Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By David Aronchick
Some weeks are better than others when it comes to business education. Since last Monday, we’ve learned all about what it looks like to be acquired by AOL, why a truly innovative (though not unique) service failed, and what the real pain in doing a startup is (hint: it’s not that they go bust too fast). And, thanks to how open businesses are today, you can learn more than you ever have before about what to be aware of in your own startup. A quick rundown:
- You can be very successful at a sexy thing, and make very little money off it: TechCrunch is one of the most widely read sites in the world – yet even if they were selling ads for an average of $0.50 eCPM (which seems quite high given how many impressions they were showing per page), that’s only ~$200k a month in ads (13 units per page, 9 M uniques, 30 M PV), barely enough to cover a large staff (35 FT (?) people @ $50k a year average = $175k/mo)
- You can be very successful at an unsexy thing, and make enough money to be acquired: It was rumored that TechCrunch made all their money on conferences (TC50 in particular). It’s not the sexiest thing in the world to run food carts and partner with hotels for WiFi, but it works.
- You can piss off an Internet luminary and, other than have him bad mouth you publicly, still do very well for yourself: Jason Calacanis is extremely well connected and Arrington was very successful in partnering with him to launch TC50. Yet even at the break up, Arrington has stayed focused, and drove it home. Being public means you have to develop a thick skin, but ignoring the chatter is more than important for you personally, it is critical for your business.
Wesabe CEO Does a Full Post-Mortem: It is always sad to see a very well-thought out and popular product go under, but that is what officially happened at the end of July to Wesabe, the personal finance competitor. Marc Hedlund, CEO of Wesabe, published a post-mortem last week, and got further coverage by their VC, Fred Wilson.
- Out of the box matters: In the world of minimum viable product, the new hotness is to get it out fast. But you can risk that first experience that has people walk away and never come back, which is especially problematic in a field (Finance) where your users have to trust you implicitly. This is where Mint succeeded, by making every user’s first experience seamless and absolutely brain dead and, unfortunately, Wesabe had just a little too much work.
- Marketing matters, paid or otherwise: In the post-mortem, Marc Hedlund pointed out that Mint was highly aggressive in SEM, acquiring users for as much as $1 a piece. We all dream of building a product that naturally pulls users in from far and wide and we never have to spend a second on attracting people. But this is a fantasy world; even if it’s your full time job getting the word out, there is absolutely no shame in paying to accelerate the process. Some back of the envelope math says that they got bought for $1.75 a user, the investment was more than worth it. Sure, it’s important to know how and why you’re spending, but the old axiom does hold, “you’ve got to spend money to make money.”
- Speed in development matters: It may have been risky, but the fact that Mint bet their entire business on working with Yodlee to simplify the user’s on-boarding process paid off huge. Wesabe worked their ass of building their own, but that was just enough of a delay to let Mint win.
One story I did not see in the coverage was why Wesabe was not able to continue and/or get further funding after the Intuit acquisition. It’s clear that Mint has started to suffer in both quality and user growth; an aggressive investor could see this as the opening to win.
The Grind, the Grind, the Grind: Sarah Lucy had a wonderful post on her take away from Disrupt about the true tax of being an entrepreneur. The fact is that the biggest lie of Web 1.0 was not that there was value in these puffed up companies – after all, nearly all the business models of the time seem to have been revisited with more intelligent cost structures and marketing plans (home grocery delivery, specialized e-commerce, simple blogging software, etc etc). The biggest lie was that real value could be created in an extremely short time – the fact is is that being an entrepreneur is a grind. Ms. Lucy’s post does a wonderful job capturing a very real sense of exhaustion that some of the most successful people of the last few years have been showing, and these are the huge successes. Just be aware, if you’re taking on the world, you had better be prepared for the long term.
It is rare to get this much insight in a year, let alone a week of so much activity. Getting visibility into the inflection points of other business, such as wins, losses, executive changes and so on, can be incredibly valuable for self-reflection as well. Because, by studying the end points of other successes and failures, you can help avoid the mistakes or the follow the lead that will guide you to the right path for your own business.
