I come from a coal mining region. For over a 100 years there has only been one mine in the area, a big mine. There is plenty of coal in the surrounding areas. This is Africa. An uncle of mine had the idea that we start a mine. He invited about 20 of us, all related. We started putting aside money to register a company, pay a geologist to prospect for the coal and get mining permit to mine the coal. We all contributed money on a monthly basis. All paper work is done in the capital city so we used to send the oldest uncle in the group to go process the paperwork. He had worked in government before and he was older. In my culture you respect old(er) people.
To cut a long story short we successfully registered the company, got a geologist to confirm there was indeed coal and got a mining license from the government. We then signed a contract with a sub contractor to come and mine. When the share certificates came instead of owing 5% I ownwed 0.00086% of the mine. Yes there were 3 zeros before the 86. Our elder the uncle we had sent to do the paperwork basically screwed all of us, including the uncle who originally came up with the idea.
Lessions
1. Never use your cultural beliefs in business. Stick to contracts.
2. Don't just trust family.
A contract is an agreement, not a piece of paper. If you all agreed that he would represent you, than he was bound to do so, no matter what got written down.
That, at least, is the theory. There are of course many, many steps between a theoretical case and successful claim. And it's certainly easier to win a case if you have a written contract as evidence --- though 20 people's testimony is pretty strong evidence, too.
I am not (quite) a lawyer, and certainly not in your country. But it doesn't sound like you did anything wrong: it sounds like fraud.
I get where your questions are coming from but the real problem was that we were first a family then business people. In my culture, there is a alot of respect accorded to the elderly. We brought up not to question people older than us. So much so I struggled at work to call people older than me by their first name.
It is fraud. Some of the family members wanted us to get the others arrested but this isn't so easy when you are family. It literally ends up with you getting your cousin's dad arrested, the same cousin you grew up playing soccer with. We collected money for a lawyer to sort it out but that dragged on and on.
I now have first had experience of the saying that "the love of money is the root of all evil". None of us had quit our jobs so we moved on. I hold no grudge, just took the lessons.
> Some of the family members wanted us to get the others arrested but this isn't so easy when you are family. It literally ends up with you getting your cousin's dad arrested, the same cousin you grew up playing soccer with
I grew up in the Southeastern US. Here, getting your cousin's dad arrested is a Tuesday. ;)
In all seriousness, sorry you had to go through this, and glad you took away good lessons. On the other side of the coin, never feel guilty about getting what's owed to you.
You're the only one you can trust to have your interests at heart.
People inside our tight social circles are held accountable by social pressure. This is why, for instance, Mormons seldom defraud other Mormons -- it would make Sunday mornings unpleasant for a long time to come.
That your uncle would choose very deliberately to alienate his entire family is the astonishing thing. Would be curious to know what his social life is like, now ...
Probably it's especially prevalant in Utah because it's not common in the US to do business with family members while it's more common in Mormon communities.
Interesting, but the article doesn't give us much sense of how close the victim and perp were in the church hierarchy, My reading is that they probably did not have the same Mormon bishop, who would have felt some pressure to take action.
So, yes, the farther away in the social network, the weaker the social pressure. If the link is mere nominal membership in the same faith, that may be worse than no link at all. Most of Madoff's victims were Jews -- because they were inclined to give him the benefit of any doubts.
You quite right, those are the reasons we trusted him. Clearly, the love for money was bigger than his love for the family.
We still meet at extended family gatherings. Funerals, weddings but no one stops by to visit him and his immediate family. Which I gather is fine with them because they have renovated their house and bought themselves a new set of wheels.
The opposite is what I noticed though. Family members will screw you over and then if you ask for repair they'll use the excuse that as family you should just all get along.
What I noticed early in life is that when a successful businesswoman in my family lent some cousins money, and they then offered fabulous stories instead of repayment, they were no longer seen at events she hosted ...
So this uncle was elected as the chairperson and given power of attorney to register everything on our behalf. The capital city is a good 800km away and we all had day jobs. As I said in another comment, the true problem was we (I) believed a family member wouldn't screw us like that. So it was literally a handshake agreement.
This reminds me of a takeaway from my failed startup - it's really not realistic to place 100% trust in someone to look after your interests if you are remote.
You need to be there in person to keep an eye on everything, or possibly complain to government relgulators / go to court if need be. If it's all remote and it's not practical to do this stuff in person, you are asking to be taken advantage of.
If he had power of attorney, in many jurisdictions he would have had certain duties to you which may have significantly restricted his ability to do undermine your interests.
I would speak with a lawyer, given what you have described you may have a case for various beaches -- an oral agreement is a form of contract, power of attorney has certain obligations that are required to be held (the agent has a fiduciary responsibility to act for the benefit of and in the best interest of the principal), and there could perhaps even provable fraud.
Not in the US in many cases. Take the Uniform Commercial Code, for example, which requires a written contract for the sale of goods over $500, or agreements creating a security interest.
But I believe in the UK it is only transfers of land that require a written contract. However you might want to think about how you would prove a handshake to a court
In the US, I cannot transfer land to you with a handshake. I can't sell you most goods valued over $500 with a handshake. I can't assume your debt to another party with a handshake.
In Europe/Norway the agreement have to be beneficial to all parties to be legal. In addition goes any doubt in favor of the one who did not write the agreement. Isn’t there any similar rules in your country?
Do the rest of the shareholders have first option to buy his shares if the uncle were to wander into the jungle and fall into a pit, just a pit, a big pit?
So the contractor did indeed come through and mine for about three years. Contractor opted not to renew his contract. At this point I have to disclose my home country, it is Zimbabwe. We have had trouble convincing anyone to invest in the country. Dictatorship. Money that we made was shared according to the shareholding structure. I made peanuts.
Nothing happening now, I guess we tired from fighting.
"He invited about 20 of us" then "instead of owing 5% I ownwed 0.00086% of the mine."
Have you made explicit the share you will end up with or you just assumed that all of you would get 100% / 20 people, i.e. equal share? It sounds that your uncle worked a lot more (from the moment he looked for partners and invited them into the venture till the end of the paperwork and beginning of the operations). I concede though that your share was way too small. If the rest of the partners (18, without you and your uncle) received the same share, your uncle gave you all only a little over 0.015% which is just below any justification I can imagine.
Its a really long story. I mean long. No the uncle didn't do all the work. Infact he contributed no money at all. There was a lot of legwork done by other family members hiring equipment to do prospecting, providing transport and wooing potential investors. You have bear in mind that half of the relatives were not educated. There was a lot of trust and good will because were "family". We are still are family.
On a side note, this made me realise why there is so much conflict in some mineral rich areas in Africa. Honestly if we weren't peaceful people there could have been serious conflict.
> On a side note, this made me realise why there is so much conflict in some mineral rich areas in Africa. Honestly if we weren't peaceful people there could have been serious conflict.
It's my way of saying we were really mad! Mad enough to come to blows which nearly happened at our meetings or to sabotage the whole mining operation. Have a look at this story[1] about a community in diamond rich land in South Africa who are still bitterly divided to this day.
It turns out, there's a name for this (which I learned in a HN comment): resource curse.
One theory being that, essentially, legal controls and enforcement are expanded with economic activity. But a sudden surge in resources (e.g. discovery or exploitation) exceeds the existing system's ability to control corruption, and it's very hard to steer a cash-rich system back to good governance after this happens.
You're right that rent seeking and corruption is a big part of the resource curse but another aspect of it is that having a large amount of natural resources makes your other exports less competitive (because all the skilled people go work in the mining/oil/whatever industry) and so it's hard to develop the educational and other institutions that a successful society has. That's why developed countries (e.g. Norway, Canada, USA) don't suffer from the resource curse. They have other options than exports for economic growth (in addition to better functioning governments).
There is an argument against aid to developing countries for similar reasons.
I chased and successfully won a huge customer for my small and fledgling startup. I chased and successfully won a sole service contract for a key part of their business process. I allowed a credit situation with them to grow over the course of 3 months while I allowed them to have 60 day terms. And then, they went out of business and left me holding the bag with $150,000 in unpaid AR after I spent $90,000 generating that AR with them.
The lesson is never trust the size of a company as sufficient reasoning that they can and will pay their bills.
^ this is real talk. Big companies love to be behind on AP for a variety of reasons, among them:
- Their own 'highly matrixed' organizational structure makes it near impossible to find 'the correct person' to talk to about accounting issues, let alone get a straight answer out of them - so chasing these issues down becomes a huge drag on your time and energy and you may very well just give up after a while
- Past-due invoices are typically penalized with tiny interest percentages [in the <2% range], so even if they do intend to pay eventually, they can gleefully treat you as a bank with really low interest on short-term loans.
- They know full well that you, the small company, probably aren't willing to put up the massive time and dollar resources in order to sue them, the big company, for what is to them small potatoes. They have a bench full of experienced attorneys, you might have a single one, and they know exactly how to extend and complicate a legal process such that the litigation itself costs you far more than the outstanding AR.
A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments.
Over the last 15 years or so, a lot of my best customers have been super-late payers. You take the good with the bad.
To double down on this it's worth finding out how the customer within the large company pays for things. Sometimes it was easier to get an annual or quarterly contract because that's how a company's accountants dealt with that employee/department's business expenses.
I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that.
Has this been your experience as well?
... and do you "outsource" your AR for a % of your invoices?
I really don't think we even think about it that much. We have terms in our contract, and we send emails when payment is due, but it's not like we'd ever flip out if someone was late.
You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely.
At Matasano, I remember one of our anchor customers taking something close to a year to pay an invoice.
As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.
That just gave me a flashback to my college accounting courses. So many examples where a discount was offered for on time payment. Must be a reason that technique has been around long enough to be a fixture in accounting textbooks.
From big co perspective, absolutely true. Tons of other priorities to get out of the door than paying on time. Our invoice process was dreadful. Thinking back, if a vendor made it easy for us, we might always pay on-time!
How big is your average client and how heavily utilized are you? Your experience is very different from mine, but I may be working with larger companies (or you might be working with an idiosyncratic subset --- I don't think I am, though).
I work with companies 1-50mil in revenue typically. I don’t know what the law is when it comes to late fees, the language is mostly there as deterrent. That being said I am VERY picky about who I work with so I’ve never had a late payment or nonpayment, I suspect that’s more due to the screening process than the language in contract. If I ever had to actually charge a 10, 20 or 30% late fee, I would not pursue it and choke it up to a business loss and forget about it, move on. Cost of doing business.
I’m pretty sure that violates most State usury laws.
Note that I’m not referring to charging interest for late payment as being illegal. I’m specifically referring to charging 10% compounded weekly, which comes out about 14200% annualized.
Probably not. Even in states that don't exclude fees unrelated to an actual loan of money, it looks like contracted late fees between businesses are excluded from usury definitions (that's the case in NY, for instance).
I'm curious if there's any examples of this ever happening. Some company keeps ignoring a contractor's requests for a couple of years and ends up owing ~$20 million on a thousand dollar debt.
But like you, I'm pretty skeptical. Probably wouldn't hold up in court.
The outcome would be entirely random - dependent on the inclination of the judges.
A sensible business would settle out of court with a very low offer. A sensible contractor would accept the offer.
But generally this is another example of corporate privilege.
In reality, late payments kill many small businesses. In a political system that was genuinely friendly to the small guy, fines for late payment would be mandatory.
We service Fortune 50 customers in a similar business to what Matasano did. This side of the business is definitely harder than the hacking / technical work. It can be tough to deal with and structuring bigger deals is important. Fast payment is not only important to not being at risk, but a short cash conversion cycle is basically more capital available at lower revenue. Kind of like velocity in the Agile dev world, only for money. There are diminishing returns (edit: in attempting to lower CCC) and large customers will throw you into the meet grinder that is their AP.
No doubt about it. An effect of the behavior set I describe above [and I was only describing them -- I've been on both ends of that phone call over the years] is that in these relationships, the established payment terms are kind of irrelevant to the way things actually play out.
I have tackled this issue (late payers) in two ways:
1. My cashflow from other investments ensure I did not run out of money. This is a bad design where I am effectively extending a 0% APR loan to the client with a term of their choosing
2. When I have ARs large enough to entice "parties that handle payments", I choose to let them handle the invoices on my behalf for a cut. A pretty large cut but 80% is better than 0%.
I am effectively looking for a way to optimize the later but happy to hear alternative solutions, specially when the ARs are not large enough to outsource.
For a bootstrapped business, this cashflow can be critical.
I mean, if you're careful about who you work with, 0% isn't really a meaningful risk. Bank of America (or, for that matter, Airbnb) isn't going to default on you; the pain the ass you could generate if they did would cost more than the invoice.
Agreed with a caveat. Having actually worked with BofA, the amount of overhead for a contract could have put me out of business if I was not a BIG5 employee.
The big boys are not even going to consider me unless I am a safe choice (they really don't care if I am a kickass programmer who can solve their problems - they want to do business only if I am a known quantity so that they don't get fired if a deal with me go sideways).
I am really lucky to have positive cashflow because I can be picky about clients but a lot of friends ask me how to get started and my experience with cashflow is that a fantastic business with client set A can absolutely fail compared to the exact same business with client set B just because of cashflow issues.
Maybe I am too old and jaded but now I always ask people to include and test for cashflow in addition to the efficacy of their business ideas vis. market fit.
Honestly though, this becomes too demanding of entrepreneurs who are already overworked with lead gen, product design and development as is.
You should definitely write a few articles about cashflow. People don't write about it enough.
Entrepreneurs should absolutely be thinking about cash flow because it’s essential for survival. Demanding yes but necessary to become a successful startup.
Too many startups riding high on how much revenue they bring in without controlling the costs. If you spend to get revenue, it really isn’t a business (or at least a solid one anyway)
You can get credit specifically to solve for that issue, usually at reasonable rates. Short-term small business loan facilities exist. Another decent option if you're reasonably sure you'll receive payment NET30 are credit cards + an online bill-pay service like Plastiq.
> receive payment NET30 are credit cards + an online bill-pay service like Plastiq
I personally have helped out a few businesses with a 2% CB CC (which helps offset the Plastiq fees) that offers a 6-mo 0% APR term but the CL is the limit of the loan which limits the extent of the loan.
Most CCs don't have such gracious terms in which case you could be paying a hefty fee to gain that cashflow.
Having done this a few times, my conclusion is that this is a very bad practise and exposes a business with cashflow issues if this is a regular occurence.
A healthy AR is better than no AR but you know what's even better?
I have excellent clients who could not afford to pay for a consultation because they themselves were waiting on the client they were farming out jobs from.
They still work with me because they know I understand their cashflow issues.
That's a self-created problem. It is possible to remain in business while self-creating problem. It is, however, not recommended.
We once were jerked around by a reasonably well known customer. Their accounting people decided they did not need to perform under the payment terms the customer signed off on. First time they did it, I sent an email to the EVP that signed the order. We got an apology and a payment. The next month the same thing happened again - we redirected all their traffic to "We are unable to process your request - please contact your account coordinator to restore access" message and did not remove it until the wire hit our account ( 5pm-8:02am ). We received a letter with apologies from the customer's CEO, customer was saved and they never missed a payment again. I heard, via the grapevine, that three people at the customer's AP group were shown the door as the result of our message.
This really irks me. Are you my customer or are you some kind of onerous business partner so that I have to share the consequences of your business decisions? Sorry, get a bank loan and pay me, then solve the rest of your problems with your client and the bank (i.e. without me).
That's been my experience, just the threat of turning it off has a way of unblocking the system. I usually start with the users of the system who are often as frustrated with the system as we are.
Having said that I mostly don't offer credit terms anymore, my average order value is about £500 which means it isn't worth the time spent chasing late payments. In 99% of cases the customer will find a way of paying upfront.
they can gleefully treat you as a bank with really low interest on short-term loans
Exactly. On MBA finance courses (and I guess CPAs too) you're taught about working capital - and one half of that is basically stretching supplier payments as far as you can.
> They know full well that you, the small company, probably aren't willing to put up the massive time and dollar resources in order to sue them, the big company, for what is to them small potatoes.
If they are well known enough surely a well placed social media post is all that's needed to oil the wheels.
Also large organisations tend to be horribly bureaucratic, with multiple layers of authorizations and people who happily sit on everything for weeks before they even consider lifting a finger or responding to an email.
My previous employer was asking money upfront, the late payment problem was still here and kicked down the road until renewal, but at least the first year was payed in advance which allowed to bootstrap the business.
(NB not criticising you here, but pointing out a cultural problem).
This is a classic cash flow problem in business. Any very simple (usually free) “start a business” course from local government in the UK will cover this. I went on such a course and they explicitly talked, in detail, about this issue. They flagged it as a major cause of business failure.
Point being not to criticise the parent but to emphasise that startups are not different from any other businesses when it comes the basics like cash flow. Something that really stands out in the startup world is how little regard is given to the simple everyday business issues that business advisors the world over teach about every day. Anyone starting a tech business should do a simple course on business basics, in this example it could literally have saved the startup for an investment of a few hours.
There's another overarching term that needs put in here:
Cash Flow: the balancing of AP and AR so that you can stay afloat.
Say your startup needs $10k a week to meet payroll. You have $20k in the bank and Accounts Receivable of $100k. "On paper" you have $120k. Cash flow wise you have 2 weeks of money left on hand.
This situation is in constant tension as:
- Large companies stall regularly on paying or require terms like "Net60", aka you complete the work, then send them an invoice, then they can take 60 days to pay that.
- Public companies have to report their financials and will often manipulate their AP schedules to help "massage" their numbers. I was once told bluntly: "our CFO said we aren't paying any more invoices this quarter"
- The reason large companies do this is they are also trying to balance their cash flow (just at a larger scale).
The two general things to do to help with this situation:
1. Keep invoicing tight, bill as often and in as small as increments as possible. Better to ask for $20k every 2 weeks than $40k at the end of the month.
2. Offer discount terms where they pay less if they pay earlier.
I’ve been through something very similar, and I know how much that bad to hurt. Hope you’ve had time to rebound and recover, and thanks for sharing your story!
I’ve seen similar situations in the past. My experience has been that small business will get excited about “hitting it big” and allow a massive customer to suck up all their resources to the point where sales and marketing are put on hold or altogether stopped, leaving them totally dependent on that one customer for cash.
I’m curious if your experience in this case was similar.
Had the same situation and thankfully had a lawyer that was able to get back 90% of what was owed in about 90 days. Big companies dont recognize that there are people at the end of their invoices sometimes. Sucks.
A single company I had a long term business relationship had a similar issue with me. Thankfully I had moved to a developing country and was able to bring costs way down as a result. If I had stayed put, back to work in a cubicle for a time I guess...
On my first startup right after university, we were doing an IoT device (hardware + software), our MVP was good enough to make a couple of sales amounting to 550 consumers. At that point the board decided the best way to grow was to bring in “adult supervision” aka a seasoned CEO to run the company.
Even though I did all the software, I had only around an 8% stake in the company at the time.
The person in question decided we needed to “perfect” our product before taking it to market. She had us working 12 additional months and since we did not have “enough tests over the new features yet” she cancelled the 550 orders and gave the contracts to one of our competitors. At that moment I and the 2 electrical engineers in the team left the company and they ran out of money and close 6 month later.
Lesson learned: Big-corp CEOs don’t make for good startup CEOs 99% of the time.
Interestingly, I wonder what the effect of you and the 2 EEs leaving was. If you had written any reasonable amount of software, that must have added an addition 6-8 months onto the 12 that they already estimated.
Possible lesson: Don't piss off the staff in an early stage startup.
Large companies are optimized for a different set of outcomes - usually including extreme concern about quality and public image. That doesn't fly in a startup.
In our case we approached construction companies. After a lot of one on one talks, we convince a couple with upcoming projects to sell the new houses they were planning on building with our devices pre-installed and use that fact as a selling point when pitching to prospective home owners. Prospective owners then, could decide to opt-out from having our product pre-installed and save that cost, but the majority wanted it and that’s how we got those 550.
From my experience hardware is hard all around and finding partners, even no traditional ones like we did on that occasion can help a lot.
It's these little ideas that make this place so great. Most of the time I would think 'I want to sell to X so I will try to sell to X'. This extra step of almost pre-selling and then making it an opt-out is such a brilliant idea.
That’s poor oversight by any CEO, big corp or not. In my view, the biggest asset is you guys, the engineers. Without you, there’s no product - should’ve focused more on landing prospects and contracts and getting them to define features rather than blindly come up with a go-to-market strategy.
99% of the time? Sounds like 100% of the time since we're only talking about a sample size of one company. Serious generalization. More like "a bird in hand".
Actually, I AM going to be that guy. I have zero tolerance for people who claim to be experts. You had one experience and used an idiom (incorrectly) to sound smart. So tired of smug upstarts like you.
I started a consumer robotics company with no more than a software and hobbyist robotics background. The grand plan was to sell furry robot pets and we got as far as the prototype stage and a demo at Maker Faire. After that we hit a huge wall. There is essentially no path from hobbyist, off the shelf components to a real product.
After that company died I joined a real robotics startup with some seriously talented founders. They had already built out several robots and had the core skills (mechanical engineering, software engineering, electrical eng, and controls) to design and build a working robot. More importantly though they knew the process to make a robot real which involves personal contacts at custom component suppliers, the right outfit to do engineering review, how to raise enough money to get the kind of runway hardware needs. And on and on.
Moral of the story, you can't fake hardware. Get experienced people on board from day one or your going to flounder and most likely die.
I worked at a small robotics company in the Netherlands, technical university spinoff. We did tests in care homes for elderly and disabled people and we actually had clients that wanted to use our robots and were very positive about them.
But we were just too early. The robot didn't even need to be very autonomous, shared autonomy was part of the plan (fake it till you make it and honest about it :-) ). I controlled the robot from the other side of the (small) country to give people their teddy bears and TV remotes etc.
Problem was that we tried to do our hardware completely by ourselves, whereas nowadays there are several options for mobile manipulator robots that look good enough to put in a home.
We spent more time getting the robot to work than on useful applications (we had dozens of activities of daily live a robot could support). And even the getting our robot to work could be done more efficiency (in hindsight). We should have used e.g. an EtherCAT motor controller instead of writing of doing it all ourselves on a micro-controller.
We didn't progress enough quickly enough for our investors and subsidizers and ran out of money.
A another great lesson was this though: when you hear talk about robots in care, the complaint I get a lot is that that is sad for the clients, because they don't get someone to talk to (but a robot) and they will get lonely. That turns out not entirely the case. A lot of disabled clients told me they don't want to talk to the care-givers all that much, they just want their drink/toilet break/pen they dropped etc. They have friends and family and don't feel lonely. The complaint about loneliness is coming from the care-givers.
For elderly people, it may be different though, but I found that very interesting.
Reading your story from an outsiders’ perspective, did you guys have a commercial person figure who was going to pay for the robots?
From my experience, healthcare usually comes down to figuring out who is willing to pay for it (insurer, user, govt, etc.) and less so about the tech. You are right that the tech doesn’t need to be fancy but funding model is usually the bit needed to be fixed.
A buddy of mine is successfully taking took a smart baby mat to market (so far anyway)
A lot hardware startup that started from zero made a first product that can barely called a MVP (Gopro first product was a camera shell, DJI first product was flight controller) do you think such ultra minimalist product(yet very meaningful to understand customer) could have been done looking back now?
The problem with a lot of robots in care is that if you pick 1 task, the MVP to solve that problem doesn't even have to be a robot. To automate 2 tasks, you will need 2 MVPs and this doesn't really scale. A single robot can do a lot of different things, all with the same hardware that gets used a lot, where as 1-funtion MVPs only get very infrequent use.
But it does require to build a robot that can do a lot of things, which is not a minimal thing to do.
Things get expensive and complex when robot arms get involved, which do give you lots of capabilities in return. Arms and mobility make the difference between a smart speaker like Alexa and a robot.
We were a spinoff of TU Eindhoven. Robovalley went up into Holland Robotics recently, AFAIK, but Netherlands is small of course.
Our company just stopped. I actually interviewed at https://www.robotcaresystems.com/ that now have an autonomous rollator on the market and I recently found out about https://mojin-robotics.de/ which seems to continue where we left off. So, yes, there is still animo for robotics in care.
I don't know any companies that focus on Alzheimers, but there is a bunch of medical robot tech companies around here, eg. http://microsure.nl/ that do micro-surgery and http://www.preceyes.nl/ that make eye-surgery robots.
A
Just a note on this: Prototypes can be enough to get a company going. Engineers/Makers think that the product is the most important part of starting a company. It's not. Selling your vision to investors and customers is. Once you have a business plan that's funded, you can refine your product by hiring consultants that will help you with production. Once you have a product then you can get customers to refine the product further.
Why is bottled water a billion dollar business in the U.S. when the U.S. has the safest drinking water in the world? I am very sure it's not the product.
If you can't sell, define your vision and prototype and find someone to sell them for you. Salespeople are viewed as BS'ers by engineers but without them, companies can never succeed.
The population of the U.S. is over 300 mil. How many people die or get sick every year because of our drinking water? It's got to be very small if any, otherwise, we would hear about it constantly until it was fixed.
But let's say it is the worst in the world. Bottled water is not the best way to fix the problem. A water filter would be much better in terms of cost per gallon and quality.
Just by you asking the question, highlights how well sales and marketing have worked when it comes to bottled water.
> The population of the U.S. is over 300 mil. How many people die or get sick every year because of our drinking water? It's got to be very small if any
All that means is “it’s very safe”. To call it “the safest in the world” is just blind patriotism. There might be long-term health effects caused by but difficult to attribute to water that are more prevalent in the US than other countries, for all we know.
> Just by you asking the question, highlights how well sales and marketing have worked when it comes to bottled water.
I’m not the person who asked, but no it doesn’t! All it highlights is how hyperbolic your statement was. It wasn’t an argument for or against bottled water at all.
I am not sure how the people at Hinckley, or more recently at Flint would take that assertion. Just because tracking causality of morbidity to drinking water can be a difficult task does not mean it has no contribution to health issues.
I totally agree with this, but you're missing selling the vision to employees in addition to investors and customers. Phase 1: sell the promise. Phase 2: fulfill the promise.
>Why is bottled water a billion dollar business in the U.S. when the U.S. has the safest drinking water in the world? I am very sure it's not the product.
The product of bottled water is availability - being able to purchase anywhere and to bring it with you.
I agree with you that hands-on experience with manufacturing is crucial for getting your fist batch out. However,what stopped you from joining one of those hardware accelerators in shenzhen?
I kind of went through the same path as you and I am hooked. Are you building what you wanted to at this robot company? Can you describe the product vaguely?
The basic gist is that I was arrogant and negligent.
I started a company to leverage an order taking and customer management system I’d built for a friend’s b2b outside sales company. Before, they were managing everything with excel spreadsheets on a shared drive and it was a mess. After, everything was in a php application that could set up a recurring credit card transaction within a few clicks. It used AJAX (in 2004, before responsive forms took off) to take different form inputs.
I rode that one client pony for too long. Managed to get a second client, but I hadn’t worked out a good pricing strategy. I needed to offer the program publicly, but we were too busy doing feature development for our two clients to develop features for multi tenant. I was bad at the administrative aspects of running the company, so I inadvertently ran up a bunch of bills. I wasn’t keeping my sales funnel full or dedicating much time to finding new clients and calling on them. The whole thing went crashing down when my clients decided that they didn’t want to have 100% dependence on my company anymore and per our contract paid a one time lump sum for a copy of the software. Still wasn’t enough to fill the holes the bills had left.
I could have been SalesForce if I hadn’t been an arrogant 24 year old who couldn’t learn from other people, but instead I ended up in about $50k of personal debt.
> I could have been SalesForce if I hadn't been arrogant.
Did you overcome that and learn from the mistakes? No offence, but to be honest you saying "I could have been SalesForce" makes it seem like you're still working on the arrogance part.
My point in saying that was not to express arrogance, but was to point out that ideas are worth nothing and execution is everything. I executed poorly. If I had executed well and a bunch of other variables had aligned, I might have grown that company successfully.
I’m still a bit arrogant and aggressive in my approach to solving problems, but it’s tempered somewhat by experience.
1. You got to work closely with 2 highly engaged customers. The value of the product development research you did with them is probably worth more than your debt, if you ever decide to build something similar again.
2. You actually built something they wanted and were willing to pay a huge lump sum for. Many startups never get to this point. You now know you have the ability to create something highly valuable. Don’t take the confidence that comes from that for granted. It’s worth more than $50k in the startup world, in my opinion.
I’m curious, knowing you’d created something valuable at the time, did you continue to try to sell it in the years after the 2 original companies left you?
That’s one of the places I messed up. The original agreement was that they’d fund development of the features they needed, but I retained rights to the software and they got a license as long as they were funding development, but they could license a copy in perpetuity for a flat fee. We never updated the amount of that flat fee as the feature set grew.
I had thought I needed to develop a multitenant feature set in order to sell to more people with a subscription, but I was probably incorrect on that (in hindsight).
The bigger issue was that I didn’t know how to plan for anything like that. I was essentially in reactive mode and got way behind.
I wrote a great software library for specific web development problems back in the dotcom boom.
I learned a few things, much of you hear already but is worth repeating :
* The MVP thing is real. I had a competitor that regularly released simple things that barely worked - while I continued to polished my project. By the time I'd finished the competitors stuff was all over the internet few a year or two and no one was really interested in my product. Plus by then the dotcom boom was pretty much starting to bust - I was way too late.
* Developing software is the easy part. I figured when I was done people would be lining up which is of course naive. Selling and support is harder and takes more time and effort than writing code.
* Writing software for developers sucks. No one wants to pay for anything as there is usually a cheaper way of doing it. The exceptions being big firms that really don't like small independents. Its better to write software to solve real problems - not software problems.
I was an early engineer at a startup that failed for a somewhat unique reason with an important overarching learning.
We built a software platform that intended to automate the job of market researchers. Those researchers we hoped to replace ended up finding the tool itself useful. Since the platform didn't replace the employees, our pricing model fell short. In the end, we found success by hiring our own market researchers and effectively pivoting into a software-driven consultancy. Profitability came slow and steady.
After months of profitable growth, things changed on a dime. Our lead investor effectively unseated the CEO one day, and made the statement that we were doubling down on the original SaaS vision. Within a month our 100 person company had been reduced to around 60. The now-unneeded consulting staff were recipients of strategic layoffs. Revenue dropped overnight.
The morale of the company also fell off a cliff. The C's lost their ability to cheer up the team and the senior staff saw the holes in the boat and promptly abandoned ship. The company folded about 1.5 years later for a fraction of the initial investment.
My learning in all of this: the tales you hear about the "bad VC"s are occasionally very real. Make sure when bringing on investors that they align philosophically with your founders' vision. Make sure that philosophy is deeper than "we want to make that cash". Great investors i've worked with since can be an immeasurable resource in so many ways. It is absolutely critical that founders be excellent in their courting of valued investors. Similarly, they must be ruthless in their rejection of the bad ones, however sweet the check may appear.
VCs run funds and need a decent return consulting biz generally does not fit the ticket for them. If you intend to run a consulting shop you def. do not want VC money. (Unless you can spin and market like Palantir than you can easily position a consulting outfit as high grow tech company)
CEO would disappear for months at a time, with the promise of returning with capital. We never really knew where he went, and he wouldn’t let anyone else talk to investors (including me, who was CTO). Eventually he stopped paying us, but promised that the money was just tied up in the parent company set up in the caymans.
After 2 months of not paying myself or any other employees, the COO and I drainked the remainder of the US account and paid out as much of what was owed as we could to the employees before helping them find jobs elsewhere. I didn’t get any of the money I was owed and was facing pretty bad debt, but the experience was enough of a resume boost that I didn’t have a problem making it up in my signing bonus.
What I learned is that a title doesn’t grant you any control, and that if someone can’t be transparent with their inner circle of friends and colleagues (in this case cofounders), then they have no business leading a company.
Armored cars and armed security are nice and all, but being in a situation that necessitates riding in an armored car and armed security detail is not really fun.
In general it's true for all positions. A CEO should be fire-able for the board to keep them accountable. We never got to the size where we had a board tho, so we didn't have anyone to appeal to apart from the investors directly, and as I mentioned, the CEO kept us isolated from them.
The bigger problem I had with lack of control was when things started to go south. The CEO was never around, so I was the "boss" in the office every day, being the technical and cultural leader of the dev team, who came to be close friends. Once the money stopped coming in, it was really hard emotionally to be the person who needed to convey that to the rest of the company, but without having any real control needed to get them money or real answers.
The CEO came from a very wealthy family, and never had to worry about money. Myself, and most of the employees weren't so lucky, and were pretty new out of college, so didn't have a pile of savings to fall back on. I am not even that upset about never seeing that pay I was owed, it was more just emotionally draining to be seen as an authority figure, but to have absolutely no ability to exact change or get answers when they mattered most.
Oh come on, you can’t leave us hanging like that! This is the beginning of the best story in the thread. How did the cartel connection form? Was your contact named Estefan? Did he have a mild accent and project an aura of power?
Luckily, nothing too exciting happened. We were operating in the financial tech space in Mexico, trying to make lending less comically predatory (a standard small business loan in Mexico can have close to the same interest rate as a payday loan in the US).
With that goal in mind, we were targeting areas in Mexico that needed the most help. Cities with a decent small business sector, looking to grow, and having difficulty doing so. Juarez was a perfect fit, especially given that a lot of citizens have been across the border and can see how much better things can be. My parents were not amused. Then the movie Sicario came out soon after, and they were somehow less amused. But I got to ride around in armored vehicles with a security detail, so that was fun.
Really my "learned not to fuck with the cartels" lesson came from our market research. This may surprise you, but the banks in Mexico are... sketchy. Well, not all of them, but definitely a few. In particular, we were in a competing market as Banco Azteca. It appears to have since been removed, but at the time, the Banco Azteca wikipedia page described it as having "a uniquely effective debt collection system" or something like that.
Yeah, what they actually have is a motorcycle gang. They give you a loan with massive, often times impossible to pay off interest rates, and if you don't pay them back, motorcycle dudes with bats show up to collect, or take enough of your property to make up the difference.
Shouldn't that be a common knowledge in the area and work out as their competitive disadvantage? Provided that there are at least some competitors that are better for the customer?
The bigger issue with lending in Mexico is a bit deeper than the sketchiness of some of the big banks. In particular, there is no reliable credit score system, so determining credit worthiness is a crap shoot. There is actually a credit reporting agency, but nobody reports to it, so nobody is really sure why they're there.
A lot of citizens also (understandably) don't trust the banks and keep most of their money at home. As a result, there's very little data available to make credit determinations on, since you can't even use most people's record of good standing with their bank accounts, so the process for getting a loan is generally sit in a room with a group of bankers and try to convince them you're a swell guy/gal and won't lose their money. This results in extremely high default rates, because people are good at misrepresenting themselves and lying about their intentions [citation needed].
With such high default rates you only really have two options; improve your credit worthiness determination process somehow, or increase interest rates and have an effective (if unethical) collections process. With some data protection laws making the creditworthiness determination route a legal minefield, most banks in Mexico opted for the latter. Our entire business strategy was to take the other route.
I myself live in a country with a not so effective rule of law and whatnot. That's why I find it odd that banks are so concerned with possibly doing an illegal data collection, while employing unquestionably criminal techniques of extortion...
This is Juarez we are talking about. Maybe this motorcycle gang was scary enough for the competitors, maybe they have cops/politicians in their pockets... There could be any number of reasons for the gang to flourish, starting with violence
I don't get why this comment is so down voted. Do you guys all find the idea that collaborating with the mafia may be a bad idea so hard to figure out?
I've had two startups "fail" for unusually clear reasons:
Startup #1: too hard to believe it could be big. Widely loved consumer website we tried to fund with angel/VC money, and it was too implausible it could ever be a $1b+ company. We needed a non-VC strategy to fund that business but didn't realize that - ran out of gas.
Startup #2: found PMF, business-model fit, high-growth, and had an amazing team. Blown up by a nightmare original founder (I was part of re-founding an existing business) and poor corporate governance. The original founder blew up a Series A and re-cap after the team new team made the company actually work.
What I learned from both is how finicky startups are and why conventional wisdom exists. The more you try to re-invent things that aren't core to the business or fit a square peg into a round hole, the more chances to fail you create.
Don't try to get 1000 things right. Try to get 1 thing right and rely on the wisdom of others to get the other things "close enough" to right to attract talent, capital, time, and attention to the 1 thing you did get right.
I'm in the position of believing I have "1 thing right." I worked in an industry (banking) with a serious software problem and one particular vertical that I'm confident I could build a good product for. I was in a position to evaluate all of the major vendors that would be my competitors, and I'm confident that I could get one particular thing very right. Ths problem is that I have pretty much no idea where to go from there. I've never started a company, I didn't even study business in school. In my career so far I've pretty much done two things: I got very good at that particular aspect of banking, and I taught myself to code and now do it professionally. But I'm so aware of the gap between my own knowledge and the skills required to run a business that I wouldn't really feel confident trying to go get investment money (and wouldn't know how to begin even if I thought I could use it responsibly). I guess what I'm trying to get at is: once you have the one thing, where do you go for help with the thousand?
You generally don't get investment money day 1. If you are able to pull that, it's because you've had success being a founder before (or have rich friends/family). But as a first-time founder? I think you'd be wasting your time without having something real to show. Generally, that's an MVP with some degree of traction.
To get to that point, you have to do a lot of the things bigger companies have to do. Those things just tend to be less complex and you have fewer people to do them. Accounting, sales, engineering, marketing, etc., etc. all exist, to some degree, in a two-person company. At first, you learn to do them yourself. You'll probably suck at them. It's okay. They all have some degree of a feedback loop. If you're open, you'll figure it out.
Eventually, with success, you'll hire other people to do them.
From there, you can get access to a great network by doing an incubator as someone else mentioned, or by just getting out there and talking to users (do this day 1). But you're worried about years 2-4 when you haven't even started year 1 yet.
If you want to discuss in more detail, I'm a founder with a product in banking that's been moderately successful. Email's in my profile. Feel free to reach out.
I’m the CEO of alloy.co and know banking software about as well as anyone, I’d be happy to help assuming youre not trying to solve identity verification for the industry. tommy @ domain
The main thing is you have to start, get a team to follow you somehow, and get a reference client live and on the record using your software to solve a huge problem. Consider YC or techstars for your first $$$ investors. Some may tell you the negative of working w them but they’re deeply wrong
What is YCombinator's take for their 100k investment? Also, it seems like YCombinator sells businesses as a product, not product as a business. Like their marketing on the website is all geared to investing in a business, not investing in a product that leads to a business. That seems to be the 21st century trend. Can you explain this dichotomy in today's market? It seems kinda fake.
I built an app for kids that created a family currency where kids would pick the chores they wanted to do each day, earn points based upon the difficulty of the chores, and then those points could be redeemed for real-life rewards that they also chose - hosting friends for a sleep-over, a fishing trip with Dad, learn a new card game with Mom, screen time, etc.
The problem came with the marketing. When I did my due diligence before building the app, it seemed cost per click for ads was around 20 cents per click. 20 cents * 2% conversion rate = $10 cost to acquire customer. My lowball avg. lifetime value of a customer was $18 if customers stayed for 3 months on average. $10 / $18 seemed like a decent ratio, and if I could get the conversion rate up or the churn rate down, it could be a good ratio.
So I set out to build the app, which took about a year and half. But, when I finished the app and went to launch my marketing campaign, I was shocked when I saw the cost per click had skyrocketed to $2 per click, meaning my cost to acquire a customer was $100 with an average lifetime value of $18. My backup marketing plans were content marketing based, with a networking campaign with Mommy bloggers, but this takes a lot more time to scale your customer base than blasting out an ad campaign. This caused me run out of runway with my cash timeline, and so the startup failed.
I learned that its important to not get too heads-down coding your product - its important to review your growth strategy every few months while you build your product, because things can come up that can dramatically affect the speed at which you can grow, and that can jeopardize the whole operation. In my case, if I had noticed the ad costs climbing, I could have started networking with more people earlier, doing more content marketing pre-launch, and slowly increasing the size of my waiting list, or evaluating alternative marketing plans before my runway got so small at the end.
I don't think you can guess in advance which marketing channel is going to work for you, you need to experiment and see what brings results. There's a book Traction that goes deeper into this, if you haven't given up yet. Good luck, both in business and marriage! :)
Yeah, maybe so, I just haven't had the time to invest in that. My wife took a high stress / high pay job to support us temporarily while I built the app, and she was nearing burnout and it just was taking me too long to scale my customer base after the paid ads failure, so I had to put it down and go back to a 9-5 to protect our marriage. ;-)
haha yeah you might be right. Startups typically put a huge strain on the founders and their families. I wouldn't advise anyone attempt a startup unless they are in good condition mentally, physically, and relationally.
In my case, I wouldn't have been able to quit my job and attempt this startup in the first place if it wasn't for my wife taking that hard job for a couple years - so I felt like it would have been a bad idea to respond to her good deed by taking advantage of her and burning her out so I could have my dream.
10 years ago I built an almost amazing business that schools, universities, teachers and students could use to build elearning and web apps. Think Square Space + Moodle + Udemy.
Heres a demo if you're interested https://vimeo.com/2221065 The demo doesn't show much of the learning management features but they were also complete.
But the app had memory leaks and I didn't have the cash to pay expensive engineers to fix them. For months and months I tried to fix the problems myself until finally I was given the choice of giving up my business or my wife.
I don't regret choosing my family because we had another daughter before the marriage ended and she wouldn't be alive if I chose to continue with my business instead.
I learned ...
1. I should never have given up. If you don't give up you can't fail.
2. I shouldn't have believed my mentor who said there wasn't a market for my product. A company entered the same market and now they are worth over $1bn. Listen to other people but have faith in yourself.
3. Be careful to choose the right technology. I chose Plone/Zope/Python the same stack that was used by CIA. I thought I was very smart about that but I didn't realise that specialists in this tech would be so difficult and expensive to hire.
4. Don't blame anybody. In the end it was my choice to give up.
5. Everything is as it is meant to be.
I fell for that once. I'm embarrassed to admit that I thought she was a spy for a couple of minutes until I picked up more context. I'm sure I looked super disappointed for the rest of that conversation.
Interesting, at the time you were dissuaded from going into that market could the actual TAM support your business idea or would it have been more viable later?
My mentors were based in Ireland, one was Managing Director of the European Software Centre for a huge computer hardware company and another was president of the university in my city. In Ireland education is mostly financed by the government and I suppose they couldn't see the market. I live in Thailand where the only good schools are private so I saw things from another perspective. Yes, the management and support fees could have supported the business if I focused on private schools who were willing to pay a few hundred dollars a month.
I spent hours and hours, months and months, up all night trying to fix memory problems, that I wasn't qualified to fix. It was one of the darkest times in my life. Everyone I loved wouldn't speak to me because I wouldn't give up. Then one night when I couldn't take the loneliness anymore I deleted the server, local copies and backups and went to bed.
Memory leaks in a python web server? Did you try just accepting the leaks and restarting the web server every x hours? That is what my old team did with our python web server.
I used to have to restart it all the time but I never thought to just set it to automatically reboot. I should have known that most computer problems can be fixed if you switch them off and on again.
Hello I'm in the same situation. I'm now very lonely and depressed because I've been working on my startup alone for 2 years with no support. I'm also stuck on a problem which is very hard to solve. You said in the parent comment that you wouldn't give up. How do you keep going when you feel so lonely and miserable and you have anxiety attacks because you fear that you will get nowhere in life?
> 1. I should never have given up. If you don't give up you can't fail.
I think if you expand the scope of 'failure' to mean your life, as opposed to just the business, then you didn't fail. You were pursuing a strategy that would have led to the failure of your marriage, which is much worse than a failed business. I think you succeeded.
The marriage ended ... but I can hold my head high knowing I tried my best. I grew and learned so much after the marriage ended that I never would have if we broke up back then so I suppose everything worked out for the best.
I worked on two that failed, one because of Napster-Induced Hysteria ("nobody will ever make money with online music!") and the other because we were myopic enough to think Orkut might bury us. Those were days, right?
From the first one I learned two things that are probably still applicable today, and from the second I learned one big thing. In order:
1. If people from outside the tech world end up controlling your software startup, that indicates you are doomed. Pretending otherwise will just make it worse.
2. Great teams are incredibly rare, and if you have the good fortune to be part of one you should really try to keep it together for the next challenge. (We dissipated so hard it was ridiculous... one went into motorcycles, one got a PhD, two floated back to Europe, one became a bartender...)
3. If the founders can not convincingly dogfood their own product, you are doubly doomed. I remember sitting at a table with founders while they tried to think of things they could maybe do with The Product we'd just spent months building, and feeling the rats of doom nibbling at my toes. It had not occurred to me that this was a possibility. Engineers: vet your founders!
We wanted to create a routing app for bikes, which would take in consideration cliffs, dangerous streets and the likes.
With our internal team, we’ve managed to create a killer backend that would do all the hard routing stuff without issues. It was better than Google Maps in most cases!
Now, we just needed the app. We used all our money to pay a third party contractor to make the app, and they failed miserably. We never received a working prototype. We ran out of gas.
The backend still exists, in case anyone wants to give the app a shot. I might release the backend as open source. Ping me if this interests you.
I didn't quite understand this. Presumably, you're developers and just created a I assume fairly complex backend product (better than Google Maps). What stopped even just one of you from picking up a book on react-native/electron/whatever and knocking out a workable front-end? Did you exceed your runway, run out of time etc?
edit: to clarify, I meant after the third-party didn't work out. Also not critiquing just genuinely curious
I hear you, and appreciate your honesty. Not many founders talk a lot about the technical challenges of building the app itself. A lot of startup stories I read take this as a given, whereas I'm sure it's one of the biggest factors if not the biggest that causes many startups to fail.
> We used all our money to pay a third party contractor to make the app, and they failed miserably
Where did you hire/find the third party contractor?
Friends of mine, in two separate startups, got burnt badly by those outfits that offer the "native apps for iOS and Android" package for $10K or so.
I talked to some of those "developers" once, when I helped my friend troubleshoot an issue. It was horrible. They were so inept, they couldn't solve a problem if you provided a solution to them (literally -- they failed at copy-pasting).
And then they want you to sign a document or email saying that they did all they would say and just rip people off when they think, "oh an iOS app with backend for $5000".
We found them in Google. They were from the same country as us. They were really bad. One of the versions of their _navigation_ app would not navigate - the GPS simply wouldn't track the user in the app's map. It was a really frustrating experience.
Hey, we're working in the space of navigation by bike as well, though not in the exact same way as your startup from what I understand. It would be awesome if you could share your backend with us (email: rohan.pandey at gmail). Thanks!
I've been working recently on something semi-similar for runners - calculating elevation gain, difficulty, route generation, etc. First time around I was using Mapbox API but ran into some difficulties and have since switch to Google Maps which still isn't exactly what I'm looking for. Would be interested in learning more about your backend if you don't mind sharing - kguebert93 @ gmail.com
You should write up a Medium article with some test results showing off the backend. You may be able to get someone to buy it before going open source.
I would love to see the backend open sourced as well, as I think this is something that could be quite unique to each country. I'm in Melbourne, Australia and biking safety is a big deal here - i ride everywhere. The uniqueness of each area would lend itself well to localisation via open source. I'm at zubin.pratap at gmail - do let me know!
My first startup failed because I had no idea what I was doing. I started an online vacation rental site, similar to vacationrentals.com vrbo, homeaway etc... I was getting traction and had people list their rentals on my site but I failed to collect any revenue. The thought was, build it, offer it for free to grow it and then charge. Well, I built it (wasting way too much money on an original solution when existing solutions could have done just fine), people came (after I bent over backwards trying to onboard them), but time sucked me dry and I was not able to sustain the "business" any longer. Looking back, I did just about everything wrong.
>The thought was, build it, offer it for free to grow it and then charge.
I feel like this is an incredibly common software developer turned entrepreneur mistake. Lack of confidence in asking for money leads to a reluctance to put a price tag on the thing you have built.
With vacation rentals, you have to have people who actually rent stuff and that's the part of the chicken/egg problem I haven't solved yet. While I was able to bootstrap the site, the traffic to it was non-existent thus I felt guilty if I charged people to list. The premise was that they would list for free first, their listings would attract traffic, then I would charge people to list. Meanwhile people are booking and more are listing - that was the idea.
The simple way out of that conundrum is to make it free to list (perhaps with an option to upgrade to a "premium" listing for a recurring fee), and charge for the actual bookings made through your site (you'd need to experiment to figure out whether flat fees or a percentage worked better for you).
Lack of leadership, we had a general idea of what we wanted but it was never defined. We wanted Shopify, years before they came along, 2001. But we never defined the product because no one took leadership of the product and business.
Bad programming, (me) had just finished college and thought I could lead a team of programmers because I had done an ok prototype that was actually working at a small scale. Given that specs were being defined on the fly then the programming was a mess. To scale it, we brought in programmers hoping it would help but they mostly sat around because we didn't know what we were building. Also, we got subpar programmers because they were cheap. One guy managed to BS his way into a paycheck for 5 months without ever programming a line of code. After he was fired, I found out that that was his specialty, getting hired and getting fired a few months later.
We could not meet deadlines, we could not meet self-defined deadlines so the investor's money stopped.
A lot of useless infighting due to egos, we could not figure out the business but we sure found ways to fight and argue.
I wish we would have been more willing to learn as opposed to being so arrogant by thinking we knew everything. I use it as a warning every time I think I know everything and it brings me back to reality. We lasted 2.5 years. We should have closed shop at 3 months.
Well, it didn't completely fail yet. It's still going 13 years after I left, actually. But part of the struggles were brought on by my mistake with a military customer that probably cost us the contract.
This was back at the beginning of the Iraq war. Our main contact told me the US should attack France, as they weren't supporting the invasion. I made the mistake of saying I was glad he was executing policy, not making it.
Oops. They started migrating to another product. Oh well.
Lesson is, if you're going to object to what a customer thinks, do it when its your own company. It's not really fair to make such a choose for everybody at your company. Kind of self indulgent, actually.
And people are entitled to their opinions and my mouthing off didn't change anything. An exercise in futility that only cost us.
You can't take people like that too seriously, the world is filled with plenty of nuts. During the Bush vs Gore chaos right after the election, the people - from another developed nation - I was working with on a start-up told me they hoped the US would collapse into civil war over it (they wanted to see the US suffer a political catastrophe for a change, they said).
I find sarcastic positivity often is good eg. "that's a really great idea - you should be president." Let's you take the piss and often they think you're being serious.
or just be professional and divert the topic to something else so you don't have to give an opinion on craziness. The guy was probably just mouthing off anyway and responding literally isn't going to do anyone any favours.
It's kind of a question of integrity. Do we have a moral obligation to disagree with something someone says that we feel is wrong? Even if it's not in our interest to do so?
Maybe we do, maybe we don't.
Personally, if someone with a large influence on my income says something I find offensive or outright idiotic, I disagree in a polite way that shows that I respect their opinion even if I don't. If I feel that it would really offend them I'm not above lying and pretending that I do.
Sometimes I feel morally conflicted about this, but it's kept me out of trouble.
I think that's wise. I could have done that. I actually sort of insulted him and that was probably unnecessary.
But if I had expressed an opinion explicitly maybe there'd have been a debate. Probably just should have said "I can't agree with that, but you are entitled to your opinion."
1) Don't spend money and time on things you don't need or will need earliest in a few months from now.
2) Regardless if you have a brand-new idea for a product or try to improve an existing product/process, you need to validate first that you follow the right path. I think a light-weight solution like the idea behing the Design Sprint (http://www.gv.com/sprint/) is a good option. Don't go off and try to build an MVP. You will waste time and money (again). Even for a simple and functional MVP you will need spend lots of time to build a frame around it.
3) If you intend to improve something existing in an industry, come up with something unique about your product first (compared to your competitors). This will help you to get initial traction. Again, you need to validate this particular unique feature before you start building.
My previous startup endeavours failed all because we/I did not follow those rules.
One time we were mostly building away because we thought we know the industry (worked many years in the same space before) and had a lot of wrong assumptions. This combined with wrong spending behavior made everything fail very quickly in the end. From the outside we just copied our competitors and even our product was superior and looked better and gave part of our business customers a much better experience, we did not attract enough customers (as in users), because there was no obvious reason for them to use us vs our competition.
In another attempt I just got too deep into the tech and totally lost focus on what I was actually trying to solve. Lots of wasted time (except for experience).
Exactly! I did not follow these rules while I started. And to make things worse, I kept the idea to myself and worked on it for years before releasing the product. And no one wanted my product although it was supposed to be better than the competitors.
- I didn't have any previous success or experience.
- I was starting it in a second language I didn't speak well enough.
- I was on my own and had no one to turn to for emotional support.
It's all too easy to read the startup blogs and think "Gee, I should be doing that!" but when the rubber hits the road it's much more difficult than I ever imagined. Lesson learned.
I was part of a start-up that still exists but it seems to be stagnating. i left due to the founders having almost nothing in common except for making money.
The site is like squarespace but for local shops and businesses. The founders met on an airplane and thought they can make a business. So you had the business CEO with no technical background living in X country and the ruthless CTO with his team in Y country.
I left ship when the CTO cleaned out the bank account and disappeared. The Y country never extradite their citizens or charges them for any international crimes so he got off scott free while the CEO had to "use" his car insurance to get money to keep the business afloat and pay the out-sourced developers. (He set his car on fire to get a payout)
Edit: I guess the lesson is that the founders need a vision and co-operation to make it work. These two basically had a common goal of making money of a fad. Back then the latest craze was to become a market place for other businesses ie. JustEat, SquareSpace etc.
Another would be that the core team better stick together. The founders were separated by hundreds of miles. The business side was in EU while the CTO and the devs where not. This caused communication issues, planning problems and of course money.
I left because of money too I guess. After working 6 months on a "paid" internship which was 50 eu a week I was offered a contract that would give me 0.5% equity, no raise and force me to work full time AND when doing my final year college thesis to be based for something the company can use.
Thats's nice... the CTO commited a crime by stealling the money and the CEO commited a insurance fraud to keep the company. I'm glad you left, I hope you ended up in a place that's not being run by criminals :)
I think the OP aimed his question at founders of failed startups. There are fewer of them than of us poor shmucks that got burned by a failed startup as a collateral damage. So their accounts of failures are far more interesting.
That's fair, perspective from actual founders definitely is a more interesting point of view.
Didn't want to give an off-topic anecdote but thought from my experience seeing what can go wrong for founders of a start-up I would share my experience.
If your business's revenue is based on B2B service sales with an extensive client educational sales process with regular renewals and varying client contacts, assume you will need built-in re-education salesperson time costs of renewals factored into the price set for your services. Don't assume clients will recognize the purpose and value of your on going services and renew automatically without proof and convincing all over again. Otherwise, your client re-education sales overhead will kill your profit margins.
After 4 years of excellent growth my partner and I had enough income to support one person full-time. Both of us were programmers, the company was a side gig for us. When his dad was laid off from his job, we hired him to handle the day-to-day of the company, which was mostly turn-key at that point.
He did a bad job, drove the company into the ground, and we couldn't fire him without major personal issues, so we let the company die. I divested myself before things got really bad, but it was so sad to watch all that work and potential go up in flames.
We should have fired him anyway, but that's how you learn.
If it was mostly turn key, how’d he do such a bad job? I’m mostly at that point with my business and am aiming to “fool-proof” operations so looking for things I may be overlooking.
I guess you can apply fool-retardant, but can’t really fool-proof processes - that’s much the business value of an org once the basics are in place. “You had ONE job” is a meme for a reason :-)
The gist: I wouldn’t try to sell SaaS/software to individuals.
My business-oriented startups have been successful. My consumer-oriented one wasn’t (at least as a business), because I thought that people would be willing to pay some amount to save time or get more done. Turns out that even if a user states that an app saves them hours per month, the vast, vast majority won’t spend any amount of their own money for it.
The product got users - some who used it hundreds of times per month - but even among those who said they loved it, they used it constantly, and it saved them hours, very few would pay even ~$35/year.
People are fairly good at valuing other people’s time (as businesses do every day). People are unbelievably awful at valuing their (our!) own time. That’s not anyone’s fault, it’s human nature.
This only comes out as a revealed preference, that is, by asking a happy active user to pay, not asking whether they would pay.
Almost every “consumer” company actually makes most of their revenue from businesses. The exceptions that don’t have millions of free users - like 1Password when it was licensed software and FastMail in its early days - are exactly that: exceptions. Most remain fairly small until or unless they start serving businesses too.
Asking individuals to spend their own money on a software/Web product (rather than a physical object or music/video content) is next to impossible and I wouldn’t do that again. Sell to businesses or find another revenue stream.
How do you feel about solo entrepreneur products that are solely for individuals? e.g. Pinboard, Tarsnap
Idea being purposefully stay small - keep costs down, so you don't need as many customers to succeed. My gut feeling is there is a sweet spot (likely below $20/year) where it's more of an "impulse buy" rather than a purchase that needs consideration.
I've learned a few recurring lessons from several start-ups failures. My favorites -
Aggressively pursue the simplest version of your idea/product/service. As a very general rule, once you begin building, try to remove more features than you add from the draft concept, until you get to launch. Get rid of ballast, be ruthless with yourself about whether you really need a given feature or aspect of the product. If the dropped features make sense, you can add them back in later, assuming customers actually want them.
Narrowly focus on knocking over that first bowling pin. Do not target too large or wide of a market to begin with. I made variations of this mistake with my first two start-ups. Focus narrow, narrow/small enough to capture a market or substantial market share, then try to knock down more pins. Chris Dixon has an eloquent explanation of this concept (which I borrowed the bowling pin analogy from). [1] Peter Thiel also has various good elaborations of the concept in his book and talks he has given.
Have a customer - ideally multiple - before you build the product. It's the easiest and fastest way to validate that there is some kind of market there before investing your time. Even better if you can get them to put money on the line ahead of launch. It's repeated over and over again, and it's worthy of the reptition, make sure you're really solving a problem that people have.
I wrote a detailed and (to me) heartbreaking account of this two years ago. The article went viral and kind of freaked me out, but I think the advice is as good as ever.
Thank you for sharing your story/learnings. I didn't come across your blog initially. These specially resonated with me:
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.
Listen to what your users say, but believe what they do.
From now on, immediate benefit: sell to the user. Long term benefit: sell to the boss.
Thank you. I'm glad you enjoyed the article. That was one of the big revelations for me as well. One of the things that made me realize that pulling the plug was not only acceptable but the right thing to do.
Once I turned around a startup from about to go under to s profitable one. We restructured every piece of the value chain, but not without resistance from the founder/owner. Every suggestion I made was met with “I tried it and it did not work.” In reality she did not try, she intended but backed off when the other party pushed back.
In essence we took control over cash by:
1. raising prices significantly
2. Introducing differentiated product and two tiered pricing
3. Switched product production from prepaid to 45 days AP.
.....
N. Restructured relationship with distributors
All these actions produced huge negative working capital. Instead of financing operations at an insane % rate, which technically was killing the business the company paid off all the debts and was spewing cash.
Our uninsured CEO/cofounder developed a chronic illness and embezzled cash from us to pay his massive medical bills.
Killed our runway, which we only found out after we hired an accountant to look into our books and find wenhad an empty gas tank. Since this was still at the f&f funding stage, none of us had the heart to go after him for it.
Wow. That's a great reason to advocate for universal health care in the US, because it lets people work for a more risky startup without having to worry about that particular risk!
Partially I agree. On the other hand there are alot of cases of smaller companies not paying social security and health insurz for there employees in Germany despite having universal health care.
That sounds... kind of weird, especially the "a lot of cases" part.
If you have an official company with official employees (and if either is not true, then well, everything's illegal anyway and your employees are not really employees) the health insurance will be on your toes quite quickly to pay your stuff (as I've experienced firsthand).
The only thing I can think about is having all your staff as unpaid/underpaid interns, but then they're not employees and your exploiting them anyway.
Just from the top of my head. A lot was, obviously an exaggeration, sorry for any confusion. Still, there are more than one might think.
Skipping on social security seema to be easier and more common than health care. Health care usually are insurance companies, so any missing payments are likely to be flagged. But atill it is possible to skip for a couple of months.
Social security is wired by the company to the authorities, and they usually take lknger to catch up. Ultimately these cases are found out amd prosecuted.
The main point being, even with universal health care cash stripped or just companies still find ways to not pay up.
I would have to dig a little deeper for some concrete examples and details. Just let me know if it is of any interest.
Thanks for the clarification, no need to dig deeper. I don't usually feel the need to defend anything going on this country, but this broad statement just went contrary to my experience in a) being an employee b) running a business c) talking to people doing both ;)
The most valuable lesson I had from the companies I ran/run is that both sales and getting investment are both volume plays. If am a technical guy and I used to be that even more than I am now; I thought people who could do sales were deeply magical creatures. But every time we had a 'super sales' (usually co-founder because of the 'super' part), the super wore off and turned into no sales which killed or downsized companies eventually. I only fairly recently found out that it is just a matter of meeting as many people as you can and having as many sales pitches as you can. Investors the same thing, although that depends a bit more on the phase and the business than the sales.
My story is rather typical. I have built something visionary that everybody liked but nobody needed.
I hated the very idea of selling something that is not finished so I never validated the product with customers. How could I explain to them how revolutionary will the product be? The only way was to show them. Like the first iPhone.
In fact, I didn't like the "talking to customers" part at all, so I focused on coding visionary product that will sell itself. Everybody liked it but nobody needed it.
Same here. I did not talk to my customers while I was first building my product partly because I worry someone might steal the idea, partly because I felt customers would not understand the benefit until I showed them a finished product. And then when I finally showed people a finished product, just as you said, everybody liked it but nobody needed it (or they just pretended to like it :-( ).
Although I learned the lesson, I still think I have not spent enough time talking to customers. I am a shy guy and would rather coding than talking to people.
If you are an entrepreneur, you will have to overcome that psychological barrier. Go to some local events and talk to everybody who is willing to listen to you. Some of them might be your potential customers.
I recently moved to SF Bay Area. I live in Fremont (cannot afford to live in SF). I don't know any good places to hang out with peer entrepreneurs. I guess I should try harder.
I have lived in Fremont for 12 years. I can tell you it is not the best place for entrepreneur networking. Most of the networking events are in south bay or in San Francisco. A meetup group I recently came across that focuses on entrepreneurs in Fremont area is Brown Bear Meetups (https://www.meetup.com/Brown-Bear-Meetups/). It is a relatively new group and all their events are free. Since you are in Fremont, it is worth checking out.
If you are serious about networking and do not mind driving to the south bay, you will get a lot more options. Personally I would recommend the following ones.
1. Startup Matchup and Networking Event at Founders Floor (https://www.meetup.com/Silicon-Valley-Startup-Founders/). It is a monthly event and is always on Tuesday evenings at Founders Floor. Try to be there at 6pm so that you can park on streets for free (or stay in your car until 6pm if you arrive early). You should expect to see about 50 to 100 people. They charge $15 and provide dinner. When the event starts, the host will ask everyone to do a self-intro (about 1 minute). This is the part I both like and dislike. I like it because it kind of gives you a chance to know everyone. I dislike it because it can easily take up to 2 hours so that there is not much time left for networking.
2. Monthly Mixer: Find Your Cofounder (https://us.techcode.com/events/2017/2/8/meet-your-co-founder). This is also a monthly event and is always during lunch time on Wednesdays. The good part is you don't need to worry about traffic and it is also free to attend. The bad part is that no food is provided. So be sure to eat something before you go. You should expect to see 30-40 people. The format is similar to the Founders Floor event. Usually it will be around 1:30pm after the intro session is over. You can stay there networking afterwards (that is why you need to eat something before you go!). Parking at TechCode is free.
3. Lifograph SV Networking : find cofounders, investors, developers, growth hackers, freelancers, customers (https://www.lifograph.com/events). This event was once combined with the Founders Floor event. But recently it is moved to Mindrome in Santa Clara. It is very similar to the Founders Floor event and you need to pay to attend. The host, Dea Wilson, is a very charming lady and always makes the event fun to attend. Parking is free.
4. Entrepreneur Mixer and Happy Hour at Sports Page bar near Google (https://www.meetup.com/sventrepreneurs/events/249922641/). This event is also monthly and happens on Tuesdays (5-8am). It could be challenging if you live in Fremont as you need to get there during the rush hour. You don't need to pay to attend the event. But you may feel obliged to buy some drinks in the bar. There will be no host and you are on your own once you step into the backyard of the bar. You just walk around and find people to talk to. Because the bar is open to the public while the event is on, you need to be sure that the person you are approaching is there to network (many Google engineers come out for drink during that hour and may not want to be disturbed by you). The parking lot in front of the bar is rather small. You may want to arrive early.
5. Silicon Valley TGIF Business and Social Networking (https://www.meetup.com/Silicon-Valley-Startup-Idea-to-IPO/ev...). This event is also monthly and happens on Fridays (8pm - 11pm). This event is one of my favorites partly because Bay Area traffic usually clears out after 7:30pm (important for those who live in Fremont). The event is free to attend and there is no fixed agenda or format. You just get into the lobby of Hyatt Regency Santa Clara and look for people with name tags on their chests. Talk to whoever you want to talk to. And there is no hard stop. You can hang out there as long as you like although most people would have left by 11pm. You can park your car for free in the parking lot right in front of the hotel.
6. Founder Hiking Monthly @ Stanford Dish (https://www.meetup.com/sventrepreneurs/events/248758563/). This event used to be at Wunderlich Park. This year they moved it to Stanford Dish. If you are an outdoor person, this event is a good fit for you. Due to the nature of hiking, most likely you will stay with the same person(s) throughout the morning. Although that leads to some in-depth discussion, it does limit the number of people you can interact with.
Other than those mentioned above, there are also a few other networking groups in south bay. I just did a quick search on meetup.com and here is the list (disclaimer: I don't know much about events of those groups; the list is just for your reference).
So far I only covered the south bay and did not mention a word about San Francisco yet. There are many good networking events in SF and you can easily find them by searching meetup.com. I used to go to SF a lot. But I quit going after a robbery accident on BART as I came back from an event in SF (luckily I was not targeted). Most SF networking events happen at night. It could present challenges if you live in Fremont.
Our startup failed because my business partner wanted to just be the "idea guy" who designed the screens, while having me code it and do all the heavy work. Initially, this was going to be a 50/50 split, but after working on it almost full time for about 6 months, I ran out of money.
He had a pretty big savings account and came from a well-off family, so he agreed to front me basically just enough to cover my rent while I worked on the app. We agreed that since he wasn't really contributing much as far as manpower or hours logged, he could help justify his stake in the ownership by contributing monetarily.
After a couple of more months, we had a working, functioning app that was about 80% finished, but we started to butt heads on some ideas and he claimed he was frustrated by the fact that the app wasn't completely finished (even though we had changed scope and redesigned the entire app no less than three times).
He used this as an excuse to renege on our initial 50/50 split idea. Instead of honoring our deal, he opted to claim complete ownership and write me out of the picture.
Another way someone could look at it: He saw the app was starting to come along and was getting actual beta users, and he got $dollar$ signs in his eyes and decided to be greedy.
Both he and I were young and naive at the time, and the whole project had essentially been built on a handshake deal, because we didn't want to spend 10 grand on lawyers and paperwork before we even had a product worth anything.
I had spent a year working on an app, barely making ends meet and living off of credit cards, but because I was trusting and naive, he was basically able to screw me over and walk away with everything. His name was on more of the paperwork and he was the primary signer on the bank account. I could have fought it, but at that point I didn't have the energy or the desire to even work with him any more.
The joke is on him, though. Without me around to actually write the code, he never did manage to finish the last 20% of the app, and here we are almost 10 years later. After all that, he never managed to get the app out of beta, and he never made a penny off it.
The end lesson I learned: Don't invest time and energy in an idea or a partnership if you aren't willing to spend the money up front to lock down the legal aspect, because by the time you have enough traction and money to lock it down, it will be too late!
Money and greed corrupts people. Period. When someone has the possibility of millions of dollars suddenly seem like a real possibility to them, you might be surprised by just how quickly they turn on you!
Unfortunately, he had solidified parts of it legally, but not the parts that benefited me.
And honestly, even if that wasn’t the case and I could somehow argue that he didn’t own any of the intellectual property for any of the stuff he helped design (which I seriously doubt I could do), we are talking about code that is ten years old by now.
I could always re-design the basic idea and re-code it from scratch, but that is both time consuming and risky (since it would be difficult to completely separate all of the ideas that he might have owned from the ones I had).
I’m currently making good money as a full time salaried employee at a company that I enjoy working at. I’m afraid that the cut-throat, high stakes appeal of a startup is somewhat lost on me at this point.
Isn't there a middle way between a handshake deal and 10K on lawyers, meaning that you write down the terms in paper in a wording that sounds right to you and then sign off on it?
The interesting thing was that I actually did send him an email with an outline of the terms, and when he got the email he verbally said, "looks great! let's do it!".
I was too dumb and naive to catch on and realize that his verbal agreement was worthless, and I moved forward without ever getting anything explicitly printed out and signed.
The startup failed because so much time was spent consulting to bring in revenue to pay meager wages, and not enough time was spent on building product.
If you're going to fund your company with consulting, make sure you have a very strict rule about how much time you spend consulting. At the end of the day, you need to build product.
No a different startup. I internalized the lesson from that startup and made sure that after I did the one consulting job for MinOps that we didn't do any more consulting, unless the job can be completed in less than a day.
I built a SaaS company, offering marketplace infrastructure to people who wanted to start online marketplace businesses.
Turns out, although tackling the technical side of building a marketplace is not that easy, it is perfectly doable. The real challenge is getting people to use such marketplaces. It takes a lot of non-technical effort to build a marketplace. There's the obvious chicken-egg problem for most marketplaces. It is solvable, but usually requires a lot of capital to attract a lot of people, or the founder should have some sort of secret (being already established as an offline commissioner in a market, having the right connections, having a following and so on) so it is not easy to compete with them.
2 things I learned irrelevant to the business are these:
1) Looking back, I've made some serious mistakes, but I had no idea that these were mistakes at the time. Therefore, I must be making all kinds of mistakes today, which will only become apparent in the future, and that is actually a bit worrisome.
2) Prior to this, I've not experienced 'being a failure' in any sort of activity so strong, and it is not a good feeling.
Too early with a ML product back in '08, people were not ready to believe such a thing was possible: basically a working VFX pipeline for what are now called "deep fakes", but I targeted inserting consumers into brand advertising TV commercials and music videos. First people simply could not grasp the concept, then they did not believe it was possible, and then because I wrote it alone and had no team VCs and partners and other potential collaborators felt working with "my company" was too risky. People want to see a team, not just one guy and an automated media pipeline. You need a team and an organization to be taken seriously, no matter how great one's technology happens to be. I did have two freelancers helping with the web site, but the entire media digital double creation and VFX pipeline was written by just me, and that is perceived as too risky. Here we are 10 years later, and still no one has done automated consumer inserting into still and video advertising. I still have my working pipeline...
It is as big if not larger than After Effects - it's an entire VFX pipeline: servers as render nodes, as compositor nodes, and so on... All extremely high speed, to the tune of 150,000 30 second clips per minute. It is/was a globally scaled on-demand VFX pipeline. Not even the VFX industry has such pipelines.
Oh, I tried all kinds of things, each with some level of success but not enough. I was offering a digital double API service to game studios, a web app for digital artists to create characters. The full pipeline was never used, just parts by various clients for customized needs.
Given that putting a potential customers face (where from?) into a video/still with a product (I'm imagining seeing a picture of me enjoying a cool bottle of cola) is more than plausible these days, why do you think it's not appeared?
Maybe consumers don't want to see themselves unsolicitly inserted into an ad?
I can easily imagine a twitterstorm over "privacy" and intrusion if adverts like that started popping up.
Or did you have a different vision/market for it? Aside from, say, novelty photos.
You pretty much got it: you enjoying a coke, driving the new car, you and your significant trading engagement rings, you in a film trailer interacting with the film's stars... The personalization can be anything from simple ads to political messaging. The trick is getting a major brand to want to do such a project. It's a completely new idea, and that requires more than a few people sticking their necks out and taking some risk. My experience has led me to believe the advertising agencies really need strong assurances to take the risk of doing personalized advertising. Consumers are used to feature film quality VFX, meaning their eyes are moderately sophisticated when looking at digital characters. The production quality required will require investment and iteration to get the personalization production pipeline correctly generating likenesses of real people that "pass" and do not look like a cheap gimmick. To date, every potential agency and production partnership I was able to begin to piece together became a no-go due to one or the other wanting to go cheap or do porn. Neither of which really work, economically or financially.
We were too early regarding the technology (doing 3d real time reconstruction of inner rooms using laser scanner - 2011), without even owning a laser scanner (price tag: $30000). We got to rent one for some hours ($2000/4hours) to get some samples but they were too few to draw a generic, working algorithm. With the samples it worked well, but we didn't get the opportunity to move further, then we ran out of money (funded by a University Program, from the money we bought computers, office stuff and travels) pretty soon, because none looked pretty interested in the product. 3 years later, other technologies reached the market and it was 'successful', even though I don't see any disruption until today.
Learned a lot in laser scanning and improved my programming skills tremendously (was CTO and main IT guy after finishing university).
Unfortunately PCs were not so fast as today and there was no help like today with all those APIs available, but only 2 major libraries that helped me to achieve the MVP: OpenCV and PointcloudLibrary.
My startup failed because I was too secretive. I though I had a great idea and always worried that somebody would copy it. I spent 4 years working on my idea only to find out that nobody was interested in what I was doing. Now my mentality completely changed. I will be flattered if someone even bothers to copy my idea. At least that means I am doing something right.
Same here. I failed for the same reason. I wish I had talked to others about what I was doing earlier. These days when I go to networking events and hear people say "I am in stealth mode", the only thing goes to my mind is "Good Luck, Man".
I was working on a video conferencing product targeting enterprise users. There were already many solutions on the market when I started: WebEx, BuleJeans, Skype Business, AdobeConnect, etc. As a regular video conference user, one thing bothering me most was I could not figure out who was talking to whom when there was a heated discussion. So I designed a system that could track people's attention so that everyone would know who was talking to whom. It took me a long time to build a usable product since I had never worked in the video conference industry. After I released a beta product, people told me that they would just ask for clarification if they don't know who was talking to whom. They would never learn to use a new system just because of that.
Two founders - friends. Thought we could work every decision out democratically. Didn't turn out that way - used to fight about almost everything until each of us tried to force our way. And we had enough - that kind of stuff will drain the energy out of you.
This is the most important lesson, and one I wish I had learned at my last start up. It drifted along and eventually failed for a variety of uninteresting reasons. But really we should have killed it much earlier when it was obvious that it wasn't going anywhere. (Unfortunately at that time it also was making just enough money to keep things turning over)
I am towards the end of wrapping my startup. There were 3 main failure reasons -
a. could not build a good team,
b. co-founder was not 100% committed,
c. picked target market in the geography which I was new to. Although it was my home country, the way to do business and lack of professional network became hindrance.
Because hardware is hard. Because product/artistic vision isn't the skillset same as marketing/sales. Because angel investors and founders had irreconcilable differences.
(Also because 95% of the functionality of the ~$60BOM hardware we spent 12-18 months getting into manufacture could be replicated with new components with a BOM of around $10 by the time we had the product in our hands...)
Startup #1: I was trying to build a location analysis tool after seeing some crappy software being used at work and charging us a crap ton of money for it. Roped my friend but also found someone completely random based on skill set. The dynamics of the team didn’t work out and we didn’t fully align on which direction to go. We also didn’t have access to the data we needed and we might have also gone after the wrong customer segment. We had ZERO experience in commercial real estate and we quickly found out that whilst our tool is useful, it’s not something the industry cares too much when it came to making deals (read nice-to-have but not hair on fire problem)
Startup #2: Born out of my own frustration with startup #1, decided to try and scratch my own itch with CRM software. At this point, it’s just me as my partners all went back to their full time jobs. Money was good and they have families. CRM is hell competitive and even more so with HubSpot in it. Everyone I spoke with had so many needs and I wasn’t able to focus on something pressing. Worked with a startup to build out a roadmap but they were not 100% invested in the product and was just trying to help.
Startup #3: Off the back of a trip to Hong Kong, I came across a very useful concept of having a mobile phone in your hotel. Tried to replicate it but met many roadblocks in terms of getting contacts, scalability of the idea within North America.
Going on startup #4 now, this looks to be a lot more promising after incorporating everything I’ve learned from the previous failed items:
- Tech is the least important issue. Usually, you can build the tech. It’s figuring out whether people need it that’s key
- Contacts, network and communication can be quite powerful. Having people who know the domain space in helps to become a great sounding board.
- Go deep with knowledge. Being a startup, you need to have some form of credibility for people to trust you and your company. Previously I had high level expertise but nothing deep enough that says I know the problems you’re solving, mr. customer. Of course you can build up that knowledge but that will take time
- Time is the most precious component. Focus on what matters, validate and think about the tech and optimisation after
For first one, got ditched by the other founders. Lesson learnt, make sure everything is in black.
For Second one - Support, you may have the best product ever and the best implementation team on this side of planet, but the customer support is paramount. We gained too many customers too quickly and our support was stretched thin, hiring new employees to train them on an exotic platform was not easy. Also learnt that product simplification is the key to product design and success. Also, a lot of other reasons, but these were the prime one.
It was well worth the time and would give it another shot someday.
Right out of school, another person and I had a startup building a managed VoIP solution.
We didn't start selling early enough, and underestimated the amount of time closing our first sale would take. That lead to my business partner taking another job to make ends meet, and not able to meet obligations to our company. Since he was managing the relationships and I was doing the tech, I basically was left trying to manage the relationships from scratch, many of whom weren't interested anymore. I very quickly ran out of money before we could sign a contract.
Lessons (probably too many to list):
1. B2B sales is a lot harder than the tech. Make sure you have the runway to compensate for learning how to sell.
2. Make sure your business partner(s) are as committed as you are.
3. Don't use your own money, or at least have multiple sources of income.
4. Have a good advisor. I feel like if I had someone I could have asked questions to, I would have been more successful, or never would have taken the risk.
5. Probably most importantly, don't look at it as a failure, but a learning experience. I was pretty depressed when everything came crashing down, but I learned later that it was a valuable experience that put me ahead of a lot of other people just due to the sheer amount of work it was.
I had a similar experience with managed VoIP. The first almost-accidental customers seemed like a good sign that the most minimal viable product could work as a business. But we did not start selling early enough, and it played out almost exactly as you described.
Lessons:
1. Sales is hard, especially if you have never done it
2. Commitment -- everyone involved should have skin in the game
3. Hardware is hard, even when you don't manufacture it -- refurbishing + firmware modifying ip phones, poe equipment, etc ate into our runway
>>> 2. Commitment -- everyone involved should have skin in the game
For those who don't get it, this means :
- don't expect anybody to help you more than what he already helped (i.e. past help doesn't imply future help)
- someone not as involved as you can become predatorial (for example, by requesting, after years of super nice cooperation, a share of the profits, of the intelectual property, etc.)
- someone who helps your for nothing may hide some agenda
- someone who helps you may realize that what you do together might hurt some of his othe business (and thus starts to undermine your business, not just leaving it)
>>> 3. Hardware is hard, even when you don't manufacture it -- refurbishing + firmware modifying ip phones, poe equipment, etc ate into our runway
This is a great point, and brings back so many bad memories. Every phone provisions a little bit differently, and so many settings have unintended side effects. I spent so much runway building a dynamic, generic templating system when we should have just gone to market mostly static coded components customized on the fly.
I started RestBackup, a backup service for small business databases.
I coded 6 months before talking to customers. When I finally talked with them, I learned that I built mostly the wrong thing. I spent half a year changing my product to fit their needs. I could have saved about 6 months by talking with people first.
Then I used the wrong sales strategy. I focused on cold emailing, snail mail, and cold calling, which was demoralizing. The pressure of impending failure was too much. I lost nearly all motivation and productivity. After another half year, I ran out of money and gave up. I could have succeeded at sales by consulting with an experienced salesperson in the industry. They would have told me to find out how my target customers buy products like mine: they buy whatever their local IT services company recommends. Then I would have focused my sales effort on the local IT services companies and probably gotten enough sales to take off.
Now it's 5 years later and I'm trying again, with a new business. Wish me luck! :)
TLDR:
1. Talk to potential customers before building anything.
2. When stuck, seek advice from experienced people.
Looked at restbackup site - it's not clear what you do or offer. Is it some sort of embeddable component for backing up host app's data to the cloud? But billed through you?
As an engineer what I learnt was that commercialization is the most important factor and that its difficult/near impossible to sell without strong branding, marketing and networking.
I now work for a multi-billion dollar company, the product I developed is superior to theirs in almost every regard.
What they have is an amazing marketing team.
I was part of a startup in the mid 2000s that wanted to make it easy to shop for homes using your mobile phone. We used j2me and actually got the app installed on a few phones. I wrote up a small white paper on j2me: http://www.mooreds.com/midp/midp.html
I believe the startup failed because it wasn't anyone's first priority. Every one of the four founders had a day job, even though we all had double digit ownership percentages. I don't recall if we even knew enough to have the stock vest.
So the tech folks worked on the product on weekends and I don't know how much the sales and marketing folks worked.
There were also issues with marketing, distribution and the fact the mobile ecosystem wasn't quite there which made the app painful to use, but I think it might have worked had we been all in (or even one of us had).
I took a year doing something I had planned would take 6 months. I was inexperienced, I shipped a product that had a very niche market. I got on the PS4 appstore and the algorithm just took me down, way down. Pricing was also screwed up in 60 odd countries for the first month with no control of mine. RIP.
I think the most important one was people say one thing and do another. This is true both from the sales perspective and a user experience/user testing perspective. Here are a few examples
- People wanted cheaper mobile app analytics, but they wanted a brand they could trust
- People wanted a lot of insights, but they would never understand most of the charts
On the whole, products which are used during firefighting are are hard products to sell and differentiate on. Google/Fb/Amazon could build a product with 10% of the feature coverage and yet own the market.
Hired a guy who do politics rather than coding. He destroyed the whole culture. When I ask why we are not firing the guy, CTO know about it but can't fire him.
- Two main clients did not pay bills on time, causing me to run out of runway. Getting them to pay became the single most important issue, and after they finally did, I was stuck with a 2.5 month backlog, two important clients who couldn't be trusted to pay on time, and a broken spirit.
- Created a b2b app, spend too much time on making it work great, not nearly enough time/effort on marketing it. Found that the people who could understand the technical superiority were not our target market, but just people who estimate technical superiority from marketing. Couldn't and wouldn't compete on that. Then we landed a big client who paid us handsomely to lose our focus and turned us into a non-scalable consultancy business which we sold for an almost symbolic value.
- Used networking to get together a team of 5 researchers/engineers in a hot field. Found funding prospects, but only on the condition that they pay us (slightly below market average), but the equity would be in the single digits (even for me). So this blew up, and a few months later the most promising researchers got jobs at FAMG. I think most $$ potential was lost here (would have been an easy acqui-hire).
Learned:
- The cheaper the price, the cheaper the customers. I took pride in offering great customer service, but spend hours looking into issues for 15$ accounts (would have been cheaper to fire them).
- The smaller the startup, the lower you are prioritized come pay-day. Would be more aggressive in collections/SLA.
- It is not how good your product is, it is how much people are willing to spend for it (how good they perceive it to be). Non-technical people are easier convinced by a sales call, than an impressive demo.
- Learned how to deal with financial stress and to keep a good sleep/workout schedule, else my output drops way too low.
- 15% equity of 0$ is 0$, but you also can't expect the really good people to work for your startup without any potential upside or throwing them a bone. Strike while the iron is hot.
The app was essentially what Slack does today. It was built to compete with Campfire and Hipchat (the new kid on the block) and the mission of the product was to be the most extensible group chat application.
Within a month we had paying customers. We didn't know how to grow the user base as neither my co-founder nor myself knew how to do marketing. After a few months of just adding features we tried finding investors and eventually had to do consulting to pay our bills.
At that point we had an acquisition offer that was way lower than what could have been. Because we were consulting and the product was going nowhere we sold it. It was overall a great experience but the software ended up dying in the hands of the acquirer as they could not find a way to market it either.
We launched our startup right at the end of the dotcom boom. We were trying to do meta-searches against Alta Vista (mostly) and a few other, doing what was a very primitive network search similar to what FB does, only specialized to things like scientific papers. The first product was trying to help academics and scientists find conferences to attend based on their common interests.
But before we got very far, the dotcom bust hit and investor cash dried up. My partner went back to his day job, and I went back and finished my degree.
Lessons learned: market fluctuations can and will kill you. Have an exit strategy. Don't rely on a single coder (me, in this case) especially one who is young and immature. But definitely do it, you won't regret it.
My startup didn't fail. But my initial projects failed. Project 1. I started a commercial version of Wikipedia back in 1990. Just the computer hardware and software section. I hated starting there. But that's what I knew. And that's the reason I started the project in the first place. It was harder to get info about computers back then. You had magazines (and user groups I guess). I wasn't sure of my computer programming skills. So I used an off the shelf database management system. Long story short. The DBMS didn't scale. It had a GUI front end. And as the project went along. Any change became exponentially longer. Small insignificant changes started taking an hour, then two, and finally 2 whole days to make a small change. (I was so mad I wrote my own DBMS. And since it didn't have all the bells and whistles, it was lightning quick. And changes were mere compiles that took 4-11 minutes.) I should have stress tested the commercial DBMS I bought, at the start. I just assumed I was paying a lot of money for it. It would work. There's much more that I don't have time for. I should have sought funding, I shouldn't have worked on my end of the project alone (I thought it would be in business's self-interest to provide content and update the info. At the start about 15% did.
Which in retrospect was decent.), ... I should have started the startup earlier in life. My aging parents became my primary concern.
2 Years ago I started a product to provide a marketplace for lawyers(http://www.legalisor.com).
People can search and hire best Lawyers & Advocates in India(mainly in NCR ).
I started this as a side project first and I did all the coding and market research part.
Why it was failed :
1. For sales and marketing, I hired my brother who was an MBA and things did not go well at work.
He was not giving enough attention and dedication as product required in its initial phase and I was not able to push him hard because of personal relationships.
He was about to get married too so he was under pressure to get a fulltime job.
2. Few people were ready to join my organization and they were ready to invest some money too but I was always afraid to give them equity of the company in return. I was in believing that I can run the company from profit I was earning from selling packages.
3. I was not prepared for the scenario when the product is ready to go to the next level.
I learned :
1. I should trust people more and give them chance to involve.
2. Personal relations should stay away when there is work involved.
3. Seed funding could be helpful to give the product a better shape.
Note: product(http://www.legalisor.com) is still running but I am not much active with its development.
Posting anon. My startup failed when my backstabbing co-founder struck a side-deal with our biggest customer to essentially "sell" our IP via consulting directly to them. We were easily acquihire material which would have possibly netted us single-digit millions, but instead my co-founder took the bird in hand and "cashed out" all our internal secrets.
As I learned, lawsuits are expensive and you have to prove things that you may not be able to "prove."
Bootstrapped a fitness app (Bruiserfit - https://bruiserfit.com/) with a friend based on my own measurable high-intensity physical training workouts. We built the first version not really knowing what we were doing, slapped AdWords on it, but users never came. We couldn't get past the activation phase - the initial product wasn't intuitive and compelling people to workout is challenging. Over the past couple years we've iterated on the user experience to an adequate state, but we still lack retention. It seems like the format is still confusing for beginners and that most people simply don't want to train themselves to do tough, fast bodyweight workouts.
On the technical side, we used Rails 5 and followed the Thoughtbot playbook. But neither of us were very experienced in native development, which prevented us from offering many of the bells and whistles that other market offerings provide. If I had to do it all over again I would probably give it a shot with React + Firebase.
Like others have said here, democratically running an equally shared company with friends sounds better on paper than it is. Different personal beliefs and approaches often lead to deadlock. Communication is essential to avoiding resentment. It gets easier with practice, but there was still too much to juggle for us and not enough time, know-how, and motivation.
We still casually hack at the project on the side. My cofounder and his wife swear having the project on his resume landed him his current and very comfy gig. I'm still waiting to see if anything beyond the experience itself comes out of it for me.
We were on an incubator where the staff were insistent that all the start-ups be 'high-growth' rather than work towards simply surviving, as an initial goal. This meant the projects were pushed to being ambitious to the point of farce...The other two in my team started trying to appeal to this 'high growth' mentality by just making absurd claims about what the technology would be able to do (without anything actually existing yet) and I was the CTO, so I got a bit annoyed by this and eventually just had to start saying 'look this is totally ridiculous now'. They said they didn't want to work with me if I wasn't willing to do it. I just said I can't do it so there's no point. I went to work at a consultancy for a bit and now I'm a research associate at a university. I have no idea what happened to the business in the end. I guess they just slowly died without proper tech staff.
What I learned (Just realised I forgot this) is it's basically impossible to start a company with people you've not met before (we were basically put together like boy bands).
Also, choose one thing and do it well.
Also, have someone with deep knowledge of the industry you're working in (we didn't, and when we did customer research from people in that industry, it was clear).
Discovering patterns from chaotic datasets, albeit via Graph Theory techniques (instead of ML) for populating a knowledge graph. e.g., find commonalities among documents, such as a single occurrence of a common phrase in each that connects otherwise obscure papers.
This technique is well suited for datasets with insufficient features for machine learning...
Initial tech focus was on finding commonalities within a set of documents, such as by crawling all links on first 10 pages of Google search via their CSE API. Next search optionally increases the pool.
Initial business focus was for marketers, who not only know their pain but are willing to pay to make that pain go away.
Nothing unique about the market... but with Lean Interviews and with 100% hit rate for interest among the 40 highly qualified leads, it seemed like a simple matter of assembling various bits that we had each previously built.
Lessons learned:
Even if a long-time friend commits to joining, has the financial means to contribute several months, owes you the personal favour to do so, etc., etc.-- Don't bank on that.
Like a perfect storm, I had multiple friends who previously committed to assisting, then each suddenly experienced extenuating circumstances preventing them from joining. One would have been our NLP lead-- ouch!
More mundane lessons learned captured in articles:
There is one and one only reason why companies go out of business: they run out of cash.
Many a situation may lead to this, but lack of cash is the reason. When Leaman Brothers when under, the company had half-a-trillion dollars in assets but it could not convert these assets fast enough into cash to continue its operations.
My first startup failed because of doubt I had in the product and because of poor coordination with my co-founder.
My finance co-founder and I wanted to make an IoT device for kitchens. I made a prototype with 3D printed parts and an Arduino. My co-founder was going to market and seek investors. While working on the prototype I found out that there were tremendous numbers of edge cases that would make a marketable product far too complex and my co-founder didn't do the things he said he was going to do. So I stopped working on it and me and my co-founder mutually decided to end the project after completing the first prototype.
Two lessons I learned was to make sure to find a co-founder you know can deliver on their promises and to work on something you're really passionate about, not just something you think will make you money.
It failed because I was an idiot who thought he knew it all. It also failed because my co-founders were my best friends so the "partnering" wasn't based on skills or what you bring to the table, but rather the fact of us being friends. And finally I've fought my incubator/accelerator who were idiots enough to fight me back and it was almost a bullying tournament, I'm glad we solved that and everyone carried on with their lives.
I've learned a lot, to listen more and to choose wisely, not to spend any money before knowing what it will return to the company and also not to over promise. If I have to do it all over again I would but with the mindset of "I want to change my self first" before thinking about changing the world.
I made a small startup while backpacking. It was called backpackbud. Contained list of hostels, tips, things to do etc
Maintinaing it was pain, backpackers are cheap and I didn’t make any money. It died.
Then I started bewolo.com with some friends. Those friends brought in their friends and I was the only technical guy. My shares were <10% and I had little social life while building it. It was around travel space. Think airbnb for things to do. I got burnt out. Working for a big company and building a startup at some time is really hard. I got burnt and left. Other founders couldn’t run it and it died eventually.
Startups are hard. We only hear about the successes and big IPOs and think I can do it too.
I’m probably going to do it again but this time, try to go full time for at-least an year.
My last failure was an idea so terrible and provocative it had to get some kind of traction. Never failed to get a "that's brilliant," laugh, but required more finesse to get people to follow through.
Burned some bridges, but really, who wants flammable bridges anyway.
- Founder gave up, went bush for weeks at a time, and I (the "right hand man") had no experience managing staff let alone running a company without the founder. We wasted tonnes of money on staff that I couldn't adequately manage or train which resulted in huge technical debt on almost every feature.
- I should have opened my mouth 6-12 months earlier and put my foot down regarding my own capabilities. Also, hiring great programmers is really hard.
I'm still trying to work out how to get co-workers and staff to come ask me questions when they need to, I'm unsure if it's because I'm not approachable (I always try to be!) or if they don't recognise that they need to ask a question.
Suggestion: Have one on ones with each of them, regularly, and have them speak (it's not you speaking during this meeting) to explain what they're doing, they will tell you what problems they face.
Speak after them to answer within short timeframe, and most importantly follow up to help them, frequently and in the long term, with thei problem they expressed.
We tried to set up a small startup of 3 people with the goal of offering a service for social bot detection, reporting and (eventually) removal. The assumption was that they are an annoyance and might be a danger to the public opinion and to brand reputation. We started on Twitter for our MVP.
We failed to generate interest in it and it turned out that social bots are actually mostly marketing tools by ad agencies to promote their customer's product. Their goal is to make a topic trending, so that real people start noticing it. There is a strong business case for social bots.
We should have created some Social bot toolkits, that would have probably worked much better...
A: Brilliant beloved and trusting visionary founder just didn't have a functioning crazy person detector (which was fortunately why he hired me), but he also unfortunately hired a self-proclaimed "Serial Hacktreprenuer" (I shit you not) as a "game finance expert", who failed to do his job raising money, and whose bizarre behavior and "volatile and erratic work habits" led to battling lawsuits and the failure of the company, who claimed the founder "tried to push him out of the company and committed an "atrocity" by trying to take away" his equity, who called the dispute a "genocide", and who then threatened to publish an "exposé documentary" by tweeting: “Looking for PR professionals to build awareness for “THE INCONVENIENT TRUTH ABOUT WILL”, an exposé documentary, releasing on YouTube 6/2012.”
But they eventually settled the lawsuits, and Will issued a statement officially thanking him for his "tenacious execution" of the company (insert capital punishment joke here), so he never followed through on that threat.
Q: What did you learn?
A: I learned to program iOS and Unity3D, and to stay out of company politics, and to listen to my bullshit detector.
On one hand it was culmination of widely known ideas and "intellectual property" that Will had been openly thinking about, talking publicly about, experimenting with prototypes and proofs of concepts about, shipping products about, and even producing reality TV spots [1] [2] and a cable TV show [3] about for decades.
And on the other hand it was also a lot of handwaving and vaporware and trendy ideas and creepy social networking and online privacy surrendering and crowd sourcing and user content creating clichés.
The "Serial Hacktreprenuer" had absolutely nothing useful to bring to the table other than the self professed ability to raise money (which he failed at) and a complete lack of shame and honesty (which is very useful in the games industry, and a skill that Will lacked), but no original creative ideas or track record whatsoever.
But he strongly believed he deserved all the rights to all the ideas that Will had been talking about his whole lifetime, and that if Will didn't go through with his deal (which was just misleading talk that he exaggerated), Will might turn around and sell the "Serial Hacktreprenuer's" intellectual property that he presumed he now exclusively "owned" to some other company if Will didn't go through with the deal that the "Serial Hacktreprenuer" (pretended to) make. You know: "genocide".
For example, he was in secret talks to sell the company to Zynga, who actually only wanted to acquihire the company to get Will himself just because he was Will, not because of any ideas or execution plan the "Serial Hacktreprenuer" came up with.
But he didn't consult with Will, who didn't want to drop everything he was doing (including his other companies) to work on the next Cow Clicker [4], and he wasn't honest with Zynga or anyone else. And EA (an investor in Will's other company) was not particularly pleased with the idea of losing Will and their investment to Zynga, either. It was totally untenable along many dimensions.
So many people just want to be the "idea guy" because it's easy and glamorous and means they won't have to do any hard work, since they think their own untested unoriginal ideas are brilliant and unique, and they will be able to simply tell other people what to do all day, then criticize and blame them for not living up to their own brilliant vision if and when they fail.
Will is the opposite of that, but when the "Serial Hacktreprenuer" had a real honest to god "idea guy" in his lap with ideas and experience and a plan of how to execute, but his job was just to raise money around that fact (not auction the idea guy's meat off to the highest bidder like a golden goose), he wanted to throw away all of Will's ideas and experience and substitute his own behind his back without consulting him, instead of trying to sell what he already had. (That's also why SimCity 3000 was delayed for so long, and EA ended up buying Maxis.)
The Venturebeat article [5] and the PDFs of the lawsuits [6] [7] explained and revealed some parts of it pretty well:
>In papers disclosed by Ansari, Ansari said that Hive Mind was in talks to be acquired by or receive an investment from Zynga, the largest social gaming company. That deal reportedly valued Hive Mind at $75 million. The talks took place in November, but nothing ever panned out. By December, Parekh and Wright resigned.
>It was unclear whether Zynga was really serious about buying Hive Mind at a high valuation, or if it simply wanted to hire Wright. Ansari alleges that Wright is trying to sell the Hive Mind ideas again, only through the Stupid Fun Club, as if that entity owned them. He also says Wright is trying to implement the ideas through yet another company, Friendly Gravity.
Great collection of info you posted about it (and a shame about legal happenings that can hamstring capable people) but I'm even more curious now as to whether there was any code at all written!
The "Serial Hacktreprenuer" never wrote a line of code -- he just destroyed companies and tried to take credit for other people's ideas. But here are some earlier demos and prototypes I developed for Will at the Stupid Fun Club, exploring his ideas about storytelling, social networking, mobile and geolocated gaming, a community scripted TV program, geographical music organization and navigation, and a reality TV show with robots, which got tangled up with the HiveMind boondoggle and was never released (so I can't release the sources, unfortunately). You can read the articles and his lawsuit complaining how Will was committing an "atrocity" and "genocide" by taking all the ideas he presumed he owned and doing them without him, but take it with a grain of salt because we had been working on that stuff for many years before he came along, and they were pretty obvious widely known ideas:
>Demo of the Urban Safari StoryMaker technology, developed for Will Wright's Stupid Fun Club, by Don Hopkins. Originally developed for CurrentTV's Bar Karma TV show, the first online community-developed network television series. Branching collaborative storytelling and voting.
>MediaWiki front end server. Python back end server. Flash Storymaker client. Geolocated storytelling. Google map overlays. Administrative back-end content management system. MediaWiki integration and embedding. iPad Storymaker application. MapKit integration. Facebook StoryMaker app. Voice synthesizer reading stories. Facebook album import and export. 3D branching story visualization with Unity3D.
MediaGraph Music Navigation with Pie Menus Prototype developed for Will Wright's Stupid Fun Club:
>This is a demo of a user interface research prototype that I developed for Will Wright at the Stupid Fun Club. It includes pie menus, an editable map of music interconnected with roads, and cellular automata.
>It uses one kind of nested hierarchical pie menu to build and edit another kind of geographic networked pie menu.
>Stupid Fun Club's "Servitude" One Minute Movie about Robot Servitude, written by Will Wright. Robot brain and personality simulation programmed by Don Hopkins.
>Stupid Fun Club's "Empathy" One Minute Movie about Robot Empathy, written by Will Wright. Robot brain and personality simulation programmed by Don Hopkins.
Not my startup but worked for one until they pivoted. We had a photographer platform (https://picr.com) competing with Thumbtack (except our photographers were to be paid higher instead of a bid to the bottom.
Everything seemed right. We had the right market (Portland, OR), with a beautiful design and great customer experience. We managed to get roughly 100 photographers on board but the customers never came. After a year or so, Picr ended up pivoting to more of a photographer platform than a AirBnb/Thumbtack alternative. Most of the team was let go and only a few devs stayed.
Lesson learned: Building a two sided market is hard.
Market penetration. We had an always-on collaboration tool for distributed groups. All anybody knows is conference tools, and even the customers that signed up for our product would have a session average time of 1 hour. The product was intended to be always-on, not started and stopped for meetings.
Anyway we figured it took 2 days of requiring the team to keep the product running, before folks 'got it' and began to use the features fluidly. After that they'd take off. But that's way, way too long a trial and almost nobody would stick it out. Our few successes came from enterprise customers that could control what was running on the team's devices.
I was a co-founder at a SaaS health startup that ultimately failed because our team imploded. I learned a variety of very useful lessons from our failure.
#1 If you do not have strong domain expertise in your target market, your co-founder must. If none of your co-founders have strong domain expertise, you are in for a world of pain. It's possible to succeed without someone from the industry onboard (and we almost did) by figuring stuff out for yourself through talking with customers, but not having that person makes things 1000 times harder. Apart from having to spend a lot of time learning the domain, you also miss out on low hanging fruit initial customers / advisors who an industry cofounder would be able to acquire through their network.
#2 This is related to the first point above, but if you can, try to get angel funding from someone from the industry. Our angel was able to put us in touch with several industry players and regulators who were incredibly helpful.
#3 Before you start any venture, you need to sit down with your co-founders and explicitly agree on what the mission of the company is, what everyone's expectations and desires are, and what everyone's responsibilities will be. Take a decent amount of time to do this, put it in writing, and have everyone sign it. In my company we had three people with the title co-founder, all of whom had different ideas about what being a co-founder meant. One co-founder really wanted to be an advisor and never did any work, another co-founder really wanted to just be CTO and didn't really want to deal with non-technical matters, and I was left doing most of the day to day work. We also had 3 different opinions on risk tolerance and persistence. If you can map things out beforehand then you can hold people to your agreement when they aren't pulling their weight.
#4 Be flexible with your team. We had an initial product idea that didn't work out and we needed to pivot. Unfortunately the team that was a decent fit for the first space was not the right team for the second space. Don't be afraid to be honest about what the new requirements are and to let people go if you are still in the early stages and some people can no longer add value.
#5 If a vendor, advisor, or other entity says they will do something for free for you, it means they won't do it. We had 3 entities offer us free services because we were early stage and none of them actually did real work when push came to shove. Demand solid contracts from your vendors and demand to pay them.
#6 Hold off on incorporating until you have to. I spent an inordinate amount of time dealing with incorporation bullshit, tax bullshit, and compliance bullshit when we didn't even have a product and were still doing early stage work. Don't do this. Wait until you are at least ready to start development before you incorporate.
#7 Very few ideas are truly unique. A bunch of people probably failed at what you are about to try to do in the past. Do your research and figure out why they failed. Perhaps even try to reach out to them. I would gladly talk to anyone that asked me for advice or information on the state of the industry / product space.
#8 Get an accountant. There is SO MUCH TAX BULLSHIT and you don't want to be dealing with it yourself.
Ultimately we got unlucky in that our primary venture was in a space that was undergoing tremendous regulatory upheaval which made our product irrelevant, but given the nature of our team and circumstances, I'm not sure we would have had success even had the space not changed rapidly.
Will an agreement in writing really get partners to do it the way you want? I feel like that's some other issue who's solution I don't know but just writing it down won't actually make the difference when it comes to actual behavior.
I've been in a similar situation where co-founders had different goals. I used to think talking before hand and getting things in writing would have helped. I'm pretty confident now that writing would not have helped. Talking might have except that people hear what they want to hear so they all think they agreed but they all think they agreed to something different
I partnered with a much larger company to profit from an existing sales structure and their technical infrastucture. To me it seems like -- due to their size -- they wanted to cut a larger piece of the cake for themselves, so negotiations about the details didn't really come to an end. They started to create and sell the product on their own with lots of stolen concept details. I am glad they failed.
My lesson is to bootstrap and implement fast. Don't worry if sales are not exploding. However, check if sales are pointing upwards and finance is under control.
I basically learned that failing a startup is similar to dealing with end-of-life care - we all make the same mistakes so in a weird way, I think the best way to learn from this experience is to read Atul Gawande's book Being Mortal. It'll put things in perspective.
I have this theory that ppl throw out crazy ides like the earth being flat or that there are giant apes living in the pacific northwest in order to find irrational consumers. If anything sticks, you've got one!
Makes sense, right? If someone, say, actually believes the earth is flat, despite having access to the Internet, etc they must an imbecile. These are exactly the types of ppl that can easily be separated from their money.
Apologies, Alex Jones, for revealing your business plan. ;>
Point well made. I could never put my energies behind something I knew to be false, dangerous, unhelpful or something I myself didn't believe in. Does it mean you have to be somewhat ethically and morally "flexible" to get going in startup land?
I am too scared to conclude anything about this lest I cement my mind into hopeless cynicism.
I started a Wordpress consultancy with a couple of friends. The idea was to eventually transition into a proper design agency that can also code.
One friend was part-time and did only design because he didn't know how to code. The other friend never did any work at all so I ended up having to do almost everything, which wasn't really that much anyway since we only had a handful of customers.
Eventually one of those customers led to a full time gig so I shut the whole thing down.
There were many lessons but the main lesson was that you cannot rely on a person's word.
In 2011 we launched Birthday Dollar, a Facebook app that let users send and receive small gifts of money and gift cards through the platform. We watched usage tic up day after day and felt momentum grow.
Then Facebook announced they had acquired Karma, a gifting company, and planned to integrate them into Facebook as Facebook Gifts.
I immediately pulled the plug on Birthday Dollar, processed the last transaction and shut the whole thing down.
What did I learn? I learned that there's no shame in surrendering without a fight.
Many people would say, e.g. don't deal with large companies because they will drag you along, eat your revenue and then not commit to a sale 12 months later. You will also find plenty of companies who will say that 1 big customer was their route to some early cash and success.
The bottom line with any business success is the CEO/executive team understanding how to take a high level view of the company and fix anything that isn't working!
We built an app that let people pay for goods and services (in the real world) with their smartphone, we grew fast, raised, built a product our users loved. Then... contactless payment (and later Apple Pay) came along and killed us. Lots of other stuff happened along the way, but with the benefit of a few years' hindsight - this is basically what happened.
I started a location-based Q&A social app. A Twitter-like quora app as per location. The idea was well received early adoption, and user retention couldn't be achieved. Learnings were that (1) there was no niche it was a very horizontal platform and people did not know what to best use it for (2) Lack of trust between strangers to answer queries
Failed because my co-founders weren't committed and I didn't care enough about the idea to attempt to pursue it on my own. Learned that having good committed co-founders is critical if you'd like to have them at all. Also learned that starting a business in an industry you have no experience in is incredibly hard.
We seemed (well no one knows for sure) to have the best data available (it was an analytics product) over our competitors, but didn't earn enough money with it. I can't blame our sales department as I have zero ideas how to even sell sliced bread, but our customers regularly said they liked our data better than what they got from the competition.
We did spend months improving our tech and even had stuff like geo-based load balancing, multi-DC failover, and a lot more. We prepared for a lot more customers and traffic than we needed to handle in the end. Some of it was warranted, but especially improving our data/algorithms even further was absolutely wasted time. We went from like 90% professional setup to 95%, and went from 99% good algorithms to 99.5% good algorithms, but we should have added more fancy dashboards and better UX. Admittedly, many customers just logged in and grabbed a CSV export, they paid for the data. But a not insignicant amount of customers also said the competition's presentation was a lot better. We never had a dedicated front end person with real design chops (not just being a JS developer), we should have hired one or two.
We also held on too long to old features/products that weren't the current focus but spread our resources too thin. We weren't enough developers/SREs for the workload, that means we either moved too slow or stuff got postponed.
I think we also never fully made the switch from "we'll do some customizations for customers to get them to fully make a commitment" to "this is the SaaS offering, take it or leave", but maybe the market space was also too small for that. It was B2B and the customers weren't something like Small businesses, where you have thousands.
Things that 100% did not matter: permanent overtime, too much vacation time
We were a German startup acting within German work conditions, e.g. 40h were the norm (sure there were exceptions when something exploded), we had paid oncall and if you didn't sleep the whole night then you just handed over in the morning and went to sleep.
TLDR: Lack of focus on a single product, not selling to enough customers, did not perform step to lower-maintenance SaaS (worked too much like an agency)
- Co-founders didn't have enough domain expertise
- Poor execution on our mission which allowed peoples personal side interests to pull tech and development in every which way
- Many other reasons
What did I learn: Strong leadership = Strong execution
If you can't communicate you can't create.
A person is not necessarily dumb because their start- up failed.
For me:
1. Improperly defined market.
2. Did no consistent marketing- marketed to a broad group for one month then quit.
3. Lost interest in the business idea- boredom!
So far I've had at least 4 failed side projects/startups, and one mildly successful product (so far).
Back in 2014 I tried to build a product recommendation service based on Reddit subreddits, where I would make money from Amazon referrals. I actually got to the front page of Reddit and Hacker News, but Amazon rejected my referral application, because apparently they don't approve any websites that have a grid layout of products (too similar to amazon.com.) I retried a few times but still couldn't get it approved, so shut the website down.
My first attempt at cofounding startup was a social network for skateboarders: http://hdwr.co. It wasn't a great idea but our team was pretty amazing. We set up a lunch with Tony Hawk (although nothing came of that), and were in talks with The Berrics (a big skateboarding brand) about a partnership, but couldn't work out a deal. In the end we didn't have enough users or growth, and after a few years everyone got bored and we shut it down. Never made a single dollar.
I had an idea for a mobile game that I thought would be fun: https://itunes.apple.com/us/app/boops-boops-swoops/id1128234...
It had an "AR" mode, a few years before that became a big thing. Anyway, I executed poorly and the game sucked. It just wasn't very fun, and I didn't make any sales. I learned that I'm not very good at making games, and even good games are a lottery ticket.
Second game: https://sudoblock.com
I had a lot of fun building SudoBlock, and it was really good to learn React Native. It was awesome to build a single app that could run on Android, iOS, Windows, and web. I posted it on Reddit and tried some other marketing things, and I earned a total of $30 from in-app purchases. I learned that I'm still not very good at making games. I think the execution was a tiny bit better than my earlier game, but still pretty bad. And the game just wasn't very fun or addictive. If I ever do another game, I should probably hire a designer. But I probably won't, because I enjoy doing everything myself, even if it sucks. And maybe I'll get better at it eventually.
My current project is FormAPI (https://formapi.io), which is a B2B SaaS service that I've bootstrapped. I launched about 11 months ago, and I'm not really comfortable with disclosing the revenue, but it's doing really well. I'm excited to keep working on it for the next few years and seeing what happens.
Started a company with a close-ish family member who also had a prestigious full time job in the sector we were in.
He promised meetings with execs and experts in the sector, and expert advice. We split equity 50/50. After three months, we had an MVP that customers loved, a contract with a large client, and several interested angels.
Unfortunately the co-founder hadn't delivered on anything (all business meetings were from cold calls, I had to learn all domain expertise on my own, my co-founder was spending no time at all on the company and kept promising to do things that he didn't end up doing).
After trying to get him to execute what he said he would do with a positive attitude for three months, he called me and told me he "didn't want me to make him feel like he wasn't doing enough". If he was a stranger I would have found a way to kick him out. But to preserve family relationships we killed the company.
TLDR: people in your family with great jobs don't make for good co-founders
Choose cofounders carefully, understand the platform dynamics of your industry, don't discount models that experts and the in-crowd look down upon (solo founder, bootstrapping, etc.)
I’ve heard “understand the platform dynamics of your industry” a lot in various forms but it’s always seemed so vague to me. How do you know when you do? What does that look like?
We didn't get enough clients. Step 1-100 is sales, the technology is pretty much irrelevant. you are a sales person first and foremost and a developer sometimes.
Back in 2010 I joined the founding team to build a crowd-sourced video editing platform with the goal of getting people to edit their countless hours of home movie footage into short clips they will actually watch instead of them sit on a tape or hard drive somewhere.
We built the whole platform, had the economics all worked out. Did a number of innovative things like connect to a royalty free music API, and Dropbox's API before that was ever released to the public.
In the end it failed because the average consumer did not have fast enough internet in 2010. Most people simply could not upload their files to us, even after we implemented a dropbox integration. Gigs of video files just took too long and people lost interest.
In hindsight, we should have seen that coming and started out by partnering with a digitization service that could handle various formats like tapes, and we should have also done some form of shipping raw media so that consumers wouldn't have to upload files to us. I think we would have succeeded in that case.
TL,DR, my main takeaways are:
- it's all about the team (what every VC will tell you)
- don't start a company with friends you haven't already worked with and really tested
- first mover advantage won't help if you move straight into a wall
It's really all about the humans. I started a UAV company with some friends about 12 years ago, and we had a very ambitious initial project: an amphibious drone. I had gone to work right after graduating, while my friends had studied some more, so that when we started the company, with my 2 years of work experience, I was the most experienced one around. Needless to say, the original plan didn't work, and it was all about the team not being good enough.
We raised over a million, paid ourselves shit salaries (ie less than minimum wage), and managed to survive 3 years. After year two, a couple of the co-founders were given the boot for gross negligence (burning over 100k through sending the wrong plans to production..), and a pivot happened. It started working, then an accident happened and no money was left to recover from it.
It could seem that a bit more money could have saved the day, as in the third year we finally were onto something which we could do and for which there was a market fit. But the pivot only happened because the team changed. The remaining members of the team, notably the flight test / composite manufacturing team, were very competent, but I suspect they were just spent after 3 years of startup purgatory. So, when it seemed like we might survive a bit longer, they decided to just kill any such possibility and finally be able to walk away. The other co-founder that was left let it happen and just folded, going so far as to forbid me in writing to try anything further to sell our assets or save the company.
It was very hard realizing that my co-founder friends, some of whom I thought of as brothers, had behaved the way they did. It is heartbreaking to see people you trust be negligent and ruin the efforts made by others, and betray the trust of the people who had trusted a bunch of 20-somethings with a big pile of money.
I'm not blameless either. I should have reacted much earlier to the lack of professional standards of some of my colleagues, and either left or asked for them to leave. Friendship made me blind, and way too trusting. I should also have tried to raise more money when we pivoted, and focused a little less on product and business development, but I couldn't see that at the time.
I've worked for two startups that failed in entirely different ways.
Startup A: We built custom analysis software, a 1.5 million line-of-code C++ codebase with 2 major products.
Head count: 20
Reasons we failed (IMHO) - in order of importance
1) Heavily saddled with tech debt. 1.5 million lines of C++ code is not an asset. When we started Web technologies were simply not able to provide the kind of functionality we were offering. So we kept doubling down on the thick-client software. When the web finally started to catch up, we had the wrong skill sets in the wrong places to pivot the tech without rebooting the entire company. We hit a weird technology gap where thick client software was on the way out, but web tech wasn't quite up to par for most of our existence. Near the end it web tech stacks were probably good enough, but we ended up going down the wrong path.
2) When we did try to start over with a clean code-base our tech skills couldn't move to the kind of technology that was becoming fashionable in enterprises. So we built another desktop client very quickly in C#. It worked well, but it was like selling a different kind of horse in the age of the car.
3) Absolutely terrible sales staff. I learned more about how important sales teams are from this ride than from any other experience. Nearly 90% of the sales came from word of mouth, and the rest from a couple of us tech guys bird dogging it out on the street. 4 successive sales guys produced $0 of sales over 6 years. To make matters worse, none of them were ever able to gain enough proficiency with the software to sell it themselves, they always had to pull along a "sales engineer" to demo. Total mess, and it's made me pay much more attention to corporate sales apparati over the years.
4) Funding funding funding. Our total VC investment was too small, and our executive team too inexperienced to realize this. We easily needed 10-20x the investment to make it work, hire good staff, pivot to better tech stacks and approach the market correctly. When we started the VCs claimed that we'd be the next unicorn, the money never added up to make that claim makes sense.
Result: I rode the ship down because I was learning so much on the way. The people were good to work with so it made it worth it. Everybody ended up in good jobs elsewhere and we're almost all in senior or executive positions, applying the lessons we learned.
Startup B: Web-based analysis software (I can learn!)
Head Count: 60
1) Absolutely dishonest, immature, corporate leadership who couldn't work together to operate an elevator. Treated key employees like garbage and ignored the rest. It was like middle-school.
2) The bad behavior extended to customers, who were often put against each other by the CEO in a web of deceit. Hard to explain, but very bad behavior.
3) Tech looked awesome, the back-end was rubbish because the engineering team was incredibly poorly run. I mean like builds completely breaking every day, completely unscalable critical architecture components, senior engineers insisting pet projects be included.
Result: I fled like a deer stampede in a wildfire. The company closed shop not too long after I left and the CEO and some of the senior C-level staff have disappeared from the face of the Earth. If they're doing something, it's not public in any way these days.
My own startup about five years ago (I've worked at several others, all different types of failures):
Running out of money. We were bootstrapped, and the style of work we were doing had some decent capital costs. We failed for a "bargain" (less than 7K), but we had cut to the bone and deeper while trying that. Side jobs to make rent just increased stress and distracted from the business.
Why did we run out of money?
Focused on engineering instead of sales and marketing. Manually spinning up servers would've been the right thing to do--since we instead were both technical we solved technical problems and kinda missed the people side of things. It was real and hard work, but it was not work that was relevant to making sales.
After we ran out of money, why didn't we keep at it?
Stress blocked further work. Too much stress led to neither founder being able to even think about the company and its business without severe anxiety. Times were dark and bad.
~
I learned that you want to prioritize the money funnel over literally every other thing that you as an engineer think matters. Coffee is for closers.
I learned to try out only with other people's money. Don't put your rent and basic living on the line for an idea if you aren't comfortable with what that can entail.
Probably most importantly, I learned that the glorification of the startup lifestyle is a lie perpetuated by people seeking to make money from it at all levels. Nowadays, even the glorification of failure and celebration of mental health seems to be by people looking to advertise their businesses, cure-alls, or just get internet famous.
It's rotten to its bloody core, and unlike finance doesn't even pay well.
"Probably most importantly, I learned that the glorification of the startup lifestyle is a lie perpetuated by people seeking to make money from it at all levels."
This I would say is my main learning point. My first startup failed because of inexperience and team implosion following incapability of generating revenue fast enough on one side, and attract favorable investment on the other. Failure could have been lighter on both me and the other members of the team, was it not for a self-immolation mindset probably driven by glorification of "startup lifestyle". Things fail. Most of the time. Assume failure. Optimize for resiliency. Never expect success as the natural outcome, but rather consider it will come collaterally to continuous reaction to ugly realities, and damn slowly. You can stumble upon a rocket ship, but it is not how businesses usually get to come to life.
Our founder went off the rails and developed a substance habit.
It got so bad that he was taking money from company account paying for drugs. Eventually arrested, lawsuits followed and now he's sitting in jail. Just a genius that couldn't control himself...
- Poor leadership (me). Inability to align team on a common goal (!), inability to communicate clearly about plans, etc.
I learned that I'm not the leader I thought I was.
- Canadian business. Means US B2B enterprise checks get stopped at the border for 3 weeks while they 'investigate'. Makes your last mile enterprise sale that much harder. Investors are conservative. Wanted $5-10k MRR before considering angel-level investment, no go until then. Harder to compete against Valley companies.
I learned get the revenue first anyway, the days of bootstrap a free service until funding are harder and harder to come by. Revenue first.
- Problem we were solving was harder than expected (barometer data to weather forecasts). Main product was going to be a weather model but we never made it that far. Data quantity, quality control and user retention were bigger problems preventing us from executing to success. This leads to running out of money.
I learned that hard problems are hard. Your startup doesn't have as many advantages as it thinks it does if the incumbents can copy/do better than you with your "hard problem" solution or if you take too long to build your real MVP.
- Team skills were not right to solve our problems. After company founding and initial pivots we were not left with founders and staff that could solve the problems we now had to solve.
I learned to be careful starting a company with your friends. And that pivoting can have risks like a lack of skill required to complete the pivot.
- Probably the final item would be despair. When things get bad there is almost no way to come back because you've lost the trust of the people who were holding up your fragile startup to begin with.
I learned to know when to quit before driving things into the ground and taking your team with you.
- One more item: If you can catch it before you start a startup, it's a good idea to really make sure your hobby project shouldn't just stay a hobby project. Maybe it has some organic growth and media attention - but that doesn't mean it should be a startup.
I learned to keep my job and my hobby separate. I'm employed with a day job now and I can do phone weather experiments in my free time with a hobby [1], not trying to shoehorn some idea of a startup into an otherwise neat and successful hobby.
I used to work at a multi-national and got fired.
I always wanted to try freelancing but didn't have the courage to leave a well paying full-time job and take the risk.
This gave me that opportunity and I went ahead to started a productized content-as-a-service http://contentiskey.co which offers unlimited content for $250/mo
Right now am busy searching for customers, you can join me
To cut a long story short we successfully registered the company, got a geologist to confirm there was indeed coal and got a mining license from the government. We then signed a contract with a sub contractor to come and mine. When the share certificates came instead of owing 5% I ownwed 0.00086% of the mine. Yes there were 3 zeros before the 86. Our elder the uncle we had sent to do the paperwork basically screwed all of us, including the uncle who originally came up with the idea.
Lessions 1. Never use your cultural beliefs in business. Stick to contracts. 2. Don't just trust family.