9 Tips to Successfully Start a New Business After an Earlier Failure
I was one of the founding team at DesignMolvi – a clothing business that amassed over 300,000 social media followers – but ultimately that business didn’t work.
Today I run a 20-man business at IFG that has gone much further and has, by the grace of God, raised over £3m.
In this article I share what I learnt from my earlier failure that helped me in my current venture.
The first 4 tips are the positive lessons I learned from my experience with DesignMolvi, while the last 5 tips are the things I avoided the second time around with IFG.
Lesson 1: Rapid Execution
As someone who speaks to dozens of startup founders every month, and has invested over £15m into 75+ deals over the last 4 years, I like to think I’ve started to see some similarities between the best companies.
One of the most important traits of the best companies is rapid execution.
The quicker you make a decision, fail or succeed, the quicker you get data about how things work and can go again. Imagine someone who makes 10 big decisions a week, versus someone who makes 1. In a year the first guy has made 520 decisions, while the second guy has made 52.
Sure, the second guy might have put out a product that seems a bit more polished – but that doesn’t actually matter at this stage. Polished or unpolished, the first few iterations of almost anything are a bit rubbish and need to be rebuilt.
So the real winner is Mr 520, because his dataset on what works and what doesn’t is so much richer than his competitor. When you repeat things that many times, you begin to see patterns and actually find a business model that will make you commercially viable.
We moved fast at DesignMolvi and we were willing to take risks. Me and my cousins (my co-founders) had hustle and made things happen. Often it didn’t work, but we were learning and having fun. It helped that our brand was pretty friendly and non-serious, so any schticks that didn’t come off added to the charm of the brand.
I carried this learning over to IFG and we’ve shipped so many new products and features in our 3 years working full-time on the business that I have lost count. A nervous energy, a building excitement, and a mission-focused “we need to get this done” is a core chord in the IFG cultural melody.
Lesson 2: When a channel is working, lean in
We were in on Facebook right at the point it was starting to explode and we grew with it. At a certain point our Facebook following was larger than much more established brands like John Wills.
What we did right was we leaned into Facebook when we saw it was working. We used paid ads to boost our channel’s growth and we experimented with graphics, videos and regular posting.
What I’ve subsequently learnt about business is that 1 channel of customer acquisition is enough to take a business from £0 to £10m. From £10m to £500m you might want to think about a second channel, and you might consider adding in a third once you become publicly-listed on the stock market.
That’s the reality for most businesses who operate successfully in those revenue brackets.
So the last thing you want to do is not take advantage of those key ruptures in the matrix when growth opportunities present themselves to you. Most businesses make the mistake of thinking “oh here’s another shiny thing, let’s have a go at that.” They fail to realise that compounding on top of the existing success and experience is almost always a better investment of time and money.
Lesson 3: go for a niche
What we did brilliantly right at DesignMolvi is pick a niche and really stick at it. We were the Islamic t-shirt guys with brilliant designs and funny/meaningful slogans delivered with an approachable, friendly brand.
We were tempted to think about mainstream designs, and to experiment with women’s clothing, but we resisted that temptation by and large.
The benefit of going for a niche – particularly with an internet business – is that, due to the power of search, paid ads, and the emerging of “watering hole” websites for different communities, there is always a way to go deep with a niche community globally.
And “global” is the key word there. You only need 1000 true fans to sign up to a subscription of £100 a year and suddenly you’re on £100k a year. There are very niches so small that they don’t even have 1000 potential customers.
In our particular niche, there were literally hundreds of millions of potential customers – young Muslims who wear t-shirts with slogans on them.
At IFG our niche is Muslim professionals – typically those who can speak English. We are also very aware of the subniches that are represented within our investor base and we make sure we particularly cater for those groups too.
The ultimate power of the niche is that you are doing something you really care about, you truly understand the customer’s issues, you can benefit from niche community virality, and you don’t face as much competition as if you were a broader product.
Lesson 4: use the power of community
DesignMolvi grew quickly and virally. Facebook certainly helped, but it was the word of mouth and people sharing our products and wearing them that really got the flywheel turning.
The Muslim community – particularly those who are practicing enough to entertain the idea of wearing our t-shirts carrying slogans like “Ramadan: recharge your eman” – are a closely interconnected bunch. So once you start making a little headway and continue to do a good job, you find that suddenly things open up much more.
Much of the same community have today grown up into Muslim professionals and here we are again with IFG! By the grace of God, we’ve never really had to do much by way of paid marketing. The content speaks for itself and people find it useful enough to share and that helps us grow.
Lesson 5: clean and workable cap table
One thing that added unnecessary cognitive load and complexity to the running of DesignMolvi was the structure of the cap table (i.e. the shareholders). It was split between 4 different cousins, without much thought given to the skillsets we each brought, nor thinking about setting up the business for the long term.
What then ended up happening was certain of us became more passive (me included) and taking up significant space in the cap table, while some weren’t contributing as much day to day. There was also the issue of “too many co-founders” which can get very complicated as a business scales.
The reason is, many businesses will need to raise external funding – and each time that happens there is a dilution of existing shareholders. But if there are too many co-founders, they will quickly get diluted down to the point where the returns are not that meaningful for them nor do they have “skin in the game”.
With IFG, there were only two co-founders, and we both, after lots of discussions, agreed we needed to go full-time on the business. There was also a frank and open conversation where we actually adjusted our equity amounts ahead of going full time to ensure both parties had sufficient skin in the game.
After fundraising we also established an equity pool (7.5%) of the business so that we can ensure that our employees are also aligned with the business, and this will get revisited and refreshed if needed at each subsequent funding round.
We’ve also set up vesting schedules. This means that our equity doesn’t go to us immediately – it comes to us slowly over 4 years. That means, if for whatever reason, one of us decides to leave, we don’t walk away with all the equity.
This is important as the next co-founder that would come in would need equity too – but if you have legacy shareholders holding up large chunks of equity then the business cannot hire the right people and you enter a death spiral.
Lesson 6: low capex business
DesignMolvi was ultimately an SME business. By that I mean it was a business that needed us to put in capital expenditure to buy t-shirts, design them, and then sell them on for a margin.
The challenge with these type of businesses is that you need to manage:
- Buying and inventory
This is alongside the:
- Online sales platform
Items (1)-(4) are not easy to deal with and make scaling a linear formula. Items (5) – (7) are scaleable – they don’t cost more for each new item you add/sell.
With online-first businesses selling intangible goods (1) – (4) broadly disappears. This makes scaling easier (note I didn’t “easy” I said “easier”!). The only things IFG sells today are digital or intangible products or services – from investments, to online courses, to digital Islamic wills.
Lesson 7: Businesses not as dependent on 1 distribution channel
DesignMolvi grew rapidly due to Facebook and paid ads, but as virality of Facebook was tightened aggressively by Facebook, suddenly we found growth a lot harder.
Where I think we took the wrong turn was we focused almost exclusively on Facebook, without spending as much time thinking about:
- Other social media platforms
- Carefully mapping out our “customer acquisition cost”: and “lifetime value” and then cracking the code between the two such that the CAC was 1 and LTV was 4 or more as a ratio.
This tip might seem odd given I eloquently made the case for choosing just 1 distribution channel and doubling down on it.
But what I see as a distribution channel here is “paid acquisition”, and my lesson was that with paid acquisition you need to figure out multiple places to put your ad money – not just one place – in case things dry up.
So we went too narrow and didn’t properly specialise in the type of acquisition we were seeing success in.
With IFG, we’re still very much on a journey, but content has proven to be a great source of traffic for us and over the years we have developed a skillset across written, video and audio formats – both long and short.
Lesson 8: full-time and focused
We saw real progress only when we were full-time on the business and completely dedicated to it. Prior to that, life was always a compromise between competing work commitments and side hustle commitments.
Of course, one has to time the exit to full-time carefully. Your business needs to be at a stage where it can support you – or you need to have saved enough of a buffer up to not need to worry about that too much.
The other big benefit is that other businesses will only take you seriously if you are full-time. So if you want to build partnerships and broker large deals – you will need to go full-time.
We never went full-time on DesignMolvi, which is probably the single biggest reason why it didn’t quite fulfil its promise.
Lesson 9: If it isn’t working, pull it fast
DesignMolvi had stalled on its momentum quite a few years back but it was only recently when we finally decided not to renew the website domain and sold the pieces of machinery we used to product the t-shirt prints.
This meant we got a worse price for the machine – but that’s not the main thing here.
Mentally, if you haven’t closed a particular door, the potential to go through it or return to it remains, and slows down and muddies the rest of your thinking. We kept this door open too long.
With IFG, frankly we didn’t learn from that mistake fully. We were slow in cutting or paring back products but when we finally pulled the plug, it really helped give us better momentum and clarity on our strategy.
Business is mostly a series of failures punctuated on a rare occasion by modest success, and on even rarer occasions, larger success.
In other words business rewards those who learn lessons from their failures to cobble together something that works.
We’re very much still on a journey – we wish you the best in yours!