Why my startup failed (opens in new tab)

The statement about wine buying being part of the fun is the crux of the issue. I'm not into wine but I am into whiskey, and rather than buy from an online merchant, I much prefer walking into the local shop and getting a recommendation. That process is extremely enjoyable, and one I happily pay a bit more for. Same with craft beers. There are some really great high end sites that cater to luxury goods which are great examples of providing this experience online, but they require a lot of time and design experience, and are about as far from a marketplace as possible, conceptually.

Reading this post I can't help but think that if they had built services that the middlemen needed that they would have succeeded. For example, take the following two quotes:

"We wanted to revolutionise the fine wine industry, a market with many layers of middle men, and one that has traditionally eschewed technology, failing to patch it's many inefficiencies."

"Unfortunately, the service offered by all of these warehouses is poor. Again, we see little technology (basic online systems, preset passwords, refusal to spend money on an SSL certificate), and lots of human errors (such as very expensive wine being moved to the wrong accounts)."

If these statements are true then there are very real pain points here. Selling services to these vendors, solving their pains, is likely where there is money to be made.

This is a truly wonderful writeup. I especially appreciated the insight that "Marketplaces need a big disconnect between buyers and sellers".

I try to tell this to startups that try to add indoor location-based technology to businesses like Men's Warehouse. What they fail to understand is that those places run better because they are staffed by people who understand their customers. When someone drives into the parking lot of a Men's Warehouse, they are already there to buy a suit. They don't need discounts or information about the products from an app on their smartphone, they need real customer service.

A skilled salesperson can upgrade anyone on warranties and other items. Having a piece of software do it, especially one built by a group of programmers and marketers that know nothing about suits, is ridiculous, and so is the idea of training skilled salespeople to also be system administrators for software that's not needed.

You should take your technology and apply it to the nursing industry. I've been saying it for years: Healthcare is an inefficient marketplace. Hospitals always have a hard time filling nursing demand, so they go to extraordinary lengths. For instance, we currently live in Portland, OR rent free while my wife makes more than she would if she lived here, all because they don't have enough nurses. My wife has a recruiter, who sends her loads of paperwork.

There's totally a startup that could make a lot of money. Maybe start out as software for recruiters to manage their "inventory" of nurses? Then expand into a full on marketplace, eventually disinter-mediating said agencies.

And last, but not least - wine market is a bubble itself. As one of my friends, very high profile sommelier, tells me every time - never pay more that 7 euros for a bottle, everything more expensive is a fluff.

> Consumers had been crying out for this, claiming that they no longer wanted to speak to a real person or pay the premium for doing so.

Was that only an assumption?

" Another round, and more time, was possible, but it wouldn't have been right to take more money for something that I no longer believed would work."

While I understand the sentiment, and I don't suspect it was done lightly, the rationale here is superficial. "I no longer believed would work". Well, whether it would work or wouldn't at one point you believed, and now you've got a team of people working for you. Closing primarily on the basis of your beliefs (which, apparently, were faulty before - perhaps they're faulty now too? market might turn around? network connections might kick in in 6-12 months?) comes across as selfish.

I don't think you actually were or are - I've no doubt there was a lot more going on that you didn't summarize in this one blog post, and it came across a bit off-handed. I say this as someone who's had to close down something with a team of people - I don't think anyone ever takes this decision lightly.

Thanks for sharing this. You clearly understand well what your core challenges were.

The interesting part is that you probably knew all of this going in. Perhaps you were so enamored with your idea, that you wanted to believe these were not the insurmountable challenges that they were. Reminds me of couples who marry knowing of certain glaring problems, but proceed anyway because they are "in love". Whether they downplay the problems, convince themselves they can overcome them or otherwise, these are frequently the very problems that lead them to failure (divorce).

But, more frequently, we probably just think these challenges will melt away or work themselves out somehow. Maybe that's why these businesses always look so good going in!

This is not to lambast you--quite the opposite actually. I have been there and I am still susceptible. I applaud you for acknowledging your challenges and getting out relatively early.

Good luck to you on your next venture!

> people were often happy to spend £5,000 on a case of wine, but not £10/year for proper storage

Irrational stuff like this really pains me, especially when it's part of the reason I'm failing. But people are the way they are, for better or for worse. You have to find a way around it.

Interesting writeup James, thanks for sharing. The point about talking to salespeople being "part of the fun" is interesting - it's counter-intuitive to my engineer's mind, but I can see how the sales process is actually part of the value they are paying for.

In hindsight, I suppose it's not surprising that an industry that prefers expensive, unreliable corks over cheap, reliable screw tops might eschew technology. If only it were that easy to figure out ahead of time.

> The market is valued around $5-6bn per year, with around $1.5-2bn based in the UK.

Does the UK really make-up a third of the world wine market, or did I misunderstand?

Is this largely an illustration of the value of domain knowledge? And I mean as an industry insider, not just a consumer. You don't even know what you don't know when you enter a new world.

I bet having someone on the team that had spent a couple years in the fine wine industry would have made a huge difference, though perhaps that difference would have been to discourage the entire endeavor.

I'm sorry to hear about the closing of your start-up, but your write-up really shows how much you have come to understand the business of solving peoples' problems. You aren't in denial about how the start-up failed and it is very refreshing to see!

In my opinion, you are poised for incredible success in your next start-up, because of what you learned at Vinetrade.

I was expecting this to be yet another navel-gazing exercise, and was pleasantly surprised by how informative and upbeat it was.

"Marketplaces need a big disconnect between buyers and sellers".

This is an interesting statement. I'm not sure I quite understand it though. Can you elaborate further?

It seems to me that you are saying that if buyer and seller know each other then they would eschew the market for a more intimate trading arrangement.

Not every problem "needs" a solution, or wants one for that matter. Good market research can help avoid these types of situations.

Well, this is a very interesting writeup

"Unfortunately, over time we found that while people used the site once or twice, they quickly reverted back to emails and phone calls. We always knew that people bought this wine for fun."

Do you know why is that? It's not only about 'fun'. It's about knowing about the wine.

For the technically minded people it is easy to assume this 'wine talk' is BS (I'm not saying there isn't BS) but most of it isn't.

So the experience of buying it with someone who understands it is superior to seeing lists of pictures, prices and generic descriptions.

Also, I bet most wine consumers that would go for this service don't care to learn an iPhone app.

1st lesson for startups: Know your market! I can't make a "disruptive marketplace removing inefficiencies" for selling sand at a beach (absurd example, but you get the spirit)

How is it done today? Remove the pains, but don't take the good things out.

Another analogy. People won't exchange eating pineapples for bananas because bananas are easier to eat, rather, remove the pain of peeling the pineapple, but sell pineapple.

This is one of the most interesting "Why my startup failed" type post I've ever read. You brought up real insights and didn't fall into the "I'm just gonna generically rehash 4 Steps to Epiphany and Lean Startup to look smart" trap. Thank you for taking the time to write it up, really excellent read.

I'm not sure if this was similar to your business model, but there is a site called cinderellawine.com that does daily deals for wines and does pretty well. I had a co-worker that was addicted to it, I don't think he even drank the wine. It does show that there is a market for "mail-order" wine that isn't based on personal connections.

My impression of the wine biz is that supply is fragmented. In which case the network of relationships is complex (many-to-many) and so costly to maintain. In my business (insurance) disintermediation only followed massive consolidation on the insurer side. Many-to-many became Many-to-few. Cheaper to maintain, easier to scale.

Hmmm... interesting to read http://jamesmaskell.co.uk/2012/inspiration_for_startup_found... now...

I wonder if the customer in this case (the wine-buyer) is misunderstood. Not only does he go in for the relationship, but I suspect he wants to be able to show off the wine and tell stories about it to his friends/guests/people he's trying to impress. Buying a case of wine with a fantastic story may justify the premium, as opposed to a case of wine ordered directly from the vendor that comes unceremoniously in a fedex case.

Why do you think people resorted back to phone orders, etc? Did you have some type of recommendation component for users?

For example, when someone places a phone order (especially for wine), they may ask the associates preference or suggestions. It would be awesome if you had a program that took drinkers preferences into consideration and then suggested maybe 3-5 wines.

Good article. I enjoyed from start to the end. I wish you the best luck on new ventures, as I stated on Twitter. I'm doing something right now wich has similar things (not wine) and it was good to read what happens and all the things that are in the game.

So you are saying that your start-up failed and you are not whining any-more? ;)

Excellent write up and thoroughly honest. Great insights.