Why Startup X Lost to Startup Y

I read two very interesting recent articles last week. They are unrelated but serendipitously talk about the same topic: why some startups succeed over their competitors.

The first one is written by Wesabe co-founder, Marc Hedlund. Wesabe is an online personal finance service which launched in 2006 and closed in 2008. Although Wesabe was early to the market, it eventually lost to its competitor, Mint. The article is a brilliant first-hand account (albeit biased, obviously) on why Wesabe failed. The article should really be read in its entirety, but I’d like to quote one part (emphasis mine):

Between the worse data aggregation method and the much higher amount of work Wesabe made you do, it was far easier to have a good experience on Mint, and that good experience came far more quickly. Everything I’ve mentioned — not being dependent on a single source provider, preserving users’ privacy, helping users actually make positive change in their financial lives — all of those things are great, rational reasons to pursue what we pursued. But none of them matter if the product is harder to use, since most people simply won’t care enough or get enough benefit from long-term features if a shorter-term alternative is available.

The second article I read is from Slate, titled The Other Network — Why did Columbia’s Campus Network lose out to Harvard’s Facebook? Campus Network was an online social network that launched before Facebook did. It had better feature and more users when Facebook launched, but none of them mattered. Campus Network lost to Facebook and closed in 2005.

The article offered reasons why Campus Network failed to succeed, namely insufficient financial resources. But one reason that I’d like to highlight is the following (emphasis mine): 

Why did Facebook succeed where Campus Network failed? The simplest explanation is, well, its simplicity. Yes, Campus Network had advanced features that Facebook was missing. But that wasn’t necessarily a good thing. Goldberg’s site smothered the user with doodads. Its pages were fully customizable, with multiple designs and backgrounds, not unlike MySpace. To sign up for Facebook, on the other hand, users had to fill in three fields: name, email, and password. User profiles were uniform, their contents intuitive—favorite movies and relationship status and class schedule. While Campus Network blitzed first-time users right away, Facebook updated its features incrementally. Facebook respected the Web’s learning curve. Campus Network did too much too soon.

Those are two great lessons learned. By definition, a startup is looking for customers/users. Obviously you have to make your product as easy as possible for people to sign up and use.

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