What I learned when my startup failed

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Dan Kelsall created a recruitment tech startup that filled a gap in the market – yet the business failed. He shares the lessons he learned the hard way.

  • Problems don’t come one at a time and it is often multiple simultaneous problems that can cause a business to fail
  • Don’t underestimate costs, especially for developing software
  • Make sure you have the right legal agreements in place with investors
  • Develop the skills to reflect on your experience and understand where you went wrong

Tell us about your startup.

Vonkel was one of the first video recruitment apps, but with a difference. Employers would record a short video about themselves, and candidates would send a short video back. Its purpose was to introduce both sides and match up employer with potential employee and it met a real need in the marketplace.

It helped young people who didn’t have much experience in the workplace show their potential and why they should be given a chance – a traditional CV doesn’t do that. It was also of enormous benefit to candidates who might have difficulty expressing themselves well on paper – such as those with dyslexia.

What went wrong?

There were a number of things. The first was the tech. We had different teams and different developers and the app itself became very bloated. We knew that ideally we’d want to start again from scratch – but that would have been so expensive.

Secondly, and I blame my own naivety for this, I didn’t do contracts properly. Our main investor pulled out halfway through which meant the other investors we had lined up also pulled out. As I had organised things with agreements rather than contracts, there was nothing I could legally do about this.

What potential pitfalls do you think entrepreneurs overlook?

In my case – how much things cost! To build a tech platform like that, it’s hard to fully appreciate the expense. I’ve recently worked with a company doing a recruitment app and they’ve ploughed in £2 million already and there’s still a long way to go.

Vonkel had £30,000 – a tiny sum in comparison, which if anything shows that for it to get as far as it got, meant it actually did really well. But to progress the app, and fix a lot of the problems, and move onto different versions – it all took money. Without the investment, that just all fell through.

What was the impact on you personally?

Your whole life is consumed by the business. It affects relationships; how much you sleep and eat; it takes over everything. But I think that is just how entrepreneurs’ brains are wired. If you mess up, your instinct is to go and start again.

What’s your advice for other founders?

It’s easy to say ‘make sure you get work-life balance and focus on wellbeing and mental health’. The trouble is that when people with experience say that, they are forgetting what it was like for those first couple of years.

When a fire needs fighting, you fight it – you miss lunch and you end up eating at 9 at night. So the true advice is to acknowledge the fact that there’s going to be that patch where there is no balance.

Also, give thought to product and market testing. Build it as quickly as possible; make it robust; check it works. The sooner you test, the better.

How do you see Covid-19 impacting founders?

The pressure on entrepreneurs is even greater now than when I set out. When you start a business and you don’t know where the next meal is coming from and you’re not sure if you’ll be able to pay the rent, it’s really tough – you certainly don’t need anything else complicating it.

Again, it comes down to personality. People who set up businesses are obsessive. Most business owners are never happy. If you have a billion-pound empire you won’t be happy – you’ll be looking at what to do next!

What have you learned from Vonkel that you now do differently?

The business I run now, Offended Marketing, is a marketing and creative agency.

We learned from Vonkel that problems with cash flow is what destroys so many companies and we’ve been able to get clients to keep us on retainer. Everyone pays up front prior to the work being done. I know that’s fairly unheard of, and plenty of people said we wouldn’t be able to do it.

But all agencies have cash problems and so many die because of it, and we wanted to do something about that. There’s a steady stream of clients and that keeps the lights on.

If there’s a problem a young business can have, I’ve had it!

It’s been profitable since day one and we’ve stayed afloat because the work is good – but behind the scenes we run around like headless chickens, trying to work out how to run a business.

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