Hackernoon logoWhy my startup nearly failed… by@johnwheal

Why my startup nearly failed…

John Wheal Hacker Noon profile picture

John Wheal

Managing Director

Just over two years ago I founded Group Hub, an online space for groups, clubs and societies. I think it’s fair to say that during this time it’s had its ups and downs. In particular, over the past few months, growth has been minimal — in fact, I’ll admit that no one is really using the platform as intended. So, what went wrong? I have decided to write about some of the lessons which I have learnt during the past couple of years in the hope they will help others.

Before I begin, I want to be clear — Group Hub is not dead. It certainly isn’t in a good place but I firmly believe that it has a future.

Not Focussing on the Product

Anyone familiar with startups will know the importance of creating a Minimum Viable Product (MVP) — I know that I certainly did. I’m therefore ashamed to admit that I skipped this vital step. It wasn’t that I thought I knew better. In fact, I thought I had created an MVP. Looking back, I haven’t got a clue where many of the features originated from — they certainly weren’t added based on user feedback. What I ended up creating was a hotchpotch of features, many of which were technically complex and hidden from view. At one time there were over eighty different webpages — in an MVP! You know that something’s gone very wrong when you need a large format printer to print out a full sitemap.

MVP Sitemap — at one time it was double this size!

What I find more astonishing is that I have advised other startups on creating an MVP and yet I couldn’t manage to advise myself. I guess it shows the importance of having someone else to challenge your decisions.

My background is in technology (I have a masters degree in Computer Engineering), I was therefore very conscious not to focus on the technology side of the business. I remember reading somewhere that founders should focus about fifty percent of their time on marketing and not just focus on developing a product. I think I took this suggestion a little too literally and would spend hours focussing on marketing to offset against the countless hours spent programming. All this time, completely ignoring the product and getting user feedback.

Looking back, I was very slow at realising that this was Group Hub’s main problem. I just assumed that my marketing efforts weren’t up to scratch. For example, I would create a demo video rather than understanding the underlying issue. I would also put off speaking to potential customers for the fear of negative feedback.

Don’t forget the product when focussing on development and marketing

Architecting the Platform to Scale

Once again, if there was a startup manual — it would certainly warn against premature scaling. In many ways, I thought that being a bootstrapped startup meant that I was exempt from this rule. As long as I’m not burning too much money, what’s the problem?

As I previously mentioned, my background is in technology. In the past I have worked with high-growth startups and know how to architect and build platforms that scale. I naturally thought that it would be highly embarrassing if my own startup went offline because of a technical issue. From day one, I therefore set about creating a platform which could scale to millions of users. Obviously such a solution is expensive but luckily Amazon Web Services came to the rescue with thousands of dollars of free credit. I therefore couldn’t see any issue with building a platform that would scale — after all, that’s what I wanted to happen. Why would I have wanted to hedge a free bet? It turns out that the answer is the same as why big company’s struggle to innovate — there’s a lot of excess baggage. Don’t get me wrong, you can create a large agile startup — you just can’t do it with one person. The result was that even a small change became complex, the complete opposite of an agile startup. On the plus side, Group Hub has never had any downtime since the day it was launched :)

It’s always more important to iterate quickly than to scale before you have any paying customers

Not Having the Right People

Being a solo founder, I had to wear many hats. Some days I’d be writing code and the next I’d be filming a video. I obviously knew that I couldn’t grow the company without others but I equally knew that money was limited. My time became a constant juggling act, prioritising some items to the detriment of others.

I thought that I had the perfect answer to this problem — I would pay people to do menial tasks which were cheap to offload when compared with costly software development. I realise now that this was the wrong approach.

I was suddenly managing more people who were solely reliant on my instructions. Previously, if I’d put off a task for a couple of days I was the only person affected — now other people were left waiting. I also completely underestimated the time needed to write instructions — in some cases, it was probably quicker to just do the task myself.

I realise now that I needed people with decision making powers. Rather than paying someone for a specific task, I should have been paying them to solve a problem.

Pay people to solve a problem, not for a specific task

Confusing Revenue Model

In my mind, the primary goal was to get people using the platform — deciding on a revenue model could come later. Whilst I firmly believe that having detailed financial projections for most startups is completely pointless (other than to please an investor) — I needed to be clearer to initial users what the future plan was.

I had assumed that having a free product would cause people to flock to use it. Based on feedback, I’ve discovered that it actually causes the opposite effect. Consumers are not stupid, they know that something cannot be free forever. This leads them to think that we are selling users’ data — to be clear, this will never be our revenue model.

The other mistake I made was not understanding the target market well enough. I always knew that targeting groups, club and societies was going to be difficult but I should have been engaging them much earlier in pricing discussions.

Consumers know that something cannot be free forever — clearly articulate your revenue model otherwise you could be turning customers away

Plan Going Forward

Whilst at this point many founders would call it a day, I firmly believe that there is a real need for Group Hub. The company still has money and a team in place to make the changes happen. We’ve gone back to the drawing board and have a plan in place which we will be executing over the next few months. I am excited about our future and hope that you can learn from some of the mistakes which I’ve made.

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