Hey — It’s Nico.

Tomorrow is the last day to fill out Failory’s 2024 reader survey. If you haven’t done it yet, please take 3 minutes to do it. It helps me a lot!

Between the people who complete it, I’ll be giving away 10 copies of my PMF eBook, 5 consultancy calls, and 3 licenses of my Pre-Sell to Validate course. Here’s the link to the survey.

Here’s what I got today:

• The reasons why the “TikTok for news” startup, Artifact, failed 💀

• An explanation of how to convey Founder-Product Fit 🔥

• A question about a Twitter controversy around validating ideas ❓

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This Week In Startups

🔗 Resources

A guide by Hustle Fund to help first-time founders raise funding.

The story of a $475k/year Gen AI startup told by its CEO.

Ryan Hoover shares why he’s excited about profit-sharing startups.

How to increase ACV by asking customers about their willingness to pay.

How to run a great demo when you’re not a salesperson.

📰 News

Logistics startup Flexport raises $260M from Shopify.

Fintech startup Brex lays off 20% of employees.

AI voice cloning startup ElevenLabs raises $80M and achieves unicorn status.

Identity protection startup Silverfort raises $116M.

Indonesian unicorn Xendit cuts 200+ jobs.

😮 Cool Stuff

Marc Lou was awarded Product Hunt’s Maker of the Year.

Pieter Levels has open-sourced his $120k/mo investment portfolio.

Alexander Belogubov built 20+ products — most failed.

Fail(St)ory

Instagram’s Founders Failed to Build the TikTok for News

In last week’s newsletter, I shared that Artifact, the news AI startup from Instagram’s co-founders, was shutting down.

It was fresh news, so there weren’t many details — now we have some more data into what went wrong with the startup.

What Was Artifact:

• Artifact was initially said to be the “TikTok for news.”

• It was an app that offered a blend of news reading, curation, and discovery, leveraging AI.

• It was created by Kevin Systrom and Mike Krieger, who co-founded Instagram.

• It was their first public venture since they left Meta in 2018, to which they sold Instagram for $1B in 2012.

• It was self-funded by Kevin and Mike. A team of 8 were working on the project.

Backstory: The app went through lots of changes over its short lifespan.

• Artifact launched in February 2023 — 100,00 users downloaded the app that month.

• The first features they launched were all focused on consuming news, like the ability to make comments, follow writers, and summarize the news using AI.

• But over time, they started to dilute their sharp focus.

• First, they launched the ability to post links (no longer only news), resembling Pinterest. 

• Then they launched the ability to post text content, now looking more similar to Twitter/X.

• In October, they launched the option to share places, turning Artifact into a recommendation engine.

• App downloads and usage started to decline over the months. In October 2023, they only had 12,000 new installs.

• On January 12, Kevin Systrom announced they were shutting down.

Why Artifact Failed: In a post-mortem article, Kevin identified market size as the reason why they were stopping working on the project.

“We have built something that a core group of users love, but we have concluded that the market opportunity isn’t big enough to warrant continued investment in this way.”

With various startups in the space being unicorns, it’s hard to take this as the only reason for Artifact’s failure. Here are 5 things I think were equally (or more) important:

1. Lack of demand: According to app intelligence provider Appfigures, Artifact has had 444,000 downloads since February 2023. Most of them happened during the launch. After that, monthly downloads declined abruptly. From the outside, the app appeared to have traction, with news having plenty of reads and comments. There probably was a core group of users, but not significantly large.

2. Struggle to expand: They failed to catch a more mainstream audience and gain an international following. US accounted for 44% of their downloads, but no other country had more than a 4% share.

3. Competition: The news space is super competitive. SmartNews is one of the leaders (with a $2B valuation) — during Artifact’s lifespan, they got 2M downloads (5 times what Artifact did). There’s also Google News and Apple News, not to mention the hundreds of already-known news outlets.

4. Lack of focus: It seems like Artifact dilute its focus on delivering a better news reading experience using AI by launching features aimed to steal users from bigger players like Twitter and Pinterest. It wasn’t clear what they wanted to be.

5. Funding: Since the startup was self-funded, chances are Kevin and Mike preferred to stop losing their funds earlier than later and decided not to raise external funding.

Lessons:

1. It’s hard to build a B2C app, particularly in competitive spaces like news. Users expect a lot, as there already are incredible products.

2. It’s important to balance your business’ original purpose with the need to evolve. You need to adapt without losing core value propositions.

3. “Making the tough call earlier is better for everyone involved,” says Mike in the post-mortem post. Instead of raising funds to keep trying to grow Artifact (which they could have easily done due to their background), they decided to put an end to the project early on — sometimes that’s better.

Go Deeper:

• Artifact’s post-mortem article by Kevin Systrom.

• Appfigures’s analysis of Artifact’s performance in the App Store and Google Play.

Hot Take

Founder-Product Fit Is A MUST

VCs only look at 6% of the deals they’re presented with and end up investing in less than 1%.

Slava Heretz is the founder of Camlann, an AI-powered video game distribution and release operating system. To date, he has raised $830K from several VCs.

This week, he wrote a guest post for Failory explaining what’s the thing that increases x10 your chances of raising funds.

What:

• The “Team” slide is frequently left behind by founders building their pitch decks.

• This slide conveys why you and your co-founders are the best people to be running this startup.

• In other words, it shows Founder-Product Fit.

How: As a first step, get with your co-founders and ask yourself the following 3 questions:

1. Why did you pick you for this startup, and why did you pick your co-founders?

2. What are the greatest strengths that you and your co-founders bring to the table?

3. What would be completely missing and impossible to do without you or them?

This Team slide from Slidebean’s pitch deck is a good one:

Each of these founders alone wouldn’t make a compelling slide by themselves, but together, they’re exactly the pieces needed to show potential for this startup.

Hint: Two more tips.

• Don’t assume something is not relevant. All your experiences define you.

• Don't be afraid to tell stories. Investors like understanding the behind of a startup.

Go Deeper: Read Slava’s article on Founder Product Fit.

Question

Can Landing Pages + Ads Validate an Idea?

On Tuesday, Andrea Bosoni tweeted a hot take:

“Stop telling people to create a landing page and run ads to it to validate their idea. In 99% of cases they will simply waste money and get zero conversions.”

Other founders soon joined the conversation and shared varied points of view.

The Argument:

• Unless it’s an impulse purchase, people need more than one touchpoint (one ad) before they’re ready to buy.

• Andrea knows a founder who almost quit after getting zero sales doing this test and is now at $1M ARR.

• It’s statistically irrelevant. $100-$200 spent on ads at $1-$3/click means nothing.

Other POVs:

• This founder believes it’s still a great strategy to test if people are willing to pay for your product.

• A founder shares an alternative: use ads to take users to blog posts explaining how to solve a problem with your product rather than to a landing page.

• This startup was validated using Google Ads and is now making $Ms (we did an interview with them).

I’ll be sharing the results. I’m interested in reading your justifications as well.

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That's all of this week.

Cheers,

Nico