2006 at 4:31 AM by Richard White


More comments craziness, it asks for my website but then doesn't display it. Go figure.

I'm Richard White, UI designer for Kiko.com. My blog (with my own Kiko eulogy) is height1percent.com.

Thanks.

posted on Thursday, August 17, 2006 at 4:54 AM by Richard White


i knew this would be a bubble right from the beggining

posted on Thursday, August 17, 2006 at 7:31 AM by anonimos


You seem to put a lot of the blame for failure on Google Calendar. I don't think there is ANY evidence that Google Calendar had anything to do with Kiko's failure. I know maybe one person that's using Google Calendar, so it's not like the market is fully saturated. The entire failure is that there is no business model and their costs must exceed their profits.

posted on Thursday, August 17, 2006 at 11:04 AM by Phil


Great post! You are right there are a lot of these Web 2.0 bust stories but most of them are never told...they simply fade away without notice.

I don't know the specifics of Kiko, but I do know that the calendar space is hard to crack. It is not about the technology...that is relatively simple. It is about existing calendars being entrenched in Microsoft Outlook, Lotus Notes, and to some degree Blackberry.

Calendars are a feature, not a company. Not only are calendars just a feature, but they are only successful when integrated with your email/communication system. I don't know of a single calendar product that is successful on a stand alone basis. Even mighty Google with all its brand, money, and engineering prowess is failing miserably in terms of market share with its calendar product. Kiko didn't stand a chance.

There are a few companies doing interesting things with calendar functionality. TimeBridge is focused on setting up meeting times for people in different companies and maybe on different calendaring systems. You know the problem of setting up a mutually agreeable meeting time and getting it scheduled? That is what TimeBridge does. The problem is that you can't see the free/busy time of people not in your own domain, or if they use a different calendar product.

There are other companies doing online calendars but the problem is always which calendar will be the primary consolidator of all entries, work, personal, or shared? each calendar comapny wants to be the controlling or consolidating point. For most users they will not agree to give up their Outlook or Notes calendar, so it is a non starter.

Not an easy space at all.

Don Dodge

posted on Thursday, August 17, 2006 at 12:27 PM by Don Dodge


They were taking a gamble, and it actually seems like a not-bad one. Google (or someone else) who needed an
Ajax calendar might have bought it up (or still might). But let's be clear about one thing:

Designing calendars is not cool.

Designing games is cool. Designing application servers is cool. Designing programming languages is cool.

Calendars? Not cool.

I mean. Go back in time twenty five years and stick this on an Apple II... Still not cool. Not even state of the art cool, twenty fjve years ago.

posted on Thursday, August 17, 2006 at 12:55 PM by namehere


I guess the question that has to be begged is that is any application that is 90% pure API have any intrinsic value? Which then begs the next question. With much of the software development being API driven and Internet facing one would be extremely exposed to a Google snarfup, why would a VC invest?

I have to wonder about 50% of the current crop of Internet SmashUps that are going on as a business plan. I have a view of them very similar to financial derivative instruments. The app development is dependent on core feeds from 2 or more base level suppliers for data. Technically nothing wrong with that but from a business model perspective that is death.

1) If one of the suppliers becomes a competitor they could put you out of business by changing the API. Think AOL with their AIM platform.
2) What does one do when the supplier dies or eliminates that core data feed your app requires? Can you find a substitute?
3) Is the data you are providing acquirable by your market base by other means? You provide the latest market analysis tool from Google and Yahoo. But why would anybody with a Bloomberg terminal care who might just be your target audience?

It becomes readily apparent that Internet based startups whose model is inherently reproducible is a very fragile thing.

posted on Thursday, August 17, 2006 at 1:17 PM by john mcginnis


wonder if if it had something to do with the fact that the logo looks like: kike

what a naming blunder!

posted on Thursday, August 17, 2006 at 4:10 PM by Austin


Is it really important to have Web 2.0 these days? I still see no benefits.
http://keith.hostmatrix.org

posted on Thursday, August 17, 2006 at 4:25 PM by Keith


The article didn't bring up the main point of failure - the failure being that they had to close shop because they didn't make any money. A calendar? Sheesh.

All of these Web 2.0 companies act like they were on another planet during the bubble.

posted on Thursday, August 17, 2006 at 6:12 PM by Ben


I wonder how many Web 2.0 startups should consider clicking on the "Sell one like this" link on the action page...

posted on Thursday, August 17, 2006 at 6:25 PM by David Catalano


An army of ants can kill a gorilla... Or at least get it irritated enough to move on.

Their first order of business, once they had come up with their cool technology , should been to intergrate with other complementary services.

posted on Thursday, August 17, 2006 at 6:51 PM by L. M. Gabriel


Their first rule should have been "solve a problem". Yahoo and Google and probably 10 others have already solved this problem.

posted on Thursday, August 17, 2006 at 7:06 PM by J S


Just a note to the commenter above who thinks Kiko could make more through AdSense alone in a year than $50k.

That's incredibly unlikely. With their traffic numbers, they'd be lucky to pull in a cool $1k per month from adsense.

I've knocked out websites over a few long weekends that get more traffic then that. Though it was a valiant effort on their part =)

posted on Thursday, August 17, 2006 at 9:41 PM by Shanti Braford


As a member of the Kiko.com team, here's my rebuttal:

http://height1percent.com/articles/2006/08/18/actual-lessons-from-kiko

Rich
Interface Designer
Kiko.com

posted on Thursday, August 17, 2006 at 9:50 PM by Richard White


I guess this is what happens when you have some ASP based blog software. the link again:

http://height1percent.com/articles/2006/08/18/actual-lessons-from-kiko

posted on Thursday, August 17, 2006 at 9:51 PM by Richard White


Your post seems too focussed on Google as being the primary reason for the demise of Kiko. It would be interesting to see that thesis supported by statistics pointing to the fact that Kiko users were switching to Google Calendar by the dozen. Further, isnt it more a question of going after lead users while forgetting that you build services for mainstream. Google video has been out there for a while but YouTube is still giving them a run for the money.

IMHO, the problem with Kiko is that they went after the geeky/nerdy lead user (which of course Google dominates) instead of focusing their resources on getting the mainstream users.

posted on Friday, August 18, 2006 at 2:45 AM by Anil


I had low hopes for Kiko the moment I looked into it.

My first consideration when evaluating a new service? "Does this solve a problem for me that I can't already solve at least as well somewhere else". No. Kiko offered less functionality of relevance than Yahoo Calendar, let alone the yet-unintroduced Google Calendar.

My second consideration, assuming the service has passed the first criterion? "Will the pain of transitioning to this new service be less than the aggregate benefits of using it?" No. Switching to Kiko would have meant giving up the ability to sync my central calendar with other data sources and with offline devices. The Palm Pilot that I paid quite a bit of good money for (and which Yahoo Calendar can sync with and Kiko could not) would become substantially less useful to me, and indeed I'd have to substantially change not just my workflow but my life in order for a web-ONLY calendar to be of any benefit at all. Updating my calendar on the web is a cool ability (which is why I use Yahoo Calendar), but even if there weren't _anybody_ who offered both, it wouldn't be worth giving up my Palm for.

I don't use Outlook, but I imagine its users feel the same way about it that I feel about my Palm.

If you want to get people out of the walled garden, you don't do it by shouting over the wall about how wonderful life is on the outside of it...you do it by building a door. You do it by giving them an opportunity to experience some of the value of the outside without having to commit almost-irrevocably to never returning.

Buzz will never be an acceptable substitute for utility, just like attitude will never be a substitute for cash.

And for the record, I'm about as "geeky lead user" as they come. I _was_ part of Kiko's target audience. I came really close to being in the same business as them. If they couldn't even make ME happy, I don't think they ever had much of a shot with Aunt Tillie or the typical Outlook-worshipping corporate droid.

They seem like cool people, and having an idea fail to gain traction is not something to be ashamed of, in and of itself. They certainly built more working code for their calendar server than I ever did for mine. It says nothing against them that their business failed...it's simply a learning experience for the community.

posted on Friday, August 18, 2006 at 5:54 AM by Matt


Online calendar is a mass appeal product. Yes those corporate androids tied to Oulook are part of that mass market! General mass appeal product races haven't always been won by the earliest or the best. Major success stories like Google search and iPod come from focus both on product and execution from a follower position not as a leader way out front. Followers learn from the pioneer’s missteps and focus more on execution and less on innovation.

The questions I pose are:
- How could a small startup like Kiko, without core capability to execute with scale and focus, ever expect to win with a universal-appeal product?
- Did Kiko in fact almost do the impossible in coming as far as they did?
- If the growth-shape for current startups must resemble a controlled explosion then shouldn't investment on execution-focus go hand-in-hand with investment on product-focus and begin much sooner in the lifecycle?
- Would investment in execution have revealed gaps in the strategy sooner with time to chart a different course?

Kudos to the Kiko team for sharing their experiences!!
/andrew

posted on Saturday, August 19, 2006 at 4:49 PM by Andrew Lavers


Someone here tried to attract some buzz for his site, Litepost.

Here's a great example of how to attract users. Provide a Web site
that says "Litepost is a revolutionary new webmail system focusing on
ease of use and an efficient user interface. We are currently
accepting beta testers." Offer no information whatsoever as to what
the system does, how it looks, etc.

I mean, it's only email, right? Not like anyone depends on it, nor
like anyone minds having *yet another* inbox to process.

Another neat trick on their page is to not check the content of the
box that's been submitted. If you submit a blank email address, it
doesn't notice it: it just says, "Sorry, your email doesn't work. Try
again?" Inspires great confidence.

And if all that fails to attract users, surely this will. At the
bottom is the sole link on the page, to litepostinteractive.com. The
sum total of content on *that* page is (a) "Logged in as , logout" and
"Fatal error: Call to undefined function: displaylogin() in
/home/content/n/a/t/nathanbraun/html/litepostinteractive/login.php on
line 33".

I really, really hope that it's a spoof site and post, and it's just
too early in the morning for my irony detector to switch on.

posted on Monday, August 21, 2006 at 11:11 AM by SK


Just in case there are any Russian-speaking readers, here is my take on the subject:

http://www.developers.org.ua/archives/max/2006/08/19/kiko-business-model/

posted on Tuesday, August 22, 2006 at 5:17 AM by Max Ischenko


http://www.developers.org.ua/archives/max/2006/08/19/kiko-business-model/

posted on Tuesday, August 22, 2006 at 5:18 AM by Max Ischenko


'Creating something of value' is more than whether or not a web service, in this particular instance, continues to live on forever in its current form by its current ownership.

Not to mention, there is value in both good and bad ideas and implementations that are now no longer in the present. As a telling for instance, look at the new IE7. It's brilliant. Why is it brilliant? Because Mircosoft were forced by the Firefox people to create a product that wasn't total crap. This is just one incredibly minor example of a possibly-soon-to-be-gone-in-its-current-incarnation idea/implementation (Firefox) that has helped make using the internets much easier for people. Did it, too, fail to create something of value?

Decent post, but the 'value' statement is more than a little boneheaded. It's especially shocking given that this is a startup-related blog.

posted on Monday, September 18, 2006 at 5:37 AM by Peter


Good lesson, tnx =)

posted on Wednesday, March 14, 2007 at 7:15 AM by warhel


tnx, very userfull =)

posted on Wednesday, March 14, 2007 at 7:18 AM by userbars


thx man

posted on Wednesday, March 14, 2007 at 7:20 AM by icons


Name Is Required Email Is Required Comment Is Required

posted on Thursday, March 15, 2007 at 1:18 AM by Name Is Required


And Akismet didn’t flag your post because I currently have it disabled. I’ll be reenabling it tonight to give it a second go.

posted on Wednesday, September 05, 2007 at 9:47 AM by Drugs Viagra


After all, Google claims to organize all the world’s information, in all its diverse flavors. Not suprising they bullied this startup. More at http://www.solutionpoint.in/india/google-yahoo/

posted on Friday, February 08, 2008 at 3:30 AM by SolutionPoint


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