Your first startup should be someone else's

You’re about to start your first startup. You have an idea, you have the talent (whether yours or someone else’s) and you’re poised to take over the world. The only thing that stands between you and success is that you have absolutely no idea what you're doing! GO!

Let’s be honest, I don’t think any of us would start a company if we already knew what the journey would be like. To do what we do requires a healthy dose of naivety . You have to be either brave or foolish (or both) to think you can succeed where so many others have failed. Being ignorant of the odds of failure can be a blessing, but without some sniff of reality it can become quite the curse.

The one common thread among aspiring founders is their absolute belief in their vision. They believe it’s unique, they believe no one else could possibly do it, and they believe it has massive market potential. More often than not, they’re wrong on all counts. But often that dedication to solve a problem without fear of failure is what makes it possible to succeed. By not stopping at the intermediate point of impossibility they eventually find a way to attain the highly improbable. It’s that drive that makes working with startups so exciting.

But whilst throwing caution to the wind can often be beneficial, even an ounce of experience goes a long way when the tough times come, and they will come.

The most obvious solution is to surround yourself with experience. Advisors, mentors and investors are all great sources of learning. People that have “been there, done that” can step in to help solve problems for which you’ve been unable to find a solution. As helpful as they can be, the bottom line is that all of the responsibility still comes back to you. It’s up to you to make the decisions.

Whether it be hiring, firing, budgeting, planning, pitching or selling… the decisions are yours to make. All the advice in the world won’t stop you from ever making a bad call, especially when you consider no one has all the information that you, as founder, has.

The only thing that can help you in these situations is your own experience and your own gut feel for the situation. The more experience you’ve had, the better equipped you’ll be to make the right call. This is where I believe the best way to help yourself is to help someone else first.

First time founders, I beg you, please go and work for someone else before you start your own business! Too many wannabe entrepreneurs have this crazed notion that the only way to work in a startup is to start your own. Unless you're solving a problem that is so important to you that it keeps you up every night, you may well be better off working for someone else. Think about it, do you really need to own the business to enjoy your work?

Go get some experience, contribute to something important, be part of something bigger than yourself! Maybe you'll meet some folks that can help you in a future venture, maybe you'll get some equity in a growing business, maybe you'll even take part in an exit! The worst case scenario is that you'll learn a lot (even if it's how not to do things!) In time you'll find something to be passionate about, and only when you've found something you must solve should you strike out on your own.

There's a whole heap that can go wrong in a startup, and the only way to really know about it is to have gone through it. It's true that you'll never learn as much as you'll learn at a startup, but it doesn't mean you have to be the owner to learn it. 

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Customers won't give you money unless you ask

Sounds obvious, but you'd be surprised how many startups are scared to ask for money or even if they do, they're scared they're asking for too much (although the latter is a topic for another day).

There are a few reasons why you might not ask for money, and whilst there are plenty of times when this is appropriate, you really need to ask yourself if it's the best choice for you.

The freemium model seems to have become the default option for startups these days, for both B2C and B2B. The thought process goes that you can get many more people using your product for free than you could by charging. So if you give it away for free, you'll grow your audience faster and learn more in a shorter period. Valid in theory, but it’s not without its problems.

There are times when freemium makes perfect sense, so I don't want to poo-poo the entire concept. For example, Freemium works really well when your user IS the product. This is the case for things like gmail, Facebook and even our own FiveSecondTest (where our free users give feedback on designs for paid users). Alternatively, if your app is super sticky (one which people won't stop using once they start), then you can leverage your low churn rate with the knowledge that inevitability users will reach some milestone which will trigger payment (e.g. dropbox, evernote). There a few other examples of good freemium models, but these are the main two.

If you’re not in either of those categories, then there are a few well known dangers with giving away your product for free. First, you may be collecting a lot of data, having a lot of conversations and learning a lot about your users, but you may well be learning about the wrong users. If you satisfy the needs of your free users, you may well be making a product that is only great for those free users. You always need to be sure you're pleasing the people who're going to pay you, not those that wont. 

Secondly, there is the classic "if we just convert 1% of our free users". For many businesses this is a fool's errand. Unless you're running an extremely sticky app, it's really hard to get people off their free plan onto a paid plan. Your free plan needs to be good enough to gain traction, but not so good that you prevent people from wanting to upgrade. You're stuck with a constant battle to balance these needs and it can be a messy challenge. 

Possibly the most dangerous thing about freemium (particularly for B2B) is that "free" comes with a perception of "cheap". It makes it just that little bit harder to prove value when you're clearly willing to give so much of your app away for free. What you find is that many users will go to great lengths to defer upgrading, often users that would've paid you up front had you asked them.

We struggled with all three of these issues in the early days of BugHerd, but we also found some things we didn’t expect. 

The first is that many users simply tried to "make do" with one user account and found workarounds to share the account. They’d use comments, or tags to assign tasks, or often just not assign tasks at all. It meant they were not only not getting full use of the app , but they were having to include “hacks” into their normal workflow just to avoid the monthly spend. Not ideal. 

The second, much larger problem, was that usage on free accounts was, on average, well below usage on paid accounts. Installation rates were lower, users were less likely to create tasks and they were far less likely to invite other users. 

The weird thing was, we found that this same behavior was consistent both before and after the unrestricted trial period! Even though a user had access to all the features, unlimited users and guests and all the support services, they still acted as if they were already on the free plan. Just knowing that “free” was an option was enough to cause a change in user behavior.

To confirm this, we conducted a simple A/B test where 50% of users we're not shown that a free plan was available at registration. With no change in the product, trial period or the pricing, we saw an immediate increase in usage across all key metrics. Engagement more than doubled. Furthermore, this resulted in a doubling in conversions to paid plans. Yes, double.

The perception of value is one of the biggest challenges facing any startup. When you have clear value, you have a clear growth opportunity. That can all be undone when give it away for free! Users will evaluate your product cognizant of the price even when they're not already paying. More often than not, if you tell someone up front that your app has no value, they’ll believe you! 

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Exits and Assholes (why shutting down your startup makes you a turd)

Hey there guy who just sold his startup to BigCorporate™! I hear you're shutting down the product that made you rich? Cool news, bro.

On behalf of all your loyal customers...Fuck you.

Fuck you and your shitty startup.

You stand there with your Cheshire grin, arms around your freshly minted friends. You sold out your customers and you're proud of that? You thank your fans for supporting you, and in the next breath you tell them you're no longer supporting them.

You sir, are an asshole.

I hope you and your team rot in corporate hell while you wait out your three year vesting sentence. I hope your lives are filled with meetings, reports, KPIs and more meetings. Oh and I hope they force you to install PowerPoint; you're gonna need it. And I really, really hope they make you take the "fuck it, ship it" sticker off because it's against their corporate policy. Not the swearing, the shipping.

Enjoy the company polo shirt, asshat.

But hey, don't get me wrong. Not all exiting founders are jerks like you. There are plenty of exits that are intended to grow the business, not shut it down. Selling to BigCorporate™ can mean a product will be better supported, or reach a wider audience or become a key member of a larger product family. The guys and girls that see acquisition as a means to grow their business and customer base are awesome. They're on to something so good that the acquirer wants to bring it in and put their logo on it, not shut it down. 

And here's the thing about you: BigCorporate™ don't want your customers, they don't want your brand, they don't want revenue, they don't want your business at all...they just want your team and maybe some portion of your IP.  Bottom line is, they're shutting you down because you failed to grow a business they want to keep.

Failing is ok. It happens to everyone. But as a business founder, it's never ok to fail your customers. Your customers made your startup what it is, and you turned your back on them. They took a risk to use your app, they put up with the bugs, they gave you feedback, they got bombarded with life cycle emails, they referred their friends, they tweeted how awesome you are... And you repaid them by simply switching them off.

Startup founders that create products with a view to exit rather than generating real revenue are not only doing their customers a disservice, they're doing themselves a disservice. Unless the big vision you pitched investors was "to get bought", then you failed. You got off the ride early because it got too hard, you got it wrong or because you lost faith in your vision. Instead you're now working that corporate desk job you swore you'd never work. You missed the opportunity to do something real.

But hey, congrats on the exit, bro. I'm sure your investor's wallets think of your exit as a success, but the rest of us see it for what it really is - a business failure.

P.S. The fact that this blog is posthaven is not without its irony.

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The dangers of eating dogfood

At BugHerd, we build a project management tool for web projects. BugHerd is, itself, a web project. 

Yes, we use BugHerd to manage BugHerd.

This is what they call eating your own dog food. The idea is that by using your own product you can better appreciate the value it offers, its failings and its successes. You know when things aren't working, or when there are performance issues; you know what features you should add, and which should get removed; you know where you need to fix up the UI and where to add some more starbursts.

But if you look carefully, there's a warning on the can. Eating dog food can be harmful to humans.

It's wonderful to inspired by a problem you have, to scratch your own itch or work in a domain you know well. But the fact is, you'll never be your own customer. You may use your product in a way that is similar to your customers, but that's where the similarity ends. 

You never pay for your product, you never have to get "onboarded", you never have to find the documentation, or learn how to use your API. You never have to contact support, work out why your credit card didn't work, decide whether to pay for a year in advance or just pay monthly. You never have to try and sell it to your boss or to your colleagues and you never have to learn about new features when they're released or understand why your favourite feature was removed.

The bottom line is, when you use your own product, you have a myopic view of your business. You have all the inside information, and none of the risk. You actually share very little with your customers beyond using some small slice of functionality. Most importantly, unless your customer market is "a startup building a product exactly like you" then your customer is not even in the same market as you. Your messaging, instructions, landing page, advertising is based on your own self perception, rather than the perception of your customers.

One of the first questions we asked ourselves at BugHerd was "would we pay for this?".... and as a cash strapped startup we said no. But that's ok, because we're not our own customer. If we'd just built what we needed, we'd be building a bug tracker for web startups, instead of our project management tool for digital agencies. It may broadly be the same thing, but the differences are often greater than the similarities.

The first mistake every startup makes is not talking to their customers and therefore not understanding their needs. It makes it so much harder to "get out of the building" when you can just ask yourself all the questions. But given all the differences between you and your customer, you're really missing out on the bigger picture. This isn't just a functional problem, it's a usability problem, a documentation problem and, most importantly, a learning problem. Dog fooding makes you lazy, and makes you less likely to understand your customer.

It's great to prove value to yourself, but at the end of the day, you're not the who's paying for it.

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