Startups: Vision is great but it doesn’t pay the bills.
Disclaimer: This was a tough story to write. My baby, CPUsage, the company that I spent the past three years building, pouring every ounce of effort, blood, sweat, tears, and money that I had, has failed.
We convinced the industry and tech press to care about us. We raised a seed round from leading Silicon Valley investors and hired the right people with limited money. We built a great product, had trouble with market fit, pivoted, raised a little more money and built another amazing and complex but easy to use cloud computing product that solved the exact problems we were trying to solve. We launched at TechCrunch Disrupt Battlefield on stage in front of thousands of people. We had a great vision and pushed as hard as we could towards that vision. So what was missing?
Vision and sweat are absolutely necessary, …but customer validation is key.
We had a grand vision. To truly turn cloud computing into a utility similar to electricity where anyone could consume any amount from anywhere and only pay for what was used. The problem is, we were not a customer-centric company. We broke the cardinal rule. Customers are the only thing that matter… well almost. We were too busy building a product that WE thought was the right product to build, a product that WE thought would change the world. We told the story of what customers wanted without getting real customers to pay us real money. We had meetings with customers, tried to sell them product, but we never had a single letter of intent.
Marketing is difficult but vital
All of our marketing was done internally. The problem is, with the exception of my co-founder who was constantly hung up fundraising, we were an engineering organization. Our team could pump out a quality product in no time, but we didn't have any way to sell or market the product.
My co-founder and I engaged with customers in the spare time we had from performing the other duties that we put first; raising more capital and building a better and better product.
We were more an engineering team than we were a complete company.
What have my hard lessons taught me?
Who’s your target customer? What are their pain points? Find the answers to these questions before you build anything. It’s easy to make assumptions. Beat the streets and really dig deep on pain points. Don’t go in suggesting the solution you came up with. Go in asking questions and listening to real world problems.
Only after really understanding the problems of the masses in the given industry you are trying to disrupt can you start to figure out what your solution should be.
CPUsage initially took the approach of building a solution and then finding the problem.
Startups are uniquely positioned to disrupt markets for a few reasons. First, they are young in the market and naive and are not jaded by prior experiences. Large companies struggle to disrupt as history in the industry makes them conservative.
Second, startups are not overwhelmed with bureaucracy. A startup can make a product decision one day, begin developing the next day, and have a product ready in a matter of months. Large companies simply cannot react that fast.
During the process of building any company, assumptions that are made along the way will be continuously tested. Founders, managers, …hell every employee in the company should be aware of what’s happening around them and be willing to change when (not if) the time comes.
Don’t read into this that the company should pivot every time a new customer wants a new feature, but stay ahead of the writing on the wall. Keep the needs of your customers, or potential customers, as true north at all times.
CPUsage eventually pivoted but we burned through most of our cash before we got there. That left us not well suited to go after the market post-pivot.
This is something I can’t stress enough. It will seem like your company never has enough money to hire the right team. You can always use another engineer, another sales person, more marketing. You can’t always afford it.
Sit down and figure out the core roles you need on your team to at least get to the next level, whether that be more customers, more funding, or the acquisition you’re looking for. Sacrifice where you can to ensure you have the team you need to get to that next step.
Hire the right people for the job. Finding someone with the skills is only half the battle. Actually, I’d say it’s only 1/3 the battle. Make sure the people you hire fit into the culture and that they see the vision. The first few hires in a startup WILL make or break you. Find people who are willing to go 150% towards your vision; people who see the vision but aren't afraid to challenge it from time to time when questions arise — Constructively of course.
CPUsage built a top notch engineering team with a very limited budget. I would go to battle any day with the team I had. We should have focused heavier, earlier on the marketing and customer side. We needed to really get customer commitments and build the exact product they need vs building a product and then finding customers.
Always have a 45 day strategy
It doesn’t have to be 45 days. 30 or 60 days are fine too but always have a strategy for all vectors of the business. Set tough, but doable goals in the strategy and meet regularly to ensure progress is being made towards those goals.
It’s so easy to go off on tangents in a startup. A customer tells you a cool idea or a brainstorming session throws the team off thinking about product two years down the road. That will happen, and those brainstorming sessions SHOULD happen. But make sure to properly prioritize and keep a plan of what the next 30-90 days looks like.
Do this for engineering, sales, marketing, even business administration tasks.
CPUsage did a good job of this on engineering. We had weekly goals, monthly goals, etc. We had release dates and we drove to meet them. We didn't do as much of this around the customer acquisition or marketing side of the business.
Maintain customer centricism
It’s hugely important to figure out what the customer needs before you start building the product — But don’t stop there. As you iterate your product, never stray more than an arms length away from your customers. Push product to customers fast and early.
Always start with a minimum viable product (MVP) and iterate on it. If you try to build the perfect product before launching, you will be left in the dust. A friend once told me “If you aren't embarrassed with your first product, you waited way too long to release it.”
At CPUsage, we got into this mindset too late in the game. After we had already burned through much of our cash. We had a huge uphill battle at that point.
We fought a tough battle and we all have scars to show it. We learned a HUGE amount during the process. While it’s tough to close down shop and turn off the lights, the skills and lessons we have learned through this process will change us all forever.
“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” — Heraclitus
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