5 Startup Lessons we learned from our first venture

by Arttu Vesterinen

Minimum Viable Product-The best investor is your customer

We all like to read about great success stories and it’s a sure thing that you can learn a lot from them. But, we believe, many times you can learn even more from failures, mistakes, crashes & burns. We certainly learned a lot from our first venture, which didn’t go quite as we expected. We were young and fool (and we are still today), we definitely made mistakes and eventually we were able to admit that we had failed. Here are five lessons we learned from our first venture Statbeat — formerly known as Liiqu (formerly known as Paizio).

Lesson 1: Don’t Just Create a “New Facebook” or Basecamp or LinkedIn (You Name It)

Watching The Social Network, feeling the start-up boom in Aalto Otaniemi campus and dreaming of being a self-made start-up billionaire, created a fertile ground for thinking about “new Facebooks” back in the cold winter of 2011 when we were starting our first business. I’ve always been a great fan of dreaming big,  doing big things and I strongly recommend everyone to do so, but back then when we were starting our first venture Statbeat, web service for team sports players, it was not a good idea to think in terms of a “new Facebook.” We were extremely naive when thinking about what it would require to create a web service for such a massive number of users and how to actually get them there.

Of course, there are lots of differences when comparing small web start-ups to big Internet companies — one of them being the scale of problems that these companies face. When we look at small start-ups and web services of our size, we believe they should focus on validation and customer development, not on how to make the site scale from one million to one hundred million users. When you grow bigger, the problems get bigger but at first it’s important to know how you get over those first stepping stones.

Lesson 2: Get Out of the Building

This should be no-brainer because I guess there’s no entrepreneur who hasn’t heard the phrase. But still we were making all excuses on earth and not getting out of the building. When we now look back, this is probably the most significant mistake we made. If we had just talked to real customers at the beginning, we would have been able to avoid so many pointless features and save thousands of hours of work. You don’t want to build a million dollar product nobody is willing to pay a dime for. Even if you were creating an extremely disruptive product (for a completely new market) you would still need to talk to hell of a lot of customers to begin creating momentum and hype for your product. There’s just no way around it.

Nowadays, almost every start-up says they are getting out of their buildings, talking to real customers and validating their business models, I think there’s still a lot to improve on. You will gain a lot more than just validating your initial hypotheses about your business. You will actually start building your invaluable network, develop your indispensable selling skills (and yes, you actually can’t live without them if you want to grow a successful business), get people interested and enthusiastic about your upcoming product and make them even redistribute word about it. So grab your phone, make a call, get out, open your mouth, ask questions, challenge people, sell, persuade and eventually you will find that your product will find its niche.

Lesson 3: Define Your Business Model

We thought that users would come when the product was ready. But they didn’t (Webvan?). We thought that doing an awesome product would make everybody interested in the service and convert them to active users. But it didn’t happen. We thought that adding new features to the product would change it. But it didn’t change anything. We believed that because we loved the service other people would love it as well. But they didn’t. When asked, we stated that getting the users is our business model. But it wasn’t. And they never came.

Defining your business model doesn’t mean that you want to create new Facebook. Those mammoth web services like Facebook, Twitter, LinkedIn and others were all based on some specific business models when it comes to spreading, growing, scaling and in the end, capturing the value. That means, concentrate on the specific user problems and solve them.

Just saying, “The users will come when it’s ready” is not enough. You need to know why they would come to your site, what problem they would be able to solve and what value they would gain by being there. And by mirroring  these hypotheses, you need to make a choice on how you are going to actually do business with it: are you going to maximize the number of users, the amount of time they spend on your site, the piles of money they spend there or something else? All of these strategies require different kinds of metrics, processes, financing and probably features as well. By knowing your initial business model and hopefully defining it clearly as well, you are able to pitch your idea better, test it more effectively and even pivot it if it doesn’t happen to work. That’s what we did in the end after twelve months of suffering.

Lesson 4: Use 80/20 Rule

This lesson is strongly related to lesson number one. If you start thinking about the future problems regarding scalability and being big, you will probably start backing up and optimizing your code to avoid those future big problems of, for example, scalability. I think this comes many times from those horror stories of websites falling apart and losing all its customers because of incomplete architecture and unoptimized performance.

Stop over optimizing. Especially stop over optimizing at the beginning. What we did with Statbeat was to polish everything and believing, trusting that everything should be ready once we get those millions of users there. Of course, it didn’t go that way. Looking back now it’s far more rational to do the 20% work that gives you 80% of results and then once you get over your initial challenges, you start optimizing the original sacrifices you made with the architecture and code. You will save so much time that you won’t even believe it. I know, we didn’t. But I certainly hope that now we do.

I also know that some of you say that by giving up  some important optimization, people will leave as soon as they come to your site.  I also agree with this. But at the same time it’s important to remember that early adopters and innovators behave differently from the majority. They will forgive you far more than the majority because they buy ideas and may even start to help  build your product. So choose your architecture wisely but, postpone the optimization part.

Lesson 5: Don’t Give Up

Finally, we started to accept our mistakes. We decided to do something about it. After running out of money in the fall of 2011 and not getting anymore funding rounds, we discussed our choices and decided that all of us still wanted to continue as entrepreneurs. Still having all the developer talent inside and with the help of a couple of our contacts, we got few consulting cases that brought in our first revenue.

But we still knew that we loved to do product business after all. Luckily, we found a way to pivot Statbeat, which we are now building with our partner Arena Center. Moreover, we found a completely new business model (more from that in the future posts).

Lesson learned: even in the face of likely death, don’t give up. It’s about what you love to do,  knowing it in your guts, and that it gives you the drive to start it all over again. Getting back to the first lesson: think big, think like Mark Zuckerberg but don’t think naively. Look up, get up and don’t ever give up.