Bootstrap Hawaii Ep. 3 – Throwing Away $50k – A Cautionary Tale

Bootstrap Hawaii

The title of this episode should give you a good idea of what its about. Hopefully it can prevent you from making the same mistakes I made.

I began doing idea (re)validation calls with existing Lesson Underground members this week. I was able to talk to 6 people so far and am hoping to continue to get more feed back and collect more data points.

While doing these calls, it quickly became evident that what we had built was just not what customers were looking for. I talked to my partner Aaron about the things I was hearing from these customers and we both independently came to the conclusion that it would just be too expensive to try to retool what we already have and paid for to effectively solve the problems the customers are telling us they have.

Thus we are essentially starting over, throwing away a $50k investment.

As bad as I felt for wasting our money, I feel equally as bad about not using the app Sudokrew had developed for us. Sure we paid them, but no one likes seeing something they worked really hard on not be used at all.

It’s a tough call, but in entrepreneurship, its important to stay solution agnostic and always be committed only to solving your customers problem(s) and nothing else.

Some of the key lessons I hope you’ll be able to learn from my mistake:

1. It’s incredibly easy to fall into the trap of potential revenue. Just because an app theoretically “can” make $X, does not mean you will ever get there, and it definitely does not mean you’ll have that day 1. Be practical and stay in the present reality.
2. Never, ever, ever begin development until the idea has been validated. Also, be sure that your data is current. We assumed things were the same as 2 years ago but markets and customer wants change. If your data is old, go back and do the validation all over again.
3. Keep hubris in check. We (I) got overconfident because Ukulele Underground has worked out ok. Generally for bootstrapping there are a few rules you want to stick to to maximize your chances of success.
   1. Target SMBs as your customers. Consumers are much more difficult and churn will always be an issue (we’ve found that to be the case with UU as well)
   2. Keep your revenue model simple. You make something, people pay you for it. We tried to monetize of a commission which requires mass volume to create a sustainable company.
   3. Don’t start marketplaces. Marketplaces require you not only to build the infrastructure for both the supply and demand side, but you also need to expend more energy and resources to get both sides of the equation into the app which usually means more money. There’s a reason why most marketplaces need to take funding.

So Where do we go from here?

Basically we’re back at square one. The good new is, by doing these calls, it still seems pretty clear that there definitely is a problem there that these people need solving. It’s not like we have to abandon the idea altogether and in fact, this will probably close to a true pivot rather than those fake “pivots” where you basically just start a new company with an existing name.

What I need to do now is continue to talk to more people; customers and teachers to really get a clear understanding of the pain points and problems they want solved. Then we can craft a much simpler product to service their needs with a simpler revenue model.

I plan to keep making calls to both students and teachers for the next week and maybe for the entire month of January. The general rule of thumb when it comes to idea validation or customer development is you keep doing it until the answers become predictable or you know the problem of your customer well enough to explain it to them better than they could themselves. With just 6 data points, thats not enough so it looks like I’ll be logging a lot more time on the phone.

Until next week true believers!

Resources talked about in this Episode:

Rob Walling – Startups for the Rest of Us Episode 262 – 13 Signs You Should Kill and Idea You are Validating

Alex Turnbull of Groove HQ on Customer Development

A cliff notes of Steve Blank’s ( I think I said Steve Krug who is a usability designer) Four Steps to the Epiphany – The Entrepreneurs Guide to Customer Development