Just over two years ago I left my job at Netflix to pursue my tech startup dream. Why? Because I loved the idea of emptying all of my accounts and throwing my career down the drain for a product that had less odds of succeeding than the Jets do of winning the Super Bowl. Who wouldn’t? My mother was convinced I was on ALL of the drugs.
Over the past two years I’ve learned more about running a tech startup than I’d ever imagined and I’ve barely begun. Ah the good old ignorant days when I thought “oh you just have an app idea and then get an investor and a developer and they make it and then it goes viral!” AWW SO CUTE BUT NO, HONEY.
I want to lay out the path that I chose to run my tech startup and also lay out some of the biggest mistakes I made, in hopes that maybe someone reading this will learn from my mistakes.
So how did I start? Read my previous article – app idea, research competitors, sketch screens, design prototype, pay average developer a tiny amount to build a crappy but workable first version. And then?
Once I had an MVP (minimum viable product – see http://theleanstartup.com/principles), I could start testing my theories with actual customers to prove the product was in fact needed and wanted, and could pinpoint trouble spots that would need tweaking. I tested the app for a few months in Miami and collected all the research and evidence I would need to start taking investor meetings.
Here’s the most important piece of information I can give in regards to finding investors: investors will not ever, ever, ever, ever invest in an idea. They need to see proof. Whether that proof is that you as the CEO have what it takes to make it happen (tech/business background, invested personal money, working full time on it, etc.) or proof that customers are using the product, they need proof. Before you can show that, don’t even think about investors – you’re wasting your thoughts.
Now, just before I started taking investor meetings I went around to various founders and investors for advice. The most common piece of advice I was given is that investors rarely ever invest in sole founders. Investors want to see a team – whether that’s two co-founders or five co-founders, they want to see a team. So, I went off to find a co-founder. And I found one alright. We started chatting on a co-founder matching site and met up later that week. He came on board to help run the tech side of things with no paperwork or written agreements, and we were off!
In less than eight weeks I discovered that this guy was definitely not the co-founder I was looking for, and the legal battles began. First major mistake. I don’t advise anyone to ever at any point go “hunting” for a co-founder and agree to work with someone who’s a complete stranger. A co-founder is like a marital partner, except your whole career is on the line with them, and they don’t make you breakfast. We eventually settled and he was paid for his work, but it almost cost me everything.
At this point I decided I was done looking for a co-founder and was just going to try raising money as a sole founder. I met my first investor in March 2015, and the other investors in the months following. So, lesson number two – it’s not required that you have a minimum of two co-founders to get investors. Yes it might make it easier, but if you already have a tech and business background and can prove to your investors that you have what it takes, screw desperately searching for co-founders just because that’s what’s “normal”. I will say that I’m extremely envious of companies that have co-founders though – having a support system and other people to work alongside you? Um, yahhh. But if you don’t have any, it’s not the end of the world.
Once I got my first couple of investors I went looking for professional developers to build out a native version of the app. First I tried one of those big online development firms that promised to do it in three weeks for almost no money. Three weeks later they hadn’t even built the first screen and I fired them.
After that I found a local small development firm in LA and hired them to build it out. They were much more expensive and said they would get it done in three months, but I trusted them. For the most part they were great, except that it ended up taking a year instead of three months and cost four times the amount they estimated. Wonderful.
My advice on hiring developers is to hire a full time developer that’s working for the company and has a vested interest in making sure the app is built fast and built well. Outside contractors are being paid hourly or in segments and have no where near the same passion or commitment as someone who’s working for the company will have. Had I done this in the beginning I would have saved almost a year of time and tens of thousands of dollars.
While the app was being built, I was still fundraising to pay for the development and other business costs. Fundraising is brutal. Don’t get me wrong I’m used to rejection – I’m 26 and still single after all. But there are 1.5 million single guys in LA. There are less than 200,000 qualified investors (I definitely just made that number up but I’m good at guessing) so mathematically speaking, rejection by an investor is much worse.
The funny thing I encountered with most investors is that they’d never reject me in person. They’d commit to investing, shake my hand, ask for the paperwork, and then spend months telling me they’d do it “in a week or two”. Mistake number 5,6,7 and 8 – don’t waste your time chasing investors who aren’t getting back to you. Every investor in Spinvite signed the paperwork and transferred the money in less than a week after our meeting. If they’re taking longer than that, toss them. Investors will be around for the rest of your company’s existence and it’s important to have investors that believe in you and your product without a doubt.
Let’s see, other mistakes. I ran out of money quite a few times. Managing your finances, especially when you have a huge overhead, is one of the most (if not THE most) important part of a startup. The good thing about living in LA and being broke is that you can just “eat” cayenne pepper and water for two weeks straight and tell everyone you’re on a cleanse and no one even assumes you’re actually broke. But for real, I’ll never ignore the importance of budgets and financial planning again.
Ok that’s all for now – I’m hungry and I just heard my website is down. I do want to note that I’m not trying to scare anyone off who wants to have a tech startup. It’s been the most brutal process of my life but if I had the chance I’d still do it all over again just the same. Maybe not the cayenne and water part.
To all my fans out there (all three of you), I love you guys.