We have just announced in a Forbes interview that Brickflow, our startup, had to be closed down because we could not raise the next round of $1m. We faced the fact that this venture was among the 9 out of 10 that fail. On the other hand building it was the best investment of my life. During these two and a half years I have made friends for life but more importantly went through a pretty steep learning curve. Here are the takeaways.
We have read all the important books, watched all the recommended videos and got great mentor feedback. However, it took us a good year to learn how to execute on the theory. Practice is above theory, so try instead of reading.
It is surprising that, as juniors with no relevant experience, we made it so far. This says a lot about the importance of courage.
I do not believe in that anymore. You can learn whatever you want, just do not hesitate to jump into greater and greater challenges all the time. Ideas do not matter, if you do not build them.
Now we are building a new business with the same team, which is growing faster than Brickflow ever did. (Yes, a typically non-scalable business can grow faster than a potentially scalable one if you have the right setting.) Instead of spending half a year in cafés, meeting random people to establish a team, we already have a proven bunch of great people. This proves that the team is the biggest asset of an early stage startup. Now I understand why investors invest in people instead of ideas.
We had no clear decision making processes and governance structure. A startup is unstable enough in terms of product market fit, so do not make your own life harder through a weak governance structure. Our new venture, Lab.Coop’s first hire (also partner) was an organization developer and now we are implementing holacracy to have an iterative, teal and purpose driven organization with motivated partners.
Until the last few months we always had several products and target groups at the same time. Obviously, this was a mistake, as did not have one properly working product for too long. This resulted in wasted time and decreased our chance to reach product-market fit. You need to have a single target and validate an MVP on that market. If needed, iterate. This made the content-discovery iteration work.
We mixed these up several times until the last iteration. It is key to have long term vision, but your first steps, the MVP might have little to do with that. By having a simple first product for a niche market you do not lose the big picture.
The biggest step forward was when we finally started to make decisions based on hard data instead of fighting with each other in front of a whiteboard. Looking back, we started to validate our assumptions in the second year of the company.
Startup Chile was life saving and helped us a lot; it is an exception. On the other hand we wasted months by waiting for a potential Hungarian public grant. This was a huge mistake, along with counting on getting paid after being accepted to a startup program of Microsoft. I’m not sure if governments or corporations are more dangerous for startups.
Brickflow was a consumer facing, growth business. As such had a hard time raising funds in Europe due cultural and financial differences compared to the US. European consumer trends are led by the US market, but European VCs take less risk, so the US is the home of consumer facing growth businesses. Next time, with this location and funding environment, I’d focus on a cash-flow startup.
Because of #10, we made the mistake of putting too much energy into the European market and fundraising. When we raised the first round or at least after the launch of the content-discovery iteration, I should have moved to the USA. We wasted lots of time by talking to the wrong potential investors and business partners.
When starting-out the social media market was still up and coming, way before its peak or saturation. Two years later, at the time of raising the second round, the early stage social media companies were not sexy anymore. Follow the trends and make sure you execute before it’s too late.
If you look at Q3-Q4 2014 (see timeline below), you can see a very clear path, potentially leading to success. Well, for all the above reasons it came too late and we ran out of money. The same growth could have been reached within one year after the kick-off. Of course, being slow impacted timing too. Learn and iterate as fast as possible!
In case of a growth business fundraising is a must, but the time when you are in need of capital and the right momentum for making it rarely collide. Because monetization is possible at later stages (once you have millions of users), you rely too much on funding, which is even harder in Europe. You have better chances to raise money when there is momentum for your business, than when you are in desperate need.
As people, our investors are lovely and open minded. On the other hand they never really ran a startup and did not have domain knowledge in our specific industry. You need investors who have more experience than you, otherwise they cannot help you.
We have always been very transparent within the team. It was worth the effort and I’d never do it differently. This is true regarding financials, strategy and also technology. For example I’m not tech savvy, nor is my partner a business person, so we rely on each other, and transparency to each-other is key. Our employees stayed loyal and motivated even after salary cuts, and decided to join our next venture after Brickflow.
Most of our previous decisions seemed to be wrong within 3 months. This shows how much we learned. Challenge yourself every day to keep the learning curve steep enough to enjoy the journey.
Learning was the team’s greatest energizer: the only way to keep growth mindset people motivated.
The team never pushed it as hard as the founders. Partly this is why Lab.Coop is an employee owned corporation. Today, I see partners around me, instead of employees, and are able to hire partners who would have never joined Brickflow.
Huge growth, Silicon Valley, startupper-is-the-new-rockstar-dream had been sold to us by those who have never been there. (Yes, the young European startup scene is full of opinion leaders, VCs and founders, who have no relevant first hand experience.) Learning things the hard way will help us build much more solid ventures in the future instead of focusing on events, articles or ideas without any direct added value. It is cool to ‘pitch all the time’, but never lose focus on your users.
- I’m not a lonely wolf, but a team player,
- Single focus is the only way I can properly function, and
- Being an entrepreneur is what absorbs me and makes me happy.
This end is a new beginning: with Tamas Kokeny, my co-founder we have decided to launch a new business together. We have been able to convince almost the whole core team (7/8) to stick together and now we are investing all this learning into Lab.Coop. It was an amazing ride, thanks for all the supporters!
- qualitative tests: A/B, copy, fake buttons, targeting;
- quantitative tests: UX tests, interviews;
- new releases.