OnStartups

Hindsight 2.0: Lessons From A Failed Web 2.0 Startup

Posted by Dharmesh Shah on August 16, 2006 in startups ycombinator web20 failure paulgraham death 44 Comments


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.