This is how my startup failed, how i lost all my savings (around $50,000) I invested into it, my car and pretty much everything of value I owned, my co-founder/friend, and my health — all in about 10 months and what I learned from it.
* I was a non-techie founder
* This happened about 2–3 years ago when I was 22
* My 50k in savings came from a combination of online marketing stuff I was doing but mainly from a contract I had to do all the marketing stuff for the launch of a different SaaS company.
* The name of my startup or what it was about is also not really relevant here, since my f ups can be applied to whatever startup you are in or thinking about doing
Alright here are my biggest mistakes and what I learned from them:
1) Don’t limit yourself to starting only what you think could be a billion dollar company
So with the 50k I had, I wanted to build not just any type of tech company… but the next Facebook, Instagram, Airbnb, etc. — point is something “big” with millions of users. If you’re cringing right now, I know.. same.
This was my first mistake.
I mentally dove into that “silicon valley” dream/lifestyle and any great idea I had for a software that could actually help people but would only make say 5MM in annual revenue wasn’t good enough. I only wanted to work on something that I thought could be “epic” (i.e. millions of users, top 10 tech company)
So many things wrong with this, but hope you get the point of how this isn’t the right mindset.
Lesson I learned — you don’t need to chase the next “big thing” to have a successful tech company, and it could grow to that size without you initially thinking it would have.
2) Choosing your co-founder
So I chose my college roommate to be a co-founder. Great guy, but he had no idea about marketing, no dev/design skills, wasn’t investing any money, and was just willing to help.
As a lonely entrepreneur I thought it would be a great idea to work side by side with someone every day and could use the help. I gave him a %, but after like 6 months of work with out any pay and I’m the one investing all the money he just easily backed out and went on his way and I obviously can’t give up just like that.
We obviously didn’t get along after that and I lost a friend/co-founder who had no business being a co-founder in the first place. In the end, it was a lose/lose, my fault for making him co-founder, and lost a friend.
Lesson — if you are going to get a co-founder, actually choose one for the right reasons. Avoid friends/family if possible.
3) Actually getting started
Once I had my idea, I spent about 2 weeks deciding on a name/domain I should choose, then another 2 weeks getting a logo made and opening up an LLC. Did all of this before I was even clear exactly on what I wanted to build or if anyone even wanted it.
Your startup will pivot in most cases before you make your MVP so the name and logo might not even be relevant. Time/money was used up, it shouldn’t have been the priority when I was first starting out and set me back a bit.
So before you choose a business name, domain, make a logo, or legally open up a business (all the stuff most people get wrapped up with before starting) — get started by just locking in your initial team, getting clear on what you want to build, validating it, initial wireframes and your off to the races.
A lot of work in that last sentence and everyone has their own way of getting started but the point is you could do all of that and more before even choosing a name. Don’t let the “formal” stuff hold you back.
4) Get clear on what you’re actually making.
For the longest time I wouldn’t be able to describe what I was making in 1–2 sentences.
This is kind of my own made up rule, maybe it exists already idk, but rule of thumb: if you can’t describe your startup in 1–2 sentences to someone not in your market and have them understand what it is, you’re not clear on what you’re building and is a sign of bigger problems to come.
5) Get clear on WHO you’re making this for and how they can be reached.
This was one of my bigger f ups. Fast forward 8 months to when I had something ready to get my first users.. I knew it was for business owners (B2B) but didn’t realize that they are that much harder to reach (for me anyways) than consumers, and I also had the type of platform that I had to grow city by city (f’ing nightmare).
After a couple days of going door to door to businesses I could start to see how this was going to be a problem.. I didn’t account for the time/costs it will take to reach my ideal customers. It was a big smack in the mouth.
So figure out WHO you are making this for and how you’re going to reach them before you start. Just take that into account so you have the right expectations and you can plan/budget for it.
6) Talk to your ideal customers / “Validation”
One of the most valuable things I ever did was go to a local business owner (my ideal customer) and sit down to have jerk chicken with him in his restaurant.
He told me what he would like my software to have, and what he wouldn’t like it to have. He told me the best features I could possibly put into my software.. essentially told me what I should build because he obviously would know what’s best since it’s for HIM not me.
Bad News: This was 8–9 months in after I built something pretty advanced already, and basically used up all my savings. What I did with him is something I should have done as many times as I can with multiple business owners before any code was even written.
Good News: That jerk chicken was on point and he gave it to me for free.
7) Don’t be a feature whore
I held back launching my MVP (minimum viable product, prototype, etc.) because I just kept adding “1 more feature”all the time. Since to me, if it just had this 1 more great feature it would make all the difference in the world.
It ran up my costs and time before launching it, and defeated the whole concept of an MVP in the first place.
Just add all your ideas for features (most of which you should be getting from your ideal customers) to a bucket list and actually launch an actual “minimum viable product” that you probably won’t be totally proud of. Will save you time/money.
8) Go lean. like Tarzan lean.
For the love of (whatever you love a lot) PLEASE freken do this.
Over 90% of my savings was paid to developers/designers for the build of it. And worse, I was paying by hour.
Paying for dev/design work by hour for a new startup is an insane concept to me now. There are always gonna be bugs, something that doesn’t work, something that needs to be added, etc.
If you are paying for a team or plan to, I would avoid paying by hour and just put them on a salary and set expectations for tasks that should be completed that week/month with them.
And ideally, especially if you’re a non-tech founder like me, PARTNER. Partner with a dev or whoever you need to make it work for equity, that’s the only way I’ve ever successfully been able to be lean and build a SaaS or any software with minimum upfront investment.
9) Don’t waste money on legal
My startup had to deal with payment processing (at least initially before I pivoted) so I thought I needed it.
Point is, in most cases you can probably get away with free (or cheap) basic legal docs. online to get started.
Don’t count on funding/investment to get initial users/survive.
I went through hell and back to try to get funding. Creating pitch decks, getting meetings with investors, the whole works. At one point, the majority of my time was spent just looking for funding for my startup instead of actually working on it.
I needed funding to get users/traction. Users/traction (among other things) was needed to get funding but you can see how this could be an issue.
Lesson here is, unless you have the funds or team to get to traction then don’t start it. (there are exceptions to everything but this just a rule I follow now for the best chance of success)
11) Advertising as your only revenue model is sketchy.
So I thought I would just make my whole platform free for everyone and just eventually have ads on it when I would get “millions of users” and then, boom, we’re all rich..
Investors were like LOL, have a nice day (especially if you have poor traction). And yah it’s just something I avoid now.. if you’re going to make something that helps people, charge for it.
Note: I’m gonna get crap about this probably.. I’m not saying this can’t work, obviously it has worked for a lot of companies and continues to.
And I don’t know how I would prove this but I would bet that a higher % of startups that rely on their business model to be revenue from advertising fail more than those that actually charge for some version of their software. if that makes sense at all…
So point being, planning to sell ad space as your only revenue model for your startup is something I would try to avoid.
12) Caution with “brain drugs”
This is probably my most embarrassing mistake to share, and I think it fits here since your mind and health needs to be right to make your startup work..
I fell into the trap of thinking “brain drugs” would help me get ahead.. From various nootropic stacks, to modafinil, to stuff like adderall or vyvance. I tried different types and ended up becoming reliant on it.
Sure I was able to grind out 15 hour days no problem.. then it turned to 24 hours straight, then 40, then before I knew it I went a couple days without sleeping, had a panic attack and ended up in the hospital. Dialed it down a bit but still was going at it too hard.
So pros.. yah I felt like a God and I would crank out epic amounts of work.
Cons — besides the anxiety I would get and panic attack mentioned above, the work that I did wasn’t better, it was just a lot. And most of the time it was useless work, or work or tasks that weren’t a priority. It affected my judgement and priorities of what I should be working on.
(Note, most nootropic stacks are probably OK, but the modafinil, and harder stuff like adderall is what I’m mainly referring too).
On that note, at the time there wasn’t a damn thing I could read that would make me stop taking any of that so I don’t expect you to stop immediately if you’re taking it (even though I hope you would) but if you are thinking about starting to take anything like this, I would stay away from it and just be you. You’re more than enough to build something great.
In the end (after about 10 months) I had burned through my entire savings and cash from everything I had sold to try to make it work — my car, golf clubs, etc., I lost a friend/co-founder, and was pretty unhealthy mentally and physically.
Eventually I buried this startup and moved on..
I ended up taking a couple months off before starting another SaaS with a couple friends, and with less than $1k invested between us, 3 months in we were live with sales and it was acquired 6 months after that.
This specific epic fail however and lessons I learned from it (although there have been many and I’m sure more to come) really helped me with some of the wins I’ve had and hope it does the same for you.