My friend sent me a story a few weeks ago about Facebook buying Gowalla, a location-based check-in startup out of Austin. It’s a good thing that they were acquired, because otherwise, I think the company would have died a slow death. Gowalla was competing head-to-head with Foursquare, even if they didn’t care to admit it, and they lost badly. The eventually tried to pivot into social travel-guide-type service, but that didn’t pick up much traction either.
I used Gowalla for a long time, and I wanted them to be successful, but I eventually realized I wasn’t getting much value from it; I was using it purely out of habit.
From a broader perspective, Gowalla is one of many, many tech startups that I read about all the time that is based on a cool idea that no matter how cool or well-executed/well-designed it is, just isn’t enough to build a sustainable business. The only reason the companies can survive is because they are propped up by VC funding. This lasts until:
- the company finds a sustainable business model (rarely seems to happen)
- the company is bought by another company, generally at the height of its hype or once its death is imminent
- the company goes out of business
- Gowalla tried to build a business model off of custom stamps that other companies could buy for their “storefront” in the Gowallaverse. It was never clear to me what value these stamps brought to either users or companies. As a company, paying to have a custom stamp wasn’t going to drive more traffic or purchases to your stores; there was no ROI. The traffic drivers on the app were proximity to stores, total check-ins for a store, and your friends’ check-ins. How did a custom stamp fit in?
It seems like a lot of tech startups focus on building the cool idea first and then eventually try to figure out how to make money off of it (with advertising being the go-to solution). The business model is hacked on to the company at the end, without much forethought.
For all but the smallest handful of companies, this is a terrible approach. The business model deserves as much attention, care, and love as the idea if you want to build a sustainable business. That’s why I’m surprised at the general disdain tech entrepreneurs hold towards MBAs and vice versa. Combining both disciplines should lead to a much stronger tech start-up than trying to go it alone. As any fan of horror/sci-fi movies knows, hybrids are always stronger.