Some Lessons from a Failed Startup
A few weeks ago, we hung up the spikes at Finishers Club — the fitness startup I’d been running since early-2016. It had been a fantastic two years, but we didn’t show enough scale or traction for the company to continue operating.
As with all ex-CEOs, I decided to sit down and write up some thinkpiece-esque ideas. So I’ve written about what it means to have inadequate traction, and some ways to try and find product/market fit. I’ve also tossed in some real-world cues that might help you decide when to veer your product into another lane, or kick out a co-passenger, or abandon the car entirely and just hitchhike or build a Hyperloop.
I don’t pretend to know everything about startups, but I hope that the lessons that I’ve learned can help other early-stage startup folks make more informed evaluations of their company’s trajectory.
1. Users Lie to You….Even When They’re Your Parents or Closest Friends.
Your earliest users are likely friends and family. You know, the people you also raised money from.
But the closeness that allows you to easily ping a friend and say, “Hey try out Tinder for Hamsters!” is the very closeness that can often — though not always — prevent him or her from being honest. “I’d never use that” becomes “well, I could see myself using it” and “the market is too small” becomes “I can maybe think of one or two people who might be interested.”
People like you. Your parents love you. Your pet hamster tolerates you. But it’s critical to not have your perception skewed by the input of people who care about you, or who raised you, or whose cage will be cleaned by you. Get your product — or beta, or PoC (Proof of Concept), or pitch deck — out to “real people,” as soon as possible. They’re more likely to be honest.
2. Talk to Your Users
One of the first things I did as CEO, and likely one of the better things I did, was to talk to our users as frequently as possible. In my second week at the helm, I tried to email, Skype, and talk to as many users — and potential users — as possible. You might have a vision, and that vision might be right, but the quickest way to validate product ideas (at least in B2C) is to shop them around to your users.
You’ll spend so long in your office or coding den that you’ll forget what it’s like to be a real person, who doesn’t exclusively spend their time refining your product. Think of yourself as one of those prairie dogs popping up from some hole outside of Tucson.
Talk to people who aren’t just living in Prairie Dog City, and who have other concerns besides the kind of SSL encryption your product or service is using, or whether your CTA text box is the right shade of mauve.
3. But Real People Won’t Always Tell You What They Want, (aka, The Faster Horse Problem)
Great, so you’ve got a beta in the hands of a few dozen users! You’ve spoken to them. They take your calls! What’s next?
Well, you build what they want, or what you think they want. Right? Not so fast.
You’re probably familiar with that old Henry Ford adage — the one about how, if he’d asked people what they wanted, they would have requested a faster horse, rather than a Model T.
So, a good precept to bear in mind is that, startups are sometimes a balance between determining your users needs, but not taking their wants as gospel, either. It’s a weird, hard, and nearly impossible balance, but you should be cognizant that it’s a balance nonetheless.
If you’d asked an executive in 2006 if they wanted a smartphone without buttons, or a teenager in 2011 if they wanted to be able to send disappearing pictures to their friends — both folks would have told you that you were wasting your time. But if you gave them each an iPhone running Snapchat and had them play with it a few days, you’d probably see something magical happen.
When I was running Finishers Club, I spoke with as many users as I could get my hands on, and many people made fair suggestions. Logical suggestions. Suggestions that we’d sometimes implement, if enough people requested it. We’d put a great deal of effort into rewriting a database, updating the CSS, ensuring cross-platform mobile compatibility, revving up some marketing dollars and then…nothing.
We’d go back to the very people who suggested the ideas, and we’d get a shrug. “Well, it’s cool. That’s fine. Thanks.”
Shrugs are your enemy.
No essay on startups would be complete without invoking Marc Andreessen’s seminal essay Product/Market Fit. Something that he wrote resonated with me throughout my time at Finishers:
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.”
Damn straight.
4. A Pivot Could End Up Being the Rocket Ship, Or it Could Just Be a Higher-Flying Dud
Many of us might know the story of how Airbnb, which in 2008 had resorted to selling cereal, made an essential pivot toward allowing hosts to be absent during stays. Or how Slack started as an online video game. The stories of those pivots have become ingrained in startup lore, and etched in stone on many a TechCrunch article.
But it’s rarely that smooth.
In building Finishers Club, we noticed after a while that people didn’t really engage with the core functionality of the site — the ability to catalog your race finish times. We had a frustratingly high dropoff rate, and people didn’t return to complete their profiles. We experimented with email reminders and badges and other Nir Eyal-inspired tweaks to get users to catalog their races.
No dice.
What users did do, however, was use a side feature we’d added: the ability to catalog their running gear — their sneakers and sunglasses and hydration packs. Users would skip right over our primary function and make a beeline for something we’d built as just icing on the cake.
But you know what? People didn’t care for the cake. They just seemed to want the icing. And don’t we all really just want the icing? Runners spent time plugging in the arcane names of their sneakers, down to the version number — “New Balance Vazee Pace 2,” and so on.
It was, as I thought at the time, a very, very interesting signal from the users. No one user had made a request for a comprehensive gear locker, but here were dozens and dozens — hundreds, maybe — of users behaving really similarly around one feature set.
It just might have been the thing.
Toward the end, we ended up building a pivot of the site based entirely around gear. And it did engender more affinity from users than our first attempt. But, unfortunately, it wasn’t enough, and users simply didn’t love the platform.
Doing v2 better than v1 doesn’t mean that you have product/market fit.
It doesn’t mean you have something people would pay for, or evangelize for, or tell their friends about. It just means you built something that they like. But likes don’t take you to a Series A. To get there, you need Product/Market Fit.
4. Product/Market Fit Isn’t Always Enough
Ben Wiener, of Jumpspeed Ventures, (and the founder of and lead investor in Finishers Club) has written a few great pieces about the spectrum of Product/Market Fit. Ben observes that product/market fit, in the binary sense, isn’t always enough. It’s not sufficient to only “Make something people want” — as per Y Combinator’s mantra. You must, as Ben puts it:
“Make something people desperately want.”
At Finishers Club, we had something that people wanted. But did people desperately want it? Would they abandon, or sideline, all their other solutions for us? These are questions, that, as an early-stage founder, you should be asking — and measuring — on a daily basis. Even if a user doesn’t use your product every day, has it, or will it, replace other alternatives for them?
You may have product/market fit in the most elementary sense, but you really need this desperate product/market fit in order to hack it. I’ll quote from Ben’s other excellent product/market fit post, “The Black Hole of Meh.” He writes:
“Startups don’t face competition only from direct competitors; they have to try to change the market’s behavior. Startups often have to pry customers loose from the various methods, tools and practices those people currently employ to meet their needs, towards the company’s new proposed way of doing things. Even if the product meets the market’s needs, it may not move the needle enough to get people to migrate, or change the status quo of user behavior.”
It’s super-super-super hard to make something that’s good enough to pull someone’s attention away from other things.
As the creator of a product or service, you aren’t pulling someone away from nothing. A user isn’t twiddling their thumbs waiting for someone to ping them the download link to “Bitcoin Delivery via Drone.” You’re fighting inertia, which is to say, whatever apps they already have on their phone, or bookmarked in their web browser, or saved as their default payment option.
You are pulling them away from whatever does the trick for them — even if that service/product/platform isn’t good enough. And in most cases, that platform is Facebook.
5. Facebook Probably Does What You Do, Even if They Don’t
To be clear, I’m not saying that your concern as an early-stage startup is that Facebook will look at your product, or your traction, and copy you. You should be so lucky as to achieve the scale that Facebook will notice you, let alone knock off your idea. That’s a problem for your Series A or B.
What I am saying is that many a good startup is felled by the fact that Facebook maybe/kinda/sorta does what they do, in even the most abstract of ways. But it doesn’t matter. Facebook is on your potential users’ phones, and you aren’t. The journey from the App Store to your App to their device is long and arduous.
I’m not saying it can’t be done — it certainly can — only that you should be incredibly cognizant of even the slightest bit of overlap from incumbents.
At Finishers, we built a really fantastic Teams feature, that would enable teams to collectively track and share their race finish times. I shopped the idea around to any running crew I could find. But no one was interested, or those who expressed interest ended up dragging their feet. (Remember Andreesen’s words “the sales cycle takes too long, and lots of deals never close.”). Even though the essence of our platform was devoted to runners, people were just fine with Facebook or Whatsapp groups, or even email newsletters — no matter how imperfect those platforms were. Inertia is a hard, hard thing to combat.
6. One Startup’s Growth Hack is Another Startup’s Time Waster
As a baby startup, you’re going to spend a lot of time trying to find growth channels or sources of organic traffic or influencers, etc. You’re also going to try and find a growth hack that vaults you from your garage to Sand Hill Road.
Know that:
(a) Stuff that worked in 2012 probably won’t work now .
(b) Stuff that worked in your last job might not work now.
(c) It’s worth trying everything.
(d) Be prepared to iterate quickly.
A growth hack — like Airbnb’s Craigslist scheme from ten years ago — can be the thing that makes you. But many of these tricks are vertical-particular, or technology-specific, and so don’t waste time on Instagram follow-for-follows or email signatures or photo filters if you can concretely determine that they don’t produce a meaningful amount of traffic or growth or conversion rates.
We spent time searching for the growth hack that would catapult us toward growth, but no method used by other brands ever really worked for us. It’s certainly possible that we flubbed the implementation, but it’s also quite likely that a growth hack without product/market fit is like launching a rocket without a payload.
7. Are You Gonna Miss Me When I’m Gone?
Growth marketer extraordinaire Sean Ellis writes about the so-called “Rule of 40:”
“If you find that over 40% of your users are saying that they would be “very disappointed” without your product, there is a great chance you can build sustainable, scalable customer acquisition growth on this “must have” product.”
I think this message can basically be distilled into the Anna Kendrick 2013 mega-hit, “When I’m Gone.” Kendrick asserts that her partner — or her boss at the local diner? — will certainly miss her:
“You’re gonna miss me when I’m gone
You’re gonna miss me by my hair
You’re gonna miss me everywhere, oh
You’re gonna miss me when I’m gone.”
The same kind of logic can be applied to your startup. If your startup were to shut down, would a substantial minority of your customers, in fact, miss you? Would they be unable to find something that would do basically the same thing? Would they be emotionally incapable of spontaneously breaking out into song at the nearest Americana-themed roadside diner? If the answer is no, you may be best advised to make your product that indispensable, or else be prepared to take off for the coast of Scotland, or Venice Beach, or wherever it is that Anna Kendrick heads off to — and without a coat, no less.
In advance of shutting down Finishers Club, I braced for angry emails from users lamenting that they would have to find another place for their race finish times, especially since we didn’t provide a mechanism for data transfer.
And yet, after we sent out our farewell email, an insubstantial number of users reached out to us — angry, sad, or otherwise. Even our most entrenched, active users sent nary a message — proving that, as Anna put it, they’ve really got to miss you when you’re gone.
It’s a weird feeling, to wish that people would send you angry emails, telling you how inconvenient and thoughtless it was that you shut down this thing that they needed. And yet, when you don’t get those emails, or you get emails that say neutrally lament, “oh, shucks, too bad,” you feel two things. You feel better — since no one was mean to you — but you also feel worse, since it means that you made the right decision shutting down your company. You feel vindicated, in a way. It’s a weird cycle, and it usually ends with several bottles of beer.
8. Startups are Finite, but Startup Tee Shirts are Forever*
Just kidding. They’re a terrible investment. Unless tee shirts are somehow related to your early-stage company finding success or turning a profit — as it was for Finishers Club — they are a waste of money, and will always, invariably and forever end up as someone’s girlfriend’s pajamas. Don’t spend money on tee-shirt marketing until you’ve blown your seed money on something more important like building a PoC or hiring a part-time developer or renting server space or finding Product/Market Fit.
And I’m pretty sure no one ever found Product/Market Fit in a tee shirt.
*(I’d like to thank my friend Melody Coven for coming up with this hilarious and poignant line. Thanks, Melody!)
I hope that some of the lessons I learned are helpful to you as you build your company. It’s not easy, but building a startup is wonderful and dynamic and exhausting and exhilarating. And if developing Tinder for Hamsters is your calling — well, by all means, carry on. It’s a wide world out there, and there are a lot of single hamsters.
Originally published at siliconspatula.com on January 22, 2018.
This story is published in The Startup, Medium’s largest entrepreneurship publication followed by 289,682+ people.
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