4 Lessons From My First Startup Failure

Before I started Grumo Media in 2010 I spent 1.5 years working alone at home pouring my heart and soul into building an online project managing and invoice tool called PointKit.

Unfortunately PointKit never saw the light of day because I ran out of time, money, patience, and energy before I could even do an official launch. In other words, PointKit was a failure, a typical first time entrepreneur’s failure.

Failing is hard, demoralizing, painful, and embarrassing, but in many occasions it can also be the most effective way of learning important lessons that will prevent you from making the same mistakes in the future.

In this post I want to share some of the lessons I learned from my first startup failure with the hope I can help future entrepreneurs avoid similar mistakes. There are many more mistakes you can and will make. Even if you knew every single way a startup can fail there will never be a guarantee you’ll succeed, as many factors that determine success will never be under our control. Let’s just hope after you read this you never repeat these 4 fundamental mistakes I made.

Lesson 1: Don’t underestimate the effort that goes into building a complete product

Why did I decide to build PointKit? Before starting PointKit I had already developed and sold a custom project management tool for a team of Canadian Cisco engineers. The tool worked so well that one of the engineers suggested I should build a business around it. At that time I was freelancing and considering starting my own company so the idea of building a SAAS (Software As A Service) startup seem very appealing.

At that time I naively thought all I had to do was put a price on my project management tool and bingo! I could start making zillions, retire on Mars and have martian piña coladas with my buddy Elon Musk.

Boom! BIG MISTAKE numero uno. A tool is not a product. A product is not just a tool.
Taking a tool and making it into a real product (productizing it) takes a lot of work, most of which has nothing to do with knowing how to program.

There is a long list of things you need to be able to do to create a whole product and many of those things will be beyond your core skills. This doesn’t mean you should not plough ahead if you truly believe in your product but it is important to understand what lies in the future.

For instance, you’ll have to come up with an identity for your product. This means coming up with a name for your product for which Internet domain is available and not already copyrighted. This can take days if not weeks.
You’ll also need to build a nice-looking website, pick a template, come up with a nice logo, and choose a corporate colour palette.
Assuming you are like me when I started, you’ll have absolute no money to hire other people to help you, so you’ll have to design your own logo, build your own website, well.. do everything yourself.

If you have no marketing dollars you will need to have a marketing strategy that involves no ads or PR agencies.
Basically you’ll opt for inbound marketing which means now you have to become a blogger and learn how to write good content often so you get links back to your site and rank higher on Google.
Then open accounts in all the social media sites you can. Post links to your blog together with good content so you can start building your network of loyal followers.

Of course, you need to build your own payment processing system. A PayPal button will only take you so far and people will not trust you or take you very seriously until you have a good payment system in place.
That is only the beginning because you need to test it and make sure it works.
You’ll set up a sandbox testing system and learn the PayPal payment API so you can accept credit cards on your site.
But for that your site needs to have SSL encryption and be PCI compliant. Oh no!

Now you need to make sure the payment system integrates well with your application, so when someone pays an account is created automatically, the new user gets a welcome message and his/her credentials.

Slowly but surely your days start getting longer and longer. Working 14 hours a day seems normal, you don’t know what day of the week it is anymore and always go to sleep past 2 am.

You thought you could start charging money in 3 months but 4 months into your startup adventure you are still trying to fight some ugly bugs in your chorizo code, have not figured out how to set up your own dedicated server, and are still struggling to figure out all this inbound marketing crap that has nothing to do with coding your awesome industry disrupting easy-to-use productivity app.

I hope you see what I’m getting at here. Building a real product takes way more than meets the eye.
Is there a faster way to build a product? Not really. Eventually you’ll need to checkmark off all of the above and much more to build and release a fully working real product. However, you can save a lot of time and headaches if you read Lesson 2.

Lesson 2: Validate your idea as early as possible

Before you spend a million hours trying to build a perfect product nobody wants, you need to figure out as soon as possible precisely that, does anyone even care about my product?
You see, my first mistake was to think my product had to be perfect before I could launch it into the world.
I thought it had to be better than everything out there right from the get go or it would not stand a chance.

There are two big problems with that philosophy. One, there is no way to build a perfect product on the first try so aiming for perfection on your first release literally means you’ll never release the product.
Second, the longer it takes to release your product the more likely it is to suck!
But Why? Because the only product validation that matters comes from real users, ideally paying users.
All the time you spend coding and scheming about world domination alone over your keyboard is worthless without involving the most important part of your startup equation, your potential customers.

When you have no customers you are working in a vacuum. If you like to daydream like me living in a vacuum feels very nice and cozy. No one can reject your baby, you are the only one you need to satisfy. But all you are doing is floating inside a bubble of self-fulfilling BS. You can only do that for so long before, like me, you run out of money and the bubble explodes when you realize that no one is willing to pay for your world changing creation.

How do you avoid this? Very simple. Follow the lean startup mantra. Release early, release often.
Or release early and iterate often based on real world feedback. I know it is scary to deliver a half baked baby into the word, but unless you have absolute confidence in your skills and product (or have a zillion dollar team of super engineers like Apple), the fastest path to product validation is jumping out of the vacuum as soon as possible.

Use common sense, don’t release when you have only produced a couple lines of buggy code. Make sure you release an MVP (Minimum Viable Product) that although it may do very little it does it well.

Sometimes you don’t even need to build a product to validate it. Many successful startups have started just by asking potential clients what would they be willing to pay for if it made their life easier.
Ideally before you start working away on your startup you have already found a couple of potential clients willing to pay for your solution once it is built.

Lesson 3: You cannot take over the world alone

Working alone sucks a lot, but for the social inept like myself working alone feels safe.
No need to interact with other scary human beings and having to deal with their opinions and odours.

The earlier you get out of your shell the better. It’s ok to spend sometime working alone in a dark room surrounded by your loyal and harmless childhood stuffed teddy bears, but eventually you need to man up and confront the world of real live flesh homo sapiens.

Sapiens means wise. Human wisdom is the most valuable resource when building anything. Even if you decide not to have a co-founder or are unable to find one during your early development stages, real people and their wisdom will be what you’ll need the most in order to build something people want. In the end all products are built by people for people.
This means that for any startup to be successful, people need to be accounted for from the very beginning.

Don’t use the excuse of having no money to avoid getting help. There are many wonderful, smart people willing to help you succeed by giving you advice, checking out your app, mentoring you and sharing their knowledge.

Join a startup meet-up, attend startup events. Pitch your idea to everyone you meet. Instead of avoiding negative feedback, seek negative feedback (top tip by Elon Musk).

You’ll be surprised how easy it is to reach some of the top entrepreneurs. Share, comment, re-tweet their articles. Get under their skin. Offer and volunteer your skills to gain their trust. Who knows, they may even invest in you down the road. Now thanks to services like Clarity.fm you can get on a call with many of your startup idols. Seek people and above all things, don’t work alone for too long or you’ll start looking like this.

Lesson 4: Only work on something you are truly passionate about

Even if something seems like a good idea, it doesn’t mean you should do it.
I started PointKit because at the time it made sense to pursue that idea. I did not have any better ideas and heck, I already had made some money building the basic app.
At that time there was nothing integrating task managing, time tracking, and invoicing all in one package, so the competitive coast appeared clear of 500 pound Spaniard eating gorillas.
I thought if I worked hard enough success was just around the corner.

And hard I worked for 18 long dark and painful months. I put my head down and wrote thousands of PHP, HTML, CSS, and Javascript lines of code. That success corner wasn’t as close as I thought. In fact I never got around the corner but that doesn’t mean that there was no potential success awaiting my arrival (I just didn’t make it there).

Paul Graham says that success comes most to those entrepreneurs that are relentlessly resourceful. You know what, I truly believed myself to be as relentlessly resourceful as any human could strive to be. There is a fundamental caveat with that belief though.

On the last hour, when you are down to your last wits, have no money, are physically and mentally exhausted there is only one thing that can keep you going. You know it, it is called passion.

Turns out I was more passionate about the idea of building a startup than about what the startup was about. Wrong!
You know, the day I quit PointKit was the day I admitted to myself that I did not really give a damn about project managing software or time tracking applications. Yes, it would have been nice to build a cool tool and say it was all mine. But “being nice to have” won’t cut it when you are starving and facing imminent bankruptcy.

This has been said a million times by a million successful entrepreneurs. Follow your passion, work only on something you truly care about, or sooner or later you’ll hate your life. (I wrote about how to find your passion in this article.)

I think PointKit could have been very successful if I had had a genuine passion for the product and what it could do to help people. But then I asked myself, what if PointKit is successful? What if I have a million users that love the app?
Success seems nice at first glance when you think of wealth and fame. But success also means commitment.
If PointKit had succeeded that would have not marked the end of my efforts. Now I would be chained to improving the app, serving my customers, my life would be PointKit day and night. Success would mean I would have to devote my life to something I am not passionate about.

In the end I’m very happy I stopped working on PointKit. Only a few weeks later I started Grumo Media and was able to validate a fun and creative business without a single line of code in less than two months.
Grumo Media has been profitable since day one and now we’ve produced hundreds of fun demo videos for startups all around the world. Much of this success comes out of the lessons learned from the failure of my first startup.

There you go! I hope you never make the same mistakes I did and that these lessons serve you well on your exciting entrepreneurial journey.

PS: I wrote this article because one of my followers, Patricio Bustamante from Chile, asked me if I could share any lessons from my failure launching PointKit to help him with a class assignment. The actual answer is in a 15 min video recorded in Spanish and can be watched HERE.

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Recommended startup resources:
Paul Graham essays
Steve Blank’s list of tools and blogs for startups
Hacker News
Mixergy – 1 hour interviews with successful entrepreneurs
Joel on Software
Balsamic Blog – Giacomo Peldi was my first role model to build a SAAS startup.
OnStartups: Advice and Insights for Entrepreneurs
37 Signals Blog

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Grumo advice to first time entrepreneurs
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“Life is too short not to take risks” – Audio Interview with Grumo
How To Create Videos That Get You Customers – Mixergy Interview