Since I mentioned yesterday that I’m starting to try and put together a seed round for Coach Wizard, I figure it’s probably a good time to finally talk about another one of the more painful mistakes I’ve made over the years - knowabout.it.
Like my former Draftwizard project, knowabout.it was a fairly ambitious thing I was heavily involved in that ultimately didn’t work out - and so digging into all the mistakes will take more than just one post.
Today, I’m just going to ramble on a bit about some of the big mistakes we made around trying to fundraise.
First - I think it’s important to mention that Will and I had mostly backed into making knowabout.it our full time thing.
At the time, I had been doing a consulting gig for Bit.ly who was actively incubating news.me as well - they were mobile focused and I was web focused, but otherwise it was clear (to me) that we were essentially working on the same problem/product.
I felt like I was a few months ahead and that they would eventually pivot more towards what I was doing (BTW - they did and it didn’t work for them either)…so to avoid emerging conflicts I chose to jump out on my own.
We were getting great user feedback, had tiny but nice early growth, and initial investor out reach felt really positive…so once I had made the jump and the commitment, Will decided to do the same and left his gig with Thomson Reuters to help kick our knowabout.it efforts into full gear.
Once we were full time, our efforts almost entirely fell towards trying to raise money…and boy did the mistakes start to rack up:
1. We didn’t have a business, we had a product.
I think it was a cool product, but we had no real idea how it was going to make money (until we got to scale; but *everything* makes money at scale.) Real business is what happens on the way to scale.
You might not be able to survive or grow the business off the revenues from your first 5,000 users - but by 5,000 users you *should* be able to generate some revenue (or at least have some real data that proves on, a small scale, your revenue stream ideas are shaping up as expected/planned).
We got to over 5,000 users - had good daily active usage and click-throughs…but still weren’t really sure how to pull even $10 out of that group.
Even if we were able to 10x that number, we had no real idea how much (if any) revenue that would start to generate.
We were just too focused on mindlessly growing the usage and engagement, when really it’s the revenue stream you’ve got to be obsessed with growing (growing anything else just means growing costs - so not always a great idea)
2. Almost all of our pitch was ‘if this, then that’.
Because we were mostly thinking advertising was going to be our holy grail for revenue, we were entirely focused on getting to massive scale (at which point we simply turn on advertising and realize great profit).
We didn’t really have a compelling story. We had some good and well intentioned beliefs (people are flooded with too much noise; there were/are no good personalization/recommendation engines out there) and our product actually did show great promise on these things. But we didn’t have the journey mapped out in a clear, entertaining, or compelling way to say how we *really* got from today to a better tomorrow (it all basically started with “Here are some problems. Here is our product. If you give us money…”)
3. We slipped into reactive mode.
Since we were only loosely mission based and instead more product and growth driven…and much of our story was along the “if this, then that” line…a lot of the pushback and feedback we got, we incorrectly interpreted as “if you do this, then…”.
If you had better design, then you would get more users. If you get more users, then we’ll be more inclined to invest. etc. etc.
What they were really saying was “You don’t really have a business or a story here yet. At least not one we can understand or buy into”.
Until we fixed that, it didn’t matter what else we did…but it was easier to take the advice more literal.
Design can be fixed. User growth can be bought and begged for. Defining our real story, building a business, those are harder to lump into an action item list – too big to be single, achievable, tasks.
4. We had no built in urgency factor.
Mostly as a result of all the things mentioned above, we had no real reason for an investor to say yes (or no) right now. The easiest, and option taken 100% of the time, was simply to say “Maybe. Come back in two months and update us on how you’re doing.”
Creating a sense of urgency is really just sales 101 (and make no mistake, raising money *is* a sales process; in fact, it’s an involved enterprise/b2b type of sales process that takes a large commitment of resources and generally has a low conversion rate [yet high return per sale and therefore economically viable]).
We also made a lot of other small mistakes throughout this process…but amazingly - our product continued to improve and we really were slowly gaining daily users.
However, this just meant that our (out of pocket) costs were just going up and up.
After about 10 months of this cycle we found ourselves with a lot of lukewarm interest from investors; a small, passionate, but hard-to-monetize user base; and a monthly burn rate of about $700 just to support our tech.
To top it off, we were seeing more and more players move into the market (some of which were already landing funding [and had *real* business plans]).
We had to step back and get some perspective before we realized how many mistakes we had been making (and really many of these things I mentioned above seem insanely obvious now; but didn’t feel so crazy or stupid when you are living them day-to-day and without an outsider interested enough to shake us into reality).
Once we reflected, it was obvious that we needed to shut it down and try something else.
Will moved on to Stack Overflow (where he’s still crushing it). I did a short gig with MyYearbook before ultimately connecting with Alan and Ryan (thanks to Darren Herman) to help automate and scale up PubGears (which we’ve been making great progress on for the two years since).
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Kevin also talks in more depth about many of the these things around twice a month via his drip campaign and has a day job as CTO of Veritonic. You can also check out some of his open source code on GitHub or connect with him on Twitter @falicon or via email at kevin at falicon.com.
If you have comments, thoughts, or want to respond to something you see here I would encourage you to respond via a post on your own blog (and then let me know about the link via one of the routes mentioned above).