GoMyWay’s shutdown: bad idea not to charge customers/chase revenue/profit from the get-go?
I never used Lagos-headquartered GoMyWay but the ride-sharing service was doing a great job. How did I know? Their growth numbers — numbers don’t lie.
A few days to its second birthday, the startup shared its growth numbers: registered users had increased by 150%; number of seats offered had increased by 300%; the number of states it operates in has increased from 5 to 16; among others. The startup ended the second paragraph of that press release with this: “It is evident that more Nigerians are beginning to embrace this innovation aimed at fixing some of the issues around transportation.”
So, it came as a shock when I got on Twitter on the morning of September 27 — just 3 months after releasing those fantastic numbers — to find news of GoMyWay shutting down operations. I later found the email CEO Damilola sent to subscribers. GoMyWay was shutting down because investors/shareholders didn’t have funds to invest further!
While I was shocked by the reason the startup was shutting down — it was backed by some prominent investors whom I believed had funds & connections — what was more shocking was the fact that the startup wasn’t making money. Several questions started popping up in my head as to why the startup decided to take this route. I did a little research to find out why some startups do this.
From my research, I found out a lot of things, one of which is deciding how much to charge for a service is a problem and so startups don’t come around to getting it right. Charging too much might drive away customers, especially if there’s a better alternative, and charging too low might hurt your business in the long run.
So how do you find the right pricing for your service? One of the best ways to do so is actually attaching a price to the service and see how users react. You can change prices based on user feedback as time goes on.
Running GoMyWay for free for two solid years, without a clear cut way of making money, was a mistake in my opinion. The investors money, no matter how large, would always be used up. And what do you do after that? Raise more money? It didn’t work out in this case even with the impressive growth numbers. These guys know better than us newbies!
Also, focusing on growing its user-base wasn’t a bad idea — in fact, every business must do this one way or the other — but to what end? To throw them an end-of-the-year party every year?
Someone on Radar gave his two cents on the matter, stating sales/marketing co-founders are far more important than technical co-founders. The whole essence of his rant is you need these people to help you sell what you’re offering as this startup thingy goes beyond writing code — it is about making money as it is about doing good in this world.
Dave McClure of 500 Startups, in his Radar AMA few months back, said “usually we like to invest in teams with a combination of hackers (coders/product), hipsters (design/UX), and hustlers (marketing/sales/fundraising). we don’t typically see all 3, but the broader the combination the better.” Salespeople wouldn’t get a mention if they weren’t important.
Besides not charging customers for its service and investors running out of cash, a lot of other things may have contributed to GoMyWay’s demise. We hope to find out in the future what went on behind the scenes.
It’s truly sad they’re joining the graveyard for Nigerian startups. Its members will have no choice but to look for alternatives, which could mean going back to old ways of getting rides. This is a sad case of taking 100 steps backward after taking 50 forward!
GoMyWay’s demise is a stark reminder of how hard it is to run a startup, especially in Africa where the odds are stacked against entrepreneurs from the get-go. This should serve as a learning experience for would-be entrepreneurs. They should remember to have a clear cut money-making strategy (these things are usually spelled out in their business plans and pitch decks) and implement such, even as they are pursuing early users, from the get-go and that investors’ money would only last for a while, no matter how humongous.