How a bad idea turned into a cash machine

This is the story of SweetHawk and how we got started. But first of all, this post is inspired by a recent tweet by Adrian Stone:

We realised, because we are the 2.5x above, that we didn’t bother to publish anything about our buyout which does not give credit where it’s due, because we are very grateful to Adrian and Nathan from AngelCube. They offered us more than what we wanted, it was what we needed.

But let’s start at the beginning. Peter Godden and I were trying to start a business together since grand final day 2014. It sounded like such a great thing to do on paper, some type of sentiment analysis so brands can instantly jump in on social media and avoid PR disasters. Like so many ideas, just because they sound good doesn’t mean they are good.

In 2015, Amir Nissen, who founded Melbourne Uni’s accelerator program, joined AngelCube. I knew Amir from a startup weekend I did back in 2008. I’d heard of AngelCube but always felt that their 10% investment of $20k was a little low, so didn’t really give it a thought, and I also thought we wouldn’t make the cut without a product or track record. Amir convinced us to give it a shot and apply. They also upped their investment to $40k for 8%, which sounded more worthwhile.

As we applied, we started on a path where we tried to turn an idea into a pitch. The reason we found this tough is because without any track record, we felt we had to fake a level of confidence in our idea. So the only thing we were really pitching was us as the team, we just didn’t realise it, and so we did a pretty bad job with it.

We created a video which we were borderline ashamed of. We were invited for the interviews, pitched again and answered some questions to some of the best startup people in Melbourne. We didn’t really focus on this during the pitch but Peter had years of experience at Zendesk, a tiny startup that went public on the NYSE and I had recently worked at BugHerd, one of the first companies to get accepted into StartMate. Unsurprisingly, AngelCube told us they didn’t like our idea. They asked us what else we would work on if this idea didn’t work out, which I’m sure they had a pretty good hunch about. We had a few other ideas we shared and bang, we got accepted! By that time I had set my sights fully on this and it meant a lot. My freelance contract was just ending anyway. Peter gave his boss 4 days’ notice which went down, well, how you’d probably expect.

On Wednesday 27 May 2015, I became a father as my daughter Roza was born. Two days later, on Friday, we were at Inspire9 getting a bootcamp into what we could expect for the next 3 months. Excitement was through the roof. As far as motivation goes, for me, there’s nothing better. We just got license to build one of our very own business ideas, completely from scratch, without being out of pocket, having a location to work at, with other entrepreneurs and mentors around.

In the first week, we worked on our original idea, Sociallama, around sentiment analysis for social media. AngelCube has a very strong focus on talking to customers. So we did. And potential customers we spoke to did not care about this at all. Well, one did, but he already had a tool to do this. It seems so obvious now but for us introverts we really did need to be pushed to do this. Clearly this saved us a lot of time, because we would have only eventually, if ever, discovered this.

Week 2, enter our second idea: video for websites! Because what could possibly be bad about having that personal touch in a world of impersonal ecommerce. We often get ask where we got the name, well, it had to have an animal in it, so ‘hawk’, and you’re ‘sweet talking’ your customers, so ‘sweet hawk’…! But what’s in a name.

Another week of customer interviews and market research. What we found was, while video was intriguing to some, we got the sense that voice only would already go a long way towards conversions. People do business over the phone, right. So far so good, let’s build a product and show it around. I honed my Twilio skills and Peter honed his LinkedIn skills. We definitely had some interest and even convinced one business to do live trials with their customers, but if anything, it proved it wasn’t going to work. At this time we were already halfway through the program. Would we throw it in, or pivot somehow? We decided to continue. We spoke to more customers and found other Twilio integrations we could make. Our product was now used by two customers, but importantly, there was no overlapping use case. For one it was a sales tool, for the other a way to connect two sides of a marketplace. We were just becoming a cheap Twilio consultant.

For the rest of the program, this caused us to flip between the two use cases more than I care to remember. We got more interest from the marketplaces use case, but the ecommerce use case made for a better demo and pitch. Something strange started to happen. Without customer traction, we felt we still should be pitching but we kept pivoting the pitch as it never felt compelling. We pitched various versions to investors AngelCube introduced us to, coming up with an arbitrary valuation and raise. The program ended with a trip to the US. By that stage, we went along, but our belief was fading. It was clear there was no business, but for some reason, we still felt encouraged to keep going, keep thinking, keep talking to customers, as this was what we perceived others were doing as well.

When we came back to Australia, we decided we should just sell the hell out of it and make it work. But we could not keep that up for more than a couple of weeks. Potential customers would claim to be interested, but we never heard back. We then proceeded to do something which turned out the most simple, obvious thing we should have done in the first place. We needed money, so why didn’t we just focus a little bit on what we knew best: integrations for Zendesk. We’d come back to this voice for websites thing later. Peter had been exposed to unmet Zendesk use cases for the past 4 years. I already built a bunch of integrations for Zendesk and knew the platform. What a novel idea, to play to the strengths of the team. Needless to say, the rest is history. Within a couple of months, we had our first paying customers and importantly, multiple customers paying for the same product. Soon enough, we shut down the original product.

We didn’t create a startup in the end, there is no exponential growth in Zendesk apps. But even so, thanks to AngelCube, we were in business and didn’t need to look for jobs. And even though the next couple of years were still full of hard work, we were all of a sudden legit. Customers were coming to us for a change. And while this may not seem like that big a deal, we knew through our AngelCube experience not to take this for granted. We kept going and hit a $500k annual run rate. However at this stage, we had already realised that this is not an acquirable business. It relies too much on us to run it, and the addressable market size is small. From an investor standpoint, this is the worst possible outcome, because it means the business will have no exit. They can’t even write off the loss. But we felt too much like we owed AngelCube for helping us get here and by that stage we had the cash in the bank to buy the shares back. So 3 years on from when the program started, we decided to offer to buy back AngelCube’s shares for $100k, a mere 2.5x return for them, which they accepted.

Did we really need AngelCube for this in the end? Was AngelCube happy or disappointed with the share buyback? Should we have just kept them on the cap table indefinitely? Should we just have started a new company for the Zendesk integration business rather than calling it a ‘pivot’, or should we at the very least changed the name of the business? One thing we do know is that a little goes a long way and that little bit of belief in us was what ultimately got us started. For that we are grateful.

Thank you therefore goes specifically to Adrian Stone and Nathan Sampimon but also to Amir and the wider AngelCube network. And it’s worth noting that the AngelCube investment involves much more than money. The AngelCube network was very generous with spending time with the teams, as well as Adrian and Nathan themselves. Also part of the program was free use of the Inspire9 co-working space for 6 months. Drinks and lunch were supplied on many occasions and last but not least there was a full-time program manager helping with anything at all, especially pitch practise. It’s an experience I will remember forever and I know I’m not speaking just for myself that it changed my life for the better.

Knowing what I do now, I don’t think I should have been too hung up about the valuation. We were just two dudes with some ideas. $20k would have been enough money, we had about $20k left over after the program and the extra 2% wouldn’t have changed much.

If I ever do another accelerator program, it would be with a product with traction however. So much of the benefits of these types of programs are geared towards having product-market-fit already and the introductions would have been more valuable from both sides if we had a more mature product or customer traction to talk about.

So, the big lessons for us were:

• Bad ideas can sound good
• Talk to customers (duh)
• Don’t persist too long when you can’t get traction
• Play to your strengths
• If you can get more than one paying customer, you might finally be onto something

But one thing is for sure. You can’t learn these lessons by reading about them. Getting started and trying to put your ideas out there and going through programs like these and making mistakes are the way to really learn. Thanks again AngelCube for taking a chance on us!