The Story: How Startup Entrepreneurs Fail in Malaysia
Age: 26 years old
Occupation: Unemployed - Previously worked for a multinational corporation as a systems analyst
Marital Status: Single
It all started off with a brilliant idea that came up over a dinner Adam had with his friends in a Mamak stall a few weeks back. He couldn’t stop thinking about the idea he had. Fueled with “the” brilliant idea, he decided to look for a developer to help create, what he thought to be the next “Big Thing”. Found a few potential developers/designers through referrals and haggled for the cheapest man-day rates. Without much savings or rather not wanting to take any monetary risks (“Better to use other people’s money than ours” mentality), he sets his next goal at securing some X amount of seed funding to help kick start his entrepreneurial success.
The Business Plan
Through his network of friends, he lands an appointment with a potential VC. Was asked to prepare a complete business plan with an executive summary, financial projections, target market & risks assessments in which he then spends the next 3 weeks researching on his idea hoping to present a business case that looks good enough for the VC to invest in. With some help from a few of his accounting friends, he managed to pull off a business plan that looks and sounds good. He is more than convinced that his idea, backed by all the time spent on research & projections, is going to be a success. There is, in Adam’s mind & heart, no doubt about it.
The Dragon’s Den
Adam submits his business plan & was lucky enough to be called in for an Interview. He presents his case to a senior member (A certified chartered accountant with no historical Startup success) of the investment firm. All cases presented was scrutinized, focusing most of the time on Adam’s 5 year financial projections. Questions was asked over and over again on how Adam arrived at the projected figures. Adam fought back rigorously, pulling out everything he had to win his case. Adam soon realized that there’s no point furthering the conversation. The VC was not able to see Adam’s vision. He was finally told to return with a better well researched business plan & hopefully some “traction” that will help to prove his idea.
The “FREE” Money. Yay!
Feeling distraught & disappointed, Adam heads back home with little learning. Awaken to a new day, Adam plans on his next move to help secure the funds he needed. Sharing his bad VC experience with his friends, they suggested him to apply for seed funding from a government grant. No equity, no interest repayment. It’s FREE money of up to RM 150,000. Adam signs up, went through the entire ordeal & managed to successfully secure the funds he needed to kick start the development process.
Adam goes to his chosen development agency & started working out the feature & design specifications of his product. As part of the grant’s requirement, a written progress report needs to be submitted on a weekly basis to ensure all funds are being used appropriately. Adam puts in on average 14 to 16 hours a day, working out the product details while his developer & designer works on the codes & designs. Excitement was in the air as more & more features are being rolled out each day. Success was inevitable.
3 months has passed. T-minus 24 hours to the planned launch date. The heat is on & everyone on the team is busy fixing bugs & attending the the nitty-gritty details of the product. Production server is all setup ready to take on any loads of traffic. Nothing can go wrong & will go wrong. Adam and his team was ready. 3-2-1 Launch! Wooohooo! Cheers and laughter in the air. Everyone in the team was happy. Satisfied. The entire process till this time has been both fulfilling & convincing. Adam was ready to take on the world!
Reality Kicks In
Long story short, days & weeks has passed since the launch date. What was expected to happen did not. More features were added, better design was thought out & implemented. Nothing seemed to work. Unsure why, Adam decides to “get out of the building” to talk to some people. He attended a few local monthly events & started talking about his product/start up. This managed to get a few spikes in his analytic dashboard but it all lasted only for a short while. All the talking & interviews, slowly made Adam realize that he might not have built a product/solution that really serve the need of his intended market. Unfortunately the realization came too late. Adam has ran out of resources & can barely survive on his own. With all the monthly expenses stacking up, Adam is unsure if he has what it takes to persistently continue his journey. He had also seek the assistance of the government grant agency, hoping that, through their network of connections in both the public & private sector, something good could come out of it.
With no money left on the table & a mounting stack of expenses to pay off, survival mode kicks in. Adam decides to halt his dream for now. What comes next can be varying degrees of the same outcome Adam had to face, being one of 80% of startups that fail.
What Can We Learn
To most, the story of Adam’s entrepreneurial journey might sound similar to what we have encountered in our own journey. To some, it may had been & have since been better if not success. The question is, what differentiates a successful start up from a failed one? What have they done that is different, that had allowed them to achieve incomprehensible success? What are the mistakes that Adam had made & what can we learn from it to better improve our next startup journey?
In the coming posts, I will serve to dissect each part of Adam’s journey into both “The Problem” and “The Solution”, that hopefully, will allow us to better understand what is at stake and how can we as individuals & and as a community work together to progressively & iteratively work towards increasing the success rate of startups in Malaysia.