How to Self Destruct a Successful Startup in 5 Steps
Every so often, you hear about a product or service that makes you think: “Wow, that’s a million dollar idea.”
Having lived in San Francisco and been active in the startup scene, I’ve seen hundreds of these opportunities pass me by. And then in April 2013, my friend called me out of the blue. He told me about a startup idea that he was already working on, and the model he had in place for it. I finally found m
This wasn’t just a whim, it was an industry where there was a need, and my friend’s model was proven. He just needed some help in generating leads and building an online presence. We had something special.
We already had several happy customers through our service, and the competition was scarce. At the time, there were only two other companies that were competing with us: one recently burned through $150 million in funding and is being sold for pennies, the other pivoted their entire model. Months later, a Google-backed startup would pop up and copy our model and messaging. But this story isn’t about them. It’s about us. This is the story of how we managed to create an awesome service, generate an online presence in a few short months, create a steady inbound lead model, and managed to self-destruct the sh*t out of our f*cking company.
How we built the company (Simplified version)
Building A Website That Worked
The first major project that I was working on was building a website that would convert. We spent hours mocking up a design with a primary focus on lead generation. After several drafts of design and copy, we finally launched. We used a two-step form submission process.The first step we’ll refer to as a soft submission, and the second step a hard submission. We saw an increase in 25% conversion of web traffic to soft submission, and 15% web traffic resulted in hard submissions.
We were crushing it. The website was converting, and it allowed us to focus on other activities.
Building Our Online Presence
This is where things get interesting. In my role, the next step was building our online presence, but we had multiple projects going on simultaneously. We were planning out a mobile app, preparing to pitch to VCs, etc etc.
Also, we were all managing day jobs while doing this by the way. That meant long hours and sleepless nights. But it’s all worth it isn’t it?
To build our presence was pretty straightforward. I scoped out the competition and found that in our particular situation SEO and content would be a low risk, high reward option. We were bootstrapping it after all. Needless to say, the content strategy was working. In about a month, we had gone from 300 visitors/month to 3,000/month.
Overall, traffic growth was great, conversions were great, we were in business. We did it. We were successful. All we had to do was keep repeating the process and doubling down on our existing efforts.
But at the same time, we were all one foot in, one foot out because we were still concerned about our day jobs.
Here’s How we Self Destructed our Startup in 5 Steps
- Losing focus.
This was the first step of our demise. Despite having a successful model in place, we wanted to get additional funding because that’s what startups do right? They get funding so they can quickly scale and the founding team can quit their day jobs.
We stopped focusing on our internal development and shifted our efforts on getting a pitch deck together and prepping for the whole VC shebang.
What proceeded, were months of flights, product delays, defocus on sales/marketing/customer service while we traveled back and forth meeting with investors. You can probably tell why this triggered a downward spiral.
2. Listening to VC feedback, not data or customers
Now, what resulted from these initial meetings was some serious interest. Unfortunately, each VC had different feedback for what we should be doing, what we should do, what our website should look like, etc. They saw our business their way, and not how we saw it. While we had a good model in place for driving traffic and leads, VCs had another direction they wanted us to take.
They made the “suggestion” that we focus our marketing efforts on social. They based this off of the success that HomeJoy was experiencing on social media (coincidentally they ended up closing up shop). We pumped a bunch of money into Facebook ads, we had some successes and some failures, but we had put some ads together that worked and were driving leads.
This particular VC that we were speaking with had emphasized the importance of focusing more of our efforts on social as if this was going to be the determining factor in receiving investment from him. At this point, he had made it clear that he wanted to invest but wanted to push us in the right direction before he gave us the initial funding.
Tip: Just because you get some advice, does not mean it’s the right advice.
Focusing heavily on a social strategy takes a considerable amount of time, and was a deviation from what was fast becoming one of our core strengths — building searchable content. We weren’t completely absent of a social presence. We were doing the bare minimum of publishing posts, occasional updates, etc. but now what little time we had was being used to design multiple ads quickly, monitor social media constantly, and post as frequently as we could to keep this potential VC happy (Note: he hadn’t provided any investment yet, but was speaking to us like he owned our business).
With this new focus on social, we had more or less slowed down on content and were staying fairly stagnant in terms of growth, and that’s when we reached one of our next hurdles.
3. Double the Jobs, Double the Stress
I mentioned that we were all working day jobs right? Well, trying to perform management level duties by day while moonlighting a startup is exhausting. We were all feeling the stress. Our developer’s sprint cycles had slowed to non-existent. Publishing a simple website update took a month instead of a day or two, and daily sales operations had started to show signs of wear.
We started turning down opportunities that we deemed weren’t worth our time, even though we should have been fulfilling these deals to build our list of happy users and evangelists. On top of that, if you don’t have revenue, no one will want to invest.
We desperately needed to commit fully to our startup if we wanted to succeed. Meanwhile, we watched our competitors get round after round of funding.
4. Seeking Perfection
The building of this app went on for months and naturally, our focus went here too. We thought this was our magic bean that would take us to the golden goose. Maybe it was, but it sure didn’t work out that way.
One of the issues that occurred here was the fact that we were building for perfection when we should have been building something that was “good enough.”
The typical lesson you hear from most startups is getting your product made fast (even with problems) and then iterate. We did the exact opposite. We spent countless cycles nitpicking at details trying to get everything perfect, and in the end, all we needed was to get something functional out there. The time we spent here showed in other areas of our business.
We had continued to let areas of our business slide in favor of making something that was splashy or sexy. We did this in hopes that it would give us a lifeline from VCs, but we ended up just reeking of desperation.
5. If it ain’t broke, don’t fix it.
Our mobile app was getting finalized, but one of the VCs that was advising us told us we needed to update our website. This is the part that really pissed me off. Our website was functioning perfectly and there was no need to make any updates besides the fact that one investor really like the Luxe website but had no insight to its actual performance (they do have a pretty website FYI).
I mentioned that we were bootstrapping, and low on resources. We had several areas that we needed to work on, but our website wasn’t one. Despite days of back and forth conversations citing specific examples of why we shouldn’t redesign, we did anyways.
As a marketer, my initial thought was “OK we can do a redesign, but let’s at least a|b test to make sure that it will actually perform better.” Well, that was thrown out the window once our founder “heard” from some investors that startups shouldn’t worry about A|B testing. I think if we weren’t so exhausted we would have seen the problem with this statement. Basecamp also has a great story about A|B testing here.
Now, for what went wrong during this whole process. Our poor, overworked developer ( I don’t think he slept for an entire 2 months) had numerous things he was building for our App, fixing on our website, and now had to implement a whole new design. We tried to ease his workload by suggesting using a Wordpress template for our website. This idea was shot down because successful startups don’t use Wordpress! (ARRGHHH!) Again, I think exhaustion got the better of us here.
I’m sure by this point you’re probably thinking to yourself “Why the hell are you listening to so much outside feedback from people who are not invested in the company?” From a common sense perspective, and looking back, we should have said no. We should have done what we wanted and ran our business our way. At the time, however, we were flying by the seat of our pants: making constant adjustments, trying new things, not sleeping for days on end, doing everything to get funded, except for running our actual business.
The new website was more or less the final nail in the coffin. Because we were spread too thin, multiple problems arose from an SEO perspective (triplicate content problems, 404s) and from a structural perspective (key funnel pages were broken). Our developer was so overworked and our schedules so chaotic that we couldn’t even find time to fix these critical problems. Our ship was leaking and it was sinking fast.
About a week later with our lead pipeline more or less depleted and sales activity basically gone, we had all gone beyond our breaking point. By this time our dual lives caught up with us: members of our founding team had panic attacks from the high stress, another was hospitalized from lack of sleep and stress, physical problems like carpal tunnel and muscle soreness had developed, aspects of our social life had been neglected, and it had gotten to the point where we were so frustrated with each other that we couldn’t even talk to one another. Yeah, we were done.
Reflecting on What Went Wrong
It’s easy to sit back and look at what went wrong. It’s also easy to feel demoralized because you read about every other successful startup story — The Snapchat’s with billion dollar IPOs, your competitors that get hundreds of millions in funding, etc. What you don’t read about often are the other 98% of startup stories that don’t succeed.
Once investors had shown interest in our service, we felt like we had already reached the top before actually getting there. We were caught up in our own hype before we were ready for funding and started to focus on everything but our customers.
It’s been 4 years since this all happened and it’s been great reconnecting with our founding team. We’re all friends again. We’ve discussed all of the different events that ultimately lead to our destruction, laughed about moments, and agreed that we lost sight of our real goal. We initially set out to create something great and to work for ourselves. Ultimately we lost sight of the fun. No matter the results, this journey was something that none of us will ever forget and it was definitely one hell of a ride.