Jeffrey Katzenberg and Meg Whitman raised $1.75 billion to build and launch a short video platform. In this episode I explain why they failed and the 3 ways they could have succeeded instead had they followed typical startup steps.
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In today’s episode I’m going to talk about the spectacular failure. That is Quibi. If you haven’t already heard the short form video platform of quick points and big stories is now closing down after six months features the world’s biggest stars supposedly, no matter how you hold your phone. It adapts. And after six months if you go on google and type in quibi News, you will find a million articles about why did it fail, one article in particular that I like on Business Insider is about how they raised almost $2 billion in launch six months later, it gives you a lot of good information as to why it failed, when you have people like Jeffrey Katzenberg of DreamWorks and Meg Whitman the old CEO of eBay, thinking that they can come in and basically create a startup out of thin air, with all of these huge investors I mean if you go on their crunchbase page and you look at their investors they have 1.8 billion from 14 investors. And a lot of the investors if you go on, again go on Google and look through these articles, you’ll find that Alibaba Disney Warner media, and a lot of other actual big companies invested in.
So this is one of the, one of the problems right here. Okay. Now I put together a three point checklist as to how they could have not failed, how they could have actually succeeded if they had just followed the simple steps that I teach everybody and I’ve been following in all my startups. And the first step is, and they completely messed this one up; they jumped the shark on this one as MVP and beta. Any startup, who feels as though they don’t need to launch an MVP or beta. You’re fooling yourself. You’re going to make huge mistakes, you’re going to spend a lot of money, you cannot make shortcuts. Okay. I can’t believe how many entrepreneurs I’ve worked with over the years that say the MVP beta structure doesn’t work anymore, it doesn’t work anymore they say, it always works, that’s the point of it is to build a minimum viable product, get feedback from a from a set of users right if the launch, to a set of users, let’s say, you know, 1000 people, 5000 people, even 10,000 people if you can launch your platform to say 10,000 people. And now you can send them surveys and mock ups and demos and features and get feedback from them you’ll know what they like and what they don’t like. And in the case of kwibi, they would have known right away that people actually didn’t want to watch this short form video stuff they have Tick Tock and Instagram and they have Netflix and Amazon Prime, and a lot of other video platforms like YouTube even where people can watch videos whenever they want. Why would you pay five, to $8, to watch.
Let’s continue here cuz I’m going crazy just talking about it. So the next thing about the MVP and beta is that they use celebrities. Okay, so they paid a lot of celebrities to do this and they could have used influencers, that are less money, right, and influencers actually promote to their audience a lot more than celebrity celebrities, they do promote I’m not gonna say they don’t, but celebrities are more to pay to play like you pay them money, they do something, and that’s it right they get their day rate, they get their series paycheck, or whatever. And that’s it. influencers actually want to grow with their brands, because they feel as the brand grows, they can grow with it, celebrities are already grown and they’re already rich, let’s face it right so they don’t really need to grow with a brand whereas influencers do. So I think they should have worked with influencers first and want 10,000 people to see if the influencers could have gotten the product out the platform to their followers. The next thing I mentioned is the fact that they charge five to $8. In the beginning, they should have gone with a freemium model right everybody knows if you’re building an app. You let people have it for free. Always don’t charge for the app you charge for in app purchases. So let’s say you know I’m using the app and I’m watching these, these shows and ads keep popping up right now I know that they charged $8 for no ads $5 with that it’s, like, What are you thinking, I want to know what what they were smoking over there right because if anything if they made it free, they probably would have gotten a lot of users, okay because there’s no harm no foul, you download it, it’s free. You watch some content if you don’t like it, oh well you’re not spending money.
If you don’t want to watch ads. Then they could have charged $5 I think that’s a fair price, maybe even charge less right charge less try $1, ask your early beta testers how much they would have charged, they failed in that they didn’t do that. And then of course, when I went on to the news and I saw that they were leasing a 10 year lease of 50,000, square feet in Hollywood like. I almost lost it, I was like, why would you sign a 10 year lease for a company you don’t even know if it’s gonna work out or not. I couldn’t believe I saw 48 employees. We just take a second here to mourn the unemployment of those people who were like, all excited to be a part of this new platform that just failed in six months. Right.
We have one chance to launch, and we need it to be absolutely perfect. Wow. Talk about a noob. And she’s supposed to be this big CEO I’ve worked with entrepreneurs who say the same thing. They say, we have one chip, you don’t have one chance to launch. I’m telling you guys right now out there, you have several chances to launch dozens of chances to launch pivots rebrands new UI UX color changes icon changes logo changes you can do whatever you want. People will keep trying your product if you’re listening to their feedback. People like to be a part of something that is right there. This right here. I need you guys to put that in your head. Put it in your head and then burn it, burn it out of your head, it’s gone, get rid of it is not true any entrepreneur says we have a one chance to launch it we have to make it perfect is wrong. I’m sorry. It’s just not the case. You have to iterate. You have to change your product consistently based on feedback from your beta testers. You have to constantly change what you’re doing and adapt to the situation for example, if they had largely an MVP and a beta premium with 10,000 users. And then, boom, the pandemic hits, and they no longer have people waiting in line for coffee and people waiting at the bus stop and waiting all these places where they thought people were going to be listening to this short form, where they thought people were going to be watching this short form content, right. It could have pivoted quickly if they had been able to iterate faster and not spend so much money on so many ridiculous things. Why spend hundreds of millions of dollars before even launching office space and ads and employees, I mean they spent all this money on ads.
They were on a hiring rampage poaching talent from snapping Netflix. Really. $150 million in ADS. That’s like Walmart and Taco Bell in discovering Pepsi you guys, I feel bad for you guys. I mean, not really because you guys take money from everybody else around the world but I mean you got duped. And I’m sorry. This is proof that the Jeffrey Katzenberg and Meg Whitman’s of the world, just because you run a company well, doesn’t mean you can build a startup, doesn’t mean you can raise $2 billion. And just instantly be successful. So many entrepreneurs, I come across who might have some funds, they might have some savings they might have some money they might have inherited money they might have, you know, earned a lot from real estate or some other investment, and they say, I have the next billion dollar idea. And I don’t need to build an MVP and get a testing group and I don’t need to test the market and iterate and get feedback. My idea is going to be a billion dollar idea. I’m going to build this big platform, and I’m going to promote the hell out of it. Everybody’s going to use it. Now I’m going to tell you guys one thing I learned in 20 years of building platforms for people with my development company. Not once, has one of those entrepreneurs succeeded. All of those platforms have failed because they didn’t listen. They want it to be perfect. They wanted to have all the features they wanted to, you know, launch the platform when it was finished, guess what, there’s no such thing as a finished platform, it’s constantly adapting and iterating and changing to the market. So, it’s better to get it out there quickly, even when it’s broken. With limited functionality that’s why it’s called an MVP a minimum viable product.
Just enough to get feedback from people. And then you can build upon that with those 1000 5000 10,000 people, and they’re going to give you their input because they feel like wow I’m actually helping this platform, be created according to what I think it should be, not what the creator thinks it should be. The other side of the fence is where the entrepreneurs I’ve worked with did listen. And they did build an MVP, and they did get feedback from 100 500,000 10,000 users, they did iterate and they did change the platform based on the features that people said they wanted. And those entrepreneurs succeeded. And they raised funds, and they were able to get bigger and they were able to earn revenue in their platform. It always works, unless you have a really bad idea, like kwibi. Great example. And there’s one more articles subtitle that I like on the wall street journal that says
streaming service designed for mobile users struggle to resonate amid pandemic crowded marketplace crowded marketplace. Did you guys even do your research, did you realize that there are a plethora of video apps out there that are already doing well, all the celebrities that you got for kwibi are already posting videos on Tick Tock and Instagram and YouTube. Why do you think people need to watch them on yet another platform and pay five to $8 to watch them. But I want to do one more thing with my calculator here, I want to type in $1.7. billion. And actually I gotta turn it sideways in order to put that extra zero in. I’m going to divide it by, let’s say $25,000 because that’s about the amount of startup needs to build an MVP, do some minimal marketing through landing pages, get some beta testers with some incentives, of course, and then launch to the public right 25 grands about a good amount I’m going to say so if I if I do that number is astonishing. With that $1.7 billion 70,000 startups could have had their boost to get started.
And a lot of them probably would have succeeded versus Quimby’s $1.7 billion in one startup that horribly failed, that money could have given 70 and this is it this is this is the moral of the damn story is you investors out there have to stop putting money into these wild ideas from people who have never ran a startup, they’ve run big corporations. Take your money, Walmart Pepsi Taco Bell, CNN, BBC, Warner Brothers, snap whoever’s investing in all these companies. Take your money and invest it into 70,000 startups around the world. That’s so many companies you could be, you could be changing the lives of so many people around the world, especially the startups that actually help society. This is a lesson of what not to do. Always follow the steps. Hope this helps you in some way.
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