28 ms·

I turned down $500k, pissed off my investors, and shut down my startup (2016)

361 points by arunsivadasan 4y ago

3np 4y ago
Original post (2016): https://medium.com/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354#.8wwhha7by https://medium.com/startup-lesson-learned/why-i-turned-down-... Altfront: https://scribe.rip/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354#.8wwhha7by https://scribe.rip/startup-lesson-learned/why-i-turned-down-...
aidos 4y ago
OT I was looking for attribution for a little more context but the only clue comes from the footer: “This article was first published in Medium and appeared in VentureBeat & Business Insider” I get the syndication and the other outlets using this content at the time it was written (2016). There’s just something very dishonest about the slapping the words on a page with some stock images 6 years later though. I don’t really have a point - maybe it would be better to link to the original medium (I know) post though? https://medium.com/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354 https://medium.com/startup-lesson-learned/why-i-turned-down-... Edit: on the other hand the article itself is very honest. And it’s an interesting question.
- new299 4y ago
  The author (Tim Romero) also runs disruptingjapan. So it's more like he's just replicating content he originally wrote for another publication to his personal/professional site...
  - aidos 4y ago
    Oh well that makes a lot more sense. Thanks for the heads up.
- timoth3y 4y ago
  Hi. Tim here. I first published in on my podcast site and then on Medium and LinkedIn a few days later. https://www.disruptingjapan.com/turned-500k-pissed-off-investors-shut-startup/ https://www.disruptingjapan.com/turned-500k-pissed-off-inves... It seems that far more people will click on a Medium or LinkedIn link rather than a personal blog. Then it was picked up by Venture Beat, Business Insider and a dozen other publications and it was off to the races. I received my 15 minutes of internet fame and over 1,000 emails about the article.
alephnan 4y ago
Another option: let the team and investors continue without you. You also have a fiduciary responsibility to the investor and a responsibility to the team members who worked equally as hard.
- aidos 4y ago
  That’s what struck me too. What about the others involved who might be relying on it? But maybe the author was the team and without them it was dead in the water anyway?
  - sokoloff 4y ago
    “ The rest of the team kept their day jobs. That was fine. It made my final decision easier.” It sounds like there were others, but they had a good fallback/continue without ContractBeast position.
  - usrusr 4y ago
    “The rest of the team kept their day jobs.“ It sucks for them, because effort invested on the side implies that it must have been quite loaded emotionally, but right before turning the others full time seems like the least bad time for giving up.
  - menzoic 4y ago
    > The rest of the team kept their day jobs. That was fine. It made my final decision easier.
- ekidd 4y ago
  In the article, the author said that none of the team has quit their day jobs yet. And this appeared to be their first significant fundraise. Their strategy critically depended on staying in the SMB market, not the enterprise market. And it was apparent that their product wasn't solving a major, urgent customer problem. The last thing you want to do is to pour your life into a startup that solves a non-problem. If you're not solving an urgent problem, you won't be able to reliably close sales.
tluyben2 4y ago
> I was deciding whether this venture was worth committing to another year of 70+ hour weeks. I need a higher level of certainty than investors do because my time is more valuable to me than their money is to them.Investors place bets in a portfolio of companies, but I only have one life. Both startup founders and investors alike seem to forget this (for obvious reasons) so it is good to put this on your toilet wall so you see it often.
- jokoon 4y ago
  70h per week, I really can't imagine a world where I could accept this. Sometimes I try to imagine how the alternative would be in a planned economy for software. On one hand, it would be very slow and very inefficient. But on the other hand, venture capitalism also has its flaws. Sometimes it sounds like there is an "excess efficiency" that leads to burnout and non-sense, where you constantly need to quote-unquote "innovate". In my view there is a limit about innovation, you can't always "disrupt" over and over and over again. If I get paid that much money, I'm going to work on my own terms, there is no way somebody will compromise my health like that.
  - Aeolun 4y ago
    > 70h per week, I really can't imagine a world where I could accept this. On my own company, when single, and living in my one room apartment? Absolutely. With a family, children, with tons of responsibilities and in someone elses employ? Not on your life.
    - the_common_man 4y ago
      I dislike this trope of a single person having nothing better to do than work. Single people have responsibilities too and have quality lives. They don't need to work themselves to death
      - sgt 4y ago
        Sure, but if the alternative (for you) is to waste time in front of the TV or gaming, it may be a valid point.
sakoht 4y ago
There are a lot of projects that want to serve an under-served space, but lack a novel idea about how to do it. In many ways, even companies like Theranos fell into this trap. They knew it would be great to have the device they promised, but the company wasn't founded around any sort of novel idea about how to accomplish it, just a wish.
- jimhi 4y ago
  I mean maybe but this is software. Providing enterprise software per use or per customer at at low cost is a common path.
- etothepii 4y ago
  This. Exactly this. However, if you do something full time the inspiration to implement your wish can appear. Waiting to be blessed by inspiration probably won't lead to a solution.
throwawayarnty 4y ago
This is extremely selfish. A founder has a team (investors are part of that team) that trusts each other to have incentives towards having the startup make it big. Ditching the team and investors like that is extremely distasteful and shows that the founder does not have the qualities to be a leader. The founder didn’t do the right thing, he did the selfish thing by throwing his employees under the bus.
- Simon_O_Rourke 4y ago
  > The founder didn’t do the right thing, he did the selfish thing by throwing his employees under the bus. How is leaving them in their more secure day jobs rather than binding then to a likely failed company throwing anyone under the bus? This founder did the smart thing, and probably did what was best for everyone involved.
- new299 4y ago
  In this case it seems like he didn't have any full-time employees, so there isn't the employee issue. But I'm curious as to how this might effect investors generally. I assume it could make them look bad, and cause issues with the fund LPs? I.e. you announced an investment, did a capital call and then suddenly the money gets returned. LPs might get annoyed that money is now sitting in the fund accounts collecting interest? or I guess it just makes the fund look bad generally?
  - menzoic 4y ago
    Sounds better than burning the funds into a startup failure
  - jokethrowaway 4y ago
    The existing investors lost money, everyone else paid in stress and overwork
- Ma8ee 4y ago
  The “employees” had other day jobs. Why is it less selfish to spend other people’s time and money on a company that you can’t see any way for it to succeed than cutting everyone’s losses as soon as possible?
ChicagoDave 4y ago
Sometimes there is no pivot. Hopefully he keeps swinging and hits one out.
grepfru_it 4y ago
Found it interesting that the author describes CLM as a vertical the requires strict access control then describes how they are viewing those secure contracts. Sounds like lack of production controls was the true fatal flaw! I’m assuming they had a better way of analysis than actually reading contracts since most vendor procurement processes I’ve seen require attestation of data privacy..
- browningstreet 4y ago
  I’m assuming the users of the CLM that he was observing were the admins who would initiate contract flows in the product. If NDAs existed between SaaS and clients, as would be typical, there’s no issue. Access controls would keep other employees in client org from seeing contracts, but not.. say, infosec team members.
  - grepfru_it 4y ago
    Ah well I wasn’t going by assumptions I was going by the authors actual words. Thank you for clarifying
icambron 4y ago
The article buries the startup’s more fundamental flaw > Almost no SMB views contract management as an urgent problem. If you are a solving a problem your target market doesn’t care about, you’re not going to get adoption. This isn’t a product problem or a top-down vs bottom-up problem.
- jokethrowaway 4y ago
  It's not a flaw, it just means your target is bigger businesses (hence why he needed sales instead of marketing)
  - icambron 4y ago
    Their whole thesis was that SMBs need contract management. That thesis appears to have been mistaken. So it’s certainly a flaw. Sure, you could fix it by creating a new thesis about a different market, building a product that addresses that market, and setting up the right GTM for it. But that’s a whole other business, and they explain well enough why it’s not one they want to do.
    - SoftTalker 4y ago
      I think the thesis was, that SMBs could benefit from contract management in the long term, but (and not initially understood) it was not an urgent problem in the short term. To get buy-in for a long term initiative, they'd need consultative sales at the executive/owner level of the businesss, but that would mean competing with established "enterprise" companies, who already are not selling to SMBs because software sold that way is too expensive for the SMB market.
      - icambron 4y ago
        By “thesis” I meant the thesis of the business, not of the article. The article said just what you said; my point is that another way to explain those dynamics is that you can’t sell software to SMBs if they don’t urgently need it. That’s because that logic about top-down sales is true regardless of what you’re selling. And that’s why the foreknowledge that SMBs don’t urgently need to solve a contract management problem is a huge red flag, ideally before you’ve written a line of code.
noduerme 4y ago
>>Pressing them directly on why they were not using ContractBeast to create all their contracts resulted in a lot of feature requests. >> Now, talking with customers about features is tricky. Often you receive solid and useful ideas. Occasionally a customer will provide an insight that will change the way you look at your product. But most of the time, customers don’t really want the features they are asking for. At least not very badly. This a thoughtful, well-rounded and obviously experienced view, but ultimately it shades toward being very pessimistic about the competence of the end-user. >>When users are unhappy but can’t explain exactly why, they often express that dissatisfaction as a series of tangential, trivial feature requests. Clearly, the writer had the self-reflection to realize that the product wasn't working, and for that should be applauded. On the other hand, maybe there's something a little intentionally self-blinding about the above statement. Assuming that people are just putting out meaningless feature requests because they'll never use the software anyway is, to say the least, taking things from a very negative starting point of view. Maybe something larger was actually missed in the "tangential, trivial feature requests" which if compiled would have pointed to a fixable underlying problem if one were take them seriously as a constellation of indicators pointing to a root issue. This is speculative: >>These aren’t necessarily bad ideas, but they had nothing to do with why they were not using ContractBeast more extensively. This is indicative of burnout, where you stop seeing the value (for other reasons which are harder to quantify): >>In any event, I was overwhelmingly getting these kinds of tangential, trivial feature requests. And this is resignation: >>It didn’t provide a significant immediate benefit. I was fighting human nature and losing. If I'd been sitting around that office, I might have suggested adding a human consultant to the loop for every new client from onboarding to full use -- not a virtual pop-up box, but someone they could call on the phone. And not to sell anything but to suggest uses and help implement the changes to the customer's business ops that they would then come to rely on. Mid-sized businesses don't make drastic changes overnight but that's also a guarantee of lock-in if you can convince them to rely on your product. So you'd give each one a sort of a "guardian beast angel" if you like, who was available at all hours. The sole purpose of the employee would be to track a few dozen customers and their user experience, really understand how this worked in their business models, and find ways to improve their use of the software while filtering back some feature requests and bugs. And thus get the customers to realize the full benefits of the software, without any attempt to sell them anything. This kind of thing would be a loss leader, it would be money out of pocket, but it would be far more cost effective than any kind of advertising, and it would establish trust and good word of mouth in addition to providing a customer base that was now dependent on you. Also, it wouldn't have involved actually writing any new features if you felt that the software was already sufficient to the tasks most users would require, if they knew how to use it properly. It would also give you runway to roll out new features on your own timetable without constantly trying to please an audience, since the customer-facing "beasts" would provide workarounds for niche use cases and reassure them personally that improvements were in the pipeline.
deleted 4y ago
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menzoic 4y ago
Why does he think he needs to work 70+ hour work weeks? He mentioned he couldn't sleep knowing user adoption was low. I think the biggest problem here is that he felt pressured to over work himself to solve a highly visible problem. This affects many engineers including myself. In many cases over working is not necessary and there are diminishing returns, possibly even less overall net returns if you burn out or become too sleep deprived and stressed to function efficiently the following days. In this case he quit, which is an example of this. As engineers we have to learn how to manage expectations and disconnect from work. As engineering leaders we need to foster a culture of maintaining good work life balance. As founder and CEO, he's in the best possible position to do this. Especially in this case where there is no external deadline.
- FabioFleitas 4y ago
  The thing is - in startups, there always is an external deadline (assuming you're not cash flow positive or profitable) - it is tied directly to your runway and when you'd run out of cash. That is the ultimate deadline for pretty much all startups. The very early stages of a startup (and even later stages) usually require this much effort because you honestly don't have enough money to last you the "right" amount of time you need - and therefore you need to put in more time. As you said - this isn't sustainable long-term - but, especially in the early stages, you may not have a "long-term" in that venture if you're not able to put these hours in. Not to say it's impossible to find a great work-life balance for an early stage startup - but it's highly unlikely.
jokethrowaway 4y ago
I've been in a similar situation but we realised we couldn't rely on marketing and that we need sales just before running out of money, incapable of raising another round. I would have definitely took the 500k. Needing sales doesn't mean the business is to throw away, it just means you need way more money than you were thinking. Probably 500k wasn't enough to execute the scale the founder imagined, but it could have been a good intermediate step to raise more money later on.
ChrisMarshallNY 4y ago
Sounds like this guy did the correct thing. I am sorry it didn't make it, but, as the author points out: > Human nature sucks. Yup. I have to design for human nature, and it can be immensely frustrating. I can tell you that this scar <pulls up shirt> was from when I neglected to plan for users misinterpreting an icon button, and this scar <rolls up sleeve> was from when I thought that a verbose help screen would help users understand a somewhat abstract concept, but this scar <drops pants> was from when I assumed that users would cut me slack, because I'm such a nice guy, and was doing this from the goodness of my heart. This is the main reason that I'm glad he pulled the plug: > and the team ready to quit their day jobs
- timoth3y 4y ago
  > This is the main reason that I'm glad he pulled the plug: >> and the team ready to quit their day jobs Me too. I'm happy to report we all ended up on good terms with each other once all the drama settled down.
jimnotgym 4y ago
>My team and most of my investors are pissed, I know it is childish, but I always enjoy this difference between US and British English. In British English when someone is annoyed they may be described as 'pissed off'. Describing someone as being 'pissed' means they are drunk! These US articles paint such vivid surrealism in my mind. In this case I love the idea of all of the investors being permanently inebriated. There is a lovely part of the 'special relationship' where the US doesnt care what the UK thinks of them, and therefore the UK has great fun at their expense. I suppose that is a win win situation? The US projects an image of being the leader of so many things, and the rest of the world jokes about how arrogant this is.
- have_faith 4y ago
  It's common in the UK to use both forms of "pissed".
  - havblue 4y ago
    You don't have to worry about which definition someone uses if it's an angry drunk.
  - bencollier49 4y ago
    Sadly that is now the case. I think the proper meaning will fall out of use thanks to US media. I am comforted by reports of US children talking about pavements, dustbins and shopping centres thanks to Peppa Pig.
  - SoftTalker 4y ago
    It's also not unheard of in the US to use it mean "drunk." At least, I would understand it in context.
hk1337 4y ago
I would think their customers would also be pissed that their contract service is now gone.
- ransom1538 4y ago
  This is the root problem! If you are a first time CTO which contract service do you want to use? Generally, you bet on sure wins. Some startup is not a sure win (it might not be there in 2 months). When companies go under - paperwork is flying everywhere (unsecured). You want your contracts flying around?
timoth3y 4y ago
Hi, author here. I'm surprised (and delighted) to see this back on Hacker News. I'm happy that people find value in the article, and the process writing it forced me to put my thoughts together and helped get me through an emotionally difficult time. To address a few questions from the comments. 1) A common opinion is that I gave up too quickly, that I was just burned out, or taking the money would have let me figure things out later. This was simply not the case. An experienced mountaineer knows if a mountain is climbable with the team, gear, and weather he has. This one was not. 2) I would have been 100% fine with the team and investors going ahead without me, but AFAIK, neither side ever discussed it. 3) We were absolutely not viewing contract information, and would not have been able to do so even if we wanted to. We anonymously logged when functions were called without storing user or input data of any kind. 4) Six years later, I'm doing well. The Disrupting Japan podcast is going strong. I took a senior role in corporate VC for a while, and ended up at Google. I was overwhelmed by the attention and positive response I got from this article. The asymmetry of value of money and time was one of my main learnings, and I'm glad to see it resonates with so many other founders.
- crabbygrabby 4y ago
  Good for you, you did the right thing. Maybe you would have shoe horned some fix, but honestly, screw it. Imagine waking up at 5am and forcing yourself to work on a company that you knew wasn't going to make it.
  - sshine 4y ago
    > Imagine waking up at 5am and forcing yourself to work on a company that you knew wasn't going to make it. Or to take up repeatedly at 5am and work 12+ hours a day on something that gains traction slowly.
    - uptime 4y ago
      Both are valid, one does not cancel the other out. I’ve been part of a fun project backed by good people and then had new tech eat our lunch. We still spent long hours trying to find value somewhere. That was less fun but OK, not a waste. I have been part of a slow traction project when the first great dot-com crash happened and too many contracts got cancelled. That was the worst time of my professional life but not a waste. I have spent time on very promising tech in a field ripe for either a good living providing something needed in service deserts, or an exit. The founder found every excuse not to launch, to keep versioning pre-launch. That neverlaunch project was a waste of a year that I’ll never get back. Learning when to bail is a true skill. Not to quit just because it is messy or inconvenient, but when it is actually harmful.
sylware 4y ago
"I was deciding whether this venture was worth committing to another year of 70+ hour weeks. I need a higher level of certainty than investors do because my time is more valuable to me than their money is to them.Investors place bets in a portfolio of companies, but I only have one life." You do the real hard work, they provide numbers in a computer database (and often kick you out once this hard work is done).
radisb 4y ago
Couldn't someone else willing to give those 70h/week take your place?
polote 4y ago
The problem with this article, is that it gives the feeling that creating a company is a sequence of logical steps. But that's not the case at all. OP stopped the company because he didnt want to invest his time in working on this problem, and thats a fair decision. But this has nothing do with unfixable flaw or "people sucks" or something like that. Those things are part of any business.
- vlovich123 4y ago
  I think you missed the main thrust of the article. They were trying to land in the mid market segment and expand from there into the large market where it’s more expensive to acquire sales. However, after doing a bunch of research actively interviewing their user base, the author couldn’t figure out a way to get these users to use the product enough for that land and expand strategy to work (it wasn’t sticky enough to actually start generating sales). In essence, from the author’s perspective, there was no path forward for success with the current business stategy. You are of course free to disagree and you may be right that there was a path there or they could have pivoted to do something totally different. What the author was trying to convey and maybe you missed is that they weren’t interested in spending another year exploring trying to find a totally different viable business strategy.
pepelondono 4y ago
You took the right decision given your context. But the whole matter could have been avoided if you were solving a problem you actually cared about. Then there would have been no doubt if you should or should not invest another year of your time.
- sfink 4y ago
  I would challenge that. If I'm solving a problem I personally care about, then I will also be personally willing to put in vastly more effort into learning and getting up to speed with the solution than the vast majority of my target customers will. As the OP said, you need something that will give relatively quick return on investment of effort. If it's going to require a larger up-front investment, then you have to really, really care about the improvement it's providing in order to put in that effort. I have innumerable half-baked solutions to various problems I care about, and by "half-baked" I mean they only work in specific situations and require massaging the inputs into a form that the solutions will accept. And that's fine for me; after all, I cared enough to implement the fancy solution in the first place. But I don't expect anyone else to use it unless I clean it up and package it nicely.

361 points by arunsivadasan 4y ago

3np 4y ago

Original post (2016): https://medium.com/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354#.8wwhha7by https://medium.com/startup-lesson-learned/why-i-turned-down-... Altfront: https://scribe.rip/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354#.8wwhha7by https://scribe.rip/startup-lesson-learned/why-i-turned-down-...

aidos 4y ago

OT I was looking for attribution for a little more context but the only clue comes from the footer: “This article was first published in Medium and appeared in VentureBeat & Business Insider” I get the syndication and the other outlets using this content at the time it was written (2016). There’s just something very dishonest about the slapping the words on a page with some stock images 6 years later though. I don’t really have a point - maybe it would be better to link to the original medium (I know) post though? https://medium.com/startup-lesson-learned/why-i-turned-down-500k-pissed-off-my-investors-and-shut-down-my-startup-2645c4ca1354 https://medium.com/startup-lesson-learned/why-i-turned-down-... Edit: on the other hand the article itself is very honest. And it’s an interesting question.

new299 4y ago
The author (Tim Romero) also runs disruptingjapan. So it's more like he's just replicating content he originally wrote for another publication to his personal/professional site...
- aidos 4y ago
  Oh well that makes a lot more sense. Thanks for the heads up.
timoth3y 4y ago
Hi. Tim here. I first published in on my podcast site and then on Medium and LinkedIn a few days later. https://www.disruptingjapan.com/turned-500k-pissed-off-investors-shut-startup/ https://www.disruptingjapan.com/turned-500k-pissed-off-inves... It seems that far more people will click on a Medium or LinkedIn link rather than a personal blog. Then it was picked up by Venture Beat, Business Insider and a dozen other publications and it was off to the races. I received my 15 minutes of internet fame and over 1,000 emails about the article.

alephnan 4y ago

Another option: let the team and investors continue without you. You also have a fiduciary responsibility to the investor and a responsibility to the team members who worked equally as hard.

aidos 4y ago
That’s what struck me too. What about the others involved who might be relying on it? But maybe the author was the team and without them it was dead in the water anyway?
- sokoloff 4y ago
  “ The rest of the team kept their day jobs. That was fine. It made my final decision easier.” It sounds like there were others, but they had a good fallback/continue without ContractBeast position.
- usrusr 4y ago
  “The rest of the team kept their day jobs.“ It sucks for them, because effort invested on the side implies that it must have been quite loaded emotionally, but right before turning the others full time seems like the least bad time for giving up.
- menzoic 4y ago
  > The rest of the team kept their day jobs. That was fine. It made my final decision easier.
ekidd 4y ago
In the article, the author said that none of the team has quit their day jobs yet. And this appeared to be their first significant fundraise. Their strategy critically depended on staying in the SMB market, not the enterprise market. And it was apparent that their product wasn't solving a major, urgent customer problem. The last thing you want to do is to pour your life into a startup that solves a non-problem. If you're not solving an urgent problem, you won't be able to reliably close sales.

tluyben2 4y ago

> I was deciding whether this venture was worth committing to another year of 70+ hour weeks. I need a higher level of certainty than investors do because my time is more valuable to me than their money is to them.Investors place bets in a portfolio of companies, but I only have one life. Both startup founders and investors alike seem to forget this (for obvious reasons) so it is good to put this on your toilet wall so you see it often.

jokoon 4y ago
70h per week, I really can't imagine a world where I could accept this. Sometimes I try to imagine how the alternative would be in a planned economy for software. On one hand, it would be very slow and very inefficient. But on the other hand, venture capitalism also has its flaws. Sometimes it sounds like there is an "excess efficiency" that leads to burnout and non-sense, where you constantly need to quote-unquote "innovate". In my view there is a limit about innovation, you can't always "disrupt" over and over and over again. If I get paid that much money, I'm going to work on my own terms, there is no way somebody will compromise my health like that.
- Aeolun 4y ago
  > 70h per week, I really can't imagine a world where I could accept this. On my own company, when single, and living in my one room apartment? Absolutely. With a family, children, with tons of responsibilities and in someone elses employ? Not on your life.
  - the_common_man 4y ago
    I dislike this trope of a single person having nothing better to do than work. Single people have responsibilities too and have quality lives. They don't need to work themselves to death
    - sgt 4y ago
      Sure, but if the alternative (for you) is to waste time in front of the TV or gaming, it may be a valid point.

sakoht 4y ago

There are a lot of projects that want to serve an under-served space, but lack a novel idea about how to do it. In many ways, even companies like Theranos fell into this trap. They knew it would be great to have the device they promised, but the company wasn't founded around any sort of novel idea about how to accomplish it, just a wish.

jimhi 4y ago
I mean maybe but this is software. Providing enterprise software per use or per customer at at low cost is a common path.
etothepii 4y ago
This. Exactly this. However, if you do something full time the inspiration to implement your wish can appear. Waiting to be blessed by inspiration probably won't lead to a solution.

throwawayarnty 4y ago

This is extremely selfish. A founder has a team (investors are part of that team) that trusts each other to have incentives towards having the startup make it big. Ditching the team and investors like that is extremely distasteful and shows that the founder does not have the qualities to be a leader. The founder didn’t do the right thing, he did the selfish thing by throwing his employees under the bus.

Simon_O_Rourke 4y ago
> The founder didn’t do the right thing, he did the selfish thing by throwing his employees under the bus. How is leaving them in their more secure day jobs rather than binding then to a likely failed company throwing anyone under the bus? This founder did the smart thing, and probably did what was best for everyone involved.
new299 4y ago
In this case it seems like he didn't have any full-time employees, so there isn't the employee issue. But I'm curious as to how this might effect investors generally. I assume it could make them look bad, and cause issues with the fund LPs? I.e. you announced an investment, did a capital call and then suddenly the money gets returned. LPs might get annoyed that money is now sitting in the fund accounts collecting interest? or I guess it just makes the fund look bad generally?
- menzoic 4y ago
  Sounds better than burning the funds into a startup failure
- jokethrowaway 4y ago
  The existing investors lost money, everyone else paid in stress and overwork
Ma8ee 4y ago
The “employees” had other day jobs. Why is it less selfish to spend other people’s time and money on a company that you can’t see any way for it to succeed than cutting everyone’s losses as soon as possible?

ChicagoDave 4y ago

Sometimes there is no pivot. Hopefully he keeps swinging and hits one out.

grepfru_it 4y ago

Found it interesting that the author describes CLM as a vertical the requires strict access control then describes how they are viewing those secure contracts. Sounds like lack of production controls was the true fatal flaw! I’m assuming they had a better way of analysis than actually reading contracts since most vendor procurement processes I’ve seen require attestation of data privacy..

browningstreet 4y ago
I’m assuming the users of the CLM that he was observing were the admins who would initiate contract flows in the product. If NDAs existed between SaaS and clients, as would be typical, there’s no issue. Access controls would keep other employees in client org from seeing contracts, but not.. say, infosec team members.
- grepfru_it 4y ago
  Ah well I wasn’t going by assumptions I was going by the authors actual words. Thank you for clarifying

icambron 4y ago

The article buries the startup’s more fundamental flaw > Almost no SMB views contract management as an urgent problem. If you are a solving a problem your target market doesn’t care about, you’re not going to get adoption. This isn’t a product problem or a top-down vs bottom-up problem.

jokethrowaway 4y ago
It's not a flaw, it just means your target is bigger businesses (hence why he needed sales instead of marketing)
- icambron 4y ago
  Their whole thesis was that SMBs need contract management. That thesis appears to have been mistaken. So it’s certainly a flaw. Sure, you could fix it by creating a new thesis about a different market, building a product that addresses that market, and setting up the right GTM for it. But that’s a whole other business, and they explain well enough why it’s not one they want to do.
  - SoftTalker 4y ago
    I think the thesis was, that SMBs could benefit from contract management in the long term, but (and not initially understood) it was not an urgent problem in the short term. To get buy-in for a long term initiative, they'd need consultative sales at the executive/owner level of the businesss, but that would mean competing with established "enterprise" companies, who already are not selling to SMBs because software sold that way is too expensive for the SMB market.
    - icambron 4y ago
      By “thesis” I meant the thesis of the business, not of the article. The article said just what you said; my point is that another way to explain those dynamics is that you can’t sell software to SMBs if they don’t urgently need it. That’s because that logic about top-down sales is true regardless of what you’re selling. And that’s why the foreknowledge that SMBs don’t urgently need to solve a contract management problem is a huge red flag, ideally before you’ve written a line of code.

noduerme 4y ago

>>Pressing them directly on why they were not using ContractBeast to create all their contracts resulted in a lot of feature requests. >> Now, talking with customers about features is tricky. Often you receive solid and useful ideas. Occasionally a customer will provide an insight that will change the way you look at your product. But most of the time, customers don’t really want the features they are asking for. At least not very badly. This a thoughtful, well-rounded and obviously experienced view, but ultimately it shades toward being very pessimistic about the competence of the end-user. >>When users are unhappy but can’t explain exactly why, they often express that dissatisfaction as a series of tangential, trivial feature requests. Clearly, the writer had the self-reflection to realize that the product wasn't working, and for that should be applauded. On the other hand, maybe there's something a little intentionally self-blinding about the above statement. Assuming that people are just putting out meaningless feature requests because they'll never use the software anyway is, to say the least, taking things from a very negative starting point of view. Maybe something larger was actually missed in the "tangential, trivial feature requests" which if compiled would have pointed to a fixable underlying problem if one were take them seriously as a constellation of indicators pointing to a root issue. This is speculative: >>These aren’t necessarily bad ideas, but they had nothing to do with why they were not using ContractBeast more extensively. This is indicative of burnout, where you stop seeing the value (for other reasons which are harder to quantify): >>In any event, I was overwhelmingly getting these kinds of tangential, trivial feature requests. And this is resignation: >>It didn’t provide a significant immediate benefit. I was fighting human nature and losing. If I'd been sitting around that office, I might have suggested adding a human consultant to the loop for every new client from onboarding to full use -- not a virtual pop-up box, but someone they could call on the phone. And not to sell anything but to suggest uses and help implement the changes to the customer's business ops that they would then come to rely on. Mid-sized businesses don't make drastic changes overnight but that's also a guarantee of lock-in if you can convince them to rely on your product. So you'd give each one a sort of a "guardian beast angel" if you like, who was available at all hours. The sole purpose of the employee would be to track a few dozen customers and their user experience, really understand how this worked in their business models, and find ways to improve their use of the software while filtering back some feature requests and bugs. And thus get the customers to realize the full benefits of the software, without any attempt to sell them anything. This kind of thing would be a loss leader, it would be money out of pocket, but it would be far more cost effective than any kind of advertising, and it would establish trust and good word of mouth in addition to providing a customer base that was now dependent on you. Also, it wouldn't have involved actually writing any new features if you felt that the software was already sufficient to the tasks most users would require, if they knew how to use it properly. It would also give you runway to roll out new features on your own timetable without constantly trying to please an audience, since the customer-facing "beasts" would provide workarounds for niche use cases and reassure them personally that improvements were in the pipeline.

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menzoic 4y ago

Why does he think he needs to work 70+ hour work weeks? He mentioned he couldn't sleep knowing user adoption was low. I think the biggest problem here is that he felt pressured to over work himself to solve a highly visible problem. This affects many engineers including myself. In many cases over working is not necessary and there are diminishing returns, possibly even less overall net returns if you burn out or become too sleep deprived and stressed to function efficiently the following days. In this case he quit, which is an example of this. As engineers we have to learn how to manage expectations and disconnect from work. As engineering leaders we need to foster a culture of maintaining good work life balance. As founder and CEO, he's in the best possible position to do this. Especially in this case where there is no external deadline.

FabioFleitas 4y ago
The thing is - in startups, there always is an external deadline (assuming you're not cash flow positive or profitable) - it is tied directly to your runway and when you'd run out of cash. That is the ultimate deadline for pretty much all startups. The very early stages of a startup (and even later stages) usually require this much effort because you honestly don't have enough money to last you the "right" amount of time you need - and therefore you need to put in more time. As you said - this isn't sustainable long-term - but, especially in the early stages, you may not have a "long-term" in that venture if you're not able to put these hours in. Not to say it's impossible to find a great work-life balance for an early stage startup - but it's highly unlikely.

jokethrowaway 4y ago

I've been in a similar situation but we realised we couldn't rely on marketing and that we need sales just before running out of money, incapable of raising another round. I would have definitely took the 500k. Needing sales doesn't mean the business is to throw away, it just means you need way more money than you were thinking. Probably 500k wasn't enough to execute the scale the founder imagined, but it could have been a good intermediate step to raise more money later on.

ChrisMarshallNY 4y ago

Sounds like this guy did the correct thing. I am sorry it didn't make it, but, as the author points out: > Human nature sucks. Yup. I have to design for human nature, and it can be immensely frustrating. I can tell you that this scar <pulls up shirt> was from when I neglected to plan for users misinterpreting an icon button, and this scar <rolls up sleeve> was from when I thought that a verbose help screen would help users understand a somewhat abstract concept, but this scar <drops pants> was from when I assumed that users would cut me slack, because I'm such a nice guy, and was doing this from the goodness of my heart. This is the main reason that I'm glad he pulled the plug: > and the team ready to quit their day jobs

timoth3y 4y ago
> This is the main reason that I'm glad he pulled the plug: >> and the team ready to quit their day jobs Me too. I'm happy to report we all ended up on good terms with each other once all the drama settled down.

jimnotgym 4y ago

>My team and most of my investors are pissed, I know it is childish, but I always enjoy this difference between US and British English. In British English when someone is annoyed they may be described as 'pissed off'. Describing someone as being 'pissed' means they are drunk! These US articles paint such vivid surrealism in my mind. In this case I love the idea of all of the investors being permanently inebriated. There is a lovely part of the 'special relationship' where the US doesnt care what the UK thinks of them, and therefore the UK has great fun at their expense. I suppose that is a win win situation? The US projects an image of being the leader of so many things, and the rest of the world jokes about how arrogant this is.

have_faith 4y ago
It's common in the UK to use both forms of "pissed".
- havblue 4y ago
  You don't have to worry about which definition someone uses if it's an angry drunk.
- bencollier49 4y ago
  Sadly that is now the case. I think the proper meaning will fall out of use thanks to US media. I am comforted by reports of US children talking about pavements, dustbins and shopping centres thanks to Peppa Pig.
- SoftTalker 4y ago
  It's also not unheard of in the US to use it mean "drunk." At least, I would understand it in context.

hk1337 4y ago

I would think their customers would also be pissed that their contract service is now gone.

ransom1538 4y ago
This is the root problem! If you are a first time CTO which contract service do you want to use? Generally, you bet on sure wins. Some startup is not a sure win (it might not be there in 2 months). When companies go under - paperwork is flying everywhere (unsecured). You want your contracts flying around?

timoth3y 4y ago

Hi, author here. I'm surprised (and delighted) to see this back on Hacker News. I'm happy that people find value in the article, and the process writing it forced me to put my thoughts together and helped get me through an emotionally difficult time. To address a few questions from the comments. 1) A common opinion is that I gave up too quickly, that I was just burned out, or taking the money would have let me figure things out later. This was simply not the case. An experienced mountaineer knows if a mountain is climbable with the team, gear, and weather he has. This one was not. 2) I would have been 100% fine with the team and investors going ahead without me, but AFAIK, neither side ever discussed it. 3) We were absolutely not viewing contract information, and would not have been able to do so even if we wanted to. We anonymously logged when functions were called without storing user or input data of any kind. 4) Six years later, I'm doing well. The Disrupting Japan podcast is going strong. I took a senior role in corporate VC for a while, and ended up at Google. I was overwhelmed by the attention and positive response I got from this article. The asymmetry of value of money and time was one of my main learnings, and I'm glad to see it resonates with so many other founders.

crabbygrabby 4y ago
Good for you, you did the right thing. Maybe you would have shoe horned some fix, but honestly, screw it. Imagine waking up at 5am and forcing yourself to work on a company that you knew wasn't going to make it.
- sshine 4y ago
  > Imagine waking up at 5am and forcing yourself to work on a company that you knew wasn't going to make it. Or to take up repeatedly at 5am and work 12+ hours a day on something that gains traction slowly.
  - uptime 4y ago
    Both are valid, one does not cancel the other out. I’ve been part of a fun project backed by good people and then had new tech eat our lunch. We still spent long hours trying to find value somewhere. That was less fun but OK, not a waste. I have been part of a slow traction project when the first great dot-com crash happened and too many contracts got cancelled. That was the worst time of my professional life but not a waste. I have spent time on very promising tech in a field ripe for either a good living providing something needed in service deserts, or an exit. The founder found every excuse not to launch, to keep versioning pre-launch. That neverlaunch project was a waste of a year that I’ll never get back. Learning when to bail is a true skill. Not to quit just because it is messy or inconvenient, but when it is actually harmful.

sylware 4y ago

"I was deciding whether this venture was worth committing to another year of 70+ hour weeks. I need a higher level of certainty than investors do because my time is more valuable to me than their money is to them.Investors place bets in a portfolio of companies, but I only have one life." You do the real hard work, they provide numbers in a computer database (and often kick you out once this hard work is done).

radisb 4y ago

Couldn't someone else willing to give those 70h/week take your place?

polote 4y ago

The problem with this article, is that it gives the feeling that creating a company is a sequence of logical steps. But that's not the case at all. OP stopped the company because he didnt want to invest his time in working on this problem, and thats a fair decision. But this has nothing do with unfixable flaw or "people sucks" or something like that. Those things are part of any business.

vlovich123 4y ago
I think you missed the main thrust of the article. They were trying to land in the mid market segment and expand from there into the large market where it’s more expensive to acquire sales. However, after doing a bunch of research actively interviewing their user base, the author couldn’t figure out a way to get these users to use the product enough for that land and expand strategy to work (it wasn’t sticky enough to actually start generating sales). In essence, from the author’s perspective, there was no path forward for success with the current business stategy. You are of course free to disagree and you may be right that there was a path there or they could have pivoted to do something totally different. What the author was trying to convey and maybe you missed is that they weren’t interested in spending another year exploring trying to find a totally different viable business strategy.

pepelondono 4y ago

You took the right decision given your context. But the whole matter could have been avoided if you were solving a problem you actually cared about. Then there would have been no doubt if you should or should not invest another year of your time.

sfink 4y ago
I would challenge that. If I'm solving a problem I personally care about, then I will also be personally willing to put in vastly more effort into learning and getting up to speed with the solution than the vast majority of my target customers will. As the OP said, you need something that will give relatively quick return on investment of effort. If it's going to require a larger up-front investment, then you have to really, really care about the improvement it's providing in order to put in that effort. I have innumerable half-baked solutions to various problems I care about, and by "half-baked" I mean they only work in specific situations and require massaging the inputs into a form that the solutions will accept. And that's fine for me; after all, I cared enough to implement the fancy solution in the first place. But I don't expect anyone else to use it unless I clean it up and package it nicely.