Losing Sight Of Lean In Your Startup Is Dangerous and Here's Proof
It's been a long time since I wrote here. Too long. And ironically the last post was about celebrating the launch of Virally - back in May 2012.
And now, here I am blogging about how we lost sight of Lean at Virally.
We've made a lot of mistakes during the last ~8 months and most of them come back to forgetting about Lean. Getting too close to the battles that we lost sight of the war.
1. We Focussed On Revenue As A Metric Too Soon
Or more specifically, we started worrying about revenue before we'd properly validated the product. And revenue can be very distracting - not only is there the technical overhead of integrating payment processing, recurring billing, plan switching, plan limits... but from a management point of view, it makes it dangerously too easy to lose site of securing validation through traction.
The result: We had a few clients paying us a lot of money, and 95% of idle accounts because we'd not properly focussed on usage, engagement, value proposition.
2. We Allowed Early Paying Clients To Dictate The Product
It's not a bad thing to have paying clients. But, we were guilty of laser focussing on our paying customers when we should have been focussing on the thousands of businesses who weren't yet paying customers, and focus on solving why they hadn't engaged with the platform.
With a UK Startups seed funding budget, it's imperitive to map out revenue as early as possible, but you need to keep focus on the fact you're trying to build a million pound turnover business, not a hundred thousand turnover. That means volume (for SaaS) and in most cases, that volume will come from the longtail.
The result: we have a lot of advanced features in Virally that confuse most of our users
3. We Didn't Raise A Large Enough Seed For Our Strategy OR We Didn't Adjust Our Spending Strategy To Fit The Seed We Achieved
We raised a large (for UK seeds) amount of money. However, it wasn't the size seed that we were aiming for. However, we didn't take down salaries to accommodate. We didn't lean up on office expenses. We didn't reduce our R&D budget and add it to marketing & sales.
In short, we either should have raised more cash or realised we needed to be more frugal.
The result: we're going to come within a knife edge of our finances, and we had to take some convertible notes, which were hugely distracting and only for a relatively small amount of funding.
4. We Stopped Experimenting With New Ideas Too Soon
Before we knew what had happened, we'd spent nearly all of our R&D budget on a single idea, and then when we listened to our customers, spotted a 'pivot' that had much better opportunity. But almost too late.
Seed stages in a startup are for experimenting. Pivoting Making new mockups to show potential customers. Trying new weekend hackathons. Focus when something 'bites' but keep experimenting until you feel a bite.
If you're unsure what a 'bite' feels like, a good indicator is that it's ridiculously simple (probably 5x simpler than your original idea) and people don't need selling on it. They just want to try it out. If you find yourself still trying to convince people at networking events, chances are you don't yet have the gold strike.
The result: we felt a 'Bite' very, very late. And it was a much stronger bite than the original idea that we'd already invested 7+ months into by this point.
5. We Were Too Slow To Use Metrics As A Foundation
We should have been building the minimum User Workflows every time, and adding complexity when we had 90% of users completing each journey. Instead, we build complex workflows, stared at our 0% metrics, and then had to go back to square one, chopping away features that had cost valuable developer hours.
The result: we had a particular process (creating a new campaign) which had a 5% completion rate. But we had no idea where the problem was. After setting up full metric tracking and analysing each stage, we increased this to over 60%. But by this point, we'd already wasted hundreds of signups.
Interestingly, the costs of the metrics products out there was a contributing factor to our launch of http://trak.io
6. We Undervalued User Experience (UX)
Virally was/is a complex product. But it shouldn't be. It's simple to explain - turning files into fans, followers and subscribers. But using Virally was NOT simple. We had loads of amazing power features that a handful of our power users had requested, but the other 98% of people who signed up couldn't even create their first Campaign.
Pretty design is not UX. UX should be done as rough wireframes - don't allow time to be wasted in photoshop.
And don't waste time on a single new feature until you are confidently getting the majority of your users through your existing workflows.
The result: one of Virally's main criticisms was it's complexity and many users found it confusing to use. They didn't care about the 17+ extra features awaiting them because they couldn't get past the first gate.
7. We Underspent On Marketing and Sales
I can't stress this enough. For a SaaS product, put at least 50% of your efforts into marketing & promotion. there are exceptions, such as startups with huge funding behind them. But, if you're looking at a 12 month runway or less like we were, you should be bringing in those Beta users and later, free Trial users in the hundreds per week, minimum.
It's hard as a developer-focussed team may not be naturally giften in these areas so the temptation is to allow those people to keep building more features. but don't. Get the whole team blogging, attending events, commenting on forums, Quora, Hacker News. there comes a time when there is no point doing any more R&D if you haven't got a large enough user base to validate your experiments.
We found it particularly hard to bring in quality PPC traffic. About 90% of a £5,000 spend was garbage. If your startup is in a disruptive area, or people aren't actively rushing out to find this solution, then you'll need to do a bit more than just throw money into PPC.
Of course, content marketing will be a huge part, but be mindful of the slow-burn nature and if you have a short runway, it can take 6-9 months for a blog to grow to a size where it will bring significant signups to your app.
The result: we have a tech product with nearly £100k of R&D in it, and yet we only make tens of signups per week, when our business model requires thousands.
Conclusion And A Virally Update
Even with our seed funding and our paying clients, Virally has come extremely close to running out of runway.
Do we have enough runway to get sustainable? Not sure. But we'll be damned if we're not going to try. Just by refocussing back onto Lean, we've achieved a new energy, focus and drive within the team. Virally isn't going anywhere!