There’s been plenty of coverage about this month’s most “buzzy” startup failure, that of the once darling one-click checkout startup, Fast. Most coverage focuses on the marketing hijinks and scandals surrounding the founder, Domm Holland, but lack meaty coverage on the subject of why a seemingly great idea failed to prove out it’s tech fast enough generate the most important thing – cash.
We have no interest in joining the scandal circus. But as software development partners to many tech startups and entrepreneurs, we believe failure is an exceptionally valuable learning tool, even if the learnings are based on speculative post-mortems of someone else’s tech startup failure, as we are about to do here.
The Value Proposition
No retailer registration, punching in credit card details, or remembering usernames and passwords = great for consumers. Just one tiny click between you and that impulse buy = great for sellers. Open source, well documented API = great for developers. Large market with opportunity for improvement and consolidation? Check. Amazon’s pioneering one-click checkout patent had expired 5 years ago and no one leader had emerged yet? Check. It all looked great, attracting investment and huge valuations.
So what the heck happened?!
What we know based on media reports is that Fast was reported to have only produced $600,000 revenue in 2021 despite more than a half-billion dollar valuation, and by some estimates was going through up to $10 million a month cash (aka “burn”). And it added 400 people to its headcount. In short, according to the founder, Holland, their burn and hiring scaled exponentially faster than their revenues scaled, and they couldn’t get it in control and raise new capital fast enough to keep the doors open. In his words,
“…[people] are wanting this kinda salacious story. The reality is was [sic] far more boring. Our burn was just far too high at the end.” – Domm Holland
So, wait… it was just cash burn that killed Fast so fast? Well, yes and no.
A lot goes into “burn”, but we help startups developer software products – not finance – so we won’t get into how much to burn and when. But there are some important factors to point out that may have contributed to or exacerbated the problem. Lets deep dive some of the issues and corresponding strategy concerns with each.
- They failed to onboard many big-name customers despite moving aggressively into the Enterprise space. In fact, they onboarded just one before closing their doors.
- Did they really save shoppers time when shoppers were already integrated with the auto-fill functions of Google Chrome and Apple browsers?
- Fast’s button would never be welcome inside behemoth payment ecosystems such as Amazon and PayPal owner eBay.
- Companies like PayPal, Apple, Bolt and Shopify offer similar services. Holland argued Fast can do it “more quickly and seamlessly than others”, but failed to prove it.
- Former Fast engineers told NPR that integrating the tool on merchant sites was challenging, and some sellers reported that it did not always function as promised.
- They thought their competition was PayPal, and therefore likely ignored what ended up being their actual competition, Bolt.
- Bolt said that about 10 million shoppers had signed up for its services as of November 2021, and PayPal, by comparison, said that it had 426 million active accounts. Fast never shared shopper numbers, only saying “thousands of merchants” had signed on. Merchants we now know to be small. So it is probably safe to assume far that less than 10 million shoppers ever actually signed up for Fast.
What can we learn from this?
“There’s a lot of stuff that you’ve got to build. For enterprise it’s not just about having an enterprise-grade product, eCommerce is very fragmented – right. Lots of different platforms, lots of different integrations. A lot of stuff that you gotta build before you can actually onboard enterprise. Bolt had just been building all of those integrations for a lot longer. They had been chipping away at the sort of medium-sized business. (Fast had onboarded a lot of small partners, and a few large ones but had largely ignored the middle market) …enough to kind of give them this foundation now that they can go and raise [capital] from.” – from VC20 interview with Domm Holland
Lesson #1: Don’t Underestimate your Competition
Whether it was due to hubris or simply failing to do proper research, Fast focused on beating PayPal when, in fact, it was Bolt they should have been watching. And indeed they may have ignored alternative solutions, like auto-fill functions within browsers.
Lesson #2: Validate your Technical Assumptions prior to Scaling
Had Fast conducted technical due diligence and fully understood the complexities involved in onboarding Enterprise customers, perhaps
they would have made different hires on the tech team, made sure their tech was proven before going after the Enterprise space, or simply slowed down. It is reported they were having issues with even the smaller client custom integrations, so jumping from small clients to Enterprise without proven tech or a critical mass of users may have left them desperate to hire and contributed to the cash burn.
Lesson #3: Your Value Proposition must be Solid before Scaling
Your unique value proposition should deliver on the intersection of:
1) What your do really well
2) What customers really want/need
3) What your competition does NOT do well
Unfortunately for Fast, they really didn’t do what they promised well enough (yet), the depth of pain/customer need was debatable, and they competed in a space that their competition DID do well. This isn’t to say that they shouldn’t have tried, but proving your value prior to scaling could have saved the company. See our software development process to learn more about developing an MVP prior to scaling.
Sources & Further Reading:
- VC20 Podcast Interview with Domm Holland
- Bolt vs Fast