10 Mar 2013, 4:04pm
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Zombie Startups

To get the full effect, press play on the track above and start reading.

This post is a more in-depth commentary following our announcement yesterday that Referly will discontinue paying users cash rewards for generating purchases at the end of this month. Referly has pivoted and you can read more about our new direction here.

My greatest fear as a startup founder isn’t to fail, it is to become a zombie startup. Kind of like in the 6th Sense when Bruce Willis doesn’t realize he is dead and tries to have a nice dinner with his wife, there are startups out there who are still “operating” but might as well not be.

It can take a long time to die. I’m not going to name any names, but you could simply cross reference yclist.com with alexa.com, and any company that shows little to no growth in web traffic in the past year that claims to still be operating is probably a zombie. Yes, even companies that focus on mobile or enterprise sales should see healthy growth in web traffic at the early stage.

With just the $150,000 each of my Y Combinator batchmates received last summer, many can continue to work on their company or change direction several times. It has been 6 months since Demo Day and I don’t think anyone has officially died. So I’ll say it. Referly died. It’s not the kind of dead where the website goes dark and everyone gets jobs somewhere else. But the idea that we started with turned out to be the wrong one, so we killed it and yesterday I acknowledged publicly to ourselves and everyone else that we have to change our course.

Helpful Things Investors Say

Over the summer when the seed market was hot and we were raising money pre Demo Day like gangbusters I seriously considered raising our Series A, or some kind of Series Seed style equity round. To feel out the situation, I spoke to some investors who had already put money into Referly and asked them what they needed to see from us in order to raise the equity round we were contemplating. I’ll never forget this feedback, which I will paraphrase since I didn’t write it down:

“The biggest problem we see with early stage companies coming out of YC, or really any program, is that they’ll approach a year or two after they’ve graduated to raise a seed round. It’s exciting to see they’re still alive and pursuing their vision, but then we ask about the growth of the team and the ways they’ve been capturing the opportunity of the business in the time they’ve had… and discover everything is the same. The same 2 or 3 people, the exact same idea, very little growth around key metrics like engagement or revenue. So why should try raise a series A? What have they proved?”

Ride or Die

Sometimes I feel caught between two mindsets, one that encourages me to be a cockroach and survive no matter what and another that inspires me to overcome my fear of flying and take it to the next level circumstances be damned.

The biggest reason to charge ahead is that I don’t want to waste a single moment of my life in denial, in deadlock, in zombie mode waiting for something I can’t control change or expecting magic to happen. It goes beyond not wanting to. I simply can’t, won’t, would never give up precious days, weeks, months, years. And it’s not that I don’t have endurance for the schlep, but I can only summon that super-human power to fight for the right thing.

Referly Monthly Active Users

I bet if you showed this graph to investors many would tell you your startup is doing GRRRRRRREAT! For a blogging platform (where we’red headed next) this is awesome – for an affiliate referrals site this doesn’t matter. It’s all about revenue, and it wasn’t climbing at a commensurate pace.

Is Your Startup a Zombie

How do you know if you startup is falling into this trap? Here are some hints:

  • You don’t want to get out of bed in the morning
  • You don’t want to go out in public for fear you’ll have to explain what you do
  • You haven’t hit 10% week-over-week growth on any meaningful metric (revenue, active users, etc)
  • You’re working on the same idea after 12+ months and still haven’t launched
  • You’ve launched a consumer service and have less than 2% week-over-week growth in signups
  • You’ve launched an enterprise service and have less than 2% week-over-week growth in revenue pipeline
  • You are the CEO and hole yourself up in the offices so you don’t have to talk to employees and can read TechCrunch
  • You’ve hired consultants to figure out revenue, culture, or product in a company of less than 10 people
  • You’re at SXSW right now reading this post and trying not to cry

Update: I’m not saying you need to hit 10% growth every week, but you should have hit it at some point like launch or some other PR event.

Turning Things Around

Does any of this sound familiar? If so, don’t panic – you can fix this. The first thing you need to do is acknowledge the reality of your situation. From there, figuring out what to do next is a lot harder and a very personal and contextual decision, but you should embrace it with vigor. Don’t waste single moment of your life, or the time of those on your team, to begin plotting the next step. Paralyzed? Yeah, I know that feeling. Just plow through it, there really is no other solution. Along the way you may consume dozen of beers/shots with good friends over long circular discussions they tolerate because they love you. Do that, and then get back to work.

I’m not an expert at figuring out what to do next, I mean I just changed course on an idea that took me 3 years to start and another year to prove didn’t work. But whatever… the point is that no one is going to tell you that your company is a zombie. Except me. Don’t waste your 20s, or 30s, or 40s being a zombie.

Worst Case Scenario

Flame out hard. That’s my only backup plan, because doing the silent fail is for boring. Failing is failing – do it up right!

Zombie — Photo Credit: jamesrdoe on Flickr

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So true.

[...] week I saw Danielle Morrill’s blog post following the announcement of her pivot (in Year 4) of her company, Referly.  I admire [...]

Thanks Danielle for your wisdom and advise. Rodrigo Tello.

Excellent and inspiring post. Thanks Danielle.

Good stuff … THX!

[...] post was provoked/inspired by Danielle Morrill’s post on Zombie Startups but it’s also something that’s been on my mind for a while.  Eric Ries talks about [...]

[...] decades in New York, particularly in the Bronx. A start-up chief executive’s advice is to “flame out hard.” Alina Dizik wants you to ask yourself 10 questions before quitting a job to start a [...]

This blog post about Zombie Start-ups made total sense to me as I’ve spent the last 9-10 months working on a project of my own. Thank You, so much. We all need to face the painful reality, walk through the fear, do what MUST be done, make necessary changes to survive and build a future. jz

Yup. Love to hear that. I could name a handful. Honestly never thought of them like zombies but… after reading this post… and having had watched the last two Walking Dead episodes last night… it totally makes sense.

Keep fighting the good fight Danielle :)

#zombiekiller

Great stuff — courageous post and courageous behavior.
“Failure is success if we learn from it.” (Malcolm Forbes)

[...] is a terrible thing to watch. Danielle Morrill is a talented young entrepreneur who wrote a great post on this too.  So did Sam Shank. It is important for all entrepreneurs to self reflect.  To [...]

[...] the market…no matter what the facts tell you. Fake it ’til you make it. This is how zombie startups keep going and going… Sometimes good (Twitter). Sometimes bad [...]

If the market has strong demand to your product, there is no reason to quit. Poor numbers just mean poor execution. You can fix it. If the market doesn’t need you, pivoting is always a part of entrepreneurship.

I had a zombie startup that met its undeath about a year and a half ago (still kind of have it…. it’s still up, but I’ll freely admit it’s dead). Admitting it was dead and stopping work on it was pretty damn painful, but I recently got the itch again and am spinning up a new project, so I must have a very short memory.

Cheers and best of luck with the pivot, and props for keeping on going.

[...] few weeks ago, I read  Zombie Startups, an excellent post by Danielle Morrill, an entrepreneur who recently made a tough decision about [...]

Good stuff – love it!

Other signs of zombie-land…
- You’re in your 3rd year of operation and still not getting paid…
- You keep postponing sending out the update e-mail to your advisors/investors/clients…. in hopes that next month you will have something more exciting to say
- You keep checking your analytics account/mailbox/adsense etc. throughout the day in hopes that something has popped
- It is your 2nd or 3rd year and you still have the same responsibilities as in startup mode… e.g. still replying to all e-mails in the company inbox, still checking the main company voicemail, still hand-editing the site….

:)

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[...] GBEDU.FM as a product is far from dead. Moving servers just took longer than planned. It was down but not out. As a startup though, GBEDU.FM was in zombie mode. [...]

Thanks for this post. I thought I must be going out of my mind as I started my start-up in Oct, had a short growth spurt in Feb and have been quite since. Need to get my behind in gear and get going again. Today is the day!

[...] up a bit of a s**tstorm in some VC/Angel circles. It all started with her excellent post about zombie startups. (A future project for Seed-DB is to better identify potential dead/zombie [...]

You know you are a zombie startup when you start telling your co-founder that a lifestyle business is more suitable given the circumstances.

[...] themselves needing to be more focused on the money. Witness this extremely honest and insightful post by the founder of [...]

[...] is that hundreds of startups funded by Xoogler’s and X-Facebooker’s are going bust -or becoming startup zombies- because they are either not worthy of further funding or because the market cannot sustain so many [...]

[...] Morrill created an awesome term a few weeks back – Zombie Startups – in a post about how to know if your own startup is a zombie. I’ve been using this [...]

[...] If your startup is not experiencing significant growth (or failing fast), you run the risk of turning into a zombie startup. [...]

[...] eloquent post-mortem blog post dissecting the events leading up to destruction or implosion or a zombie-like-state-of-mouth-breathing-and-glass-eyed-eternity doesn't do the true pain, fear, and self-disappointment justice. It is immenesly personal. And it [...]

[...] and many savvy entrepreneurs in Silicon Valley know but aren’t saying: just as there are zombie startups, there are zombie VCs out there and they walk among us. These are partners at venture firms who are [...]

They seem to have gone the extra mile to ensure
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If you’re going to use it for cooking food for yourself only, then you can choose a small electric model that will be enough for that purpose. This article lists the various types of these units based on the place where they may be used. The Weber Performance Grill sells for around $300-$350, but consumer after consumer state it is more than worth the price in durability, quality and ease of operation.

[...] Customer Development gives a good structure to help entrepreneurs begin their startup in good conditions (understand the right problem for a targeted audience in order to build the right product). If you’re applying Steve Blank’s methodology, you’ve the opportunity to build a customer-centric approach in your DNA: first, you spend time listening to your potential customers about their problems and, then, you keep this reflex of asking for customer feedback all along the company development. However I believe startups can engage their community more. The goal is to boost your startup growth, which is where so many fail. [...]

[...] Customer Development gives a good structure to help entrepreneurs begin their startup in good conditions (understand the right problem for a targeted audience in order to build the right product). If you’re applying Steve Blank’s methodology, you’ve the opportunity to build a customer-centric approach in your DNA: first, you spend time listening to your potential customers about their problems and, then, you keep this reflex of asking for customer feedback all along the company development. However I believe startups can engage their community more. The goal is to boost your startup growth, which is where so many fail. [...]

[...] Customer Development gives a good structure to help entrepreneurs begin their startup in good conditions (understand the right problem for a targeted audience in order to build the right product). If you’re applying Steve Blank’s methodology, you’ve the opportunity to build a customer-centric approach in your DNA: first, you spend time listening to your potential customers about their problems and, then, you keep this reflex of asking for customer feedback all along the company development. However I believe startups can engage their community more. The goal is to boost your startup growth, which is where so many fail. [...]

[...] Customer Development gives a good structure to help entrepreneurs begin their startup in good conditions (understand the right problem for a targeted audience in order to build the right product). If you’re applying Steve Blank’s methodology, you’ve the opportunity to build a customer-centric approach in your DNA: first, you spend time listening to your potential customers about their problems and, then, you keep this reflex of asking for customer feedback all along the company development. However I believe startups can engage their community more. The goal is to boost your startup growth, which is where so many fail. [...]

[...] closed a prior startup she ran because she did not want to become a “zombie startup“, which she defines as “startups out there who are still ‘operating’ but [...]

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[...] others, I should actually be saying Spinlet. Iroking, while not officially dead, is reportedly in zombie mode – releasing the majority of their local team. They may also not renew their content [...]

[...] others, I should actually be saying Spinlet. Iroking, while not officially dead, is reportedly in zombie mode – releasing the majority of their local team. They may also not renew their content contracts, a [...]

[...] If your startup is not experiencing significant growth (or failing fast), you run the risk of turning into a zombie startup. [...]

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