Zombie Startups
daniellemorrill.com
daniellemorrill.com
When we changed from Rewardly to Streak, it wasn't an easy process even though we wanted to "fail fast". The key thing for us was we came up with some critical hypothesis that we knew had to be true for Rewardly to be a success. We then came up with various experiments and systematically tested the various hypothesis, and once we exhausted them, we could confidently say success was going to be very difficult.
I also think one of the most useful things to come out of YC was having an office hours with pg and him telling us to do something new. Not many people have the confidence and candor to say that so bluntly, but also the authority to be listened to.
This is also one of the reasons why I like Kevin O'Leary on Shark Tank/Dragon's Den. He often recognizes that people are wasting their life on broken ideas and isn't afraid to tell them that. The other sharks don't want to be "mean" or hurt people's feelings, but telling people the hard truth is a lot more noble in my mind.
We are now delighted users of Base (https://getbase.com/). Great features, super responsive team with very functional mobile apps (tablet and mobile). And it comes from somebody who religiously hate Sugar CRM and Salesforce. We haven't it the limit of the free plan but will gladly pay when we do.
Isn't this one a little extreme? I started a company in 2004. In 7 months we had sold $92,000. It was slow going, since it was a manufacturing company. In the 8th month we sold $40K, the next month was $60K, the next $72K.... the point is that I never achieved 10% growth on any metric for 7 months, and then it grew like crazy. Had I known how hard it was going to be, I wouldn't have started. Now that I have been through it I have no fear of doing it again. The company has now shipped its 100,000 product (lift kit for pickup truck).
It is a nice honest essay. I just think the one point was too extreme. It is extremely hard to tell when persistence turns into stupidity. I have been both persistent and stupid. I guess if she has spent three years pursuing the vision and it didn't work, then she knows what she is doing.
We're not shutting down, we're changing course and there's no reason we can't make more money doing what's next. I am betting we will grow revenue dramatically with our new direction.
More context: http://refer.ly/please-read-referly-discontinuing-rewards-pa...
I wish you luck with your new direction. I am sure you thought deeply about your choice, so it is probably the right one.
Major props for separating the mission from the vision and going with the mission.
I tell myself (and whoever asks) that I'd be okay if our startup turns out not to be viable, but I'd never forgive myself leaving our potential as a big fat question mark. We finally started a beta last week so answers will come in time, I just hope that if it ever comes down to it, we also pick mission over vision.
Best of luck with the next incarnation of Referly.
I think a tougher question (for me anyway) is when you have moderate, sustainable success, but not the stratospheric rise that you envisioned at the outset. At that point, the decision becomes tougher because walking away means that you are giving up something of significant value. I have also found personally that I like building businesses, but running them? Not so much.
So, the business becomes an anchor, keeping you from a greater vision/mission. At some point, you finally realize that it has to be sacrificed in order for you to get back on track, but precious years can be wasted under the illusion of success before you get there.
Edit: Out of interest: your best customers, how were they mostly generating commission? Quality Content? Personal Networks? Existing Traffic?
A good growth rate during YC is 5-7% a week. If you can
hit 10% a week you're doing exceptionally well. If you
can only manage 1%, it's a sign you haven't yet figured
out what you're doing.
I didn't particularly want to invest in Referly because I didn't believe in the idea. But now I want to invest in Danielle, no matter what she does.
And it's not hard to see why. You need to sell about $2mm worth of stuff on Amazon to pay for a single engineer (estimating with a 5% payout). It gets even worse when you add in all the complicating factors that surround sending someone off your property to convert. And in your case I believe you were sharing a portion back with the customer, so it's even a smaller slice of a small slice.
I think affiliate models are perfect for part-time bloggers and the like, but to build a big venture-backed business on the model is an incredible challenge.
For small bloggers though, there is either a lot of overhead in managing affiliate network accounts and using the right offers or you trade that for smaller commissions with a service that abstracts that from you.
I would love to be pointed to some counter examples of small bloggers for who the affiliate model is working well. For my previous (mostly dead now) startup Affclicks (an analytics tool for affiliate marketers) we considered those type of bloggers as possible niche to target but didn't actually find a lot of them. (granted we didn't push hard on the marketing side)
Another ad network based on keywords...pssshhh....that'll never get anywhere.
A file storage service to allow you to share files between computers? Ugghh...been there...done that.
You can see where I am going.
Entering a crowded space with no perceivable differentiators means one of two things:
1. You intend to grind it out on volume and compete on price.
2. You intend to differentiate yourself in a meaningful way that the vast majority of the world does not understand yet.
I put forward that option 1 is much more likely than option 2.
An idea can be smart all day, if the market doesn't need it - it's just an idea. It will never be a successful product.
It's that simple.
Turns out, the hard thing...is not coming up with "ideas"...it is building successful products.
Then try to find people who resonate with that message. If they really believe in your vision they'll sign up for beta, and start paying as useful features come online. But you have to communicate the essence of your vision first.
I think the idea if polishing what you have so it's always usable before moving into new features is also pretty liberating, so you can show rather than tell where the vision is at today
It sounds to me like you need to examine your market and talk to the people who are asking for things and figure out what problem you're solving for them.
If people care enough to send you feature requests, then you need to look at what's driving them and how you can reach others like them.
It sounds to me like your product is close enough to an unmet need that it's picking up signal, but that you haven't quite found the place to really dig in for the results.
If you have a piece of something that already works for you, to the point that you cannot live without it, then you already have much, much more than most of the startups after a year of funding.
Maybe you should hire someone who will be able to sell this thing, or make such a person a partner, if you are not capable of this yourself. But you should not, definitely, continue to make this thing only for yourself.
jesus, stop talking to private equity
Absolute figures without context hardly ever tell an interesting story.
1) Despite a lack of hockey stick growth at first, there was a gut feeling that the team was solving the right idea and just needed to iterate long enough to get there or be at the right place at the right time.
2) Despite a lack of hockey stick growth, the team was too afraid to change course on an idea that deep down they knew wasn't working and will probably never work for them.
http://techcrunch.com/2012/10/28/killing-your-startup-on-a-t...
You find people who use co-working spaces alone in Japan for years working on the same business or series of ideas but never really growing.
I'm curious to see what you guys come out with next, but I have no doubts that you will eventually be massively successful!
Suddenly I find myself cheering for them ...
[1] http://blog.paulbiggar.com/archive/why-we-shut-newstilt-down...
10% per week = 313% per year or ~1000% per two years. Or very modest 3000% in 3 years. Good luck getting that kind of growth. (of course it depends on your initial number but the percentage growth stated here is a bit crazy IMHO).
What about the entire life of peasants in developing countries, how does it count?
They may not realize how important their work is. They may not be appreciated or getting paid well.
But unproductive they are not.
The raises and huge quarterly bonuses were a way to give out rewards without paying the shareholders.
But, it can actually be worse than failure if you let it keep you in limbo too long, thus preventing you from reaching your true potential or achieving your mission elsewhere.
And, if you find that it is not enjoyable or actually painful to continue, then it can be far worse.
First, this obligatory link and quote:
http://www.paulgraham.com/die.html
If you can just avoid dying, you get rich. That sounds like a joke, but it's actually a pretty good description of what happens in a typical startup. It certainly describes what happened in Viaweb. We avoided dying till we got rich.
That said, I don't necessarily agree with the criteria asserted in TFA for being a "zombie" startup (which presumably means it's effectively dead, but just hasn't realized it yet), at least not without a lot more context around when to apply them.
Given the following as identifiers of a "zombie" startup:
You haven’t hit 10% week-over-week growth on any meaningful metric (revenue, active users, etc)
You’re working on the same idea after 12+ months and still haven’t launched
You’ve launched an enterprise service and have less than 2% week-over-week growth in revenue pipeline
I'd say none of those are valid in isolation. If you're doing an enterprise, B2B play, for example, the lead time to get that first sale can be pretty dang big, and from the first sale to the second sale can still be pretty big... you could easily go quite some time without being able to talk about 10% revenue growth. But getting to even one sale and having any revenue is a binary difference between not having revenue. So what do you do until you get there?
Or to use a "hits close to home" example... we have been working on an enterprise startup for some time, and don't have any revenue yet. Zombie? I don't think so, we just made a conscious decision to forego seeking outside funding, and do the bootstrapped, self-funded model (for now anyway) while working our dayjobs. This necessarily means slower progress, but the thing is, we are making progress. Not in revenue yet, but in terms of working through @sgblank's Customer Development process, learning about our customers and their problems, learning more about how to market the kind of stuff we're building, learning more about our competitors, and building the product.
Of course, a cynic might look at us and go "Yeah, you guys are exactly what TFA means, give up now." But we look at it this way: We're running very lean, with almost no burn rate to speak of, learning more every day, and moving towards product/market fit and that first dollar of revenue. And since we have no burn rate to speak of, we can "not die" for a pretty long time, as long as the co-founders stay motivated.
Of course, there probably will be a point in time when metrics like "10% revenue growth over $SOME_TIMESPAN" will be a reasonable metric, but that time isn't now for us.
Lifestyle business != zombie. A zombie startup is a get-big-or-die beast in which the major stakeholders have lost faith, and for which growth is unlikely.
On the other hand, a lifestyle business capable of generating a mere 1% per week, reliably, is doing well. That's a doubling every 16 months. As long as the company keeps headcount and scope from growing too fast, that's fine.
For headcount growth, anything more than 20% per year is usually unhealthy. It is very difficult for a company to keep a good culture at a faster growth rate.
We need to be realistic. Not everything that is useful can grow at 10% per week, and people who don't want to spend 4 years of their life creating a build-to-flip get-big-or-die venture shouldn't be shut out of entrepreneurship in the way that they are now.
This is made even worse by jurisdictions where employers can claim rights over side projects.
Their salary from a $DAYJOB?
This is made even worse by jurisdictions where employers can claim rights over side projects.
Pay the couple of hundred bucks to have a lawyer review your current employment agreements vis-a-vis "Intellectual Property" and let you know where you stand. If your employer has grounds to claim your independent work, negotiate a new agreement. If they won't negotiate, find a new job. Or quit and consult part time, or work as a short-order cook or barista while doing your startup... I doubt O'Malley's Irish Pub is interested in your startup's IP.
And, about side projects: work on them on your own time, on your own equipment, and don't compete with your employer. (And most importantly, don't brag to your coworkers about your moonlighting ventures.)
You work a dayjob, or consult part-time, and build the startup in the rest of your time. It's what I'm doing, and while it's tough, I think anybody who's really committed to their startup would be willing to make that kind of sacrifice.
Or maybe you have a spouse that works full-time, while you work on the startup fulltime. Or maybe you raise a FFF round. There's more than one way to skin a cat.
Why do you think so? There are quite few types of startups (web based SaaS businesses in particular) that can be built with a minimal investment, bootstrapped while working a $DAYJOB, and entail little personal liability. And creating an LLC as a shield against personal loss isn't terribly expensive either. I'd argue that most people who aren't living in outright poverty could make a reasonable stab at building a business 37 Signals style.