What can be learned when sharing leads to failing

By Adam Berk , written on March 16, 2013

From The News Desk

My sharing economy startup, neigh*borrow, was an obvious idea. There were hundreds of doodads in my apartment that I only used once in awhile -- wrenches, power drill, vacuum, vegetable peeler, and camera. My building held 300 units whose occupants I figured were in similar straits. And my New York City neighborhood had 20 such buildings, all within a short walk.

In my view, a big building packed with people (population density) plus redundant ownership of material possessions and close proximity (physical, social, demographic) equaled a clear opportunity. If I could convince people to share stuff they weren’t using anyway, so that those who needed it could borrow it when they wanted, I’d really have something. All I needed was a domain name and a technical cofounder. Then I could build a platform, raise some seed capital, then surely land on Mashable and Thrillist. (PandoDaily didn’t yet exist). From there I’d be on way to changing the world.

The crazy thing is, all that happened... Well, except for the changing the world part.

In 2006, I secured the domain name, convinced a friend to join me as cofounder, hired a kid off Craigslist the next day, and started “waterfall development.” Our idea was to pool all of this stuff into a common library from which anyone in good standing could borrow items then return them. Inevitably we made the same mistakes that many entrepreneurs and entrepreneur wannabes do: We spent money on the wrong things: unnecessary, ugly, and ultra-expensive code, a terms of service agreement whose terms few would ultimately see, and a designer who lectured us on eye fatigue and charged us every time we wanted to change a word or button. What a nightmare!

Then CNBC put us on TV. People liked our idea, and this, it turned out, was probably the worst thing that could have happened. It exacerbated the next five years of what Lean Startup guru Eric Ries calls “land of the living dead.” The problem was people liked the idea of our idea, not our solution. Journalists flocked to write about us, but they never signed up for the service. Gatekeepers of Internet contests and startup events wanted us there, but didn’t use it. Even the users who wrote us emails saying how we were awesome (I got emails like that every week) didn’t make an effort to lead their communities to neigh*borrow. We were great in theory but not in practice.

This false positive set us on the wrong trajectory. We spent far too much time building and stressing over parts of the site that were like 10 assumptions deep. There were 50 ways we could have made money but we had zero ways of actually making money. For a long time we spun our wheels trying to figure out the disconnect. Maybe we should raise more money. Or we just needed more media coverage, now that we’ve nailed that last A/B test. Perhaps it was our design, which didn’t pop. No, wait, it might be that we were too focused and should expand beyond bikes and drills.

We instituted marginal improvements to design and focused our customers from apartment buildings to colleges to treehuggers and beyond, seeking a core, enthusiastic user base. For 18 months we kept cycling around different combinations and permutations of customer focus, business model focus, product focus, feature focus, etc. We kept pulling the lever of the startup slot machine, but it was years before we asked what problem we were actually solving. Theoretically we were solving 50 different problems but actually solving none.

Entrepreneurs can be delusional, and we were no exception. (To be fair, Dave Tomback, my cofounder, was more grounded). That can be healthy. You need to be able to ignore the people who don’t share your passion and vision, but at some point you have to listen to the market. We were so close yet so far, and just like today with other sharing startups in the news, the cheerleading and hype continued. People wanted us to succeed, but that isn’t enough to achieve success.

I continue to believe in the concept of neigh*borrow. I am also fairly confident that a supply focused, inventory-based platform for consumer goods like drills and vacuums is not a “scaleable startup,” as Steve Blank would call it. It can be a lifestyle business, or maybe a non profit (an option we are currently exploring). Today neigh*borrow runs exclusively as an experiment, so we can learn what it should be. It is individual Facebook groups and unbounce landing pages (as I respond to every piece of data myself).

For the rest of the “sharing economy,” it is going to take more than building a platform and expecting people to share. Here’s a sad fact: Most people do not want to share. They want convenience. They want to be elated. I challenge anyone working on a sharing economy startup to solve one real problem instead of nattering on about all the waste and underutilized resources that plague our society.

Want the advice of someone who was early to the game and struck out? Here it is.

1. Solve a problem. This does not make you a non-visionary. Airbnb was not just a utopian vision of sharing real estate. The problem was not “wasted couch space.” That problem statement is too vague and not a problem that can be falsified. Many people are thrilled with extra couch space. The real problem was “nowhere reasonable to sleep during the X conference.”

2. Do something now. The word does not need a platform; it requires a solution. You do not need a logo and a domain name to test your idea on 10 people. The founders of Airbnb rented out their own couch. The founders of renttherunway rented dresses out of their dorm rooms at Harvard. Stop making excuses. If you can’t find 10 people to use your product, you can’t find 100.

3. Do not assume your value added is too small. You can make one small change and still make a big difference. Before streaming, Netflix customers got the same exact product as blockbuster customers... just with no late fees and with better distribution. Zipcars were the same basic cars but with easier access. Freecycle got to 7 million members just using Yahoo groups. You do not need to reinvent the wheel.

4. Prove something without the thing you think you need to prove it. Can you provide value for, and therefore confirm demand for your product or service? Today. Is there a single person on earth who would pay you or participate in your solution in a meaningful way that is valuable for them and you? Think you need money to do this? Reverse engineer what you need the money for (or the tech person, or the marketing person, or the designer) and figure out a way to do it yourself first, even if it’s inferior.

Above all, don’t be afraid of failure but also don’t be beholden to it. Sometimes your idea simply won’t work. Admit it, learn why, and move forward. And that’s perhaps the best piece advice I can share on the sharing economy.