FROM HERO TO ZERO: What I learned screwing up 0.5 million as startup co founder
This post is about some young guys hustling towards a big dream, build a company by their own and launch a world class product. Moreover, it´s about what I learned in this journey that ended up with a “big sexy fail”: we screwed half million reais-US$ 200K -in investments.
It´s been around one year since I´ve had the idea of doing this post. For some reason I decide to write and share it now.
Cucco started as a SaaS for multiple service providers based on appointments. As we launched the product and iterated with clients from multiple segments we had a tweak in our business. We decided that all our efforts should be to dominate the beauty and wellness LATAM market. In a StyleSeat — opentable for beauty services — way, we would first tackle Brazilian huge beauty market (+500K beauty shops).
We started our journey at LATAM´s biggest acceleration program in 2012, lost our CTO right after the first successful case, worked in a home office, got a new development team, then got a headquarter, lost the dev. team again, got back to home office and when the energy was dropping down we finally got some gas:
- We won Building Global Innovators (BGI) as the only startup from the Americas (100K euros = 107K dollars)
- We were selected for StartupBrasil (~90K dollars).
We also had a couple offers of angels as a plan B.
Source: Revista PEGN — Globo.com
At that point I thought it was the right time to roll-out a powerful inbound machine, build an inside sales team, set up customer success, automate backoffice/billing, implement all those features and all that “tech-disruptive-plan”. However along the way we did so many small wrong steps that culminated in misalignment between partners.
Bottom line: Due to attrition between partners we didn’t agree on the termsheets of BGI´s prize and didn’t get money; we eventually lost our CTO (again) and the accelerator partner of StartupBrasil program stepped back in the deal after those bad news.
FROM HERO TO ZERO
This is not a playbook, what I´m sharing bellow is a mix of advices and lessons from what we did great and what I could have done better.
#1 THE ONLY THING YOU MUST NOT DELEGATE
Spend time understanding term sheets and legal rules by your own.
Even if you are not that good with details and rules it´s better do it yourself. As a business person it will always be your Achilles heel (“The Founder of a $50 Million Startup Sold His Company and Got Nothing”).
I didn’t spend time understanding term sheets as deep as I should. Brad Feld´s book about this issue is a good way to have smarter talks and actions dealing with legal agreements.
#2 DEALING WITH POOR PERFORMANCE
The time spend getting real is the most valuable asset and there is little room for poor performance. It breaks team morale, influences hugely in overall results and pisses off team members.
We had this problem and it was hard to deal with that for some reasons:
- We became friends as we had lunch, happy hours and spent a lot of hours together;
- I thought poor performance people would get better and could be my fault as a Leader/peer;
- I tought maybe in another position the person would get better results;
- We didn’t have a legal agreement about it;
- We didn’t spend time building “tools to data-driven decisions” about performance;
- I was not sure how to handle this situation.
So if you are dealing with these issues or if you are finding a poor performance in your path be sure to solve it quickly and smartly.
Besides having your legal and management right, the following framework might clarify things:
- Is it a skill problem? Make a plan with a deadline agreement. Still the same? Make a breakup plan.
- Is it a personal problem? Set a plan together, help it out, give time and track.
- Is it a culture problem? Make a breakup plan.
What I learned: don’t lose time with the wrong ones. It´s better to wait finding someone or overwork than dealing with poor performance / culture fit issue.
#3 DEALING WITH “STARS”
In the middle of our development rollercoaster we convinced a tech star to leave his secure job in small solid software company to join us.
What I think we did wrong onboarding the person:
- Mistake #1: As we were an earlystage company and were dealing with so many things together we didn’t take time to make a selection process (interview or cultural test). We simply convinced the person to come;
- Mistake #2: The person came as a magician that would solve all our product gap. So we were afraid to piss the person off. It scaled so fast that we lost ascendance. Setting deadlines, planning and making the job started getting a lot of friction;
What would I do in this situation:
- Convince but test (cultural mostly);
- Get all agreements right before real work;
- Have more forward based conversations over past expirence dialogs;
- Challenge the person;
- “An eye for an eye and a tooth for a tooth” — let the time and results prove things;
#4 PEOPLE AND CULTURE — CO FOUNDERS AND 1ST WAVE EMPLOYEES
Values and culture aren’t negotiable!
As serial entrepreneur @gziller said in a mobile talk “If we don’t breath we die. Isn’t it obvious? It´s so obvious that we don’t even think about it”. The point here is that when we are young, full of energy, in order to get real, grow the business and rock shit up we sometimes end up not thinking about the most obvious things.
Find and select the best people — aligned to your own criteria — varies. But what I consider the best fit for endeavors are:
- Hungry (really hungry) for knowledge. Those fast learning examples!
- Has deep desire to succeed. Passionate about what they are doing.
- Brave and courageous people that support pressure and failure. Moreover, take risks, accept challenges and are not afraid to have “ugly talks” (=ownership).
- Forward thinking and an insane growth mindset.
Bottom line: How are you going to race at 200km/h with someone afraid of velocity?
#5 LIVE THE CORE!
Doing a mobile app? Good to know you are competing in the most expensive inch square of consumers with guys like: instagram, facebook, waze, evernote and many other great apps. There is no room for mediocrity!
If you are doing a SaaS business be sure to find the best sources about it and over consume it. If you want to be funded spend time doing your pre gaming with the best VCs of your field.
If you are serious about doing something great and useful you have to pursue greatness everywhere, every time. From the people you join to the knowledge you seek. And tailor that towards a user/segment issue.
I had amazing opportunities of mentoring and talks with great people and that will stick with me forever — thanks to BGI, StartupFarm, StartupBrasil, Inovativa (Endeavor) and our fantastic tech community of San Pedro Valley.
(There is a great post of Neil Pattel nailing some thoughts on how to get closer to key people)
#6 STRATEGY, EXECUTION AND METRICS
In doubt stick with execution.
Being too strategical on planning can be a trap. Make us feel smart and gives that feeling we have had figure out everything already.
It´s hard when you are small and there are plenty of big rocks to overcome. Especially when you’ve shipped the product to market and things start to get messy. Keeping track of things and forget the noise is crucial!
With time I think we’ve found a path to balance the planning-doing cycle. Here is an overview:
- 3-month range cycle;
- Start planning the key goal(s);
- Be creative when planning, military executing (Thoughts of Carlos Brito — AMBEV );
- Every goal has one-and only one-owner;
- Performance is measured by the number above (I learned late how important was to do this since day 1);
- Weekly checkpoints of overall KPIs;
- Lightweight as possible (from the tools to the solutions);
- Metrics: In my experience it´s extremely time consuming to collect, process and analyze data to have data-driven decisions. In my opinion, data-driven decisions should take place whenever possible. But do not panic for not having a NASA-metric-panel. Manage the few metrics related to your KPIs and simply collect and store all the other data for the right moment (We could have done much better on this).
Example of key company goals:
- Launch V2 of software,
- Validate content marketing as distribution channel,
- Build SaaS metrics dashboard,
- Get funded
Example of key goals and owners:
- Data of deployment(Person A),
- #leads (Person B),
- MRR (Person C).
I’ve been thinking about goal setting and performance track for a while and I´m sure it´s a process where we can constantly get better.
Recently I was introduced to OKRs (Google, intel, linkedin way of doing this) and I really think is a great path for startups. (OKRs by Google Venture — It´s pretty much the way I believe of doing this cycle I found out the hard way).
#7 WHEN TO PIVOT
Along the way I got me thinking about: “Am I being insistent or persistent? Should I move forward to new challenges or stick to the boat?”
As I was struggling with that @DiegoGomes, @Edmar and @Peçanha from Rock Content (again) told us about how and why they set, as a company, a “success bar/agreement”. When they started, they said: “100 customers or nothing”. That was their decision point.
If we had that approach as a company it would be much less painful and frictionless for the team.
#8 QUICK PILLS
- Marketing & Sales are key for survival and growth, especially in SaaS. You should have someone able to sell and envision a sales machine from day 1;
- Value your backoffice. When planning and talking to VCs remember about it. Having a person that you trust dealing with details about Operations will leave time for what founders usually are better;
- Media is noise. It can fool you, your family and friends. The upside is that helps you with competitors, new employees and investors. Always have a strategy and call to action (CTA) aligned with your media buzz;
- Build a Board as soon as possible — in a straighforward way/no bureaucracy. The process of having regular business meetings with a Board can accelerate things . (Wish I did that and stick with it early on).
Being a co founder of a startup was the best experience of my life — in all aspects. I learned so much about myself and things — digital marketing, sales, UX and so on — that as an Engineering Student I never thought I would be able.
Also as a first time entrepreneur I learned it´s really important to balance the passion and the basics of business playbook (Vesting, partners, money and so on).
The most important thing I´ve learned screwing half-a-million opportunity building a business is not to lose time with misaligned people and be fast getting it right.
For example, if I’m going in a bike ride and climbing trip I won´t go with someone who doesn´t like this type of things.
Hope those thoughts clarify things on your journey. Good luck!
If you want to chat feel free to email me: firstname.lastname@example.org