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10+1 Valuable Lessons I Learned From My Failed Startup

…That I will take into account for the next one.

Being the Founder and CEO of Vocabulary Notebook for more than 2 years (from September, 2012 to January 2015) was one of the most intense, enriching, stressful and exciting experiences I have ever lived.

Picture of a man using a writing machine and smoking with a pipe

During this period I went from doing some mockups alone at home and printing them in paper to use them as low fidelity MVPs for customer discovery; to close a seed funding round, found a company, build a multiplatform product, build a team of 12 people, receive several awards, participate as speaker in 3 international events, get 30 000 users in more than 130 countries, register a trademark, conduct scientific research on our product and collaborate with schools and universities from 4 different countries… As I said before, it was intense!

Sadly, two years after the beginning of this adventure we had not been able to reach the break-even point yet, we had a cost structure that we were not able to maintain and we didn’t manage to close another funding round to keep us going (to keep improving the product, launching marketing campaigns, validating new hypotheses, pivoting and improving our business model…). So, by last summer we had to start progressively reducing our cost structure, until we had no option other than shutting our startup down completely.

However, during this amazing period I learned very valuable lessons, some of which I am going to share with you now, if you keep reading:

  1. Validating your hypothesis with the real customer may be very difficult in some B2B models. Being lean with B2B models is usually a lot harder than with B2C models. In our case the toughest part was interviewing the real customer, this is, the person that was actually going to pay for the product. Vocabulary Notebook was intended to be sold to schools. From the beginning we tried to be very lean, so we did customer discovery and tried to validate our hypotheses with students and teachers (our users). We did so, learned from them and pivoted a few times based on their feedback. We made sure both students and teachers found the tool valuable and that teachers considered the pricing solutions acceptable for the school. However, since our goal was to sell the product to schools, we must have been interviewing school directors instead. They are the ones with enough power to make the final decision (paying for the product). All the same, as the CEOs of any other company, they are usually very busy people and it is very difficult to have the chance of arranging a meeting with any of them. What is even worse: if you manage to arrange a meeting with a school director to make a presentation of your product and she finds out that what you are just asking her some questions to validate some hypotheses, or that, what you are offering her is still in development phase, she will feel that you are making her waste her time and she will probably ask you to come back later when the product is ready.

  2. “Being Interested” and “paying” are very different. It is important to remember that it is very easy to say “Wow! this looks great, we will definitely use it!” when you are not forced to pay now to prove that you have real interest. In our case, many times when we had meetings with schools, everyone looked excited. Teachers were usually very interested in combining language learning and technology and our product looked just like the right fit for them… But it was always very difficult to close a deal at this stage. Almost always they were telling us that they would have to discuss it in further detail as well as organize themselves for the implantation of the product in the school for the next course (in which they were going to use it for sure…). This is something typical in B2B models: sales cycles are long. For us this meant waiting several months to close the deal, either until the end of the current course or until the very beginning of the next one… And as you can guess, most of the time when the next course arrived, nothing happened. They had been very busy and they had not been able to plan the implantation of our product (but… we they are still very interested! “Next year we will include it for sure!”…). After a while we tried to reduce friction by providing them with materials and pilot projects, even offering in-house consultancy to “kick-start” the project in the school… But the point I want to make here is: Customers paying for your product or service is the only real validation of your business model.

  3. Connections are worth more than money. You will need connections in the market in which your target customers are (this is, in which your product is). Seriously, you will need them. This is really important, because as human beings we rely on our connections, either to decide whether to purchase a particular product or to decide if it is worth writing an article about it or not. For instance, if you are building a vocabulary platform which you are intending to sell to schools, you will need to be well connected with schools: you will need to have a good relationship with many school directors, teachers, teacher trainers, specialized researchers in the field, specialized bloggers and/or media, etc. If you don’t have those relationships yourself, you better find a partner or employee that has those connections. It is definitely worth it. Those connections will bring you money, it may be in the form of specialized investors, by saving money in expensive ad campaigns or, what is even better, in the form of important paying customers or early adopters that you wouldn’t have been able to reach otherwise.

  4. You will need money for marketing. This is very related to the previous point. Selling is very hard. And very expensive. This is especially important for founders with a tech background. It may seem to you that you can build the next great app in a garage on your own (or with a few friends), with no funding at all and without marketing & sales teams. You may think that all you have to do is to build the right product and suddenly… it will go viral all alone and you will get rich! Well… Honestly, that is extremely rare, even if you have a great product. It is so rare that probably most of the cases you think went viral all alone had actually a team that planned carefully their marketing campaigns and invested a lot of money and/or talent on them, even if it doesn’t look like that. A good example of this may be crowdfunding, and particularly, Kickstarter. Nowadays, many of the companies that are having successful Kickstarter campaigns had already been backed with investment before (even millions). These companies are using Kickstarter as a marketing tool, which provides more visibility and more customers (either directly or indirectly). Companies are investing a lot in those campaigns to make them go viral (design, content, videos, pricing strategy, advertisement…). It is not just about creating a great product, it is about making many people believe your product is great. And that is expensive.

  5. Make sure you get enough rest. Building a company is not a sprint, it is a marathon. It is easy to get too involved, to work almost every minute of the day, long hours, weekends, to keep thinking in your business even when you are having lunch with family or friends, or even when you are watching a film with your girl… But if you work too hard for too long you may burn out and then everything will fall apart. Many entrepreneurs have been there before. Make sure you disconnect and have quality rest every now and then. Set some spare time apart and do some exercise. Do it for your own health and personal life. Once you start doing it you will realize that it also helps your startup a lot. Since you will feel better, you will have more energy, bring new ideas and be more productive at work.

  6. Analytics are crucial. If you haven’t heard about KPIs, web analytics or A/B testing yet, it is time to work on it. When you are a startup founder and you get some traction you end up realizing that you want to measure everything. Not a lot of things. Everything. Where do the users come from? How many of them came through the last tweet we posted? How much time do the visitors that come from the sponsored post in xxx spend in our site on average? If I change the sign-up button background to green, will it increase conversions? How much is the cost of acquisition of my users through Google Adwords? …And what is the lifetime-value of those users? Everything is important. Data is a key element in a startup. You need to make decisions based on data, otherwise you are guessing and guessing can lead you to lose a lot of money. Remember, it is not what we like or how do we behave using our product, it is all about how our users and customers do. Avoid this opinion-based strategy meetings with your team. As Jim Barksdale (CEO of Netscape) once said: “If we have data, let’s look at data. If all we have are opinions, let’s go with mine”. Let’s focus on having the data!

  7. Remember what your role should be. When your startup starts running it is very easy to be overwhelmed. Specially if you are a solo founder or if it is your first time in the startup world. At some point things start to get mad: your product starts generating some revenue, customers start to ask for bugfixes or new features; you start going to several startup events (which sometimes are just a waste of time, to be honest); you start having too many meetings… You have to hire new people, coordinate a bigger team… And at the same time you try to keep in touch with investors and customers, try to close further funding rounds and deals… With all that chaos it is very easy to lose focus on the most important things of your startup: developing your business, validating your hypotheses, analysing the performance of your product, reviewing your KPIs, doing some A/B Testing, reviewing customer feedback, making strategic decisions… Remember what your role should be.

  8. Be sure to build the right team. Very related to the previous point. It is crucial to have talented people with different skills in your team, so you can delegate different areas, such as administration, finance, software engineering, product management or marketing and sales. Sometimes, especially with tech founders, we tend to underestimate other areas rather than product development, or some of us tend to do everything. And it may be the case that you can also be skilled in other areas, but the reality is that there is too much work to do and you can’t do it all. Moreover, there is always work that you like and work that you don’t, and you tend to work on what you like, even unconsciously. In my case I always tended to focus either on product development, user experience, analytics or business strategy; but always tried to avoid paperwork. Sadly, I didn’t have anyone in the team to delegate paperwork tasks and it ended up being a significant part of my daily workload, preventing me from doing the other things I really liked.

  9. Be careful with side projects. We always tend to underestimate the cost of losing time. For instance, when you don’t have enough funding to be 100% focused on your product, it may be tempting to start doing other side projects for your company to “survive”, until somehow we hit the hockey stick with the product and can focus totally on it. Paradoxically, by doing that you may be killing your startup, since you may start devoting too much time to those side projects, having meetings with those “side customers”, paying less attention to the users of your product (because the money comes from the side projects)… It is a risky solution and most of the time you will end up losing focus on your product and becoming a zombie startup. Be very careful with side projects.

  10. Be very careful with government grants and / or loans. Funding is one of the toughest things for a startup founder (if not the toughest). The lack of funding can lead us to accept side projects, work too-long hours and even apply for grants and loans. The government, at least in Spain, in the last few years has created programs to help fund startups with grants and, mainly, with loans. However, these programs are not lean at all, they will involve a lot of paperwork (including 5-years-ahead cash flow tables with month-by-month detail); there will also be a lot of uncertainty until you get their answer (and even after it is approved uncertainty may be around); you may have to re-do things several times… And money may arrive late (or may not arrive, or not the full amount). My point here is that, although government has created these programs with good intentions, trying to help startups, you should be very careful. It may be a bad idea if you are trying to be a lean startup. Maybe you can consider it as a last resort… But in case you decide to go through this risky path, you better be aware of what it involves. It could even be a good idea to have someone in the team devoted exclusively to this tasks, so you can stay focused on the important stuff (developing your business and validating hypotheses).

Well… If you have reached this far, you have been patient enough to discover 10 key things I learned during my adventure as Founder and CEO of Vocabulary Notebook. Probably I am forgetting another 10 things that are at least as important as these, but it is always difficult to summarize such an overwhelming experience in a post like this. That being said, I will be glad to read any opinions and stories from others with similar experiences. Feel free to write a comments below :).

Finally, I also wanted to add an extra thought here (the +1 in the title), which is not related to this particular experience, but is something I have seen too many times happening and has even happened to me before in previous startups:

  • “Lean Startup” does not mean “it’s a hobby”. To validate a few hypotheses, iterate and build an MVP you will need to take it seriously, invest real time and some real money as well; although a reduced amount of both money and time when compared to traditional approaches to building companies, in which people spent millions and years to create and execute business plans with no validation whatsoever. But you will definitely have to invest several hours a day to build, measure and learn in order to validate your hypotheses. And this is just the beginning. After your first validations you can decide that it is not worth to continue with your startup (if you haven’t been able to validate your business model and have no plans on pivoting). But if you get positive feedback you should probably take it even more seriously. This will force you to be 100% committed. You will need to interview a lot of potential customers, build a great team, look for funding, participate in events, build a product, organize marketing campaigns, analyze your KPIs… It will be a lot of work. So be honest to yourself: is it a hobby or is it a startup?

If you want to build a great company from the ground, there is just one thing I can guarantee you: You will have to work hard. But if you are passionate, you will love the experience. No matter if your startup ends up failing. You will learn a lot, meet awesome people, have this incredible feeling of discovering that something that you created was valuable for other people (maybe at the other end of the world)… It is an awesome experience. And if you pay attention to other founder’s experiences, you may avoid some errors and thus you can make this adventure a bit easier for you, increasing your chances of success. I hope this article helps with that.

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