6 candid lessons of a failed startup in Latin America

6 Candid Lessons Of A Failed Startup In Latin America 6 Candid Lessons Of A Failed Startup In Latin America
6 candid lessons of a failed startup in latin america

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Originally written by César Hoshi in his personal blog.

Contxto – Some weeks ago, my partner and I decided to close down Mi Media Manzana (MMM). For the last six years, we have dedicated ourselves to our startup, product and enterprise. At one time, it was the largest online dating Android app made in Latin America.

As a Product Manager and co-founder, what lessons can I share with the community? I could speak about some numbers and the traction we had, but they are just senseless numbers today.

I could also write about our values, culture and what we wanted to achieve. However, our CEO and my partner Pedro Neira did a magnificent job posting his “good-bye Mi Media Manzana” thoughts on LinkedIn. With this, there’s not much more to add there. Give it a read, though. It’s really inspiring.

So, I decided to candidly share some of my personal lessons, failures and mistakes that made me grow as a person and sharpened my product-driven mindset. I hope you can relate to some of them.

1. If you’re going to pivot, pivot your product and features, not your purpose

Since our early days, we were proud of our build/measure/learn Lean Startup mindset and the speed in which we could pivot. We took Eric Ries’ best practices seriously:

The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere. All successful startup processes should be geared to accelerate that feedback loop.

Pivot or die. Everybody tells you to do it fast if you’re not getting results. But what I want to share with you is that if you’re going to pivot, decide what is non-negotiable and embrace constraints.

We built MMM with this purpose: create a dating site where you can find a compatible partner for a long-term relationship. The first version of the product responded directly to this. Since we lacked results, though, we made many decisions for changing the product. Without even noticing it, our new versions didn’t respond anymore to the purpose!

At some point, when we reviewed the product and features, it didn’t match with our original purpose! At one point, we didn’t give users compatible partners, we just gave them random matches. Also, we weren’t focusing on long-term relationships, we were happy if users started chatting as early as possible.

I can remember at least five major product versions we had but only two of them were consistent with our purpose. I’m not saying you should not change your purpose, but if you firmly believe in it (which we did), your product should always be consistent with it (which we didn’t). 

Embracing constraints will make you pivot in a much smarter way instead of just pivoting for the sake of it.

2. In moments of crisis, don’t forget the right questions

In our six-year adventure, we almost broke several times. I remember that at those times of crisis (when we knew we only had money for a couple more months), we radically changed our mindset.

For example, we asked ourselves “what should we build so customers love our dating app?” Or, “crap, how will we increase our conversion rate so we make money to survive?”

Sometimes, it went from “wow, this new feature seems to be moving our OKRs, let’s explore some more!” To “stop everything, what will our next pivot be? We’re about to die”.

…and so on, you get the point. We somehow always managed to survive but always deviated from the important things.

Of course, sometimes you have to run and change things if they are not working. However, my takeaway here is that those moments of crisis are the best moments to ask the right questions (how to add value to your users). Conversely, they are some the worst moments to ask the wrong questions (only focus on the shareholders pressure and cold metrics).

3. In a marketplace, you should worry about liquidity and density, not overall growth

There are tons of good posts about Marketplace Liquidity, in which it makes total sense to focus on density. That’s to say, focus on the number of participants within a certain geographic area instead of overall growth, but we still made many mistakes here.

Our first version of the product was launched in our home-country of Peru. We got traction fast, and said: “hey, we have good conversion and retention rates, and we also have just fundraised a new round of money, so let’s roll out to new countries, let’s grow big”.

We moved fast and we were ambitious. Also, we did what made sense for us at that time. Specifically, we launched our product in Colombia, Chile and Mexico with strong online marketing budgets and PR campaigns almost all at once for “activating the country”.

We were really proud and blinded by the vanity metrics, such as total registered users, gross sales, press releases, etc. Suddenly, every metric flattened, though.

We learned the hard way about density. Months later we would figure out our “optimum number” of “critical mass per city” for our dating app to work.

For example, purposes, let’s say we spent US$25,000 on the online marketing budget for user acquisition per country, which were four in total. By the time we noticed, we had already spent $100,000, and not a single country was self-sustainable.

Our approach was totally wrong. We were focusing on “countries” when we should have been focusing on “cities.” In the online dating industry, this is crucial since people want to go out with someone close by.

Like I said before, though, we were blinded by “our first million registered users” instead of “hey, we totally nailed it in City X, let’s roll out to the next city.” We had to start our acquisition strategy all over again, almost from scratch.

4. Apply known frameworks but don’t try to do it alone.

Hooked — How To Build Habit-Forming Products” is one of my favorite product books out there. I read in 2016 and was amazed by the powerful insights regarding the “Trigger, Action, Variable Reward, Investment” framework.

Inspired, I tried to include some of it to our development process, but not hard enough. In 2017, my partner also read the book and felt amazed. He suggested me to design the new features around those concepts.

At the time, though, my excuses were “the backlog was already full” or “we have other frameworks running.” I didn’t really do anything with it.

A year later, I saw my Senior Android Developer reading that book. He then asked me, “hey, why haven’t we tried this stuff before?” See how we lost a couple of years and lost tons of synergy?

From the opposite side of the example, in 2018 we were accepted into the “Reforge Retention Program,” one of the best growth materials out there. We expected a lot from it, so my partner, our CMO and I took the course at the same time. Therefore, we scheduled activities for debating, adapting and trying to apply the framework with the rest of the team. 

It was time consuming but was time well spent. There was synergy from doing it at the same time, which was effective in terms of transmitting it to the rest of the team.

The point is, if you’re trying to change some processes or apply new frameworks within your team, first take the time to get the key players on the same baseline. It is much easier to do it that way instead of trying to do it directly by yourself.

5. Discover early on what are the inputs for your “one metric that matters”

After the initial results, pivots and findings, we decided that “retention by month two” was our most important metric. That’s to say, how many registered users were still active the next month. If it went up, everything else did, as well.

We obsessed over retention but it took way too long to realize that we couldn’t control that metric. Due to the nature of our dating app business, retention was an output rather than an input that we could control.

We thought we were doing fine by focusing on one metric. The mistake with that single focus, though, is that you try to control things you can’t, such as how many users return to your app. Additionally, it doesn’t consider the inputs that you can actually control.

These include the number of optimal profiles seen in a first session, time for the first match, chatting tools, ways to “break the ice” with a conversation, display for notifications about new users in your area, etc.

I learned to ask myself if that metric that you’re trying to attack, whether it be conversion, DAU, monetization, time spent on your app, is an output or an input. You can have a deeper reflection in this great Reforge’s article: Don’t let your north star metric deceive you.

6. Have uncomfortable discussions early on, especially when defining the problem you are trying to solve

Whenever we find a problem to solve, we tend to start interviewing, draw mock-ups, recommend solutions, debate possible paths to explore, etc. Ultimately, though, it amazes me how easy it is for teams to have different views for “the same problem”.

This quote is stuck in my head (Three step framework for solving problems).

Nothing is more certain to cause a project to fail than a misunderstanding of the problem you are solving.

As a Product Manager, it requires a lot of discipline and awareness that you should never start building something unless all of your key players have the same understanding of the problem.

Even if it demands more pre-planning time or it implies uncomfortable (and long) discussions with other stakeholders (CEO, investors, or team members). These uncomfortable discussions will make everything easier later on.

Rounding-up some of my greatest mistakes

  • 1: Pivoted the product without consistency with our purpose
  • 2: Too much focus on “the company” instead of “the users” in crisis moments
  • 3: Focused on overall growth instead of market density
  • 4: Underestimated the power of synergy, tried to do things alone
  • 5: We took too long to realize that we couldn’t control our “one metric that matters”
  • 6: Avoided uncomfortable discussions for defining the problems we were trying to solve

Did you find value or feel identified in some of these points? Have you faced similar mistakes? I’d love to hear your thoughts in the comments below.

PS: Here are some details and numbers of Mi Media Manzana, for a better context of what our product was about:

  • Dating site (web & app) focused on long-term relationships.
  • +2.5 Million registered users across Spanish-speaking Latin American countries
  • Android app with +4.2 ratings and 100,000 MAU (monthly active users)
  • Achieved #1 app in Android’s free “dating category” in countries like Colombia, Peru and Chile
  • One of the first Peruvian startups to fundraise more than +US$2 million from local and international ventures
  • Dozens of relevant press releases about the dating business and happy couples across Latin America.
  • …but without a profitable business model. Product & company shut-down June 2019.

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