Alikolo

What did it do?

Alikolo was an online marketplace in Indonesia that connected sellers and buyers across a wide range of products, from electronics to fashion. With a name that echoed Alibaba, the site was built on a modified WooCommerce platform.

Why did it shut down?

Danny Taniwan, a software engineer from Medan, founded Alikolo in 2014 without researching the sector or getting to know his competitors; in his own words, he did not even know Tokopedia existed. In return for investment, he handed a majority stake in the company to two angel investors who traded commodities and had no e-commerce experience. A free shipping campaign launched at the end of 2014 made December 2014 the company's best month, but when the campaign ended in February 2015 sales fell and it became clear the product had nothing else to set it apart. An ownership structure in which the founder had become a minority shareholder scared off new investors, and no second round could be found. Taniwan closed the company debt-free in spring 2015.

The story

Danny Taniwan was a first-time founder from Medan, the big city of North Sumatra, trained as a software engineer. He did not know the start-up world, but he had been impressed by Alibaba's success in China. In 2014 he set out on his own to build an e-commerce marketplace and gave the site the name Alikolo, a nod to Alibaba. The aim was to bring Indonesian consumers a wide range of products, from electronics to fashion.

Taniwan later admitted he had done no market research and did not even know that Tokopedia, the country's largest marketplace, existed. The two angel investors who funded the company were businessmen who traded commodities and had no e-commerce experience. In return for their investment, Taniwan handed them a majority stake in the company.

When the investors wanted to see results, Alikolo launched a free shipping campaign at the end of 2014. The campaign worked, and December 2014 was the company's best month, with sales of around $50,000. But when free shipping was withdrawn in February 2015, sales fell. Taniwan realised the business was not sustainable on its own and had nothing to distinguish it from other e-commerce sites.

A structure in which the founder had become a minority shareholder kept new investors away, and no second round of funding could be found. Taniwan closed Alikolo in spring 2015 without leaving any debts. In Tech in Asia's round-up of Asian start-ups that closed in 2015, Taniwan attributed the failure to his inexperience and to handing a majority stake to investors who knew the sector even less than he did. In later reflections he said he should have sought support from an experienced co-founder who could have spotted the warning signs in his strategy.

Lessons for founders

• Before entering a market, research your competitors and why customers choose them; discovering your biggest rival after launch is a disadvantage that is hard to make up.
• Handing over a majority stake in your first round can lock up later rounds; consider what the founder's share signals to new investors.
• Do not mistake sales driven by incentives such as free shipping for real demand; measure in advance, with a small experiment, what is left once the incentive is removed.

Sources

1. 20 failed startups in Asia in 2015 and lessons learned (Tech in Asia (Yahoo Finance Singapur), 2015-11-26)
2. 6 Companies That Failed To Make It Through The 'Middle Mile' (Leaderonomics, 2017-09-01)

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