Continued from part 1: Learning to explore
I’ve now had plenty of time to reflect on my last start-up, which continues to grow and has reached profitability! There were some good decisions and some lucky breaks along the way. However, as a first-time founder, I made too many mistakes to count.
I’d like to highlight two of those mistakes in particular:
Mistake #1: I scaled the team too early.
Prior to business school—around 2015—I tried to build a couple of software businesses using offshore, freelance developers. I had zero experience with software design, product management, or any kind of entrepreneurship.
That experience didn’t turn out well. Hundreds of hours and nearly $20,000 of my after-tax savings down the drain.
After those failures, I decided that my next start-up would be different. I wanted to do things the “right” way—come up with an idea, form a team with technical co-founders, raise money, and head off to the races.
And that’s exactly the path I took with my last start-up in 2017. Given the nature of that business, I may have been able to bootstrap for longer with a leaner team, but I wanted people to help me shoulder the burden. So I recruited three co-founders—an unusually large founding team, and I also hired several employees.
My decision limited our financial flexibility. I now had to fundraise. And when I couldn’t raise as much as we needed, things became difficult.
Mistake #2: I did not focus enough on product market fit.
My last start-up had paying customers very early on. Partly due to our large team size, I felt like we needed every bit of cash we could find to survive, so I decided to serve anyone willing to pay. Too late did I realize that this is not the way to optimize for product market fit.
I didn’t think hard enough about our ideal customer persona. I chased too many different customers. I distracted us.
In general, as an entrepreneur, you should avoid competing on price. It’s a race to the bottom that is tough to win, unless your last name is Bezos.
Most of our early customers saw us as a low-cost service. But there was one particular customer who saw us as a premium provider. And they were willing to pay up. They were so happy with our service that they started referring us to their colleagues and friends–across multiple firms too.
This should have been enough signal for me to double down on this specific segment. But I didn’t. No excuses. I never tailored our product and marketing message for this ideal customer segment as much as I should have.
Apart from my last company in particular, I’ve had two recent realizations about entrepreneurship at a more general level:
- For most start-ups—at least the types I’m interested in building—reaching customers is more difficult than providing the solution itself. As the saying goes: “First time entrepreneurs focus on product. 2nd time entrepreneurs focus on distribution.”
- I’m a more experienced, wiser, and overall better entrepreneur now than ever. I do want to dive again into a new venture. The key question is what.
Continue for part 3: Finding structure through serendipity (And a new career announcement!)