What could Gardencoms three entrepreneurs have done to reduc

What could Garden.com’s three entrepreneurs have done to reduce the negative effect their lack of industry experience created for their venture? Reference: Experience is the most critical factor to a new business’ success. Prior entrepreneurial experience makes founders familiar with the process and more likely to avoid costly mistakes. Founders with experience in the same industry as their new business will most likely have better professional networks and more expertise regarding how to compete in the industry. If you do not have prior business experience, how can you overcome it? There are several solutions: ? Get business advice and assistance from such places as o the Small Business Development Center (www.sba.gov/sbdc) o the Service Corps of Retired Executives (SCORE) oLadies Who Launch (http://www.ladieswholaunch.com/) ? Participate in Online Forums and Q&A sites such as: o StartupNation (www.startupnation.com) ? Pick a Type of Business that Minimizes the Need for Prior Experience such as o Franchising ? Last but not the least, find a business partner that has experience! Garden.com In May 1995, three new MBAs, Cliff Sharples, Lisa Sharples, and Jamie O’Neill, each in their early 30s, met in one of their homes. They were all working for Trilogy, a software firm in Austin, Texas. They wanted to start a company together but didn’t know what to do. Though none of them had any experience in garden retailing, they picked the gardening industry and decided to launch a gardening e-commerce site: Garden.com. At that time, Amazon. com and Yahoo! were new, and there was a huge buzz about the Internet’s capabilities to deliver value to customers in a virtually endless array of products and services. The $50-billion gardening industry was fragmented, and no one was selling gardening supplies on the Internet. Seizing on what the founders thought was a golden opportunity, Garden.com was formed to offer a way for gardeners to purchase plants and supplies online. The company launched its Web site in March 1996. Over the next 4 years, as the dot-com bubble expanded, Garden.com raised over $50 million in funding. Soon, in addition to gardening supplies, it was selling a range of other products, such as furniture, candles, cookware, soap, tea, perfume, and Christmas ornaments. In September 1 999, the company went public. Two years later, it was out of business. What went wrong? Well, several things. First, its business model may have been fundamentally flawed. Garden.com’s only means of attracting customers to its Web site was advertising, which made it extremely expensive to get people to look at its offerings. In fact, the company spent 56.7 percent of the money it raised through its initial public offering on various forms of advertising, including glossy catalogs and full-page magazine advertisements. Commenting on Garden.com’s high customer acquisition costs, John Thornton, a member of the company’s board of directors, later said, “They [Garden.com’s management team] did not understand what it would cost to attract the traffic.” Second, the Internet bubble burst in early 2000, making it impossible for Garden.com to raise additional funds. Because the company wasn’t even close to being profitable (it lost $1 9 million in its 4 fiscal year that ended June 30, 1 999), it couldn’t continue without raising money. The company’s plan was to drive costs down and increase revenues to the point where it was profitable and wouldn’t need any more investment capital, which it felt it was within 2 years of achieving. But after the Internet bubble burst, investors closed their checkbooks. This series of events left the company with no way to continue financially. Third, the entrepreneurs behind Garden.com had no background in gardening or retailing and had no prior entrepreneurial experience. Although it’s hard to know how much difference this made, it is a point worth serious consideration. For example, after studying the demise of Garden.com for a book titled Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble, D. Quinn Mills, a Harvard Business School professor, wrote: “Gardeners for this book observed that the Garden.com Web site was difficult to use, and offered the opinion that the people running the company seemed to know little or nothing about gardening.” Discussion Posting #1: Please read the mini case of Garden.com above. One of the major reasons that lead to the failure of this company is the founders’ lack of experience in the industry in which they intend to launch a new venture. Share with us what you think if it is possible for entrepreneurs to overcome the problems that surface when they lack experience in the industry in which they intend to launch a new venture? What could Garden.com’s three entrepreneurs have done to reduce the negative effect their lack of industry experience created for their venture?

Solution

The lack of experience in a particular sector led to the downfall of the buisness of Garden.com. The owners of the company were software professionals and it would have been easier for them to manage the company had it been in the software sector. Howevern that did not happen. The company did well in the beginning but this could not be sustained for long due to the lack of experience of the owners in the gardening and retailing sector. The problem could have been avoided if they would have included a person of the field in their board of directors then they could have understood the intricacies of the business. Moreover, the three of them should have undertaken some gardening courses by themselves so that they could understand the problems faced by gardeners on their own. This would help them to design their products accordingly. Since they were software professionals so they believed that the people using the website would be well versed with using a website. However that was not the case. So a proper understanding of the customers, their needs and requirements along with the experience of gardening would have solved the problem of Garden.com.