Last week we talked about 3 reasons why new startups fail. One of the 5 main reasons for startup failure is lack of demand. Tech-startup Navdy failed for that very reason.
Navdy was a hot tech-startup producing head-up displays for cars which can be connected to a phone.
These days head-up displays have become common in luxurious cars but are rare on mainstream vehicles. Navdy sought to fill that market niche with their $500 devices seeking to make head-up displays affordable.
However, recently Navdy has emailed its customers stating that the company is going to liquidate its assets. Furthermore the company warned its customers that :
“within the next couple of weeks, your Navdy unit may stop functioning properly. Features like the turn-by-turn navigation and voice recognition could fail and it is possible that this may cause the device to fail completely”.
But why did Navdy fail considering that the product seemed to fill a market niche?
The main reason for Navdy’s failure, one might argue, was lack of demand for the company’s product. Navdy launched its head-up displays at $799, the price, however, has been quickly cut to $499 as it lacked the predicted demand.
Another reason for Navdy’s failure was that the startup developed its own maps service. Instead of using Google maps or another well-known maps provider, the company sought to build its own service. Obviously such a service is expensive to maintain which makes it hard for the company to keep its current subscriptions going.
Moreover, many users claimed that Navdy’s head-up display and its corresponding mobile app have not been developed to meet customer needs. It was argued that the display did not blend right into the car’s windshield but that the device rather sits in front of the user’s line of view. This also means that checking your directions on Navdy is not much different compared to looking at a conventional navigation system that is a few more inches away. Finally, many users claimed that the system’s response rate was rather slow and thus does not meet the needs of today’s customers.
So what are the next steps? Currently Navdy’s goal is to sell its assets to a potential buyer interested in maintaining the company’s service. However, knowing that the launch of its own maps service has caused serious trouble, future investors might be interested in adjusting the company’s long-term strategy.
In conclusion, there is a few thing we can learn from this case study. First, make sure you research your market before launching a product. The example of Navdy proved that entrepreneurs often underestimate their customers price sensitivity. Moreover, startups should try to build their product on existing services. One of Navdy’s biggest mistakes was that they tried to create their own maps service instead of using Google Maps or another maps service. Especially during a startup’s growth phase, it is important to focus on improving the product’s core elements and to invest in marketing. Once a product has been developed to meet the high demands of today’s digital customers, startups can think about expanding their services such as creating your own maps platform.