What Startups Can Learn From the Demise of Quibi

Published on November 6, 2020

Quibi, a once trumpeted startup that planned to revolutionize how people consume content and attracted some of the biggest stars in Hollywood, is shutting down. Mobile and digital content is a potentially lucrative space for emerging startups. Quibi hit obstacles they were unable to successfully navigate around. The demise of Quibi provides good lessons about understanding the marketplace and what startups and entrepreneurs need to look for when bringing on investors.

Quibi’s failure was not a surprise to many who followed along and know the space. The once touted Silicon Valley unicorn that raised almost $2 billion in six months, only to quickly meet its end, offers teachable moments. Those of us who have invested in early-stage growth companies, who followed Quibi saw a perfect storm gathering that ultimately led to its end:

  • Rushed capital
  • Lack of differentiators in a competitive market
  • Absent investors.

Assess Market Demand

Early stage startups need a strong understanding of market demand, and what their product or service brings to a competitive market. Quibi’s paid streaming service offering of costly short-form content was bound to hit a bumpy road.

Quibi brought on expensive A-list talent to further promote the platform, which had little consumer appeal, and investors were shortsighted. Investors saw an opportunity in digital streaming but did not fully evaluate the marketplace. Rather than taking a critical look at slow adoption from the onset, Quibi continued with its model without making necessary pivots.

Look for Investors Who Will Have a Seat at the Table

The right investors offer startups more than just capital. Seek investors who can offer support, mentorship, and meaningful guidance. Quibi’s high-profile investors were largely absent when Quibi needed strategic direction to move forward confidently. The investor teams could not keep the business afloat, despite having the likes of Google, Alibaba, and other industry leading figures behind Quibi.

Startups are looking beyond the investment dollars to understand how potential investors will take a seat at the table. It is necessary for investors to offer knowledge and expertise to make a successful partnership. Investors need to closely review the leadership teams to identify how their experiences can support a startup’s goal. Look to investors who have built out advisory boards to offer mentorship across other important areas, such as accounting, HR, diversity, culture, and sales techniques. Active investors support a startups vision, and offer mentorship to aid other areas. It is necessary for investors to allow entrepreneurs to continue with forward thinking and building a foundation for success. 

Patient Capital and Incremental Growth are More Important than Ever

Venture-backed entrepreneurs face immense challenges and pressure in terms of output when taking traditional VC investments. The more money gained, the greater the leverage. One of the challenges facing well-funded entrepreneurs is defining success. The metrics that matter most to VCs are often the ability to prematurely acquire customers and show initial revenue earned. This “rushed capital” forces startups to bring their products and services to market too early. Lackluster results put a growing business ahead of schedule with no opportunity to make adjustments or align with core values.

Identifying investors with a “patient capital” approach to funding can provide startups the time to have strategic conversations and develop more meaningful products and services. Patient capital empowers startups to lay the groundwork for customer acquisition and retention, and revenue growth without the pressure of instant returns.

Startups across the digital space have a unique opportunity to bring innovation and advancements. A wide population is seeking new technologies to improve everyday life. Learning from Quibi’s missteps is an opportunity for entrepreneurs to get their ideas to the public successfully. It is pivotal to identify and revisit market demands when seeking investors who want to work with you. Sticking to timelines is the bedrock of success. Venture capital doesn’t ensure a victory for startups of any size, but with the right market knowledge and investor support it can help entrepreneurs make profound innovations.

Eric White is a Grit Daily contributor and President of Seismic Capital Company, an early-stage growth investor committed to identifying, guiding, and nurturing companies seeking to meaningfully disrupt the space in which they work and Eric has also been an advisor and has worked with major Hollywood studios and production companies. Seismic’s patient capital approach to investing allows the team to bring a unique and collaborative approach to helping entrepreneurs get set up for success. Its unique democratized capital structure opens the door to more investors to support the companies they admire.

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