In what feels like a lifetime ago, I decided to build my first, real startup. From February 2010 to February 2014, I served as the co-Founder and CEO of a small company named CPUsage. Me and two amazing co-founders took a crazy idea, explored a big problem space, began building a prototype, raised venture capital, built a team, built a couple products, flirted with providing value to a market, and then failed miserably. Four years, about a million in outside funding, destroyed personal lives and finances of at least one co-founder, and we had nothing to show for it. No meaningful revenue, no product worth something to others, no acqui-hire.
These were the most enjoyable and educational years of my career! I loved every minute of it! I learned more than I imagine an MBA or any set of degrees could teach. I’m a better human for this experience, and a better professional. Failure and all.
I learned so much about so many things, and in this blog post today, I want to focus on what I learned about what it takes to be successful when starting a company. Specifically doing so with the intent to innovate, grow rapidly, and return outsized rewards to employees and investors….in other words, a startup.
I try to limit regret in my life, but I do seek opportunities to improve myself by learning from my past. Through my experiences co-founding and leading CPUsage from 2010-2014, here is some of what I’ll do differently next time I start a startup.
Go deeper with potential customers
In short, I became a Product Manager after CPUsage because I quickly realized that we failed in part due to one specific reason: we didn’t go deep enough with customer discovery. We talked to a bunch of people, there was no shortage of potential clients or simply just people to learn from. The problem is that we got too excited, too easily. We stayed at the top level of the problem, we didn’t dig deeper to understand the root of their problem or how truly painful it was. We heard what we wanted to hear, went back and built what we thought the potential customer wanted, and then they never used it.
There was clearly a problem, and it was painful. We just didn’t know exactly where the pain emanated from, which meant we couldn’t prescribe the right medicine. We sought what we wanted to hear, not what we needed to hear.
I became a Product Manager because I wanted to master customer discovery and make sure I was equipped to prevent this mistake again. I loved building software, but I wasn’t going to build truly great software until I figured this out. Big thanks to Todd Etchieson for believing in me and giving me that opportunity at New Relic!
The next time I build a startup, I’ll do what I’ve done as a Product Manager since CPUsage: be relentless with customer discovery, seek deep understanding of the problem space, and build products that are 10x better or 1/10th the cost of the alternative.
Have a REAL go-to-market plan
So it turns out that taking a product to market is more than posting about it on Twitter or Hacker News and hoping people will come use it. Who knew?! Through my experience at CPUsage, I learned that my world may seem big and important, but it is just a spec in the universe of software, technology, and the market I am going after.
We honestly had no plan, and no idea how to win customers. We were building a two-sided market and easily figured out how to capture the supply side, but didn’t tackle the demand side. Seems obvious now, but it was far from obvious then. Tell a few friends and it will take off, right?
The next time I start a company, I’ll think about go-to-market from day one. We’ll make demand capture and distribution an inherent aspect of the product. Just because you build it, doesn’t mean they will come.
Focus spending
I now know that in the early stages of a software startup, the most important thing to invest in is customer validation with product. There is little that you can spend money on that is as, or more important than, putting product in the hands of customers and prospects to learn from, and adapt to. Almost anything else is a distraction and likely doesn’t produce significant enterprise value.
Don’t hire sales people. There is no need for a CMO or even a marketing intern. It’s all about engineering at the pre-seed and seed stage. The co-founders can do the rest. Spend to learn, and learn through the eyes of your customers and prospects as they use (or don’t use) your product.
Seek accountability
If it isn’t obvious yet, I should tell you that my co-founders and I had never started a company before, never took funding, never built a real product outside of our day jobs. Not only did we need help, people to guide us, and hold us accountable…we didn’t even know we needed this. As the saying goes, we didn’t know what we didn’t know.
Within weeks our initial close of funding, we attended a portfolio event for our lead investor. For some reason, we thought this was the right time to ask our lead, “you gave us money but didn’t ask for a board seat, don’t you want one?” He probably laughed inside, and then told us that as a seed-stage company without a complete product or any customers, we didn’t need the overhead of a board. We should just focus on building our product, and let him know if/when we needed help.
We didn’t take him up on that offer enough. We talked to our investors frequently, but we were mostly on our own. We asked for help, but in hindsight we only asked for help a fraction of the time we should have, in part because we didn’t know we needed help.
We may not have needed a traditional board of directors at that point, but we certainly needed the accountability that a board with investors/outsiders provides, along with the sense of “in it together” that I believe board members share with founders.
When I do it again, I’ll ensure that I have a framework in place to hold myself more accountable. It may be a board with investors/outsiders in the early days, it may be advisors, it may be a peer group, it will probably be all of the above. Regardless of the form, I’ll seek accountability, asking others to say the things that are heard to hear, tell me when I am wrong, set high expectations, and ultimately walk with me on the journey. Business success is no one’s responsibility except the founders, but we can’t do it alone. That’s just human nature.
More goal setting
Especially in the early stages of a company, it’s simply impossible to plan very far into the future (you decide what “very far” means). That doesn’t mean you can’t plan, and those plans better be more specific than “build valuable things that people will pay for.” How will you know what the thing should be? How will you know when you’ve gotten here? How will you know what valuable means? I may not know what I need to do every day between now and ultimate business success, but I can predict with high degrees of certainty what questions need to be answered, and what milestones must be reached.
When I do it again, my co-founder(s) and I will drive our work from questions we know need to be answered, and milestones we believe need to be met. We’ll put short term and long term goals in front of ourselves. We’ll commit to doing achievable things in the near-term, then do them. We’ll create inflection points and forks in the road, and we’ll ask others to hold us accountable to these things. All this will be done while being firm on the vision and flexible on the details, giving ourselves room to be wrong, or change our minds, in service of the goal.
Fail faster
Did you catch this earlier in the post? About one million dollars and four years? As first-time founders, we falsely believed that stretching our money out as long as possible would give us the best opportunity to learn and build for success. We were so, so wrong! Our frugality meant we did less, in more time, and impacted our ability to learn quickly, from meaningful product development. Sure, we had 4 years to learn, but those learnings were each less valuable than they would have been had we gotten them in 12-18 months, instead of 48. In fact, we would have had a better chance at success had we spent the same amount of money over a shorter period of time. Building more, more iteratively, and more quickly would have created enterprise value. Both in the product itself and the trust we’d have built in our investors and customers. We would have had a better chance because we would have pivoted sooner, but also because we’d have more people believing in us and rooting us on, including ourselves.
We failed too slow because we made all the other mistakes listed above. We didn’t set specific enough short term goals and questions to answer. We didn’t have a framework to keep ourselves accountable to this work. We didn’t spend purposefully to develop products we could learn from. We had no clue how to get our product in the hands of customers. We didn’t really listen to the problem within the problem when speaking to the market or customers. All of these mistakes ate up time. Sure, they ate up money too, but most importantly they ate up time.