Postmortem of a Venture-Backed, Acquired Startup
Decide.com was acquired by eBay on September 6, 2013. For those unfamiliar with Decide, we invented technology that predicted the future price of consumer goods. Thinking about buying a Samsung television? We’d tell you whether the price would drop in the next two weeks. We helped you decide when to buy.
I’m obviously happy with the outcome. From my brother’s basement, we raised $16.5M, employed 30 people and most importantly built something people found useful. Only in my wildest dream would I have the audacity to think I’d build something that would be acquired by a company like eBay.
Although the outcome was positive, it’s helpful to reflect on the experience. Below are 3 lessons I learned from the experience. They’re not new but hopefully from within the context of a real startup they’re more tangible.
Scale Your Company with Your Product
We launched Decide.com on June 20th, 2011 with 20 people and 2 round of funding totaling $8.5M. That’s atypical, especially these days when investors want to see traction before investing. Instead of those resources helping us find market-fit it slowed us down.
We focused on company building:
Hiring. We hired 20 people in the 9 months following our first round of funding. That took lot of work. For every person you hire, you might interview 5 others, for each of those people you have a recap meeting with everyone that interviewed them, work on a offer for the person you want then sell them. That doesn’t take into account the work it takes to source candidates and fire people that don’t work out.
Organizational Structure. As we kept adding people, we had to figure out how they’d all work together. What teams should do what? Who leads those teams? How do those teams interact? Who needs to be in the meeting where we decide what we’re doing?
Once we got through those parts, it was harder to change directions:
Communication Overhead. The larger the team the more energy you need to spend communicating. Let’s say you want to change directions, something that happens often pre-market-fit. You have to convince everyone that there needs to be a new direction, what the new direction is and why this new direction will work when the last one didn’t.
Specialization. As companies grow, the people they hire become more specialized. If we had pivoted to target businesses (we talked about it) instead of consumers we’d need sales people (we didn’t have any) which probably meant we’d have to layoff other people (probably engineers) to hire them. This didn’t happen to us but it impacted some of our decisions so I felt it was worth mentioning.
Do whatever helps you reach market-fit faster. In my experience, that’s raising modestly (if at all) and keeping the team small. 2 or 3 people can get a lot done and is small enough where you don’t have to worry about structure or communication.
You wouldn’t scale your technology to support 10M users when you only have 100. Don’t scale your company that way either.
Hire Similar Minded People
Our hiring criteria can be summarized with 2 basic questions: (1) Are they great at what they do? (2) Do we like them? Turns out there should’ve been a 3rd question. (3) Do you generally agree with me?
We spent a lot of time debating rather than doing. What technology should we use? When should engineering get involved with the design process? What’s our design methodology? How long should our release cycles be? Should we even have release cycles? I could go on indefinitely.
Decide how you want do things then hire people that want to do things that way. There’s value in having a diversity of opinion but in a early stage startups, the benefits (moving fast) of hiring people that generally agree with you outweigh the benefits (diversity of opinion) of hiring people that don’t.
If you can’t hire anyone that agrees with you, re-evaluate how you want to do things.
Expanding Your Target Market Doesn’t Help You Find Market-Fit
We started with support for 3 categories (televisions, laptops and cameras) but expanded into all electronics within the first year. Looking for more growth, we talked about a few options:
Option 1: Expand into more categories. Be relevant to more purchases. Number 1 thing our users asked for.
Option 2: Expand beyond when to buy. Move up the buying funnel by helping people figure out what they should buy (product scores, reviews, comparison,etc.) in addition to when.
Option 3: Double-down on when to buy. Make it so good, if anyone is buying in a category we cover, they have to use us.
We ended up doing a combination of 1 and 2. We built features (product recommendation, sentiment analysis, etc.) to help people figure out what to buy then expanded our coverage into appliances, home and garden, babies and kids. We looked for growth by expanding how often we would be relevant (more categories, cover more of the buying funnel).
Most of our traffic stayed in electronics and our experience became thin. We were in a lot of categories trying to do a lot of things. I would’ve liked to see us do option 3, double-down on when to buy. That was the part of the market nobody else was playing in. Get that experience to be amazing then roll it out into other categories.
Expanding your target market, like we did by supporting more categories and building when to buy features, doesn’t help you get to market-fit. In fact, I’d argue it makes it harder because there’s more needs to satisfy.
Said another way, is it better to start with a small group of people who love what you’re building or a large group of people who are indifferent? I think you’d rather have the small group that love you. It’s easier to turn a small group of rabid users into a large group than a large group of indifferent users into a large group of rabid users.
Keep your product narrow and focused on the small group of people most likely to love what you’re building.
I don’t want to end this negatively because there’s a lot we got right. I just tend to learn more from failures than successes. Maybe I should write another post about worked for us. For now, let me tell you about my proudest moment at Decide, when we lost almost all our revenue.
When we created the first version of our mobile app, we put Amazon’s prices next to everyone else’s just like we did on the web. Apparently Amazon doesn’t allow you to do that on a mobile device but it’s ok on the web. They want you to use their app to check their prices.
We received a notice from them informing us we weren’t compliant and unless we removed it they’d suspend our affiliate account. We weren’t making a lot of money but that account probably represented more than 80% our revenue.
We had 2 choices: (1) Comply and remove Amazon prices from our mobile app (2) Not comply, keep the prices and lose our biggest revenue stream. Proudly and with very little discussion, we decided not to comply. Most people want to buy from Amazon. Not being able to show those prices to our users wasn’t acceptable. In the 2 years since we got that notice we never complied. When faced with a decision where we had to choose between revenue or our users, we chose our users. I couldn’t have been more proud.
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