Why my first startup in the valley “flopped”
pozo.me
pozo.me
They sound the same but they aren't. In the first case you look around and you say "What problems are people having?" and you see one and you thing "Oh, I could solve that, let's go!"
The challenge is that if you asked them they might agree its a problem but might not think it is worth solving. If instead you talked to a bunch of people and said, "I'm here to solve your biggest problem, tell me about it so that I can get started." you get from your future users what they think is the biggest problem that needs solving.
Now if you talk to a lot of people you will get a set of problems. If you make sure you talk to people of different ages then you'll populate your set with problems from different age groups (and different life stages), if you talk to people in different industries you will populate your set of problems with with different skill sets, and if you talk to people at different sized companies you will populate your problem set with people with varying levels of time/money to invest or spend.
Now if you take those problems, and try to tease out what the underlying structural issue is that makes it a problem you will get a list of structural issues.
Finally, after all this talk talk talk, you find the structural issues which are at root of many problems, and then design a product around that.
Your will have a huge advantage. You'll know why you built your product, you will know the kinds of problems it can make go away and how much of the problem it will mitigate. You can quantify the impact on your customer's quality of life, and you can target people who you can reasonably expect are having the problem you can solve.
In many ways understanding how your vision fits in to the rest of the world will be the 'secret sauce' that makes you successful.
Didn't that mean replacing a large body of stable working code and engineering knowledge with fresh stuff with unknown behavior possibly understood by no more than one or two people in the entire world?
Didn't that cause recruiting headaches, quality issues and schedule slips causing them to almost entirely miss the window for their product?
I'd think it a bit disingenuous to call that company a success. If anything they should serve as an example of what happens when a company's technical leadership identifies the wrong problem to solve.
Edit: there appears to be a timeline here http://www.freegate.net.au/news/press_releases.html with plenty of mention of funding and partnerships starting in 1997 but no announcements of actual shipments or sales.
The solution then was a system that could provide a full point of presence on the network and be fully debuggable by a service tech without having to roll a truck to the customer site or ask them questions they had no way of knowing how to answer. This has been a remarkably successful tool in the telephone market in the form of private branch exchanges (PBX). So how do you build a network server with the management and usability characteristics of a PBX?
The path FreeGate chose was to design and build a 1U server that could fit inside the telephone racks of the time, and then create a management package on top of a stable OS release that would allow us to offer the local customer a UI for doing the kinds of things they wanted to do (like add or delete email accounts, put up web pages, or create a VPN tunnel between outlets or offices.
FreeGate shipped the first one about 3 weeks later than the original schedule called for it to be shipped. That included designing a new motherboard, creating a chassis to hold it, and getting it through a bunch of modem qualification paperwork. As for market window, FreeGate, Whistle, and Cobalt who all ended up in variations of this space shipped about the same time. So I really don't think we'd characterize it as a market window 'miss.'
We also didn't replace "large bodies of stable working code", we did create an entirely new management system, and we did create a way to proxy DNS requests so that you could have a DNS namespace for all of your machines both those with public addresses and those with private addresses. (the box did NAT and Firewalling as well).
The biggest headache turned out to be Java. And more importantly how 'not true' the 'whole write once run everywhere mantra' was. Of course Microsoft and Netscape and Sun were all pointing fingers at everyone else but Java code that worked fine on Netscape didn't on IE and vice versa, and to make it worse from minor release to minor release of either of them.
This comment: "Didn't that cause recruiting headaches, quality issues and schedule slips causing them to almost entirely miss the window for their product?" is amazingly exactly opposite reality.
During the dot.com "boom" recruiting was challenging for everyone due to the insane competition for talent, people were giving away 1 year leases to a BMW sports car for sign on bonuses, kids with 1 year of experience out of school were demanding titles and pay of "architect." But none of that was at all due to our implementation.
We did have a weird quality issue, it was too high. One of the strangest things I learned from that experience was that VARs (those people who re-sell gear from Cisco and Juniper etc) loved the fact that our product dropped in and worked, but they didn't like that it never broke. As it turned out their business model was predicated on making service calls and charging for each one. When they installed the FreeGate box the customer was 'done', they just didn't have issues.
After the acquisition, the stock continued to gain value. I don't know about you, but being worth multiple millions of dollars (on paper of course) post acquisition made me feel pretty good about the exit.
[1] Sidebar: This comment from 'freeflop' is showing as posted 8 hrs ago from an account created 8 hrs ago. This is not particularly unusual, especially when someone wants to talk about their own company in a bad light, but these things happened last century man. And it seems you still have a lot of pent up anger/hurt. I think if you came out in the open and had the discussion you might be able to get some closure but also respect your choice to live with it inside of you too.
I find your quality claims rather incredible but I have no experience with your box. However I do find it rather curious and ironic that you of all people, an original member of the Java team, were burned by quality problems in Java. I know WORA fooled a lot of newbies but shouldn't you of all people known enough about Java at that time to have avoided being bit by those?
Perhaps you personally benefitted from the deal and I'm sure it was fun while it lasted, but your overall rationalization leaves me unsatisified. Let's be serious here. If FreeGate
a. knew what to build
b. knew how to build it
we'd all know about it.
[1] Well, I could have posted this from the HN account I abandoned 4 years ago but who cares. I'm just a FreeBSD contributor who got wind of what FreeGate was doing second hand and was a bit saddened when I heard about the whole database thing. That meant I thought they would be unlikely to ever be able to contribute back to the FreeBSD codebase in a meaningful way (e.g. the way Whistle did with netgraph).
To this comment "Well, I could have posted this from the HN account I abandoned 4 years ago but who cares." I don't know if anyone 'cares' whether you post on a newly created count or existing count, but I do care that creating a throwaway with a snarky name often can indicate a lot of unresolved personal pain and anger on the part of the poster. That stuff can eat away at you and leave you in a bad place. As a community we've lost too many good people to unresolved anger and depression.
That I do not understand. Why are people so desperate for funding, any funding?
An ex-Zynga engineer should be easily able to save enough money for at least 6 months, while he's working on an mvp.
Pre-emptive note: I do understand the value of idea validation, expert advice and connections that comes from getting a small investment from YC or a well-connected angel investor like Kevin Rose.
But "friends and family"? It seems bad for both parties.
If successful, the founders will loose a significant portion of the business for insignificant help (small amount of money but no expert advice and no network to help them in the future).
But most likely they'll fail which doesn't seem fair to their friends and family.
Incubators like YC and angel investors are sophisticated. They only invest money they can afford to loose, they understand that any single investment has 10% chance of succeeding so they hedge their bets and they also have a much better understanding of what has a potential to be successful enough to offer enough ROI for the investor.
Compared to that, an average person is naive and over-confident about investing, just like the author of the article was ("I quickly learned that unless your product has mass appeal and traction, or you are Kevin Rose, high profile Angels are not going to throw money at you.").
Both parties are victims of confirmation bias: reading TechCrunch one reads mostly about successful investments and exits which makes inspiring entrepreneurs think that an investment is normal and inevitable (reality: it's extremely rare and only awarded to those who stand out from the crowd) and makes naive "friends and family" investors think that making 10x ROI is a sure ticket to riches (reality: only the top investors make significant returns).
I don't know what product you built but it sounds like it flopped because no one needs a better way to gather their friends. That doesn't sound like a problem (or a business) to me.
From the blog post: "If we had gone through several products, and applied multiple times our chances of getting in would have been higher and who knows if I’d be writing this blog post today."
Are you sure it works that way? Having never applied for YC, I have no idea if it does or it doesn't, but from what I've read here on HN it seems like the product idea is very secondary to whether or not the YC team believes in the founders as individuals and pitching them again with a new product idea in a subsequent YC round wouldn't have really helped if the product is all that has changed.
Which is not to say that failing to get into YC once means you'll never get in but rather getting in in the future won't be due to new product ideas, but rather demonstrable growth as an individual (or team) which is probably actually harder to accomplish in a year-long timeframe if you're constantly focusing on which new product idea you should try.
In any case, I'd say your startup failed for the primary reason any startup fails, which is that failure is the natural state of any startup. Successes are the very rare exception.
Not making it into an incubator didn't contribute to the flop at all. A bad company going through an incubator is still a bad company. I'm not saying your company was bad, I'm just trying to explain that this whole idea that a startup can only be successful if they go through an incubator is completely bogus.
Coulda figured that out a priori, which is partly why VCs have economic value. They have their limitations, but they're not quite so hypo-maniacally deluded as most valleyite entrepreneurs.
In many ways doing hardware ventures teaches you something very important: Ideas are not what's important; Opportunities are important. This, because the cost of failure can be very high, and so you learn very quickly that the idea is almost of no real value until a matching opportunity is identified.
Everyone has ideas for a million different gizmos. I certainly get approached on a regular basis with "let's build this thing that does this and that and that". When I ask about the opportunity I usually get blank stares. People think in terms of ideas. Business is about opportunities that are then matched with solutions and execution in order to turn a profit.
I used to be on the "I have this great idea" camp. After a number of businesses all I really care about are solid opportunities. Ideas are nearly worthless on their own.
Now, if I never remembered this stuff, okay, it would have been time wasted. If that's the case for you and you don't take away anything from blog posts (the closest thing we have to rich Usenet posts any more), then perhaps you could try not reading them.
I think useful advice about the latter is far more rare about the other kind.
Experience is the valuable part because, after hitting the wall, you look back at the same advice and realize how much of it you ignored.
The lessons are valuable; they just fall on deaf ears for most of us.
Kevin Maney, in Trade-Off, posits that something needs to be 10x cheaper (or better, or faster or...) to compel someone to change a behavior. Ray Ozzie liked to apply this rule during his tenure at MS as well. Obviously, measure 10x cheaper is much easier than measuring 10x better but the point remains that if you're asking people to change their behaviors in any meaningful fashion, you need to give them real incentives. Edit: adding line break for clarity.
Deleted comment