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Requiem-For-A-Startup-April-30-2011.html
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<h1>Requiem For A Startup</h1>
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Apr 30
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2011
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<div><em>Our business in this world is not to succeed, but to continue to fail, in good spirits.</em><br>
- Robert Louis Stevenson</div>
<p>Three years ago I left my sales engineering job at an analytics software company to start an <a href="http://rallyplan.com" title="Events, Plans, Deadlines - Time-sensitive announcements from your Twitter friends">internet company</a>.
This is the story of what happened between then and now from a personal perspective, the stuff I might have been writing about along the way had I not been so busy trying to get a company going.</p>
<h2>Starting a Startup</h2>
<p>I've wanted to become an entrepreneur since starting a driveway sealing business called Dr. Driveway in high school with three friends.
It was an awesome experience.
I consider it a good day at work when I have half as much fun as we did in those days wearing a thrift-store jumpsuit and spreading stinking tar on 110 degree asphalt.</p>
<p>After college I guess I assumed that circumstances like my high-school startup would occur again, that a group of friends and I would get together to start a company and have a ton of fun.
I joined a small tech company that seemed like a startup at the time (it wasn't) and had an amazing ride on the dotcom rollercoaster.
We went through hypergrowth (250 people to 2500 in 3 years), an IPO, and a 5500% increase in stock value thereafter.
By the time the bubble bursted, SEC investigations for illegal revenue recognition had already removed any doubt among the folks on the stock market that a better valuation of the company would be just slightly above zero.</p>
<p>I got off the rollercoaster broke (not to be confused with poor), but one thing I still had was my eligibility for the AMT tax designed to close loopholes for the wealthiest Americans.
I got a job at a more stable software company where I could do my job well without a lot of distractions, get out of debt to Uncle Sam, have a good work-life balance, and eventually build up savings for a startup.
As time went by it began to become clear that the circumstances, let alone the perfect circumstances, for doing a startup were not going to just happen.</p>
<p>I got involved in the startup community in Boston nights and weekends, landing on a team entering the <a href="http://www.mit100k.org/" title="MIT 100K">MIT 100K Business Plan Competition</a>.
Around this time I began to feel physically, viscerally sick at my desk. Not because the company or people were bad - they weren't.
But because I badly wanted to make a change toward doing something I really enjoyed and felt a huge burden of the ongoing opportunity cost of not doing that.
This is one example of the circumstances under which a person might make an ill-advised (not to be confused with regrettable) decision to make a career change into a poorly conceived business venture with relative strangers, none of whom had startup experience or much work experience for that matter.</p>
<p>In the Hollywood script version of this story, these might be the makings of the next Google.
In reality we really didn't do too well at all.
We didn't do much in the 100K, and our grand vision was best summarized by Paul Graham in his graciously delivered verdict on our 10-min Y-Combinator pitch: "Sorry, but I have no idea what you guys are doing".</p>
<h2>Going solo</h2>
<p>The team fell apart shortly thereafter. I didn't realize the implications of going solo at this point.
Being a software engineer and being psyched about the technology challenges we'd been looking at, I figured a reasonable course of action would be to do a major pivot into a product vision more my own, build a prototype, and use it to motivate conversations with prospective founders and investors.
I sure as hell didn't want to give up.
Despite the rocky start, I was really enjoying the experience, especially being able to spend my whole day thinking about and solving early-stage problems.
I was beginning to realize something that I believe strongly today: Getting to work on early-stage problems is one of the great privileges available in life.</p>
<p>Being a capable engineer is both a blessing and a curse in this situation.
Put another way: just because you can do something doesn't mean you should.
Limiting development and focusing on finding a co-founder is the course I would advocate today for most folks in this situation.
Instead I went heads-down for over a year, evolving my startup from its origins in recommending investments (Alluvial Labs) based on blogs and other content you like, to recommending jobs (JobGravy) based on content you like, to recommending news and jobs based on content you like (Likematter).
Customers were reluctant to adopt when faced up-front with having to work (e.g. upload an OPML file) in order to get value.
Trying to tackle a huge problem like personalizing news, I began to appreciate the importance of sizing the project to fit the resources.</p>
<p>Although it was becoming clear that being a solo founder was very difficult, a team was beginning to coming together.
I hiring a smart MIT student part-time and a very productive Python developer/entrepreneur in Mumbai.
And I had learned to compensate partially for the lack of co-founder by leaning heavily on advisors and members of the <a href="http://betahouse.org Betahouse">Boston startup and tech communities</a>.</p>
<p>I had about a year of runway left to make something happen, and decided to focus on a problem I was increasingly experiencing myself: Being heads-down meant not staying on top of opportunities to socialize with friends.
I wanted a menu of what everone's up to tonight, or this weekend. There were services where you could announce what you're doing (Twitter), or where you are (Foursquare), but nothing to announce what was going to happen in the future.
Coming out of a super-valuable <a href="http://www.mitforumcambridge.org/events/concept-clinic-featuring-touted-com/" title="MIT Enterprise Forum Concept Clinic">MIT Enterprise Forum Concept Clinic</a>, the vision began to crystallize around a service where people check-in their future plans a la Foursquare.</p>
<h2>The Startup: Rally - Events, Plans, Reminders - Time-sensitive Announcements from your Twitter Friends</h2>
<p>I had gotten hip to <a href="http://theleanstartup.com/" title="Lean Startup">lean startup methodology</a> and <a href="http://steveblank.com" title="Steve Blank">customer development</a>, so I started sourcing stories through Mechanical Turk about how people make plans and hanging out in coffee shops all over Boston engaging in customer development research with anyone willing to talk.</p>
<ul>
<li>How do you find out what your friends are doing? Have you ever missed out because of failed communication?</li>
<li>How do you get your friends involved in something you want to do? How well has this worked out for you?</li>
</ul>
<p>The research yielded some very interesting observations:</p>
<ul>
<li>Predominantly, people used SMS, telephone, and email to make plans with friends.</li>
<li>There was little mention of newer social media technologies like Twitter or Facebook in these conversations.</li>
<li>Google Calendar was very popular, and was shared by groups of mainstream folks in advanced ways, like coordinating a group of six parents in determining who can best pick the kids up from soccer practice.</li>
</ul>
<p>I was surprised at how emotional the conversation would become with many people I talked to. Asking people to quantify and assess how they socialize with friends seemed in some situations to touch a nerve. Perhaps for many of us our social lives might not be as filled with cool plans as we would like.</p>
<p>I found it nearly impossible to interpret the spreadsheets of data and stories I collected. I believed that it confirmed my initial hypotheses:
-There were many situations where a person's friend(s) were doing something where the person would be welcome, but there was insufficient communication and no connection was made
-There were many situations where a person had a desire to do an activity or go to event but no one lined up to go with. In some cases the person was able to surmount this problem in a number of ways. In other cases, the problem remained unsolved, typically because of fear of social risk - e.g. getting rejected by everyone, friends knowing that the person doesn't already have plans for this weeekend, etc.</p>
<p>The coffee shop research also confirmed that most people rely on direct conversations via SMS, email, and phone to make plans with friends.
I decided on email, because of its unique one-to-many (Cc) capability.
I expected that people would simply Cc our service a la Tripit whenever making plans with friends.
The service would help the group coordinate by creating a persistent page to thread the conversation, look up location and venue information automatically, and optionally make the plan available to a broader set of friends - along the lines of what Group.me, Beluga, etc. are doing with SMS today.</p>
<p>No one used the email functionality as intended, and only a few people shared plans via the web (an interface similar to Plancast, whose launch I learned about around this time) but I did use Twitter OAuth signup so I had access to users' Twitter accounts and ran a simple test: what if I analyze people's twitter stream looking for time-sensitive announcements and then send them a daily email saying "here's the stuff going on today that you probably missed because you get like 100x as many tweets as you can read." Results were encouraging. Aided by a <a href="http://www.boston.com/business/technology/innoeco/2010/03/on_the_radar_rally_which_mines.html" title="Scott Kirsner on Rally">Boston Globe article by Scott Kirsner</a>, the regular user base grew to several hundred people. Clickthrough on the daily emails was around 4-5%, and users were telling me things like "I found out about the SXSW deadline using Rally and was able to submit my application in time - thanks!". Very cool!</p>
<p>I embarked on a new major release by doubling down on the twitter-based daily email that had worked well. I also estimated that if people were using the crappy initial version so much, they'd use so much more an improved version with a greatly improved email format that featured conversation threads providing a much more complete picture of who's going and what's being discussed. Actually, clickthrough rates for the new version would turn out to be exactly the same as before despite months of engineering and design improvements.</p>
<p>But the main thing the new release had to get right was customer acquisition.
People were discovering events and plans through Rally, but weren't sharing them.
Which means that they weren't using the service to share plans with friends in a way that also shared the service with prospective users.
I had not built functionality to do this in original version.
The new version would include a carefully designed way to do this.</p>
<p>Take a look at the screenshot below. If you were interested in the Founder Dating event, what would you do next? </p>
<p><img src="/media/images/rshot.png"></p>
<p>If you answered anything other than "I would click on the bit.ly link in the tweet to find out more and maybe sign up", then you'd be a major outlier among the Rally user population. The calls to action I hoped people would use: add to calendar, reply via twitter, click title for more information, have seldom ever been used. I've received some good advice post-release that I should have given people only one primary call to action and make it very large and easy to understand.</p>
<p>Good advice. That's one of the next things I'd do if I were going to do more things.
But I'm not convinced this would help.
The fundamental problem would still exist: People want the tweets they care about from the people they care about. Rally helps them do this. Once found, they want to engage directly with that person or answer the call to action in the message - <a href="http://www.quora.com/What-percentage-of-tweets-have-links-in-them?q=percentage+tweets+contain+links Quora on % of Tweets Containing Links">25% of all tweets contain links</a>, more than 40% for tweets found on Rally.</p>
<h2>Future for the Rally Product</h2>
<p>What I ended up building was:</p>
<ul>
<li>an interactive search product - a way to discover events, plans, deadlines, and other time-sensitive information - that was not well-received</li>
<li>plus a daily email of aggregate search results that was quite well received</li>
</ul>
<p>What I tried to position to the market was a more comprehensive tool to assist in the process of making plans with friends, going beyond discovery to include originating plans, announcing plans to friends via Twitter, integrating with your calendar, etc.</p>
<p>I'm optimistic that there's a market opportunity for the Rally product. For example, the daily email could compliment content from daily email services like <a href="http://thrillist">Thrillist</a>, <a href="http://dailycandy.com">DailyCandy</a>, or <a href="http://urbandaddy.com">UrbanDaddy</a> with opportunities specific to your social graph.
But I don't intend to keep hunting for it. Time to move on.</p>
<h2>Lessons learned about single-founder startups</h2>
<p>I've hit the end of my runway, having invested almost $400K in savings and opportunity cost associated with foregoing salary in the Rally effort alone, much more if you count the previous startups.
And I've reached the limits of my willingness to keep thinking creatively about how to market this thing.
<a href="http://www.paulgraham.com/founders.html" title="Paul Graham on Founder Success Factors">Paul Graham's piece on what to look for in founders</a> applies well to this situation: Determination is the #1 factor in startup success, but only when combined with the flexibility to adjust or change directions completely. </p>
<p>Another huge success factor is quality of the team. I think this was a major limitation to my startup succeeding. I've got a lot of confidence in my own abilities, otherwise I wouldn't have done all this. But my company failed in large part because it lacked the foundational leadership needed to succeed. There has thankfully been a good bit written about <a href="http://ginzametrics.com/the-royal-we-single-founder-startups.html" title="Ray Grieselhuber on Single-Founder Startups">single-founder startups</a> in recent years. It's a subject I've thought a lot about. I think it can be boiled down into two points:
<ol>
<li><b>Two heads is much, much better than one</b> - spreading leadership across two capable & compatible leaders increases expected results while reducing risk in much the same way diversification does in investing - see modern portfolio theory. Multiple people smooths out individual peaks and valleys of productivity and creativity. Two equivocal leaders means that each's ideas have to pass the test of outcompeting the other's. Interestingly, there are a lot of startups with 2+ founders that don't benefit from this effect. The most common example of this involves a business founder representing like 85% of the juice in a situation paired with a technical founder who's domain of owning the building of the product, while representing a potentially much bigger part of the value created, is really only carrying 15% of the burden in the key leadership issues that make or break the startup in the first 1-2 years.</li>
<li><b>One head is better than one head + the wrong head</b> It pays to be very confident about the relationship with your co-founder. The benefits only happen if both people are capable of working in the right way with each other. There's never been a better time to do a single-founder startup in industries that benefit from open-source and cloud-computing. One person's leverage is huge. The main thing I would do differently in retrospect is to apply a very lean startup approch, cycling through short-duration projects/experiments testing specific parts on a problem while searching for a co-founder, instead of trying to forge straight ahead with a venture-sized concept. Understanding what kinds of problems you have the resources to tackle is important for any startup, none more so than a single-founder startup.</li>
And not to be overlooked is the fun factor. Having a co-founder means you can go-on vacation without the company shutting down. Being a part of a solid team that kicks ass is a lot of fun. And working on something that's bigger than myself has been something I've missed and am looking forward to getting back to.</ol></p>
<h2>What I got out of doing a startup</h2>
<p>I'm grateful that I had the opportunity to spend a few years trying to make my own ideas happen and I'm glad that I took it.
Of course I would have done a bunch of things differently with the benefit of hindsight. There's something very rewarding about doing what you want, maybe a startup or maybe something else, when it's not clear how you're going to succeed.
I've found that as I've had to strengthen my faith that I can make things work out and that the world is a place in which that can happen, profound changes have occurred.
I'm more confident in making instinctive decisions, especially about people, without much analyzing.
I have a much better understanding of how corporations and other businesses, such a huge part of American culture, get formed and operate at an executive level.
Perhaps counterintuitively, I put a lot less emphasis on money and certainly worry less about it now than I did when I had much more saved up.
And I'm in a much stronger position in terms of ability to develop technology and tech startups that will create new wealth in the years to come.
While I'm not sure I agree with it as a useful criteria for dichotomizing the human population, I'm glad that <a href="http://cdixon.org/2011/04/26/there-are-two-kinds-of-people-in-the-world/" title="Chris Dixon Two Types of People">Chris Dixon wrote this piece about people taking real risk to build a company</a>. Working hard and sacrificing to save money, then investing all of it and all of your energy in a failed attempt to bootstrap a startup is something to be proud of. And I am.</p>
<h2>And most importantly ...</h2>
<p>Startups often involve financial sacrifice and require a lot of work and attention around the clock. I can't imagine anyone more understanding and accepting of these realities than my wife. Thank you for being that way. I love you.</p>
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