Not analyzing early growth leads

In 2014, Lindsay Hyde launched a pet-care company called Baroo. Located in the basement of a residential building in South Boston, it offered pet owners “high-touch” services like grooming, dog walking, play dates, and feeding. It was an instant hit: seventy percent of pet owners in the building used Baroo’s services.

Excited by this initial success and the 6 percent commission they’d stand to make, four more apartment buildings signed up. Baroo then quickly expanded into 25 buildings in Chicago. A year later, Hyde set up in Washington, DC, and metropolitan New York. But despite this rapid expansion, by mid-2017, Baroo’s financial health wasn’t just poor – it was terminally ill. In February 2018, Hyde was forced to pull the plug. Her mistake? Failing to identify whether those early adopters in South Boston represented the broader market.

Baroo lacked several of Eisenmann’s crucial opportunities and support networks. Its fast scaling led to the breakdown of its technology and operations, its team, and its relationships with partners and customers. But these side effects of Baroo’s accelerated scaling weren’t the root cause of its downfall. The spark never caught fire because of a false positive.

False positives occur when founders misinterpret their startup’s early success. They assume the mainstream market will embrace their product or services with the same level of enthusiasm that initial customers had. In Hyde’s case, she believed that around 70 percent of pet owners in the buildings she expanded to would use Baroo’s services. But that simply wasn’t the case.

Hyde had failed to consider the specific circumstances that led to that initial hype. First, the building in South Boston was brand-new, so few of its pet owners had existing relationships with local pet care services. Also, many of the residents belonged to a Hollywood film crew that had relocated to Boston for a shoot; they’d brought their pets with them and, flush with cash and short on time, they needed help caring for them. This clientele didn’t represent the mainstream market at all.

To avoid misinterpreting early success, analyze whether early adopters represent mainstream customers, or if your instant success resulted from exceptional circumstances. Scaling too quickly can lead to complete ruin, as it did in Baroo’s case – so make sure there’s mainstream market demand before you attempt it.