I just shut down my second startup — here’s my retro
I spent a year building my second startup Verve, working on ideas predominantly focused on enterprise software.
We shut down in December 2023 and I wanted to share an epilogue filled with my reflections and takeaways from this experience. I hope this gives future founders a little perspective on what the early stage journey is like and if you are indeed daring enough to go 0 to 1, some data to aid your decision-making when you come across similar crossroads.
Everything is geared towards ‘conventional’ startups — that is, fast-growing pure tech businesses (Fintechs, marketplaces, software).
Ideas are a dime a dozen…or are they really?
If you stay in the startup space for some time, you’ll start hearing from founders, investors and other tech operators that the idea really doesn’t matter. It’s all about execution and the team.
It’s true. Ideas are indeed a dime a dozen, because if it weren’t, nobody would use your product — it’d be a nonexistent problem!! But for founders, this advice is often taken out of context because the idea matters a lot if you’re literally building a company around the idea.
What this generic advice misses is the second compounding factor for early-stage startup success — the team. The team can be exceptional executors or have a deep connection to the problem, ideally you have both.
Exceptional execution is specific to the idea, for example, three young 10x software engineers would be a great team for SaaS but probably not for a genetics startup.
The other archetype of a strong team are those with a deep connection to the problem and unconventionally strong conviction around their vision. Melanie Perkins from Canva fits this archetype. Typically you will have experienced this problem first hand and feel something along the lines of: “I can’t believe that this is still the status quo”
For Verve, we fit into the former. We were a team of ex-founders (with mixed failures and successes) with the technical capabilities to effectively work on any SaaS idea we wanted to — pretty much the typical Silicon Valley ‘hack’ your way to an idea by writing code and talking to users.
The Silicon Valley hack your way to an idea works BUT not if you’re a non-technical founder.
Being *non-technical* building a *tech* company is completely paradoxical.
You’re literally trying to build technology to solve problems — what makes you believe you can add any value in founding a startup?
This means if you’re stubborn, naive, or egotistical enough to try start a tech company, you need to be completely exceptional in every way possible.
Michael Seibel said it best — as the only non-technical founder at Twitch, he did everything and anything that was needed to support his technical co-founders, even making coffee for them when they needed!
This showcases the attitude that is required for business founders — you have to be willing to do everything and anything — whatever it takes to set the company up whilst your co-founders build the product.
However, on top of this, non-technical founders should also provide something their technical founders may not have — that is the connection to the problem. Whether that be conviction around this problem existing through some first-hand experience of it, a crazy vision of what the future should look like or a strong feeling that the current status quo sucks — the non-technical founder can provide the prolonged activation energy for the startup to succeed in solving this problem.
In other words, if your startup has a non-technical founder, your team needs fit in the second bucket of founder — being those that have a deep connection to the problem.
Takeaway: Only have a non-technical founder in your startup if they bring something you cannot get, learn or build — this typically looks like having a deep connection or conviction around the problem you’re solving. If you’re technical, you can always develop an appetite for sales and marketing over time.
Our 1st idea got us into YC.
The first idea we worked on was an employee benefits fintech. Our product was an employee expense card loaded with all the company benefits and perks. We were going to save HR hundreds of hours in admin time per year by automating the tracking and managing of employee benefits and their reimbursements.
The big picture vision was to distribute consumer credit via employers. We believed that there’d be a new wave of consumer credit cards powered by employee benefits, with significant advantages of underwriting through payroll and salaries given we were directly connected to the HR systems.
We worked on this business for 4 months, launched the cards to our first users (see below for our card on Apple Pay) and locked in design partners with large enterprises like Electronic Arts and Buzzfeed.
This momentum and our founder backgrounds got us into the S23 batch for YC.
So what happened?
Last minute one of our co-founders pulled out because he realized building a company wasn’t his dream. When we told YC this, they rescinded our offer because they had invested in us as a team and wanted us to pivot in the batch. Given both the team and idea was unstable, they weren’t confident in us being able to effectively execute for the batch
I’ll write a separate post about our experience getting into YC but here’s our founder intro video for S23.
YC Founder Intro
Obviously, this hurt. YC had been a dream of mine ever since getting into startups but we recognized that YC was an important stepping stone not the end destination.
So you got kicked out of YC and what happened?
After pivoting post YC-rescind, we ended up working on the final version of Verve, an enterprise data governance platform helping users across the business access and analyze data.
My co-founder and I continued to relentlessly execute for the next 6 months, pretending we were still in YC, mimicking the intensity of the batch by focusing on talking to users and building product.
So why give up? Let’s take this scenario —imagine you have 2 teams building the same idea…
Team 1 are deep industry experts but they’re first time founders and struggle with executing correctly and spend time doing auxiliary and not very useful things like talking to investors too much (as an example 🙂)
VS
Team 2 who are second time founders that can execute, understand how to talk to users, build product, but have little connection to the problem and aren’t sure they’re the right ones to build the solution.
Who wins?
Team 1 will win 9 times out of 10 given a long enough time horizon. Team 1’s unit of execution might be lackluster and Team 2 might be able to identify the better insights from users/build faster BUT, there’s something more important than execution in the early stages, that is, the team itself working on the idea.
The founding team is multiplier on an idea
Building and talking to users may seem like the right thing to do when you’re in the weeds of trying to lift a startup off the ground BUT it’s completely conditional on your team and what you’re working on.
You should view the team as a multiple — if you’re in a certain field where you understand the industry, who you’re solving a problem for, how to solve it, plus you have the technical chops to build the solution, your multiplier on every unit of execution might be 100x. (Team 1)
Versus if you had little expertise in a field with semi-technical capabilities to solve this problem your multiplier might be 0.1 or 1x. (Team 2)
We fell into the second bucket. We were Team 2
Despite feeling like we were doing all the right things, executing correctly, validating the problem and getting early signs of a market need with a simple MVP, it just felt so slow…every action or decision we made had to be second guessed, reviewed by multiple users in order to collect enough conviction to move forward.
It’s strikingly difficult to manage the mental gymnastics of feeling like you’re giving up vs feeling like you need to drastically change something
Momentum is everything
As much as I believe we had the perseverance and grit to sustain our fierce execution, the lack of momentum felt like we were wading through thick swamp water every day we worked on the company.
Despite this however, it’s strikingly difficult to manage the mental gymnastics of feeling like you’re giving up vs feeling like you need to drastically change something. I’m sure this is a common founder struggle as you commonly hear people like Sam Altman talk about how dreadfully painful the early days are.
But I have a strong conclusion from this experience that I’ve decided to take forward and maybe you should too.
If you ever feel like you’re chugging along, you’re doing it wrong. Either fail fast, or succeed fast.
I believe this is the crux of startups, business and perhaps life. If you’re chugging along in something — especially startups — there’s often a fundamental problem that isn’t related to your current actions, where in our case, it was being the wrong team working on the wrong idea, and me being the non-technical founder working on an idea with little personal connection to.
This should also not be measured in terms of outcomes of course as that’s generally out of our control but I’m advocating more so to have the self-awareness on whether your inputs are 100% useful to your company.
What I’m taking forward for my next company.
If you’ve gotten to this point, thanks for reading my retro, it’s been helpful for me personally to reflect on a crazy 2023.
For my next thing, I have a couple key takeaways:
- Work on a problem field where you have some connection to (ESPECIALLY IF YOU’RE NON-TECHNICAL)
- Trust your gut with people. Your gut subconsciously takes in all the information and subtle cues from people. You’ll find that if you think back to any decisions related to people, if you had asked yourself what you truly thought/felt at that time, you knew the right answer along.
- Founding teams must have a sense of *single-threaded ownership* — A concept from Amazon which I believe is even more important for early stage startups. Co-founders should have little overlap in areas they’re focused on. You’ll find that many of the successful companies were built by co-founders that had 100% ownership over one significant area of the business.
- Take startup advice with a grain of salt. Business is inherently random in nature and startup advice is typically hypocritical or anecdotal and always delivered like prescriptions. Treat advice as objective data points to build you own mental models on how to operate your business.
- Company building is an art not a science. Like art, you learn by painting not by rote learning. And just like every successful artist, each of them made it their own way. Building a company and being a founder is just like being an artist so remember everyone is on their own journey! (A personal reminder to myself 🫡)
