Why My First Startup Failed and Why I’m Happy It Did
“Like I told you sell drugs, no. Hov did that so hopefully you won’t have to go through that.” — Jay-Z, Izzo (H.O.V.A.)
I made every mistake you could possibly imagine. I built too much product too soon, and for too much money (over $100k!). I pitched investors far too early, before I had enough traction. I didn’t talk to nearly enough customers about their problems, but got far too excited about my shiny new “solution”. And for the first time in a long time, I failed. And I would happily do it all over again.
The chips were clearly stacked against me. Based on the most recently available data in 2010, an astonishing (but not surprising) statistic was released; only 1% of companies founded by African Americans received venture capital funding. In 2016, $84B was raised in total. Think that’s bad? It’s even worse for black women as that statistic drops to 0.2%. But even with this as a backdrop, I was determined to make it work! I mean, who else if not me right? I would often tell myself that to keep myself motivated when things got tough… Unfortunately, that wasn’t enough.
With the clarity of hindsight, I can now look back on several decisions along my path that ultimately led to my company’s (Oleo) demise. I’m sharing my experience with great detail so that you can avoid the same pitfalls I experienced. Starting a company is easy, but growing a successful tech company is really, really hard. It’s even harder when there’s no one there to tell you the shit you need to look out for. So since I couldn’t find anyone to offer me guidance when I started, hopefully this helps the next person attempting the nearly impossible.
Your Problem is So Much More Important Than Your Solution
The Techcrunch headline seldom reads “Really Bad Customer Experience ABC Still Isn’t Fixed”. It more often reads “COMPANY X Makes Autonomous Drones in a Box” (I didn’t make that up btw). It’s natural, we fixate on our dreams and creations, instead of pouring over the boring details about why the customer problem is an important one to solve in the first place.
Steve Jobs was famously quoted during an interview recalling Apple’s mindset when building the Mac. “A lot of times, people don’t know what they want until you show it to them.” Stupidly enough, that was my mindset as well. “I’m going to build a really awesome product that’s going to revolutionize the way we do things. People just don’t realize it yet”. And although I still really do love my original idea, did my target market (restaurants) want my product? Did their dining customers want it? In short, sort of but not nearly enough. My product was a nice to have, buried under the myriad of problems restauranteurs needed to solve immediately. Additionally, the primary targets that I aimed to onboard feared that my solution would erode their customer experience. Even the smaller outfits like food trucks couldn’t fathom customers ordering ahead of arriving at the truck.
Not All Traction Is Good Traction
To make matters worse, I doubled down like really hard working, gutty founders often do. As a result, I fooled myself into thinking the traction I gained was a sign I was heading in the right direction. It turns out, not all traction is good traction. In my case, because I offered my product for free during the beta period, my initial customers, although great references for future customer pitches, agreed to sign up in large part only because my product was free.
This is why I highly recommend you charge for your product from day one. Discounting off of your MSRP if necessary, but never free. Even if it’s heavily discounted, establishing a price point and creating an exchange for your services gives your prospective customer some skin in the game. By paying you, they’ve signaled to you that they truly do want whatever you’re selling, despite what their words might suggest.
If You Build It, They Won’t Come
If you’ve got a good idea, try selling the potential solution to prospective customers before you spend a dollar on the actual product. I write that sentence fully understanding that most will ignore it. I get it, when you have what you think is a BIG idea, the last thing you want to do is tell someone before you’ve had time to work on it. Like Reid Hoffman, Founder of LinkedIn, mentions in his “Masters of Scale” podcast, the value in your company isn’t the idea, it’s the fact that you’re taking action on it. Don’t be offended, but ideas are truly a dime a dozen. It’s the execution that will set your company apart. In the spirit of limited investment, some founders have even gone as far as to sell PDF versions of their product before they’ve started developing. While extreme, this is an example of taking as little risk as possible to get your potential product out in the world in order to gather feedback to craft the perfect solution, instead of making your “perfect” solution fit the preexisting problems your customers have. Your idea is merely a hypothesis of what you think will work. Your initial product is built to test that hypothesis out.
Raising Money Is Stupid
I know, “stupid” is rather harsh, but attempting to raise money takes time, effort, and ultimately pulls your attention away from what you should be focused on; talking to potential customers and building a product that solves their problems. But bypassing the allure of fundraising can be challenging for many founders to grasp as the measure of success in today’s climate can often be how much your company is able to raise. Don’t get me wrong, if someone were willing to give me $5M dollars to start a company tomorrow, I would personally accompany them to the bank and provide them with my bank information to expedite the process. I was once so determined to raise, I made the cardinal sin of paying a HEFTY $2,500 fee just to have a group of late stage investors, posing as Angel Investors, listen to me pitch my idea. If you look below, you’ll even see how they pimped me out for a photo op on their website.
With no success, I took my talents to Austin, TX (for a much smaller $250 application fee) to present to Central Texas Angel Network, a process that was actually as high class as they come. I would eventually get great feedback and mild interest, but dollars didn’t fall from the sky. And after a few more weeks of follow up emails and meetings, I shifted my focus back to running my company, something I wish I would have been focused on all along.
My Advice? Read this Techcrunch article. It’s a really comprehensive summary of 35 companies that bootstrapped their way to success. It’s probably going to take longer to scale, but the financial discipline will force you into highly efficient decision making, doing the bare minimum to find product/market fit, the most important part of your company.
So yes, I failed. But I learned a TON of lessons. Tough ones that were costly and draining enough to my ego that they now shape every decision I make. This is also why my next endeavor, PryntIt (more on that later), even if not successful will be far more efficient. Will this matter in the long run? Who knows, but it’s sure as hell a great story to tell my kids one day.
