☠️ How my first startup failed after 1.5 years

Hey Founders,

Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.

In this first issue, I’d like to share how my first startup (Staq) failed after building it for 1.5 years and the lessons learned. Closing down Staq was the darkest period in my life, but it was also an important lesson for a first-time founder like me.

Let’s get to it! 🚀

☠️ 1 Failed Startup: Staq

I met my co-founder at Entrepreneur First — an incubator to help people find a co-founder and build a startup together. Since then, we pivoted a few times before we landed our startup idea to build Staq — a universal API to access financial data from SMEs easily.

• The Problem — Digital lenders (i.e. Funding Societies) struggle to provide critical financial products to over 25 million SMEs in SEA due to the lack of access to relevant financial data.

• The Solution — Staq helps digital lenders access and aggregate financial data (i.e. banking/accounting data & credit reports) from SMEs via our Staq API.

Together, we spent months doing user interviews and building the MVP before we launched Staq in September 2022 when we started our fundraising journey for a seed round.

We were ambitious. We had big plans ahead. We wanted to build the most comprehensive and developer-friendly API to help businesses access SMEs’ financial data easily.

On the surface, it seemed that we were getting significant traction with multiple big digital lenders in our pilot tests and sandbox. However, on the inside, we were struggling financially as none of these pipelines converted into paid contracts.

Meantime, we were fundraising to convince investors that we were onto something and we were the right team to build this financial API for SMEs. Because of the collapse of FTX around the same time, the whole sentiment on the ground for VC became very pessimistic and VC wanted to see more meaningful traction (sales) before they wanted to invest in us.

By the end of December 2022, we were running out of cash. The last resort for us was to secure an acquire-hire deal with one of our clients. This was a desperate move as we wanted to continue building Staq even though we had to do it under an enterprise.

This was the darkest period of my life as we were in talks for potential acquisition with uncertainties of what lies ahead for our startup, and most importantly, our career. Finally, we were informed that the deal didn’t go through in April 2023. With that, we officially closed down Staq.

⚠️ 2 Mistakes

Mistake 1: Not The Right Team

Yes - building financial API for SMEs sounds exciting. But we didn't have domain expertise in the industry, and we didn't have the right network to leverage on.

Because of that, we spent lots of time conducting user interviews, understanding the problem, validating our hypothesis, and iterating our product.

By the time we knew it, it was too late. We were dying. Our runway was left with 2 months. And the rest is history.

In short, we didn’t have the founder-market fit.

Mistake 2: Fell In Love With The Solution

When we first started Staq, we often referred to Codat (another similar player based in the UK). We fell in love with Codat’s solution, business model and product and we wanted to apply the same way in SEA.

As a result, we focused too much on using Codat’s model to solve our customers’ problems, when in fact what our customers needed could easily be solved by simple automation (not API).

We never truly and deeply understood the problem faced by customers because we never had the problem before and we had no experience in digital lending. This made it hard for us to come up with a good solution.

Needless to say, Codat’s model didn’t seem to work in SEA due to low market readiness (SMEs are not ready to share financial data) and timing (recession).

🧠 3 Lessons Learned

Lesson 1: Solve The Right Problem

My co-founder often reminded me of this saying:

Similarly, as founders, we all want to solve painful problems when building our startups. The reality is that not all problems are worth our time because:

• We might not be the right team to solve the problem

• We might not have the skills to solve the problem

• We are not excited about solving the problem

• We don’t care enough to solve the problem

When we started Staq, the problem didn’t come to us organically. We simply referred to Codat and thought we could use the same solution in SEA. We picked a solution we thought people might want. There was no deep connection to the problem we were solving.

Yes - we failed. But we learned a valuable lesson. We learned that a problem is only a good problem to solve if you are the right team to solve it.

Lesson 2: Fell In Love With The Problem (NOT Solution)

We should have focused on the problem, instead of how to use the solution to solve the problem. Falling in love with the solution blinded us and wasted months of runway, causing us to run out of cash.

This is probably one of the biggest mindset shift for me as a startup founder. Being problem-focused makes me open to new ideas and feedback to challenge my assumptions. Our goal as a startup founder is to:

• Step 1 — Identify the right problem to solve

• Step 2 — Build the right solution to solve the problem

We skipped Step 1. Don’t be like us.

Lesson 3: Validate First Before Building Anything

Throughout our startup journey, we had many assumptions which were mostly unproven. For example, we thought Codat’s model would work in SEA, which had yet to be proven.

In hindsight, we should have been more “hackish” to build a quick solution to test Codat’s model by leveraging any existing solution in the market. We could have saved months by first testing the idea before building it from scratch.

Always validate first before building anything. Use the quickest and most effective way to test and validate.

That's all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.