What I learned from my startup’s failure
medium.com
medium.com
You generally don't need a payment processor when starting out. The first ~200k in revenue can be done manually. Payment processing is something that takes time to do and most likely you will need to tweak it a few time as you figure out your business model.
>Paying for dev/design work by hour for a new startup is an insane concept to me now. There are always gonna be bugs, something that doesn’t work, something that needs to be added, etc.
Tech products are very complex. There are thousands of bugs and edge cases that needs to be resolved for a high quality product.
>And ideally, especially if you’re a non-tech founder like me, PARTNER.
One of the worst idea is to have non-technical people try to create a tech business without a strong technical co-founder. Imagine starting a dentistry office without any prior knowledge or a partner who is a dentist. Imagine trying to start a restaurant without a chef, etc. Creating a tech business is not a get rich plan. It takes a lot of skill, knowledge, and luck to get a business off the ground. Unfortunately, the media stories that we read make creating a great product or fundraising millions of dollars super easy. The reality is that running a start-up is probably one of the hardest things that one can do.
What do you mean by 'done manually'? Could you elaborate for the curious? How does one handle CC transactions manually?
unless your invoices are so large that paying with a wire transfer is better, most companies want to pay with credit card or ach.
If I want to use CC transactions is there a 'manual' way? Can I collect the numbers and 'process' them myself?
The best formula I have seen is one business guy and two strong programmers, where one of the two has some talent in ops.
No sorry, bad example. Having an understanding of logistics, supply chains, and having consultant contacts for things like building a menu and interior design. It is the foundation of how franchises work - they've (even) done that leg work for investors. Often times they already have studies for potential locations. Investors just add money and management of people.
Source: family works in restaurant and independent supermarket supply chain/logistics.
There are many many founders who have been through the exact same situation in almost exactly the same fashion. And they have shared their experiences. So why not read up or ask advice from them before jumping head first? It doesn't take long; 2-3 weeks tops.
This is my advice to future entrepreneurs -- read on a variety of topics before you jump in head first. No matter what your idea is or area of expertise gain some understanding of at least some areas of running a business including but not limited to marketing, sales, technology, finance, incorporation, financing, growth, hiring practices, legal, equity, etc. etc..
Before anyone mentions Lean Startup or Startup Owner's Manual - I've read them, lent them to friends, actually put them into practice, and that startup (startups, actually) still failed. And I've got a half dozen or so friends and acquaintances who have done it too, and their startups all failed too. The advantage of that methodology is that you fail fast, oftentimes before you quit your day job, but if founding a startup is something you really want to do, knowing a few dozen ideas that aren't viable businesses is only marginally useful.
This is actually better. Because it means that the authors have had their failures (hopefully?) and are telling a practical story. It's subtractive but it works, re. Ten Commandments, via Negativa style.
It's actually much worse to tell somebody who'll probably be halfway across reading your book to jump x metres when the wind speed is just under y mph to achieve some z business effect.
Point is your context may not be somebody else's context, so it's much better to harp on universal principles which you violated in business than to show us a sequence of events which leave out the role of timing, chance and other unknown unknowns.
It took us 5 pivots and a year before we saw any meaningful revenue, and it would've probably taken us three times as long w/o those essays. Three pieces of "book knowledge" really helped in making hard decisions on the journey so far:
1) As an entrepreneur, you have the ability to make excuses and, say, welch on a sales call. ("I am not feeling well; I had better sleep in.") You can exercise free will in this manner, but doing so is a complete moral failing. (Steli Efti)
2) Never buy risk unless you're being adequately compensated. Before you have product-market fit, the riskiest thing to do is to work on a project with a long feedback loop. Structure your projects so that you can learn if it's working or not ASAP. (Alfred Sloan)
3) Keep track of your runway, and don't forget to exercise :) (PG)
[1] We read them because they were super fun to read - it didn't feel like homework or due diligence! PG's Twitter is also wonderful.
I think it's some kind of signifier that a project is doomed when logo-making happens so early; maybe it's because it means that no one wants (or doesn't know how) to do actual work. I've seen it happen multiple times.
Actually there doesn't seem to be much that sounds good with logo applied.
Losing $50k and a college friend may seem like a lot but I think it is at the beginning of your career. But good that your learn these lessons before you have a $$$ home, a wife and kids -- then losing it all is a lot more serious.
I would not be surprised the hard nootropics played more of a role than you give it credit for in taking you down such a path. Hyperfocus drugs and anxiety-inducing drugs are not conducive to globally optimal decision making in a diverse and rich environment that is critical for running a successful business.
The biggest red flag to me was that they tried start a startup to which (as far as I could tell) neither founder brought any actual useful skills. You can get away with that sometimes if you have huge funding and can work the hype machine, but not as a pair of self-funded kids.
(As an aside, point 8 'Go Lean' is basically saying "push your risks/costs onto others, exploit your workers, better yet partner with someone who has skills so they can do the work for you." I've met guys who (try to) work like that and they're leeches.)
But... but... how was he even supposed to contribute and pull his weight without any crucial competency in an area that directly impacts the product's success? The issue, here, is not that he was a friend/family. He was simply not useful.
Small comment about valuation vs return. A lot of business types have really rotten valuation yet provide a somewhat steady income stream for the owners. The valuations are crummy because the potential passive income stream is too small. However these businesses can be lucrative for an active investor/manager.
The issue is when you're in your 20s and you had some financial success, you can use that to justify not listening to anyone and even feeling like you are eligible to give anyone else advice!
Reality is, in your 20s, there are things you don't know know that you don't know. That's how little you know :)
This is a subtle point - you don't even know, the types of things you don't know, you are not aware. That's what being delusional is about - it makes you write blog posts that you genuinely feel will help others, and all the while you are VERY much lost.
Anyhoo :)
Sure, there are people who aren't very technical and don't have any MVP to speak of, but most of those people know to stop before they've blown through $50,000 and have shredded their liver with "brain drugs" (which are just drugs btw, there is literally no pill for hard work)
I'm glad he eventually got a start up going elsewhere, but I'm genuinely worried for this guy. His writing is all over the place and he was ripped off by shovel sellers during a gold rush. He couldn't see any fault with paying thousands of dollars for legal services and developers when he had barely any customers and no discernable product?
Yikes, poor guy.
Good luck trying to convince the prospector that there isn't actually gold in them hills.
Yeah maybe he got fleeced by some opportunists, but he also dove head first into making a "epic company" with no idea what he was actually selling (at least that's how it sounds). It's not the shovel seller's job to vet the skills of the prospectors, and even if it was, do you really think the prospector would listen?
A businessman probably shouldn't be judged by the success of his customers.
You can sell the horse some directions to the nearest watering hole, but you can't be judged on its drinking ability ;)
For me two important points 1) always surround yourself with people smarter than you 2) it's all about money. Hit the ground and start making money
All in all this is a very good post. I cringed at the first line when I read he was non techie. That explains most of the failure. Plus his choice of co-founder.
My startup doesn't even have a good logo, or confirmed co-founders or is registered but with focus on earning revenues we are making money
That said, we now have a dev on our team and we can do a lot more. It does pose the danger of feature creep. We try to be very aware of that.
So there's this meme:
1)Make something awesome
2)???
3)Profit.
If you can't reach the customer you are screwed.
Probably one of the most common f-ups: not having customers that actually want your product.
This times a million. I've been burned so many times I use as few "free" services as possible, and nothing critical ever goes on one.
> Note: I’m gonna get crap about this probably.. I’m not saying this can’t work, obviously it has worked for a lot of companies and continues to.
It continues to work because the bubble is still holding. Eventually when privacy regulations finally go into effect, that decades worth of millions of users data that every startup trades around in back rooms is going to be effectively worthless. I suspect a lot of companies will be shifting to subscription models once we finally end open season on spying.
I'm still upvoting your comment, just for its optimism. ;)
Can someone tell me if the above statement is a mistake of the author? I mean the co-founder should be someone you know from long time that would be your friend or family brother/sister right? I think the author has chosen the wrong friend.
You can't win them all, yet there's a lot you learn from failing and the lessons will stick with you.
We saw it many times before. And also you spend time setting up email on your new domain, and simple website, and analytics for your launch page, and sign up form and blog etc. Instead you should focus on your business, but it feels that without all of this you don't have a legitimate business.
We started bunch of projects and saw this cycle repeat itself. Now we are trying to help fellow entrepreneurs to get through these initial steps as quickly as possible. For a small fee (that is much smaller than usual annual fee at known website providers) we will do lots of configurations, email confirmations, dns table editing to get you free email, website, blog, analytics. We will even setup Stripe account for you (you'll just need to put your bank info to be able to use it). Check out https://www.ninjalauncher.com. Sorry for the plug, but it seems relevant for the discussion.
I doubt that a person who can post about it on the internet did actually lose everything. Most likely he leads quite a luxurious life: he is a wealthy (compared to other parts of the world) American, most likely wrote his story from his MacBook and has a place to live. A lot of people can only dream about a life like his. His expectations is what makes him believe that he "lost everything".
P.S. Clicked on the link after writing this post. Yeah, the guy actually wrote it from his MacBook.
Judging by the comment that he would never pay by the hour instead using a flat salary he would simply assign expected tasks and deadlines. Not sure that strategy attracts the type of developer who could build the next facebook.
The problem with trying to figure out what your product is by actually developing it is usually solved by designing what you want with pen and paper first.
Most successful businesses start with a product idea and the difficult part is getting funding to built it. It sounds like the author started with money but no vision.