Three months ago I wrote a post titled: How I launched a lean startup for $8.17. Today I am officially shuttering Tradesthatmatter.com. I made this decision within a couple weeks of the launch, but am just making it official now. I’ll send an email to the three people (yes three) that have signed up for the service letting them know the product won’t be launching and pointing them here for the gory details.
Lessons learned:
- Don’t work on things you aren’t passionate about
- Don’t test a hypothesis if the results won’t change your approach
- Don’t overestimate your ability to manually “fake” the output of a technical tool before building it
- Focus on a big problem
- LinkedIn is your friend
- Compete.com is your other friend
Background:
SEC.gov has lots of interesting data that people are required to report. If combed through and looked at in context, the information can be valuable. It is highly structured data, so a technical solution is not too difficult. My value proposition was “protect your stock portfolio and spot the best opportunities with meaningful real-time alerts”. The initial hypothesis I wanted to test was that “people would find the context of insider activities useful and engaging.” I wrote one post as a test of this hypothesis, shared via Twitter, got 9 clicks on the bit.ly link and 15 visits to the post. I didn’t have much fun researching or writing it, not many people seemed to care, and I’ve always known this was a small market. Now, on to the lessons learned.
Lesson 1: Don’t work on things you aren’t passionate about
My primary motivation was to actually try out one of my ideas. Map out the business model, potentially build my technical skills on a small project, maybe make some extra cash, “found a startup”, etc. However, I don’t really care about the opportunity that I identified. Delivering a solution doesn’t resolve a pain point that matters to me. A great comment I recently heard from Zuck at 27:01 in this video was this: “the companies that work are companies that people really cared about and had some vision for what they wanted to see exist in the world, not just because they wanted to start a company.”
Lesson 2: Don’t test a hypothesis if the test results won’t change your approach
The initial hypothesis I wanted to test was that “People would find the context of insider activities useful and engaging.” I didn’t expect my one post and couple tweets to “go viral”. Rich people buying stocks just isn’t that interesting, even with a little extra context thrown in. I knew from my research of the market size, competitors, traffic statistics, etc that this was not a big market. So why test trying to get people excited and engaged about a financial utility? If wildly successful I proceed, if no interest at all I rationalize it with “well it’s a niche product and I just have an awareness problem.” Useless test.
Lesson 3: Don’t overestimate your ability to manually “fake” the output of a technical tool before building it
Browsing some competitive sites, running some screens, doing a little research, etc, all takes time. That is why building a tool to automate all this would have value. Doing this manual process many times over to build awareness of the product would be very time consuming. Additionally, sometimes there is nothing interesting going on in the world of publicly-disclosed insider transactions. I thought this content would be much easier to fake than it was.
Lesson 4: Focus on a big problem
Real-time alerts for publicly-disclosed insider trading activity is not a big problem. Competitive sites with a basic product get between 2 and 10 thousand monthly uniques. Run a freemium model, convert 2% at $49 a month, and you are in the $20-$100 thousand annual income range. With taxes, some administrative overhead, etc, this quickly becomes not worth much. I can achieve much greater upside and leverage on my incremental efforts in my day job. This problem is too small for me to work on. I knew this from spending a couple hours spread across Google, Compete.com, and LinkedIn. However, my desire to “start something” led me to ignore these hard facts.
Lesson 5: LinkedIn is your friend
So you Google up a few competitors. What next? Let the people tell the story. Use LinkedIn’s advanced search and search for the competitive companies in the “Employer” field. See who works there now, who used to work there, who the founders are, what kind of other places they have worked, what other things they have started, their education, their technical chops, etc. The facts of a few LinkedIn profiles laid out alongside each other often tell a fairly complete story. Questions like what kind of revenue is attainable, how hard is the technical challenge, how easy is it to recruit people to work on this idea, are all easily answerable. In this case, the most successful competitors seem to be run by 1–2 people, coming from different industries, running what look to be lifestyle businesses. One competitor had a team of 5–6 in place once (including a former Googler) but everyone but the founder has since moved on. Another competitor is a retired engineer from the tel-com industry, another is a couple of young relatively non-technical guys who have done a couple other projects in parallel, another much more technical product comes from a Y-combinator originating team of 2–3 guys with no obvious public signs of going anywhere in the last couple years.
Lesson 6: Compete.com is your other friend
What kind of traffic are people doing? Are they growing? On what kind of trajectory? What type of keywords are they owning? What are their sources of traffic? This can be good for finding other competitors you didn’t know existed as well. Look at the range of pricing models in the market, look at the traffic they do, look at the industry conversion rates if using a freemium model and turn that into some revenue projections. Do those projections support your cost structure? What will you do differently than those competitors? Will you convert better, charge more, get more users? What makes you think so? Sounds like a good area for some user testing.
Let’s see if I can learn from these “lessons learned” the next time around. Please leave a comment below with any key startup lessons you’ve learned.
