Fund My Startup

“All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dream with open eyes, to make it possible.” -T. E. Lawrence

Roughly 2 months ago we put a temporary, yet tight lid on nearly everything financing related.  It was following an epiphany we had regarding a new strategic focus, that we reevaluated the allocation of our resources.  As opposed to using up valuable resources on financing activities, we decided to instead direct them towards attracting reputable customers, generating revenue, and revamping the entire product.  By focusing solely on building tangible value for paying customers, we anticipated our financing story would also improve.

A week ago I received a request for our executive overview; for the first time I could barely recall when the last time was that I updated (or even thought) about that document.  This request was a nice reminder for me to look back and see what type of progress we actually made during the last 2 months.

How did this experiment work out?  Put mildly, these have been the most productive couple of months we’ve had so far at LockerDome.

The results:

• Revenue: We went from zero revenue to sealing paid licensing deals with more than a handful of decent sized, reputable customers (elite sports organizations).
• Useful Product: We took customer feedback and revamped the entire product, bringing it into good enough shape to satisfy the product requirements for our first launch with paying customers; the feedback from this new release has been overwhelmingly positive.
• Traction: Influential customers are now paying for and finding unique value in our product; not just liking the idea of what it could be.  With that, a proven business model is emerging.

What we also noticed:

• We’re more productive: Fundraising is usually a necessary evil in startups–and is something that we’ll probably approach again soon–but it’s ridiculously time consuming to be effective with it.  During financing activities, a team with limited resources can come to a near halt in many areas of the product and business.  By strategically redirecting our limited resources, we were able to focus on building value for the customer as our top priority.
• We’re more valuable: Because of the results above, our own story is vastly improving.  We are significantly better positioned not only to raise additional capital (when the timing makes sense), but to attract top tier employees as we begin to scale the company.
• Team morale is up: As we say in sports, it’s fun to win.  In the technology world, it’s fun to build something that customers find valuable enough to not only use, but to pay for.  Building for the sake of building is pointless; our customers are why we get out of bed each morning.

Back when I played competitive baseball, I received the following piece of advice:

“Do whatever you can to influence outcomes the way you’d like, but absolutely let go of anything that’s outside of your control.  How you practice, do your homework, and live your life are all things under your control.  What others think of you, where Coach plays you, and of course, when Coach plays you are all outside of your control.”

Our success over these last couple of months boils down to a similar philosophy.  Instead of worrying our team with stuff that we can’t control, such as the economy– and more specifically, how the economy affects potential investors–we are intensely focused on the facets of our business that we can control.  As a software company, within our control is our product and team, including how we use both the product and team to solve real customer problems.

As far as financing, it’s still too early to measure the exact impact because we have yet to restart these activities.  Nevertheless, between tangible improvements in revenue, the product, and traction, it’s clear that this time around, the story is going to be much more fun to tell.

“All men dream: but not equally.  Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dream with open eyes, to make it possible.” -Thomas Edward Lawrence

An important question that frequently arises for any product company is, “How long will it take to build?”  Internally you will debate this (our lead developer can insert his silent chuckle here).  Externally you’ll hear it constantly from your customers, partners, investors, family, and really just about everyone you meet.  If you’re honest with yourself, the realistic answer is usually simple: we don’t know, but we’ll estimate anyways.

This rule applies to every build: your alpha, your beta, & every iteration within.  This is the nature of building a new product.

Product timelines are tough to pinpoint because of the large number of unknowns on Day 1. These unknowns result in consistently evolving product requirements.  For example:

1. Innovative systems many times require innovative solutions.  Using new solutions to solve new problems is an experimental process, not an exact science.
2. Your customers may not like exactly what your’re building.  You’ll need to alter your approach to build less of what they don’t like and more of what they do like.
3. Your market itself will likely evolve while you’re developing; sometimes drastically, sometimes slightly.
4. Bugs will take 10 times longer to fix than you anticipate.

….and I could go on and on.

Don’t be discouraged, these obstacles are normal.  What’s now comforting for me is that over time we’ve continually become more accurate with our estimates.  Better accuracy occurs because we’ve become more educated about our customers and their requirements, we begin to more keenly anticipate market moves, our system has taken on a more precise form, and the economic market forces focus, etc.

So as a parting note, here are three lessons I’ve learned to stay sane during the grueling process of building a product from the ground-up:

1. Avoid constant comparison to other teams’ development efforts; especially those within a different market than you. Your product requirements are different.  Your customer needs are different.  Your technology is probably different.  Just because the HotorNot.com guys built their initial technology in a weekend, doesn’t mean that your alpha product will also only take a weekend to build.
2. Perform frequent releases.  Get feedback.  Then build more of what users like and less of what they don’t (mentioned above, but this is an important point to reiterate). This provides your team the opportunity for consistent feedback so that you aren’t just building for the sake of building.  Building for a reason (i.e. real customer requests) is so much more motivating than anything else!
3. If you can still taste the market and you have the talent, then use your team’s vision as motivation to survive the long haul. If your market requires a tough solution then many of your competitors will either lack the skill set to get ‘there’ or will simply become too discouraged at some point and quit.  Keep going.  Persistence mixed with talent, agility, and keen market awareness will result in something special.

“The fight is won or lost far away from the witnesses, behind the lines, in the gym, and out there on the road; long before I dance under those lights.” -Muhammad Ali

There are many reasons why I love software startups: innovative thinking, blank canvases for building new products, smart people, etc.   The single greatest reason, however, is that each day that you don’t die as a company becomes another opportunity to edge slightly closer to a product/market fit.  With proper focus you’ll always end up building a little bit more, generating a few more customers, gathering additional customer/market feedback, and refining your product.

Why must you keep building?  Because as Marc Andreessen writes, a product/market fit is the only thing that matters and as Paul Buchheit points out, it usually takes a long time to get there.  If you’re working on a new deal I recommend you read both posts.  Here’s an excerpt from Buchheit’s:

“We started working on Gmail in August (or September?) 2001. For a long time, almost everyone disliked it. Some people used it anyway because of the search, but they had endless complaints. Quite a few people thought that we should kill the project, or perhaps “reboot” it as an enterprise product with native client software, not this crazy Javascript stuff. Even when we got to the point of launching it on April 1, 2004 (two and a half years after starting work on it), many people inside of Google were predicting doom. The product was too weird, and nobody wants to change email services. I was told that we would never get a million users.

Once we launched, the response was surprisingly positive, except from the people who hated it for a variety of reasons. Nevertheless, it was frequently described as ‘niche’, and ‘not used by real people outside of silicon valley’.

Now, almost 7 and a half years after we started working on Gmail, I see things like this: Yahoo and Microsoft have more than 250m users each worldwide for their webmail, according to the comScore research firm, compared to close to 100m for Gmail. But Google’s younger service, launched in 2004, has been gaining ground in the US over the past year, with users growing by more than 40 per cent, compared to 2 per cent for Yahoo and a 7 per cent fall in users of Microsoft’s webmail.”

The grueling process of achieving a product/market fit is one of the primary reasons, among several other important reasons, that we built the core piece of our technology in-house.  Because of such, we can listen to our market and respond with the confidence and versatility to switch focuses on a dime.

If there’s anything I am certain of, it’s that tomorrow we will be better than we are today.

Update: As I skimmed my feeds tonight I ran across another post on one of my favorite blogs, Venture Hacks, that touches perfectly on the topic of ‘learning your way to a product/market fit’.  If there’s one funny result of tough markets like we are currently in, it’s that it gets a lot of people thinking along similar lines of how do you build something of actual value.  Give it a read.