Start-up Failure Story

As per research, out of 10.000 funded startups, only a single one becomes a unicorn. Every year a number of startups fail, even those with VC backing and support. But, with every one of these failures, we learn something.

Generally, enthusiastic entrepreneurs are so in love with their idea that they neglect to look at it from the users’ perspective and skip the mandatory questions they should be asking themselves before putting resources into it. That is one reason why new businesses end up in the Valley of Death. And there are others too.

One such startup was 99 dresses, established by Australian Nikki Durkin when she was only 19. The platform offered clients a medium for exchanging, purchasing, and selling used pieces of attire for a little expense depending on its value.

In spite of the brilliance of the idea, the startup was plagued by serious issues even before it truly got an opportunity to get off the ground. Why it happened and what was the reason behind the failure of this eCommerce business? Let’s Find Out.

The Heart-Melting Story of 99 Dresses

Established in 2010, 99 Dresses was an eCommerce platform that enabled ladies to exchange designer clothes with users all over the world. When launched in Australia, the site drew a great number of users and raised hundreds of thousands of dollars for it.

The idea of this business originated when Nikki realized that 80% of the garments she owns were just worn once or twice and they were kind of buried forever in her closet. She used to trade her garments with her friends often to stay updated with the most recent designs. Hence, she was sure that the solution could be moved on the web and chose to validate it.

She was not at all a technical person and has just taken a couple of programming classes. While she was validating the idea of 99 Dresses, she was on a full ride scholarship to a degree at college, but she dropped out to concentrate on her startup.

In the Journey, she experienced everything from the highs of getting into Y Combinator and shutting a US$595,000 round to the lows of not getting the required traction, losing her tech co-founders, and in the end coming up short on the money.

In the start, her business startup worked better and quicker than she planned. In just a quarter, they did more than 1,000 exchanges per week and expanded revenue on every exchange. Her startup effectively worked well for one year after which it began experiencing technical and money related troubles which prompted the closing down of the business in 2014. Here is a detailed explanation of what went wrong with this promising and unique startup.

Read Also: Why Everpix – The World’s Best Cloud-Based Photo Startup Failed?

5 Reasons behind the Failure of 99 Dresses

1. Poor Business and Revenue Model

The company’s business model was based on the percentage of the transaction cost. Their transactions decreased in cost and 99dresses’ revenue got a hit. Additionally, their plan to scale up to incorporate handbags and numerous adornments failed to get the desired traction and the number of transactions on the platform dropped.

2. Loss of Investor’s Trust – No Funding

At the peak of her career, Nikki’s technical co-founder was hospitalized with a serious medical condition and needed to drop out of the organization. This resulted in the loss of investor’s confidence and the $1.2 million which had just been raised. New funding rounds got 99 Dresses just about half of what it had lost. And the startup failed in overcoming this money-related problem because of decreased revenues and no funds.

3. No New Customers

The next obstacle in the 99 Dresses was gaining new users, which proved shockingly troublesome in spite of excitement from early adopters and long term users, the most active of which were making a number of traders yearly on the website.

4. Technology Issues

The idea was to launch an iOS app for the startup to get more traction. However, the team was not very much aware of technology at that point of time and did not know how to work with developers as well.

“I thought by then I’m not well-versed with technology, I didn’t have any idea on how to code, and I truly did not know how to work with developers as well. So I was not able to understand some of the issues we were facing,” said Nikki in an interview.

As a result, they were losing it all because of these issues that they were not able to sort it out.

5. Visa Issues

Nikki is an Aussie young lady and she was not having a visa to the US. Therefore, the startup also experienced Visa issues that obstructed smooth activities between the United States and the Australian team.

With these numbers of reasons, the organization’s group of prime supporters slowly gave up on the platform and the startup needed to shut down.

Key Takeaways from the Story of 99 Dresses – a Success as well as a Failure

• Look for a simple issue and check whether you can make a digital solution for it

• You don’t need a technical degree or a background in programming to build a startup.

• However, it is essential to have some fundamental knowledge about how you should manage developers and technical people.

• Want to expand your business in some other country? Check whether you are qualified for immigration or not.

• Define a proper Business and Revenue model for your startup and focus on scaling it.

• Invest as much time, effort and energy into your application for funding as you can.

• Do proper research before you commit to work with any of your co-founders.

• Make your services or products addictive by concentrating on how you will get people to keep coming back.

Wrapping Up

The two major lessons to learn from 99 Dresses are: make sure you can trust your co-founders and think deeply about your business model. If you want to maintain a strategic distance from some of the traps that these new companies wound up stuck in, contact our team of business experts and analysts.

Tags: 99 Dresses, 99 Dresses Failure, eCommerce App Failure, Start-up Failure Story