Startup lessons from WealthLift.com
In August 2012, Soroush and I returned to school after having worked on WealthLift.com full-time for a year. One of our mentors told us to write down all the lessons we had learned from working on WealthLift. I am very thankful that I took the time to do it, and this is what I wrote. It's not the most organised brain dump, but there are some real gems in here that have now become part of my DNA as a founder.
1. Your Business Partner is Everything
Pick someone you respect in both a personal and professional way
You will have arguments and bickering. It's really important that you both completely respect one another. Respect each other to tell the truth, even when its unpleasant, and also enough to judge and weigh each others ideas and arguments with an even hand. It's easy to belittle someone's points if you do not respect the mind behind them.
After all the arguing and discussion, once a decision becomes more or less evident as more right than wrong, you need to respect one another enough to accept the outcome and forget any harsh words or stares and put the issue behind you. Any kind of grudge held against one or the other that is not addressed can dismantle the entire company. Remember, at the beginning, you ARE the company.
Pick someone who is as motivated and driven as you are, passionate about the idea
Again, this is the next 3-5 years we are talking about here. You need to both have a sustained conviction about the importance of the underlying problem you are solving to make it. You might not have the right business model or plan but as long as you are solving a real problem or creating real value for someone, you will eventually figure out how to make the opportunity work.
Emotions in life are like a pendulum and sometimes you are feeling on top of the world and that nothing can stop you and other times, you feel under the weather and that the entire venture is about to fail. You need someone there who can act as a counter balance, over the moon when you aren't and grounded when you're a shooting star. Remember, most ventures fail internally before ever being truly tested by the market. As human beings, we are our first and largest obstacles.
Are you both willing to commit 6 years at the onset? You need to go with the worst case scenario when deciding what to do. Making the decision to start a company with the hope of selling in one year for millions wont help you get there, it might happen but the chances are slim.
You're going to marry this person for the next couple years, so take your time with the decision
When excited about the prospects of a new idea, its easy to get so enthralled by it, you want to jump straight into building it! It happens every time. If you are starting the venture with a new or even existing partner, take the time to consider the match. Your business partner is the HARDEST thing to change about your business. The HARDEST. So don't take the decision lightly. Think of it more like dating then just a business, this will seriously put you into the right mindset for choosing your partner.
Pick someone who compliments you
This might seem obvious and cliche but you need to think hard about what your strengths and weaknesses are. Get someone who is an opposite to you. For example, at WealthLift I was great at imagining new, useful features and pushing for their implementation. I was not however a perfectionist in the actual implementation. It was very helpful to have Soroush push me to perfect what I would come up with beyond what I initially thought was necessary.
2. Understand your business
A. Do the research
What is the Market opportunity?
Realistically speaking, how much do people currently spend trying to solve this problem?
How high are the barriers to entry? Is there customer loyalty? Are there costs to the customer for switching?
What kind of a business model can you build around this problem? I am not saying you need to start this way but you need to be aware of the possibilities here.
Is each customer a one-time buyer or is there the possibility for recurring payments? This will dictate a vastly different customer lifetime values (CLTV) for your business.
Be sure not to mistaken the entire restaurant market with the market for italian food in Palo Alto.
Leverage the power of the internet with your idea. Build something that doesn't rely on localisation or physicality. Yes, these are also competitive advantages if you can claim them however the alternative can easily be 5X or 50X an opportunity.
With WealthLift, we blinded ourselves by saying "This is a global opportunity" and "Affiliate deals from brokerage houses is just our first revenue stream. There are infinite ways to monetize". Neither of those statements were wrong yet... Just because you have a global opportunity does not mean you won't have to start locally first. You will need to conquer one market before being able to take on the rest. Be sure that you can build a viable business out of one market and do not rely on the elusive size of the world to cover your bottom line. While there are always multiple ways to monetize a business, the preliminary method you choose will be crafted into your product and will be harder to supplant later on. One big problem with the one we chose was that it was a non-recurring revenue stream, forcing us to constantly look for new users without being able to focus at all on driving additional value from our existing user base.
- Who are your competitors?
If no one is doing what you want to do, this should be a big red flag. Best is to take an existing industry and bring a large leap forward in the offering. Not only are you sure people are willing to use your product, you also have a strategic exit or at least another company you can acquire once you become the juggernaut in town.
Businesses always look vastly different on the inside then on the outside. One mistake we made with WealthLift was overestimate the amount of money our competitors were making. We thought because of their massive amounts of page views that they were surely making a lot of money. This was not the case. Talk to an insider, someone who knows the organisation to get a real sense of the competition.
Are they getting old, loaded down with bureaucracy and inefficiency? Are they unable to move fast? Are they taking advantage of the new ecosystem of the web and mobile? Times are changing quickly.
How would you improve upon their offering in a way that is meaningful for the user?
What are your competitive advantages? How will you do it better?
Always think in terms of the user. Will they find this improvement significant? Will they be willing to switch for it? Will they stay into the long term? Are you asking them to change their behavior or do you fit into things they already do? Changing behaviors significantly is very difficult.
B. Don't lie to yourself
This is probably the hardest thing to do.
No matter how amazing an idea seems, be sure to do yourself a huge favor and take your time understanding it in as much detail as possible. Question every assumption, they each will lead to further assumptions and if a core one is wrong, you will invest time and energy unnecessarily.
C. Show living proof
Who can you point to as proof that your idea will work?
What are people already doing around you that could translate into usage of your product?
Look at people's habits, look at the things they do and why to understand where an opportunity exists.
D. What is your ideas Minimally Viable Product?
Important is for you to test out your idea as quickly as possible. Developing a product for years before putting it in front of someone is death. Isolate the key features that are most important to your value added offering and focus on those. This will also force you to make a much more concise product and remain focused.
It is always easier to add then to take away from a product. A concise product is also easier to explain and understand.
If your Minimally Viable Product doesn't become an instant hit, don't give up too quickly. The important part of launching a Min Vi is what you learn from it.
First build a Minimally Sticky Product, and then a Minimally Viral Product
Don't forget distribution when building your Minimally Viable Product. Build virality into the product from the onset.
E. How will you market it?
There is no such thing as an intrinsically viral product. It must be built into the product.
Think long and hard about which channels you will use to promote your product and how you can succeed in each channel.
Marketing is real work and just as hard as programming so don't let it be an after thought.
F. How much funding do you need?
What I learned at WealthLift is two fold. One is that there will always be more unforeseen costs then you at first think. Second, is that a lot of personal money is not a lot in terms of business money.
Bootstrap for as long as you can before raising a round. Ask friends and family for your first 10-30K to get you up and running with a live product to demo.
At this point raise a seed round that should last you your first year (100-150K). This should help you bring on board some people, market your product and become cash flow positive.
Only once you are making revenues and see the opportunity to accelerate your trajectory, raise from VC's.
The best option is to bootstrap forever. Raising from investors has been glorified by the press but it can be limiting and the source of many problems for a startup. If you are able to bootstrap your way to profitability, you might want to.
3. Build modular, clean code
Coding debt is a real concept. If you don't pay the down payment, it'll bite you in the ass later.
Build code you can re-use (libraries, hurray!)
Build code that you could give to a stranger to understand (you wont be writing code forever)
WRITE DRY CODE: NEVER WRITE THE SAME CODE TWICE
4. Distribution is EVERYTHING
Although the first hurdle you will face in starting you company is building the product, it is only the first battle of the war. After this, you need to attract people to your platform and that in itself is another battle.
Build distribution into the platform so that each user can attract another 10 users to the site. Let them invite their friends, broadcast their activity onto Facebook and Twitter. If you have a virality co-efficient of only 1.1, you will eventually see exponential growth.
Think long and hard about Programming Marketing / Growth Hacking (a sustainable, large scale marketing approach)
5. Communicate your Vision
You need to be LOUD!
You need to communicate what you are doing with everyone inside your company and outside of it. Unexpected opportunities will spring up by telling people about what you are doing.
Get feedback, answer questions, be useful to others
Write a blog, answer quora/stackoverflow questions, become an expert in your industry.
Email reporters who write about your industry and give them a fresh perspective, additional insight. Seek to be helpful.
Remind your employees to think of the long term, to do things properly and make them feel like a part of something bigger then themselves.
I hope some of this advice proves useful!