
Why I turned down $500K and shut down my startup - jason_tko
https://medium.com/@Timoth3y/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354?source=linkShare-1837d4349d1d-1465433659
======
timoth3y
Hi. Tim here.

I'm delighted that this article struck such a chord. I'll try to answer the
most common questions here. I wish I could answer everyone directly.

1) I called it off before anyone sent money or quit their jobs. The only one
who lost money or a job because of ContractBeast was me. If the money was in
the bank and the team on board we would have gone ahead. That's why I had to
make that decision when I did.

2) I'm not saying there was no solution. There might have been, but the team
and I could not find one. Think of it this way. You and a team decide to
summit a mountain. It's a high-risk endeavor. After weeks of going over your
maps and equipment you just can't see a plausible way up. Do you call it off
or set out hoping you'll be able to figure it out. It doesn't mean no one can
do it. I means I could not do it with that team and that equipment.

3) Why didn't we leverage the contract approval features that customers loved?
We tried. The problem was that those kinds of approvals were not core workflow
for SMBs. It was useful when importing contract templates, but was not used
much after that. Nice feature but not important enough to get companies to
sigh up for multiple seats, which is what we needed.

4) Whats going to happen to the code and to Tim? No decisions yet. I'm open to
suggestions on both counts.

~~~
a-saleh
You mention that you might write an article on distinguishing the tangential
feature requests from the useful ones. I would really like to read that :)
Especially if I could send it to our product managers, because our product has
been in a cycle "we need an enterprise sale" > "potential customer mentions a
feature they would have liked" > "we scramble for a month to write the feature
and close the deal".

To be honest, it is much better now, but as a QE on the project, now I get to
deal with so many half-abandonned/half-finished features.

~~~
timoth3y
That's a bad place to be stuck in. I'll see if I can put something together
that makes sense and is fairly comprehensive. At the moment, a lot of it is "I
know it when I see it" but that's not exactly helpful.

~~~
StavrosK
Isn't a big part of it the client saying that "it would be nice if..." versus
"we can't use this unless"?

~~~
davidgerard
Much as a salesman can tell when a customer is saying "I would most certainly
give you money if you turned your product upside down and painted it blue",
which is correctly translated as "I will never buy your present offering."

------
santoshalper
It sucks when you realize you have built something that users like, but they
don't really NEED. I like the good habits analogy - I built several great
workflow apps for a Fortune 500 company in the past few years, but discovered
most users don't really want the yoke of workflow and there wasn't enough
immediate lift to tempt them.

Sorry man. Good call not to waste a year of your life.

~~~
mpbm
"It sucks when you realize you have built something that users like, but they
don't really NEED"

That's a great point. There are a lot of intractable problems that everybody
wishes could be "solved" but the reason they're intractable is that solving
them simply requires working harder. They can't be solved with cleverness they
just require doing all of the work, rather than doing as much of the work as
you absolutely have to. A ton of "solutions" just shuffle the work around. So
it's like you have a clean sink, but if you want to use the oven you have to
find another place for the dirty dishes. One pseudo-solution that doesn't
actually reduce the work is just as good as another, so there's no NEED to
switch.

------
zer00eyz
The underlying idea behind what he did here is sometimes called Ethnography.
There was another great article a while back on this going on at adobe/photo
shop: [https://medium.com/startup-study-group/my-two-years-as-an-
an...](https://medium.com/startup-study-group/my-two-years-as-an-
anthropologist-on-the-photoshop-team-e700acb7d3d5#.t6m5wue0c)

As far as tools go, ethnography can be very powerful in the right hands.

~~~
grizzles
Great comment. Fantastic article.

I wonder if they considered involving both sides of the contract from the get
go. When I've negotiated small-mid size deals with other tech savvy folks,
I've often thought a two sided chat style interface that I could use sitting
next to someone or if they were across town would be ideal.

The way I conceptualized it would be a 3rd party tool for making deals where
the main feature is standardized clauses for minimal lawyer involvement. Eg.
Need a standard confidentiality clause? (Drag Drop). Boom. Let's do business.

Commercial lawyers would hate it, but that's sort of the point.

~~~
rtpg
I think the primary issue is that when you start redlining, everyone has their
workflow and the side that's in the "position of power" will use what they
feel like using.

"Oh check out this contract at FooBarContracts"

(counterparty opens link, copies text into word doc, edits)

"Here's the latest DOCX with my revisions."

~~~
grizzles
It could be an iterative process, with niche domain and custom clause support.
For small-mid business people interested in GTD, I think there would be enough
utility gained by both sides to remain on the platform. For experienced
business people, involving the lawyers is an inevitable drag on dealmaking.

I bet people involved in frontline sales for (eg. software) would love
something like this to exist for fast closes. There are your shadow unpaid
product evangelists.

------
lordnacho
"When users are unhappy but can’t explain exactly why, they often express that
dissatisfaction as a series of tangential, trivial feature requests."

This bit resonates the most with me. I worked on a project worth little
traction where we'd keep getting feature requests from the client facing team
members for things that were of minor value but sometimes major effort. It
grinds you down over time as you realise there's no real demand. Eldorado
isn't over the next hill.

Sometimes it feels like the people giving feedback are just too eager to
please you with positive feedback.

~~~
aedron
> Sometimes it feels like the people giving feedback are just too eager to
> please you with positive feedback.

This is an important observation. As someone once said, "no one wants to crush
your dreams". If you present people an idea for a business plan, most people
will say that is sounds very interesting, nice opportunity, they'd definitely
consider buying that, etc. If you show them something you made, they will say
it's great and politely have a little conversation about it.

It is very easy for perennially optimistic (/self-deluded) entrepreneurial
types to take this kind of feedback as validation, when in fact it is nothing
of the sort. The only validation is this: Are they giving you money for it?
That is when you know you've made something of value, not a second before.

------
capkutay
"I was deciding whether this venture was worth committing to another year of
70+ hour weeks. I need a higher level of certainty than investors do because
my time is more valuable to me than their money is to them. Investors place
bets in a portfolio of companies, but I only have one life."

That's the key quote in the article. It's a fair decision from his standpoint
but I wonder if saying that will lead investors to question his determination
in the future (if he tries a new venture). I suppose the investors could also
appreciate that he didn't want to waste more of their money if he didn't
believe in the product.

~~~
onion2k
If the situation were really "take the money and do 70+ hours a week for a
year" versus "shut down the business" then I'd agree, but that's a false
dichotomy. You can run a startup putting in far less time than that; putting
in long hours is a choice. You can bring in a team or outsource the parts you
don't like. It makes it harder to succee but it's an option. You could
(depending on _lots_ of caveats) simply hand the business over to someone
else.

I respect the author for admitting he didn't want to run the business, and I
realise it was his choice to stop in the face of any other options, but I
really don't agree with the idea that running a startup _requires_ 70+ hours a
week and if you're not willing to put that time in you have to shut down.

~~~
quanticle

        but that's a false dichotomy
    

It's a false dichotomy for self-funded/bootstrapped businesses. But if you
consider yourself a startup, you have to deliver _growth_. It's that pressure
that leads to the 70+ hour weeks. It's entirely possible to own and run a
business while still putting in reasonable hours. But it's unlikely that
business is a _startup_ , by Paul Graham's definition of the word.

For reference, Paul Graham defines a startup as:

    
    
        A startup is a company designed to grow fast. Being newly founded does not 
        in itself make a company a startup. Nor is it necessary for a startup to 
        work on technology, or take venture funding, or have some sort of "exit." 
        The only essential thing is growth. Everything else we associate with 
        startups follows from growth.

~~~
nickbauman
This idea is key, regardless of what the dictionary definition of startup is.
A startup cannot merely be a profitable business. If that were true many more
startups would be still running today. But if you take investment of 10
million and you're positive cashflow of, say, 200,000 in your first year with
a projection of 1 million / yr in 10 years, you will be shut down and sold
off: Investors want AT LEAST a 2x return in that same timeframe otherwise it
isn't worth it.

~~~
tedmiston
Perhaps a confusing example, since that startup isn't profitable during its
lifecycle anyway.

~~~
nickbauman
yeah not a great timeline comparison, but the idea is a Nx growth translates
to Nx return on investment at some point.

------
encoderer
I have to say, I don't agree with this part at all:

"But most of the time, customers don’t really want the the features they are
asking for. At least not very badly."

Customer feedback drives an absurd amount of our roadmap at Cronitor. We have
a good idea of the many shortcomings of our product and are constrained
primarily by resources in developing it faster. When a customer -- especially
somebody on a trial -- puts their thumb on the scale of a specific flaw or
deficiency, we look at it as an opportunity to seriously delight that user and
at the same time level-up the product for all users after. We don't build
everything asked for, but I would say "most of the time, customers know
exactly what they need, and we try to give it to them within our ability."

A specific example for us would be Etsy, who uses Cronitor on a part of their
business and during evaluation asked for a couple API endpoints to expose more
advanced functionality.

~~~
vonklaus
the horribly over used Ford quote:

> if i'dve asked people what they wanted, they'd have said faster horses.

is applicable here, much more so than in the battlecries of every company
making something no one wants for some hypothetical market that doesn't exist.

While I don't understand the author's biz/space enough to comment
situationally, this is a key insight. People almost _always_ miss this. Users
want to get to places much faster, and much more confortably in the Ford
example. They speak in solutions and it is an entrepreneurs job to translate
this into problems, rank them, and provide actionable responses.

The flaw I believe in your example, could be a few things. possibly if you are
paid by a customer directly & are more a consultant/contractor than a SaaS
provider, well, that's how you get paid. However, generalizing about a
feature, especially without behavioural feedback is dangerous. if it is very
easy to do, of course do it. However, the risk of a feature is some subset of:

* value to customer

* conviction/data in that value prop. & feedback

* difficulty to achieve

* is it replicable. how valuable is this to all my customers? is it very valuable to a few, or semi-valuable to many/all.

This is again, highest level, even in the last point above you can see the
thread fan out.

So, again, i am bot super familiar with the authors company but I agree
wholeheartedly with his process of decision making. Consider it is possible
that either etsy was a big client, thus worth retaining for markwt goodwill &
rev, or that it was quite easy to open an endpoint to data you already had,
and thus doesn't discount this methodology

~~~
stephengillie
The somewhat underused 3M quote (paraphrased):

> When someone is shopping for a drill bit, they don't want you to sell them a
> drill bit. They want you to sell them a hole in their wall.

If you're wondering, most people will put a nail or hook in the hole in their
wall, and hang a picture or something. 3M would go on to sell them tape or
other wall adhesives instead of a hole in their wall.

Rephrased to correlate to this thread:

> When someone is shopping for document signing software, they don't want you
> to sell them software. They want you to sell them a set of agreements
> already negotiated with their business partners.

Don't confuse the tool with the goal.

~~~
vonklaus
I agree with this and I think it compliments Ford, or at least my
interpretation.

I've put a fair share of holes in walls and also fastened plenty of material
together. No one would buy a drill for _one hole in a wall_ but there is a
massive amount of leverage in being able to put thousands in quickly, ect.

> don't confuse the tool with the goal.

I think this is the lens/acid test. For your correlation above, it sounds like
it was harder to sell them automated agreements than it was for them to
manually produce them. Or at least, the perceived opportunity cost was higher
and the cost to educate them otherwise was higher than the authors profit
marg.

edit: just looked at your profile; very nice array of quotes you have.

------
angelbob
This story has a ridiculous amount of integrity. You did what was right, even
when convention went the other way.

Future investor reaction to it will tell us what they think of _actually_
bucking convention to do the right thing.

------
hyperpallium
I guess that's why this top-down market hasn't been disrupted. This guy is
seeing clearly. Cutting the old makes way for the new - it would be better if
I did this with my own zombie business.

And now, the armchair brainstorming: focus on the "contract review and
approval" immediate gratification and marginal user wins - if not sufficient
benefit for them to buy, make it multi-month free trial, make it a year. After
some "months of use", users get the delayed gratification. They become your
sales force from within, and CIO's notice the long-term benefits, validated
within their own company, and mandate its use top-down.

It's a long slow burn and mightn't work.

~~~
hyperpallium
Still fascinated! Couple ideas using _Crossing the Chasm_ (CtC):

1\. Your vision is crucial to your determination. Your vision is disrupting
SMB CLM with "huge gains in accuracy and efficiency". You can only start the
fire with those also inflamed with your vision - those who care. It seems only
CIO's (anyone else?). The CtC idea is to target those few adventurous CIO's
("visionaries") who want to leapfrog the competition with this new, unproven
approach. Reach them through those very, very few CIO's who are excited by the
idea itself ("enthusiasts") - just because it's a clever, efficient, elegant
approach to a broken process. They exist, just not many.

So: if you try to appeal to users, it must be those users who are excited by
what causes the "huge gains in accuracy and efficiency". Otherwise they'll
carry the wrong torch to the CIO.

2\. The other CtC idea is "niches": pick out the types of customer who would
_really_ benefit from your solution. e.g. inaccuracy causes chronic problems
for them/losing customers/bad publicity; CLM is a dangerously high cost
center; they can't keep up with sudden demand and are losing sales; they can't
adjust to changing contracts, and lose opportunities; (new)
regulations/legislation makes inaccuracy very expensive. Plus, it would open
up a new market; overtake a competitor; resist a competitor. These also excite
upper management.

Applying it gratifying users: are some businesses constantly approving
contracts, and importing templates (or should be)? Maybe during M&A;
law/consultancy firms?

Choose your customers to suit you.

------
EGreg
People live lives. Companies create products.

Sometimes what you build becomes bigger than you. If you want to quit, and
everyone else wants to keep going why not let someone else run the show?

If you started a chess club, or even a chatroom, and had no time (as the guy
says, he only has one life) to be an admin, would you just close down the
whole thing and kick everyone out? Maybe. If they really were so passionate
they'd pick up the pieces and start their own thing. Your old group might have
a way to transfer the accumulated wealth to the new group. Instead of just
losing it.

I remember writing an article about this a couple years ago called _the
Politics of Groups:_

[http://magarshak.com/blog/?p=135](http://magarshak.com/blog/?p=135)

Here is an excerpt:

 _If the individual - the risk is that the individual may have too much power
over others who come to rely on the stream. They may suddenly stop publishing
it, or cut off access to everyone, which would hurt many people. (I define
hurt in terms of needs or strong expectations of people that form over time.)_

~~~
erikb
Great question, imho. But indirectly it is also answered. It seemed like he
spent the majority of the power into the project and the others would have
joined when it was starting. It's like you have the chess club but other
people only come if you are there and maybe even only if you have something
special to offer.

~~~
EGreg
Right but often they come for the chess. It's about the chess for them, so
they don't want to have the club shut down on the whim of a single dude.

~~~
erikb
Okay, you say A, then I say "not A but B", and then you continue the
discussion by saying A again?

------
pookeh
Often times, the products we make should really be features of a larger
offering. Did you guys explore building on top of your contract tech or
getting acquired by a company that requires your tech? for example: 1\.
Marketplace of services that need contract signing between parties. 2\.
Project management app for SMBs or freelancers 3\. Legal document authoring
app that extends to contract signing.

There are prolly more ...

------
e12e
It sounds like most of the customers had a flawed process - or perhaps an
_actual_ process that was different from the process they felt they _should_
have. Perhaps they were even in breach of some guidelines legal had drawn up,
or even laws or statutes on acquirement.

And it sounds like the product automated a good, sound process. One that was
different from the customer's actual, current process.

I don't know how one could hope to sell a new process (incidentally along with
an automation framework) without massive training, and, well, consulting.

I'm a little surprised they didn't take the opportunity to pivot. Maybe none
of their beta users were interested in the 100x(?) investment buying such a
package would cost? It sounds like they found a different market, smaller in
number of customers, larger in revenue - and chose to walk away because:
software is fun, human process is hard and boring?

It's a valid choice to be sure, but it strikes me as a little odd. I thought
the idealised, naive idea of a computer system being more important than the
human systems it enables was more of a delusion limited to Silicon Valley,
than a general problem.

I'm reminded of how model-view-controller was internally known as model-view-
controller-user, and how shortening it to mvc[1] was probably a terrible
mistake that obscured most of the valuable idea behind the concept (that of
mapping the users mental model of domain knowledge to widgets on the screen
and on to the data models used by the software).

[1] according to a talk Trygve gave, but it kind of shines through in his
brief history of mvc too: [https://heim.ifi.uio.no/~trygver/themes/mvc/mvc-
index.html](https://heim.ifi.uio.no/~trygver/themes/mvc/mvc-index.html)

------
epynonymous
that's why i firmly believe you have to find the idea that you're really
interested in because that's what will pull you through those 70+ hour work
weeks or through those days where you're on the brink of failure wanting to
fold shop. there are many ideas that are interesting and probably could be
good businesses (lifestyle or startup), but can you overcome all those things
not just on sheer will power, but just because that's what you enjoy spending
your time on?

~~~
elliotec
Or bootstrap a lifestyle business with an idea that you're really interested
in and spend exactly as much time as you feel like working on it, making money
and not answering to investors.

~~~
epynonymous
awesome, you sound like you have experience creating a lifestyle business. i'm
in the midst of starting one myself.

------
chalam
Tim,

Interesting comment in there about 'Approvals' being one of the most used
feature. Why couldn't you build around that? A more generic approvals solution
for any kind of contract.

------
reilly3000
Moving down market is tough. The reason why enterprise ecosystems can flourish
is that consultants have a symbolic relationship with software, act as a
silent sales force, drive legitimacy and solve the soft issues that make
software projects fail. Creating a simple CRM system isn't that hard, but
getting mass adoption AND offering a customizable product takes hand holding.
Content alone doesn't hold hands, nor does (most) UX. Software that changes
how people's jobs work (accounting, CRM, EHR, etc) naturally invites pushback
because PEOPLE HATE CHANGE.

Maybe the next generation of UX will have change management built into the
system, not just tours and tooltips. For now, the burden of software adoption
is best served with donuts and somebody how cares enough to make it work for
the business that is investing in it.

~~~
prmph
How then do you explain the sometime massively enthusiastic adoption of
disruptive consumer software?

My understanding is that people seem to resist change in corporate
environments because it is a high stakes environment where, for example, the
ability to hold onto work "flow" achieved over a long period can make the
difference between thriving and failing. Thus software becomes more of a
political tool, not necessarily in the sense of office politics, but in the
sense of being part of a strategic toolbox by which people grapple with the
networks of power they participate in at work.

So corporate users are not necessarily resistant to change; they are just
strategic about whether and what changes are to their advantage; if the
introduction of new software can strengthen their work-related strategies,
they can become its champions. I have seen this myself when I used to work for
big multinational corporations.

To model software adoption in the corporate space, therefore, one might need
to employ a theory of power such as Actor-Network theory (in which terms one
might think of software as an actor that can be "enrolled" for various ends)

A theory of work and instrumentality, such as Activity Theory, is what most
people (sometime without knowing it as such) apply to analyze work
environments; but paradoxically it is usually the wrong approach to analysis.
I see this failure of analysis all the time.

In a nutshell, the more instrumental and work-oriented software is, the more
necessary it is to analyze it through a power-relations lens.

------
selectron
Quite interesting. Why couldn't you build in a reward system to using the
product? Similar to how games like WOW do?

~~~
timoth3y
zer00eyz comment is pretty accurate. Gamification is something that came up
during brainstorming, but most business users tend to view all but the most
subtle approaches as distracting. We concluded we needed something that
actually made their task more efficient or effective.

------
agentgt
I don't know much about contract management so take most of what I have to say
as an ignorant opinion.

I'm trying to figure out how ContractBeast's problem of continuous usage is
any different than almost all the business tools out there that require human
intervention (with the exception of email, and MS office suite).

It seems every investor and entrepreneur has this desire to make "crack" and
not just tools. Good tools don't need to be used all the time. They don't need
to provide some sort of gamification, feedback loop, or enjoyment.

As for money making good business tools don't need even need to be used by the
user... in fact they really should be automated. I know this because we had
some of the some problems ContractBeast did and the key was not getting the
endusers involved at all. Automate and integrate so they are almost out of the
loop completely (again I don't know much about CLM... maybe this isn't
possible).

As far as top down selling it is almost impossible in the B2B market to do
something different. Managers force users to use tools and those users use MS
Office most of the time but those tools still get bought and eventually those
tools do provide value (aka sales force).

------
tyingq
Having some experience dealing with the "purchasing" side of the house at
large companies, I can guess part of what might have gone wrong.

Contract Beast's customers were likely exclusively these "purchasing" people,
and thus, that's where the feature requests and feedback were coming from.

But, in the end, the success of the product within a customer company is often
more driven by the "non purchasing" users...the actual departments that are
trying to buy (or sell) something. It's not unusual for the wants/needs of
these people to be completely different than the purchasing department.

I watched several attempts for contract management software fail because of
this. In the end, what won out was narrowing the solution down to the biggest
pain point...implementing just e-signatures. That got rid of all the manual
print / sign / scan-or-fax cycle, which everyone could agree on.

------
Steeeve
500K is not a lot of time. It's six months with a small team and maybe not
even that considering you need to either have time to pitch another round of
funding or get to the point where you can pay the bills independently. If you
don't see a path to something strong enough to get you to the next level in
that amount of time, there is no choice but to walk away.

Every idea to fix it takes time to develop, and with whatever time remains you
have to make progress with sales and the existing customer base. With any
given product and the right team you can get there, but the only way to get
the right team to commit is with a passionate belief that you will get there
before you run out of money.

If you spend the time trying to build a roadmap out of whatever options you
can come up with, and none of those options give confidence given time and
budget constraints... well, then you've done all you can do. It's not hard to
come up with a list of reasonable options to move forward with, but it is hard
to come up with one that's worth committing to.

If you've grown to the point where you can man up and make the decision to
walk away early, you have a good future.

------
spupy
"I’ve started four companies in the past with a mixture of exits and
bankruptcies, so I understand that this is what startups are supposed to do,
[...]."

As someone completely unfamiliar with the world of startups, this sentence
baffles me. If this describes your track record, how do you even get funding?
Obviously I'm not an investor, but this sentence alone is a massive red flag.

~~~
bshanks
Merely knowing that something often or even usually fails is not enough
information to conclude that it's a bad bet -- in order to compute that, you
also need to know how much money it makes when it succeeds.

For example, if you expect something to fail 80% of the time but to gain >400%
the other 20% of the time, then the bet has positive expected value.

------
arcticfox
It's pretty surprising to me that there was no way to shift enough of the
value gain from "huge gains in efficiency" forward to keep people motivated
about the product.

For example: use a chunk of the $500k as rewards to push people through the
initial adoption. Then presumably the real gains would take over and they'd be
happy customers.

~~~
mdorazio
Yes, but would that really be sustainable? Paying every single user to get
them to actually use your product is generally a money-losing proposition in
the long-term unless you plan to jack up your prices after you lock them in.
It's also not at all clear if just offering rewards would be enough to get
people to use the product in their daily contracts workflow. Switching from
whatever system someone currently uses to a new one for contracts is a _huge_
pain, so it would require a similarly huge up-front commitment. I've seen
contract systems switchovers a few times at clients, and pretty much every
single person in the trenches has hated it and only done it because it was
forced on them from the exec team.

------
matchagaucho
The challenge with CLM is that you're constantly competing with users desire
to use MS Word.

Moving everything to the cloud would be far more efficient. But the corpus of
legal text captured in Word and Legal's preference for redlining email
attachments is the status quo.

------
Dwolb
If we're going with the whole human centered design approach here the writing
doesn't sound as though you were thorough enough in the research, analysis,
and synthesis.

There should have been some guideposts here: who were the power users? what
did they love? who were the huge detractors? what was their big issue? how did
ContractBeast fit into the ideal world? how were people splitting their work
between the old system and ContractBeast? were there network effects for the
old system?

Yeah we can look at some sort of short term win and long term gain framework,
but it's pretty reductionist to a) only depend on that framework and b) not be
able to come up with any solutions to fulfill short term wins.

------
advertising
Sounds like the right move.

If you had discovered this when you were 6 months in, spent 50% of the cash
and had employees would you have made the same decision? To pull the plug and
return remaining capital vs trying to make it work.

------
veritas213
"ContractBeast did not address the problem of providing a significant,
consistent and immediate benefit"

Neither does insurance but its pretty much a no brainer for most companies.
Contact management isnt suppose to give instant gratification. Its supposed to
provide peace of mind knowing you will not miss important dates in the FUTURE.

Hate to say it but Mr Romero seems to have given up way too early. All the
smart people on HN someone will pickup the baton and run with this idea.

------
icu
I think the entrepreneur failed to assess why it had to be him to solve the
market problem and give birth to the company.

Sometimes it's not necessary to assess this because you are compelled to act
and you can't stop.

In this case I think had he asked this hard question sooner he would have
found his heart wasn't in it. Either way dropping it was the right thing to
do.

In comparison my 'why' for the thing I'm working on makes my soul burn and is
a limitless well of determination.

Call it 'Conviction/Opportunity' pull.

------
ztratar
"It would have been different if we had been debating which plan among several
to implement or how to shore up specific weaknesses, but we had nothing."

I don't really understand "having nothing" \-- you're either creating value or
you're not. You guys spotted a real problem, but your v1 solution was meh.
There were certainly multiple ways out (and not just tack on gamification),
and even if some were long-shots, the uniqueness of a startup is to place
those bets.

~~~
williamstein
He assumed that if he personally couldn't solve a problem in a few weeks of
hard work, then nobody coudl. This is kind of naive or possibly arrogant. It
also sounds weak to me, coming from academic research, in which people work
very hard on problems for years, and sometimes even succeed at solving those
problems (famous example: Fermat's Last Theorem).

~~~
dwwoelfel
He explicitly says in the post that he's not claiming the problem is
unsolvable. If I read it right, he even thinks it is possible that he could
solve it, but he doesn't want to bet a year of his life on it.

------
dharma1
If you don't believe in what you're doing then I think it could have been a
mistake to take the money and carry on.

If the team and investors believed in the product, perhaps you could have
asked if some of the current team were willing to take it on, and make it
work. You could have retained a bit of equity for the year and the hard work
you put in so far without having to commit any longer yourself.

------
rkwz
> About 35% of our users continued to use the system at least three times per
> week after completing registration.

OT, but curious, how is it possible to get this kind of engagement data?

Querying DB to get number of logins per week? But that doesn't mean that
they're "using" the system.

Google Analytics? I'm not aware of any such GA feature

Third party analytics?

Surveys?

~~~
dimfeld
Heap Analytics and Fullstory are two popular systems (among others) for this
sort of thing. They record and instrument your user sessions much more
comprehensively than GA does.

------
amenghra
Selling products to SMBs is hard. Most small businesses will often take the
free trials but won't be willing to pay for a product if it entails a
financial commitment.

I have seen a small companies use student licenses instead of paying for the
more expensive commercial license in order to save every possible penny.

------
dnautics
Why not make an open offer to anyone who thinks they can solve this problem
and turn this around?

------
Chyzwar
Nope, His business was perfectly reasonable. He could become next
Taleo/Atlassian/Slack, grow slower but dominate space. He only needed to
extend offer with with self hosted version.

------
frozenport
Can't you just charge them $2.99 for each contract, and go with volume?

~~~
vonklaus
I suspect you would get killed here. You are trying to change user behavior
and as noted they don't have short term benefits. This pricing model
disincentivises a company because it costs them money up front each time they
try it and not showing and value.

Essentially they need to add an extra step to their routine & pay for the lack
of convenience. This was likened to ecercise by the author. However, if you
expect anyone without a top down authority (also mentioned) to do something
that is harder & more expensive, they won't. It's why gym memberships bought
on Jan 1 are rarely renewed in Feb or March

edit: so you are correct, paying for what you use is logical especially vs the
value. Here it sounded like the customer has high value, but we discount it
steeply for lack of immeadiacy.

------
spectrum1234
Great article. However given its by a ~4 time founder the logic to shut it
down doesn't apply to most people reading it (first time founders).

------
chrismcb
I'm sure the fact that this was in private beta had nothing to do with the
fact customers weren't using it all the time.

------
leroy_masochist
> I left my job in January so i could work on ContractBeast 70+ hours a week.
> The rest of the team kept their day jobs. That was fine. It made my final
> decision easier.

Reading between the lines here, I'm picking up some resentment. I think an
underlying cause of the decision to walk away from ContractBeast might have
been a specific subtype of founder burnout -- the kind that happens when you
feel like you're pulling more than your share of the weight, and/or you feel
like you're more committed to the company/project than the rest of your team
is.

There's a downvoted comment at the bottom of this thread stating that the
commenter would never give this guy money. That's a bit harsh, but at another
point in the comment he makes a very (IMO) valid observation that burnout is
at play here and the author should have taken some time off. That rings true
to me.

Also,

> Weeks of brainstorming and dozens of hypotheses later, we had nothing. Not a
> single, plausible way of providing our users with the instant gratification
> their cerebella so desperately crave.

> With no clear path forward, investors ready to wire funds, and the team
> ready to quit their day jobs, I decided to pull the plug.

Is it just me or does this seem like there's a big hole in the plot here? The
whole team spent several weeks trying to figure out how the product was going
to get traction, came up with zero good ideas, and everyone's still ready to
quit their jobs and work on this full-time?

Assuming this is accurate and absent further details, I can think of two non-
mutually-exclusive hypotheses for how this might have actually happened:

1) "We had nothing" was really "I had nothing". Either because of a failure on
the part of the author to communicate with the team, or their indifference
upon hearing the author's description of the problem in question, the only
person really working on solving the problem was the author. To the extent
that this was the case, it would certainly have exacerbated the "I'm working
way harder on this than my cofounders are" burnout described above.

2) It's also possible that the other prospective cofounders and/or early team
members were aware of the headwinds facing ContractBeast and just really,
really hated their day jobs and were thinking, "I honestly don't even give a
shit if this company works out, I just want to go somewhere I can get paid
while not having to deal with my current boss, and if it fails it's not a big
deal, it's a startup, they fail all the time and I'll be able at a minimum to
use the newfound flexibility in my schedule and relative seniority in the
organization to make myself much more available for interviews at other
companies."

------
redneck_
Tl;dr I burned out.

------
getgoingnow
Why is Paul Graham defining a word that's already well defined and understood?
Go to Google and type in "define startup" and you will see that:

    
    
      startup = a newly established business
    

I think the reason he wants to redefine the term is so that people associate
starting a business with rapid growth, which will benefit him personally. How
do you achieve growth in almost all cases? By taking VC money. What happens
when you take VC money? Investors expect an exit. So, even though he says you
don't need to take venture funding or 'exit', he really wants people to do
that, because he can make money from it.

~~~
mediascreen
I think Graham's definition aligns much better with general usage of the word
than a definition that would make the new ice cream stand at the corner a
startup.

~~~
vertex-four
Really, only on HN and other "startup forums". Anywhere else... well, do you
think even an ice cream stand is immediately a viable, profitable business?
Usually not. The space between "having a registered company" and "actually in
the black and stable" is a startup.

~~~
mediascreen
I would still say that, to most people, a startup implies more than just a
newly started business. I have never seen or heard someone who has just
started a small brick and mortar business (without grandiose expansion plans)
refer to it as a startup.

That said, I'm not a native english speaker and I don't live in US - maybe
it's more common than I think.

~~~
tedmiston
You're correct. We'd just call them small businesses.

Though I have seen some small businesses working in technology refer to
themselves as startups without really understanding the definition (or because
they're trying to sound "sexy" to recruit developers).

~~~
collyw
You are too old. Its youngster hipster speak for running your own small
business these days. I have heard a few friends referring to their business as
a startups.

------
moribondus
ContractBeast would have accumulated lots of data that would be compelling for
its users. The only problem is that you cannot hand out that data directly:
How much did someone else pay for the same contract? What conditions did he
get? If you find a way to effectively use this information without actually
revealing it, you would have found the compelling feature that you were
looking for. ContractBeast would have become the go-to place to check if your
contract actually makes sense.

------
DarkIye
it was a bad idea #savedyouaclick

------
vinceguidry
It seems like the marketing was all wrong. If you're selling to big business,
you need a big business sales process. If you can't afford that, you're just
pissing in the wind. He was focused on product when he should have been
focusing on his sales and on-boarding.

Patrick McKenzie has demonstrated that you can do high-touch corporate sales
as a small organization or even as a single person. He just needed to figure
out how.

------
ChicagoDave
After this, I'd never give this guy time or money and I doubt anyone else will
either. No matter how shitty you feel about your start-up, if you have a
willing team and cash, you should see it through. Being an entrepreneur isn't
always about having all of the answers. It's very often about not knowing the
answers and figuring things out. Especially if you have a team and cash flow
and investors.

I think this guy needed to take a day off or seven and get his head back on
straight. I'm nearly positive every entrepreneur goes through the "doubt"
process many times in a given start-up.

It's the person that figures out how to renew themselves that ends up
succeeding.

~~~
kasey_junk
> The rest of the team kept their day jobs.

> The team was excited. Our potential investors were excited.

He didn't really have a team and he didn't really have investors. He took a
personal risk and found it wasn't working. He shut it down _before_ it got
expensive for people other than himself. I applaud this.

People, especially around here, need to understand failure is the norm. This
person failed fast, well. Nice work. On to the next thing.

~~~
ChicagoDave
This goes to my core belief that "failing fast" is bad for entrepreneurship.
It is far more rare for an initial idea to succeed than one that morphs out of
original ideas. Even Facebook started out as something other than what it is
now.

I have nothing against accepting failure in an idea. My first start-up failed
and I had to let it go. It was really fucking hard to do that. But I tried to
pivot twice before finally letting it go and I worked at it for a number of
years.

The people that want us to fail fast don't have entrepreneurs best interests
at heart. They're looking for quick wins and the more starts and fails they
get, the better _their_ odds of something "popping".

But there's something to be said for perseverance.

I won't argue that there shouldn't be a balance, and maybe I was too hard on
the OP, but it sounded to me like he needed to step away and think about it,
not just let it go.

But I guess we have to defer to his judgment since it was his idea.

I just really don't like fail fast mentality.

