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Me and my co-founder, Ian Shafer, in June 2012. Fresh off our first round of financing and clearly unaware we’re about to spend 2 years flailing around in the startup desert.
Me and my co-founder, Ian Shafer, in June 2012. Fresh off our first round of financing and clearly unaware we’re about to spend 2 years flailing around in the startup desert.

No one starts a company expecting it to fail. Sure, we say we know the odds, the stars need to align, etc.

But deep down, we all believe we’ll be different.

When our Yabbly journey began in early 2012, we felt the same way. The idea was to build a social decision making platform —  what we’d eventually settle on as “the Quora for shopping research.” We even floated an early version of the idea (aka “RoundTable”) on GeekWire a few weeks before taking the plunge.

I personally made the tough decision to resign from a lucrative VP job and around the same time turned down a particularly attractive offer to lead a product team at Google (much to the chagrin of my wife). We were steadfast in the belief that we could start the next Instagram. In fact, the photo sharing application had been acquired a few weeks before we incorporated for $1 billion (#omen).

Of course, we never became the next Instagram. Not even close. Maybe more like a very weak Burbn. ;-) But it certainly wasn’t for a lack of trying. We raised about $1.5 million in capital in three financing rounds from experienced angels in San Francisco, New York, and Seattle.

We were a finalist at SxSW Accelerator 2013, had a partnership with Consumer Reports, and were landing great media coverage with national outlets. We had assembled a killer team from Google, Amazon, and designers who worked on the Target and CNN mobile apps and we shipped new features and improvements practically every day. Our iPhone app was a 5-star app and one of the top 3 iTunes search results for the term “product reviews.”

None of this saved Yabbly from the deadpool.

Two and half years later we shut down Yabbly and sadly, only a handful of our power users noticed. With a few months to reflect after the shutdown, here are five of the many lessons we learned through making mistakes building a failed multi-year startup.

1. The only proof of market fit is organic customer adoption growth. Everything else is noise.

Making it to the top 3 in SxSW Accelerator 2013’s Social Category.
Making it to the top 3 in SxSW Accelerator 2013’s Social Category in Austin, Texas.

Press coverage, pitch competitions, early investment and fan email are great; but don’t mistake that for product-market fit. Real product-market fit will feel like a surprising number of customers are happy to use your version one product in spite of all its obvious missing features because you’re solving a big problem they care deeply about and you’re approaching it in a fundamentally different way. It may help to think of product-market fit more as a ratio than an absolute number.

Does your minimally viable product get disproportionate customer traction relative to its rudimentary level of product execution?

On the other hand, if you feel like your adoption chart is flat despite a well built product or like a saw tooth with every surge because of some one-off event (e.g. press coverage, paid marketing, etc.), you’ve probably got some core stuff to figure out.

At Yabbly, we ignored all the signs and constantly convinced ourselves we were “on the cusp” of “breaking through.” This next feature, bizdev deal, article, hire, growth hack, was going to help us reach a “tipping point.” Once we hit critical mass of users, the chart would go from sluggish growth to magical inflection. We kept reminding ourselves that a small but loyal group in the midwest used Pinterest for the first three years and then they suddenly blew up nationally overnight. Ergo, we were on the cusp since a small but loyal group was using our service after two years.

Jason Stoffer at Maveron said after a year of us not killing it: “Tom, a year is a long time to spend iterating on a product that isn’t seeing traction.” Andy Sack of Founder’s Co-op said to me about a year and a half into it: “I’ve never seen a business that had no business.” I only now appreciate the prescience of what they were trying to tell me.

Rarely will you have a business that screams out to shut it down. That would be a gift! Most of us have good, but not great ideas. Ultimately, we loved our product, we had rabid customers who used it literally every day, and we had lots of cool ideas to make it even better.

But if you took a dispassionate view, our monthly growth was between 0-8% for most of our 2+ year existence and the few big bursts we enjoyed were all a result of hustling and elbow grease — also known as unnatural, external, and unrepeatable.

The first year of Yabbly. Every little spike was a siren to convince us we were about to break through. We never did.
The first year of Yabbly. Every little spike was a siren to convince us we were about to break through. We never did.

2. Solving a problem is not even table stakes.

A winning idea needs to be solving an excruciating problem and solving it 10X better than the incumbents. Before Yabbly, I had worked in product roles for well over 10 years and one of the things I always believed was that you had to build a product that solved a real problem. I still believe that’s the case, but it’s far from sufficient.

Seattle entrepreneur Andy Sack offered some solid advice to Yabbly.
Seattle entrepreneur Andy Sack offered some solid advice to Yabbly.

In fairness, Yabbly did solve a problem. It helped people make better purchasing decisions. What we didn’t realize was that to build a big business from scratch, the problem you’re solving needs to be intensely painful and the way you solve it needs to be 10X better than the alternatives.

One Silicon Valley investor on Sand Hill Road told me in our early days that you have to remember people are only awake 16 hours a day. Then they’re at work or at meals 12 hours and with family and friends another two to three hours. The remaining hour they’re watching TV or on Facebook/Twitter/etc. People have no time for your app.

You might have a chance if you address a humungous pain point that’s so broken they regularly curse about it. If we had bothered to listen, we would have realized that picking the right vacuum cleaner, camera, or dishwasher can be a bit annoying, but isn’t really a huge, aching pain point that consumers are so desperate to solve they’ll try some random startup’s new app.

To raise the bar further, not only does the problem need to be huge, you need to be solving it in a fundamentally different way. If we really asked ourselves, “Is Yabbly truly 10X better than reading Amazon reviews or reading a WireCutter article,” we would have had to say, “no.”

3. Until you have product-market fit, don’t hire unless you have no choice.

Money is time and time is the only thing you have to crack the code. If you even raise a few hundred grand, you’ll be tempted to spend it on headcount, contractors, agencies, etc. People will ask you “how big is your team now” and you will want to reply with as large a number as possible. That’s pride messing with you. As Marsellus Wallace said, “Pride only hurts. It never helps.”

Ian Shafer and Tom Leung. Photo via Poachable.
Ian Shafer and Tom Leung. Photo via Poachable.

If you cannot draw a bold, dark line between spending that money and seeing immediate growth in your key performance metrics, you probably don’t want to add to the team until you’ve figured out the fundamentals.

Every time you spend money on a recurring expense like headcount, you should think of it as accelerating the countdown clock to raising more money sans market fit. Raising money without fit is not pleasant – especially after you’ve already raised your “we just started, but we’re smart and this could work so give us the benefit of the doubt” round.

Going out for “another round” pre-fit is like asking someone out on a second date when the first one started out well but ended so-so and now you’re asking for another shot but with bad breadth, wrinkled pants, and a poorly sized shirt. Even if they take the meeting, it will not end with a kiss. It might even end with the ultimate death sentence as you’re packing up your laptop and they’re already thinking about the next meeting (“well…best of luck to you”).

Of course, if you’ve figured out the core business model, you’re collecting money, and growing every month organically, expanding the team might be the right call. In that post-fit scenario, those investors who previously never replied to your follow ups will be approaching you for meetings and suggesting you raise more money to go faster.

4. No one is out to get you.

Founding a startup is an intensely personal experience.

With the exception of your co-founders, no one really knows how stressful, lonely, tiring, frustrating and toxic it can be — especially when you’re running out of money. One of the natural things that happens is it can turn into an unhealthy “us versus them” psychosis.

That investor was a bit short with you on the call? He’s an arrogant Ivy League ass who’s never run a company himself. Your brother is telling you why your product is terrible? He has no idea how to ship software. That competitor got press and you didn’t? They’re totally ripping off your idea. Your spouse looks at you the wrong way. They don’t appreciate how hard you’re working for the family. I could go on and on.

Ninety nine percent of the time, everyone is either just trying to help, give an honest opinion, or fighting their own battles.

5. Institutional investors are generally not stupid.

Every successful startup seems to have stories about getting turned down by investors on Sand Hill Road 100 times before getting someone to back them.

Again, resist the urge to compare yourself to early Pinterest.

Investors see a lot of startups and investors want to make money. If an endless string of experienced investors you talk to or email are just asking you to “keep me posted” or less, there is probably something missing.

You don’t want to prematurely pivot after your first dozen “no’s” but you probably don’t want to assume 30 “no’s” (including no replies to email) in a row is simply because all 30 investors are complete idiots and only you can see the future. Better to focus on proving them wrong once and for all with data (i.e., months of consecutive, unpaid, organic double-digit growth).

If that’s not happening, it’s not the end of the world to experiment with tweaks, pivots, or even resets while you have runway. We should be careful not to over celebrate the pivot as the answer to all our prayers. But if approached, timed and executed well, sometimes it can work. Even Burbn and Odeo finally figured it out ;-)

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