The Most Colossal Startup Fail You Never Heard of in 2020!
Quibi (short for quick bites) was the short-form streaming platform that generated content for viewing on mobile devices. The idea is that when you had downtime, like waiting for a doctor's appointment or standing in a line at the airport, you would watch their content. It was subscription-based and designed to deliver short-form scripted and unscripted shows to your cell phone that ran seven to ten minutes in length.
Quibi was led by Hollywood icon Jeffrey Katzenberg and Silicon Valley veteran Meg Whitman. It reportedly closed a $750 million funding round in March 2020, which took its total pre-launch backing to the crazy sum of $1.75 billion!
Yet, Quibi shut down six months after launching. What?! It was a complete fail for a highly touted startup that attracted some of Hollywood's biggest names with the goal and changing the way people consume entertainment.
What went wrong?
This is startup 101; do consumers want your product and are they willing to pay for it? "Product/market fit, also known as product-market fit, is the degree to which a product satisfies strong market demand. Product/market fit has been identified as a first step to building a successful venture in which the company meets early adopters, gathers feedback, and gauges interest in its product." (Wikipedia).
Quibi had brilliant people with a ton of cash. Did they not test the product with its target market? No one or not enough people understood what Quibi was. Quibi's value proposition was "fresh content from today's biggest stars," targeting the 18-34 target market. But, it was just another streaming service with much competition. The celebrities did not appeal to the target audience, who are much more passionate about digital influencers.
Their secret sauce was its strategy to only create short-form videos to watch on your phone. This plan of action goes to my second point...
2.It is tough to change people's behavior.
Quibi was designed to disrupt mobile viewing and was built around the idea that short, seven to ten-minute episodes of shows would appeal to users on the go. They positioned that these short episodes would be like chapters in a book, allowing people to tune in and get complete pieces of content briefly. However, users did not want to consume content in increments just on their phones.
According to the Harvard Business Review, "Most businesses underestimate how hard it is to change people's behavior. There is an assumption built into most marketing and advertising campaigns that if a business can just get your attention, give you a crucial piece of information about their brand, tell you about new features, or associate their brand with warm and fuzzy emotions, that they will be able to convince you to buy." But, most often, this is not the case. Consumers have much inertia when it comes to their habits. They are not assessing every new opportunity that comes along to make a change.
When I interviewed Scott Norton of Sir Kensington's, he said they started out to be very different from the other condiments in the grocery aisle. They wanted customers to do a double-take as they passed their products.
He said, "If Heinz is squeezed as a product, we will use a wide-mouthed jar like a European preserve or a marmalade. People love that story. They love the story of the outsider. They love something that is different and is making a statement. People may love that story, but functionally they don't want to dip a spoon in ketchup. They just want to squeeze it on their hot dog or burger. They just want precision and plastic, which isn't breakable. You can give it to kids who are the biggest consumers of ketchup.”
3. The team is crucial to startup success!
Do these two look happy?
A plus to Quibi was Whitman's strength in tech and Katzenberg's strength in entertainment. But, the personalities didn't mesh. The relationship between startup co-founders is very much like a marriage, especially in a company's early stages. If the founders have never worked together, there is a bit of a learning curve. Co-founders have to learn to handle their emotions and best engage with the person or people they work with every day. The chemistry between co-founders can propel a startup to growth or doom it to failure.
Before Quibi launched, Whitman and Katzenberg were already quarreling. Whitman threatened to quit as the company's CEO, finding that "Katzenberg was dictatorial, undermined her authority, and belittled her," according to The Wall Street Journal.
Disagreement and conflict are inevitable. It's how a startup's founders fix relationships and respect others' decisions. Companies have succeeded even with co-founder friction, but a well-balanced team will more likely find success than a company that must continuously deal with conflict within a team. Noam Wasserman, formerly a professor at Harvard Business School, found in researching his book, The Founder's Dilemma, that 65% of startups fail because of instability within the management team. Getting the co-founder mix right, he says, sharply increases a startup's chances of success.