Startup Mistakes I Made in the First 2 Years

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June 20th, 2012

It has been quite a journey since I wrote my last blog post here. In the past two years, I’ve started a company, met a great co-founder, built a talented team, and launched our first product, which was mentioned on TechCrunch twice.

But at the same time, I’ve also made every textbook mistake along the way. That’s why I want to dust myself off here and talk openly about my failures so that other entrepreneurs can learn from them and I can become a better startup entrpreneur going forward.

You don’t get “A” for effort

After consistently working until 3-4 am 6 days a week for more than two years, I realize that I’ve been over-relying on my perseverance to be my startup’s biggest competitive advantage. It may be great if startup is a competition in working hours. But it’s actually more like a marathon. You not only have to keep running but also need to run it smart. It’s naive to think that I may have a better chance to succeed just because I stay at work a few hours longer than anyone else. Like Seth Godin said, when you turn intellectual work into factory work, you’re only racing to the bottom.

To be more effective, I need to constantly remind myself the difference between motion and action. The activities (the motion) that I was doing to get the company rolling hadn’t accomplished anything if they didn’t lead us closer to our goals. My real job (the action) should be building the right team, developing the product’s vision, getting to product/market fit, solving the distribution problem and making sure that we’ve a lot of happy customers. My eyes have to always focus on the prize, not the process. While most people measure progress by “the steps they took”, successful entrepreneurs have to measure progress by “the goals they accomplished”.

It’s true that some smart entrepreneurs can pull it off by only working 4 days a week AND in remote locations. But I guess my personality can never fit into that type of management style. In fact, I’m fine with working longer and harder. I just need to make sure my “actions” are making REAL measurable progress.

Successful bootstrapping is an art, not a science

When you are a first time entrepreneur building a company in a place that a startup ecosystem is virtually non-existent, bootstrapping is your only option. Obviously, using consulting to bootstrap your startup has its benefits. It allows you to control your destiny, slowly build traction and have better investment terms down the road. And there are many successful examples to prove that it is doable.

However, this approach has not been without its complications. Doing it successfully requires you to have good clients and the right amount of projects consistently for a long period of time so you can slowly build the business on the side. Clients who make unreasonable requests will not only affect your productivity but also greatly hurt your team’s morale.

In retrospect, I probably would not expand the team until our product has some kinds of market validation and achieved ramen profitability, which means making just enough to pay the founders’ living expenses via product revenue. In this way, you can reduce your dependence on consulting works and the pressure to meet a bigger payroll when you are still seeking product/market fit.

In the past two years, I only saw a handful of companies that could make the transition from consulting to products. While there are no magic tricks to solve this problem, I find the bootstrapping stories of Github and Buffer are quite inspiring.

Remember that client project is a lot like drugs. Once you become addicted to it, it will be difficult to pull yourself out in a continued downward spiral. You need to remind yourself that bootstrapping is only a survival tactic for not dying along the way. A startup should shoot for the moon. Like Paul Graham said, when your company fully slides into consulting, you have turn into a different kind of business and it’s not a startup anymore.

Overlooked distribution

According to Peter Thiel, “Poor distribution – not product – is the number one cause of failure. If you can get even a single distribution channel to work, you have great business.” Still, I only allocated less than 10% of our resources on distribution in the past two years. My engineering bias blinded me to the simple fact that even if you have a remarkable product, you still have to tell people about it. And worst of all, marketing was always the last thing I did, making it even harder to solve the problem. Marketing should be the first thing we do, not the last.

I once got advice from Paul Sutter, cofounder at Quantcast, via Hacker News and his words pretty much sum up my lesson here – “most of all don’t even start (a project) unless you know how you will promote and sell it.” This is what I need to remember for the rest of my life.

After all, without marketing, it’s not a business at all.

As a startup, I don’t have money for big advertising, so going forward I have to learn to rely on tactics like Guerrilla Marketing and Inbound Marketing. These are incredibly valuable skills that will serve us well no matter how big the business grows.

Did not get customer validation

Although I’ve read countless blog posts and books regarding Lean Startup and Customer Development, I still failed to consistently put the following ideas into actions.

Getting out of the building to get users’ feedback.

Do experiment (MVP) before building anything and measure their behavior.

Let the metrics tell you the inconvenient truth.

We often spent 1 to 3 months to launch the first version of our products without any market validation or customer’s feedback. And since we overlooked distribution and didn’t do it until the product was finished, this approach put us in an uphill battle. When we couldn’t acquire users fast enough, it made us difficult to measure any data or get validated learnings about customers. By the time we planned to go full force in marketing, we usually got caught up with consulting works or distracted by cash flow problems because of the prolonged development time.

How can I improve this weakness? I need to be more serious about experiment and develop a system that can increase the speed at which tests could built, deployed, and analyzed – allowing us to move and innovate at a high speed.

If an experiment is not measured to validate the product hypotheses, why waste time doing it?

Underestimated the importance of an ecosystem

When I returned to Hong Kong from the United States two years ago, I naively thought that, with determination and persistence, you could build a successful technology company anywhere in the world. Well, I was so wrong. While there are some successful startups coming out of Hong Kong, they all have to move out of this city into bigger markets at some point. Without a proper ecosystem, it creates additional challenges for entrepreneurs, especially for pre-traction startups going through the bootstrapping route.

Your network is one of the keys to your success. Reid Hoffman discussed the same topic at Stanford recently:

Another huge thing to emphasize is the importance of your network. Get to know smart people. Talk to them. Stay current on what’s happening. People see things that other people don’t. If you try to analyze it all yourself, you miss things. Talk with people about what’s going on. Theoretically, startups should be distributed evenly throughout all countries and all states. They’re not. Silicon Valley is the heart of it all. Why? The network. People are talking to each other.

When you are at a startup hub, just exchanging ideas with the smart people can help you learn new things. And oftentimes, that insight is what will keep you ahead of the curve.

In a perfect world, you would like to build your startup in a place that entails the following:

  • Able to find experienced and successful entrepreneurs to be your mentors/advisors/investors
  • Able to raise smart money
  • A culture that embraces failures rather than punishes failure and creativity
  • Enough amount of talent who are willing to invest time to do big things long term

But in reality, you can find none of the above in Hong Kong.

Recently, I had the chance to meet with Joel Gascoigne, founder of Buffer, who is temporarily staying in Hong Kong. I’ve learned so much from him just by bouncing ideas and challenges off each other. This experience reinforced my belief that I need to find a way to move back to Silicon Valley. Like Reid Hoffman said “(startup) is not a go-and-read-everything strategy. You’d die before you could pull that off”. Learn to leverage your network.

Ignored founder/market fit

According to David Lee, founder/market fit means the founders have a deep understanding of the market they are entering, and are people who can “personify their product, business and ultimately their company.” It is also the best predictor of whether a startup will eventually achieve product/market fit.

In our first product, we made something that we needed but I failed to let the idea evolve further. Successful startups need to launch fast and iterate. However, we were just improving upon the initial idea without creating an unique value proposition that can distinguish ourselves from the competition. When you are trying to beat competitors that are much bigger and better funded, you are not going to win by playing their own game.

I made an even bigger mistake when choosing the market in the first place. Even though I love to empower small business to do more faster through technology and I love SaaS because of its working business model, human resources software is just not a topic that I’m passionate about. And I didn’t spend enough time becoming an expert in that field. It’s ironic that I’ve read about how Mark Suster and Aaron Levie made the same mistake in their early careers but I still did it wrong.

That hurt.

Without founder/market fit, people cannot feel passion in your products, which ultimately prevent you to make something worth talking about, which helps you rise above the crowd. You need to find a market that you will irrationally obsessed with as your product and market change over time.

No matter what idea I’m going to do next, I not only need to think long and hard about “what to do” but also ask myself “why am I working on this idea?” If I can’t find a compelling “why”, I probably should rethink again. The bottom line: founders need to LOVE their market.

Conclusion

Having said that, it is not like we didn’t do anything right. We’ve built a team that I feel they are the best in the world and can do anything with hard work. We’ve picked up Agile Software Development practices. And most importantly, we build a team that ships. These are all important future assets.

After looking back all these mistakes with a mix of pride and regret, I’m glad that we’re still alive and realize that these blunders helped me mature as an entrepreneur. I guess when quitting is not an option, you learn how not to die. I hope these failures and lessons will prepare us for future success.

And for other entrepreneurs in the arena, I hope this blog post can prevent you repeating my same mistakes.

Good luck and have an exciting journey.

“Every company had roadblocks and challenges, and at each step and with each setback, I became smarter.” – Mark Pincus

 

Photo Credit: David Chu @Flickr

Vincent Chan
Hi, I'm Vincent, co-founder of Primitus. This is my personal blog where I share all of my startup experience and lessons learned. If you think that I can help you on anything, feel free to let me know. Let's keep in touch on Twitter and Facebook. You can also subscribe this blog with RSS.
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