10 Lessons From A Failed Startup
My Startup is closing and I’m going to tell you why.
Yep, the cat’s out of the bag. Sadly Traxart wasn’t able to make it through COVID and this week I struck off the company and started the process of deregistering.
For many first-time entrepreneurs, closing their first business might be seen as a failure. Everyone dreams of raising their first, second, third investment rounds and scaling to the £10m ARR that we tell every investor we’re going to achieve. However, you know what? I have never been in a more positive place in my entire career! Allow me to share some realisations with you.
When I decided to go full time with Traxart 16 months ago, I approached it with the attitude that actually, I didn’t think it was possible to ‘lose’ if my perspective was in the right place.
How is that?
Well, I decided the two possible outcomes were either A) I would get a year down the line and have a profitable company ready to scale, or B) I’d receive 12 months of incredibly fast-paced learnings that I can place into other startup ideas and roles in the future. Whichever played out, both are incredibly positive scenarios where I would gain an enormous amount of value and were equally well-worth the risk.
With that in mind, I was always taught that reflecting on a season and consolidating my learnings is a valuable tool for your leadership. So, for all you budding entrepreneurs and founders out there, here are my top 10 learnings from my first attempt at launching a SAAS startup.
1. Select your team carefully.
These are the people you will go to war and spend much of the next 7 years with. Choose them wisely!
When I first launched, I hastily used an outsourced CTO in the UK and a team of developers abroad. Both ended up not delivering on what was promised and I wasted a lot of valuable time and money. A large part of the reason for this is on me as I didn’t do my due diligence on their skillset, nor did I truly understand what value they would bring to the table or set the correct expectations from the start.
If you are going to outsource any development, get a third-party recommendation, review their code with an eagle eye before making decisions and ensure everyone is on the same page with delivery. After learning my lessons, I contracted Ramsey Ajram to rebuild our MVP and he restored my faith in the outsourced method. I would highly recommend his services to anyone looking to build product.
On the contrary with hiring, I on-boarded a technical Co-Founder 7 months in and bringing the dev in-house worked incredibly well. Michael was a dream to work with. Dedicated, a problem solver who cared about the product we were creating and committed to seeing the vision through.
2. Obsess around validating your idea
Read any of the first-time founder staples (Lean Startup, The Mom Test) and you will learn that the main reason startups fail is due to lack of market need.
Enthusiasm got the better of me when I initially launched. I was so convinced the idea I had was killer that I jumped straight into building without really understanding the actual pain I was solving.
Next time around, I won’t write a single line of code on a new idea without having a minimum of e.g. 50 direct F2F conversations, (with people I don’t know) in order to validate the idea.
Read The Mom Test to give you everything you need to know on validation. I had a chat with another Founder where we mutually agreed that book would have saved $40k between us. Well worth a $10 investment!
3. Build quick and build simple
Within the first 6 weeks, I had spent £1k on an animated video for a product that didn’t yet exist and had not been validated, £5k on a CTO to ‘manage the MVP’ and £8k on an outsourced team. That is quite frankly, ridiculous!
Once you have had validation conversations, build the simplest version of the product you can possibly create. I spent months wasting time on features that didn’t matter and, in the end, much of which didn’t work properly as we rushed to get it all included in the first version.
Eric Ries writes in the Lean Startup, “If you are not embarrassed by the first version of your product, you’ve launched too late”.
Create something quickly, with as little spend as possible and get it out there for feedback.
4. Get to know your ideal customer. Fast.
This is tricky but crucial. The faster you can narrow down customer segments, understand who you are solving a problem for and find product-market-fit, the more chance you have of succeeding.
Key to this is continual customer conversations. Define your segments, spend a short period of time talking to each one about their problems and see if there is alignment with your product. If there isn’t, keep moving on until you begin to receive positive signals.
The worst conversations end with “this sounds interesting, I’d like to know more”. (That’s code for “I’m not interested but too polite to tell you”).
The best ones end with “x is a real problem that’s causing x pain in my day”.
5. Pick a problem you care about.
If you ever fill out a Techstars application, you’ll notice the question ‘what makes you and your team uniquely qualified to solve this problem?’.
It’s asked because passion keeps you motivated outside of equity.
Without a personal attachment to your problem, you have little to hold onto during those days when you’re really having to grind. Long, lonely weeks, with no team around you to bounce ideas and the business off. Those days will come, and you need a passion for your problem as a fallback for motivation.
6. Cashflow is king.
I can’t emphasise this enough. Raise as much as you can, as infrequently as you can.
Cash keeps the business alive and raising investment sucks time out of your day. Get money in the bank then continue focusing on solving the problem rather than staying afloat. If you solve the problem, the money and investors will come.
7. Community is everything.
Many Founders will disagree with me, but I decided early on that it would be beneficial to place myself in a co-workspace rather than slogging the first year out on a desk in my bedroom. It was one of the best decisions I made.
WeWork Labs provided me with fellow-Founders that I learnt an ENORMOUS amount from and as a single Founder for the first 7 months, this was truly invaluable.
There are too many to name everyone but a massive thanks to (Jamie, Nick, Fred, Tonisha, Harry, Tom, Dawid, Seb, Niro). As well as awesome mentors and colleagues (Dom, Mark, Anaïs).
If you are starting a business, surround yourself with like-minded people and become like a sponge. Ask questions, share knowledge, don’t be afraid to seek advice and build as many relationships as possible. They are what makes the whole journey worth it.
8. Split equity fairly.
Again, a controversial topic between founding teams. Many will argue points to receive more equity and the common ones I have heard are:
· It was my idea
· I put in the initial capital
· I’ve already been full-time for a year
Even if all these points are true, the reality is that the hard work is still ahead of you. It takes 5–7 years for a startup to reach maturity and be ready for acquisition. Are your team motivated by their equity portion to stick it out for the next 7 years?
Maintaining an equal split for the early team is now a solid core value I’ve taken onboard.
9. Time is your most precious commodity.
If you had all the money in the world but no time, what would you be able to accomplish?
In June 2019, I was made redundant which gave me an opportunity to go full time with Traxart. Many people advised me to get contract work and stick it out part-time until it developed an income, but the reality is that what you put in is what you’ll get out.
Part of my personality is that I am a huge risk taker. I joke that I’m the worst poker player because after a while I get bored and decide to go ‘all in or nothing’. This trait reflects on my decision to go all in with my startup for 12 months and use the time I had available to give it my best shot.
A core component of using your time wisely means remaining laser-focused on the problem you are solving. Looking back, I spent far too much time on things that didn’t matter. Potential partnerships, seminars, features, growing internationally. All that matters is solving the problem and dominating your local market first. The rest will come.
Spend your time wisely and remember that the days are numbered. Make the most of them.
10. Life’s too short not to take risks.
It is (generally) true that the higher the risk, the higher the potential reward.
Going all in on Traxart taught me more about myself than any leadership seminar, business book or self-help podcast ever has or probably will. It showed me my personality is geared toward being more of a trailblazer than a follower. That I want to shape a career far from the norm and that actually, higher rewards are available to all of us who are willing to take the risk, work hard and get them. All it takes is a first decision to move out of your normal routine and step into something unfamiliar.
I would love to hear your stories on startup, business and founder learnings. Feel free to comment below or get in touch directly.
Let’s continue to change the world together.