Stories of failure and redemption
If all you do is read Techcrunch or watch reruns of The Social Network, it can be easy to think that startup success is a linear progression from idea to riches. So easy right?
It’s actually much harder than it appears, and all founders go through periods where it seems like everything is about to come crashing down.
If you’re going through a hard time right now with your business, take the time to read the stories below. You’ll see you are not alone, and that if you persist you might just end up with a success story that you can tell your kids about one day.
WPMU DEV is an award winning WordPress plugin developer, with a collection of some of the best WordPress, Multisite and BuddyPress plugins on the web.
STORY OF FAILURE
James Farmer – CEO of WPMU DEV
You want one story of failure?
I think if you’re going to pick just one, the most ludicrous thing I ever did was insist that I go 50:50 with my co-founder (who I’m certain would have taken 30, or even 25) when I kicked off my business. I did it because I thought it was ‘the right thing to do’.
Net result? Four years later, $75k in lawyers and accountants fees, six months of troubled sleep and general stress and a debt so large that I still have 8 years and 10 months to go before I pay it off. But still, I’m happy now… I have 100%, and if I’m going to gamble I’d rather gamble on myself than anyone else!
But next time… oooo, next time I’m gonna be mean!
Right now, WPMU DEV is one of the most trafficed WordPress sites on the web.Without investment and despite the initial hurdles, James has built the business into a profitable company with over 98,000 members and 29 staff.
Retail Me Not is one of the leading coupon sites on the web today. Customers can obtain discount coupon codes from 100′s of leading ecommerce stores.
STORY OF FAILURE
Guy King – Co-founder of Retail me Not
At a crucial stage in running our startup I inadvertently blocked Google from indexing the site. Technically speaking, I managed to plonk a link rel=”canonical” href=”/” on every, single page. Fortunately we noticed within a day that traffic had dried to a trickle and I managed to stumble across the problem quickly.
It was a sleepless couple of nights as we waited/prayed for the Google gods to restore our much-missed traffic. Thankfully within a week we were back to normal, but I still cop crap about it to this day.
Guy recovered from his technical catastrophe to make it to a successful exit. With 14 million uniques a month and $30 million in revenue a year, Retail Me Not was acquired by Whale Media in 2010.
CarRental is an Australian startup that allows a customer to compare car rental companies, book online and pay on pickup, all for the same points and price.
STORY OF FAILURE
Chris Bailey – Founder of CarRental.com.au
We wanted to build a comparison engine for car rentals. We’d seen how much others were making from suboptimal sites, and we thought we could do it better.
We found a dev house that was 50% less than most quotes. They eventually got us designs that were quite good but four months late, and the whole project was scheduled for a six week ETA. Then they started coding.
Around this point we asked them what they would code in, they chose Rails, we didn’t fight it. They spent most of the first month coding their custom agency-wide CMS. Weird. Then they spent the next six months in a manic state, either coding til 4AM or not coding at all for weeks on end.
We ended up getting our site live, with massive issues, about 12 months late, with a final invoice that was 125% over the “fixed” quote. Alas there was a “non-fixed” component. They had blown over the included amount very early on and continued to code without notifying us that we were now on a steep hourly rate.
We happily requested all sorts of tweaks and features and improvements, which were duly built, and all charged through the irrelevant “non-fixed” component. We received our buggy site, spent a year trying to fix it all, got it stable and now it’s time to change languages so that our 10 PHP devs can work on it, rather than our 0.5 FTE Rails dev.
It all worked out in the end for the crew at CarRentals. The site is making money, paying for other “adventures”, and the overall experience taught them a lot of great lessons.
Buffer is a social media application that allows you to schedule the great content you find. Fill up your Buffer at one time in the day and Buffer automagically posts them for you through the day.
STORY OF FAILURE
Leo Widrich – Co-Founder, Buffer
Suicide attempt: How we created a DDoS attack on ourselves
There is one particular example with Buffer, where we made a huge mistake and nearly committed suicide. All of a sudden our servers got extremely slow, the site was very laggy and unusable. We went down after the heavy load continued and were absolutely furious. We thought it was one of those well known DDoS attacks and it totally scared the hell out of us. It turns out it was us attacking ourselves.
We have a browser extension that allows you to add any article you read into your Buffer to be posted well spaced out over the day. We would show you how many Tweets/FB posts were left in your queue. And that little number would be updated in real time, constantly calling our servers and creating an insane amount of traffic.
We just turned off that number and from then on the DDoS suicide attempt passed!
Buffer recently raised over $400,000 from a range of top tier investors, and are piling on new customers at a tremendous rate.
Productive Web Apps is an interactive directory that lets you search, sort, rate and compare hundreds of the best web applications to help you at work and play.
Scott Purcell – Founder of Productive Web Apps
I’m a banker by trade, caught up in the startup gold rush. Since this is my first attempt, I had visions of throwing up a website within a day, getting millions of hits, making thousands of dollars each day and paying someone else to run it for me while I sit back and ponder the more important aspects of life. How wrong I was.
We didn’t market the product well and ended up paying a fortune for too much advertising that never turned in to sales. We’d spend hours choosing certain colours for a banner and focusing on tiny details which in the end made little difference. On our very first sale we had the wrong price listed on our site by accident, which meant we had to charge them 60% off.
Scott says “Building this start-up from nothing has been one of the most challenging and most enjoyable things I’ve ever done. I actually enjoy the work that goes into it and the lessons I’ve learnt along the way…even from the big stuff ups.”
Trunk.ly was a site that tracked all the links you shared via your social media platforms, storing them for you to review and search later on. (Editors note: It was awesome).
Tim Bull – CEO and Co-founder of Trunk.ly
The lowest moment for us with Trunk.ly is easy to pin-point. We spent three months negotiating final contracts with a VC, then flew out to meet them only to have them pull the deal as we faced them across the table. Not only did it cost us 10′s of thousands we didn’t have, it wasted time and effort we really should have been spending on the business.
We’d built a great team of advisors however and they picked us up and dusted us off. There’s a huge feeling of relief when you’ve hit rock bottom, we felt we couldn’t really sink any lower and the only way forward was up. Things had to get better from there. And they did.
The most important thing we learnt was that walking away is NOT the worst outcome. We felt we had no options and continued to pursue the VC deal even when we first felt it was going wrong. It was an expensive way to drive home the point that walking away is a genuine option.
Trunk.ly was acquired in late 2011 by AVOS, the startup behind the newly launched Delicious.com. From a failed raise to an acquisition in just a few months – comeback of the decade!
Flowtown is a social media marketing platform that helps businesses transform email contacts into engaged customers.
Dan Martell – Co-Founder Flowtown
After raising $750,000 from a range of investors, we set about scaling up the business. Month over month we grew users and revenue at 30+% until one day it all came to a stop.
It all started when the Wall Street Journal published a front-page article attacking Facebook for leaking user data and how some companies – not us – were selling private data to 3rd parties that were using it for advertising solutions.
Although we weren’t directly mentioned, it did cause Facebook to take a hard stance against the data-brokering industry, and resulting in our sevice being shutdown.
The next steps were hard. We immediately cut our burn by 60% to extend our runway. That meant some tough decisions regarding salaries and overhead, but we knew we had to move quickly. We then went to the whiteboard and brainstormed ideas that would still be relevant to our customers but that we would feel passionate about, too.
Three different “pivot” ideas later, we finally settled on Gift Marketing.
From having their business model shut down to a successful exit, Flowtown made it. Flowtown were acquired in 2011 by DemandForce. Boom!
Feld Technologies was a software consulting firm co-founded by Brad Feld, now a VC at Foundry Group.
Brad Feld – Co-founder of Feld Technologies
While Feld Technologies was a software consulting company, the companies that installed the networks that our software ran on (mostly PC-based Novell Networks) were so shitty that we set up our own small network installation group. Some of our clients wanted to buy everything from us so we also sold them the hardware. We made about 20% margin on the hardware so this was worthwhile, especially since we were able to bill by the hour for all the time we spent on this stuff.
People liked working with us – all of our new business either was “random” or “word of mouth.” We ended up working for a bunch of Boston-based VC firms and several of them referred us to their biotech investments. In the early 1990′s, biotech was white hot – these companies raised tons of money and spent it on crazy wet lab facilities, which included lots and lots of hardware.
I can’t remember much about Hyperion other than they were out on 495 somewhere (it was a long drive) and they bought a bunch of hardware from us. They paid intermittently and one day we realized they owed us around $75,000 and hadn’t paid us in over 60 days. For another 30 days I called and kept getting promised checks, which never came.
I vividly remember The Struggle – I was lying in bed with Amy in our apartment at 15 Sleeper Street (Apt 304 in case you were curious). It was the middle of the night and I couldn’t sleep. Amy could feel the wheels turning in my brain and asked me what was wrong. I told her I was worried Feld Technologies wasn’t going to make payroll because Hyperion owed us $75,000. I then went in the bathroom and threw up.
It’s important to realize that it wasn’t that we were out $75,000, but the hardware had cost us 80% of this and we’d already paid our hardware vendor so we were really out over $125,000. We were a $1.5m-ish self-funded business at the time so this was a devastatingly large amount of money for us.
After a sleepless night, on a totally empty stomach, I got in my car and drove out to Hyperion. They were still there (thankfully) – I then sat in the lobby until the CFO would meet with me, and I stayed in his office until he brought me a check for whatever they owed us. They went out of business a few months later.
(Re-produced with permission from this blog post)
Feld Technologies was acquired by AmeriData Technologies, where Brad served as CTO. Brad is now a successful VC at Foundry Group.
mmMule is a social travel network connecting locals who want stuff with travelers who can deliver it. In return for delivery travelers are rewarded with fun, local travel experiences.
Avis Mulhall – Co-founder of mmMule
Our biggest failure was a near-death experience. Shortly after arriving in Sydney and during the creation of mmMule, I became seriously ill. So ill in fact that I nearly died – enduring four months in hospital, 3 major surgeries and even now I have an ongoing battle with Crohn’s disease.
At some point we really felt that it could be the end of the road for mmMule, things seemed really dark. But throughout everything, I had a single-minded vision – you could call it blind faith or you could call it stupidity – all I knew was that this was going to happen, that despite everything, we’d pull it off and get to launch.
If anything, mmMule helped me pull through. Without having something that I truly believed in, it would have been much harder to get well again. I have a real passion for what I’m doing and honestly believe that we’ll do great things, especially with AngelMule.
Despite Avis’ illness the founders were thrilled that they managed to go live with mmMule. “We didn’t even plan it as a soft launch, we just pressed the button, sent out a tweet and a facebook post and crossed our fingers!” says Mulhall. “The extraordinary thing was the response we saw immediately from around the world” declares Avis, “In our first 24 hours we had 1600 unique hits, 100 new members, 50 requests posted and even had our first delivery accepted from the UK to Australia!
Twilio lets you use standard web languages to build voice, VoIP and SMS applications via a web API.
Jeff Lawson – CEO and Co-founder
When we started Twilio, we were raising our seed round in Fall of ’08. We had a prominent VC interested in leading the round, and we had our final, full partners meeting planned.
We walked out of that meeting, thinking it went well. We checked out our phones to discover that Lehman had collapsed. Talk about bad timing! The VC ended up passing on the deal (and all deals) as VC funding basically dried up for the year.
Without a seed round, we were worried about getting to launch. But, in a real heart-to-heart between founders, we decided we didn’t need money, and just kept doing what we’d done for the previous 9 months. We put our heads down, kept working without salary, and got the product to launch and in the hands of paying customers. Once we had a product in the market with traction, we closed our seed round within a month and kept growing ever since. Just goes to prove, stay focused on product and customers, and everything else will fall into line.
Twilio recently raised a $17 million Series C from Bessemer Partners and Union Square Ventures. They continue to go from strength to strength, reaching over 100,000 developers on their platform in June 2012.
Smartbear was the first commercial tool available for developers to do code reviews.
Jason Cohen – CEO and Founder of Smartbear
Failure that most people don’t talk about is emotional failure.
I felt like a fraud every day. Here I was, selling a wobbly, buggy tool and pawning myself off as an expert in a field that didn’t exist. (My software was the first commercial tool for code review.) Every second I felt like I was putting one over on the world.
I would explain how my tool cuts code review time in half, but was that actually true or had I just repeated the argument so many times that I stopped questioning it? I would instruct customers on “best practices” for code review, but who am I to tell other people how to critique code? I would orchestrate purchases, but should I be handling large sums of money with no knowledge of accounting, cash-flow, invoicing, purchase orders, or “enterprise sales” process?
Aren’t I too young? Isn’t the tool too crappy to charge for? Aren’t I too inexperienced? Don’t I need an MBA or at least some sales training?
Objectively, and with hindsight, my feelings were misplaced. The tool really did save time and headache; customers said so. As much as I doubted the title “Code Review Expert,” I had developed more experience with more teams in more situations than any one person could (because everyone else was busy doing their actual jobs). And sales isn’t as mystical and unknowable as I feared.
(Re-produced with permission from this blog post)
Jason sold his company in December 2007, and has since gone onto co-found Wpengine
Fivesecondtest helps you fine tune your landing pages and calls to action by analyzing the most prominent elements of your design.
Alan Downie – Co-founder of Fivesecondtest
My co-founder and I had a great little usability start-up called Fivesecondtest. It was a simple little memory test where you look at a website landing page for 5 seconds, and then we hide it, and you try and recall what you saw.
It’s still running of course and is doing ok, but it was very nearly a failure of monumental proportions. The app was originally built as a free app, and had a good amount of traction. So much so that we decided to relaunch the app as a paid product, and immediately started to make a reasonable amount of coin out of it. At the time we were both consulting, and so this suddenly seemed to be a great way to get out of doing crappy client work! Awesome!
It wasn’t yet earning enough for both of us to live, some growth was needed, so we decided another revamp was required. We needed to give our customers more value, and more value meant more features! Everyone knows that people pay more for more features right??? Right??
We were pretty naive at the time, and spent several months building and polishing a new version of our famous Five second test that we thought would blow everyone away. Instead of just being a five second memory test, we added the ability to click and provide answers on specific parts of the app as well as being able to add a “feedback” question after the test. It ROCKED. We launched and then sat back while we waited for the money to roll in! Great plan, except everyone hated it.
I don’t mean some people; I mean everybody. We had long standing customers that literally screamed at us for changing the app that they relied on for doing their job. Several people even said if we didn’t change it back, they’d go and build their own in direct competition. Usage dropped through the floor, people stopped doing our tests and we had usability experts (previously fans) telling us that our changes were a joke and had no basis in usability whatsoever. We’d hadn’t just killed the goose that laid the golden egg, we kicked it a few times for good measure.
After we’d gotten over the shock, we immediately set about rebuilding a third time. This time we put back the classic fivesecondtest, and added two new apps (a simplified click test and a funnel test). By the time we’d finished our third revamp we’d lost all love for the app (and hence why we moved on to BugHerd). The apps are still alive and doing well, but the pain of three rebuilds in a year just about killed it. Lesson learnt – never build without talking to customers first!
Alan and his co-founder Matt have now launched BugHerd, a point and click bug tracker for web developers and designers. BugHerd have since raised funds from both 500Startups and Starfish Ventures.
Banjo notifies you when any of your friends are near. Explore the world and global people watch to find photos, updates and people who share your interests.
Damien Patten – CEO and Founder of Banjo
The Banjo app you see today is not the Banjo we started with. We initially built an amazing app based on location and messaging. Everyone who saw it was very impressed with the technology, especially the speed at which the app operated. The product was strong enough to get amazing engineers ready to walk away from some of the biggest companies in the valley to join us. We tossed around the idea of launching at SXSW in 2011 but decided it would be smart to go and “observe”.
It turns out it was one of the best decisions I’ve made in the creation of Banjo. We quickly realized that despite our innovative technology, we were going to have the zero user problem (just like many of the other “hot apps” of SXSW who are no longer around). I knew if we launched our app, we would have lots of media and industry buzz but people would probably say what they say about many new apps; “This would be cool if more people were using it.”
We had spent months designing and building Banjo and even taken seed funding. While we knew the product had the ability to see good results in the short term, we were in this for the long term. So instead of waving a white flag and calling it quits, or worse, launching a product we knew would fail, we scrapped the entire thing; all of it. Gone!
We started over, created an entire new product, new code base, new design and in only 6 weeks after the first line of code was written, launched the Banjo you see today.
As Damien says: “One year and almost 2M users later, our technology is a leader in the “social discovery” space. While it is too early to tell where Banjo’s future lies, one thing is for sure, pulling the plug, and starting again was the right call at the right time. Bottom line – founders shouldn’t be afraid to fail or to be wrong. It’s from this very experience some of the most amazing innovations happen.”
Geeklist is a place for geeks to share what they’ve done, who they did it with and connect with great companies and communities.
Christian Sanz – Founder
Before I started Geeklist I remember asking all my friends and friends of friends, including random people I ran into in coffee shops or at the gym (yeah I was obsessed), about the concept of Geeklist. It was basically giving developers/geeks a place to share and take credit for their achievements and help them connect with companies, super simple.
The majority of my developer friends (and strangers) really loved it of course, but I did get my fare share of skeptics that didn’t really think any devs would ever sign up or share their achievements. So I ignored all of that and went ahead with the project. I asked my friend Reuben Katz to join forces with me, and we drafted an executive summary and launched ourselves into the shark tank with way too much confidence.
It didn’t go well.
After 3+ months of rejection from multiple people (including friends who were doing light angel investments) and feeling like there was no light at end of the tunnel, rather than giving up I decided to pause development on the bigger project. I focused all my energies into something quick, something that could spread out virally. I coded up the ability to reserve your username, create a profile and follow people and I shipped it in a few days. It took off, and in a few weeks we went from zero to 10 thousand members.
Geeklist ended up closing an angel round of almost 1 million in seed funding, including some of the investors that rejected them the first time around.
Manage your tasks seamlessly from anywhere. Producteev helps you organize your tasks and projects in the simplest way.
Ilan Abehassera – CEO and Founder
The story for Producteev is like millions of other startups, a roller coaster. We did hit a pretty hardcore roadblock though.
I started the company in 2008, and we launched the first private beta early 2009. We had quite a lot of press coverage in 2009, so a bunch of people were trying out our service. By the end of 2009, we had 15,000 users in our private beta, but almost no one was using it. The product wasn’t sticky at all.
We ran out of money at the same time. Four employees, no customer, hardly any active user, and I was already two months late to pay my team’s salaries. Most of my first investors were telling me to shut down the company and go do something else. But I didn’t want to. I knew we were close. But we had to raise money and hire engineers so we could build a version 2.
Against all odds, I went out to raise a series A. I was pitching at an event in NYC, and some guy I didn’t know came to see me at the end to tell me that he could “introduce me to a VC firm who would love what you do”.
Two months after pitching in NYC, in February 2010 the round was closed. Producteev grew from 4 to 8 team members, and in July 2010 released Producteev 2.
Apptopia is the the first marketplace for mobile app acquisitions.
Jonathan Kay – Co-Founder
I will never forget Valentines day 2012, and not for the reason you are thinking. At this point I had been about three or four months into being a startup founder and I thought it was over already. I had an amazing job running marketing at Grasshopper.com and I walked away from that to found Apptopia. We were building the first ever online marketplace for brokering mobile app acquisitions. We wanted to help app developers create an Instagram like acquisition for themselves (but on a micro scale, think $1,000-$200,000).
On Valentines Day my partner and I hit the final wall with Apple. We had talked to so many people and finally got the same answer so many times that we had to accept it as reality. We sat down in a conference room together and processed the realization that we might not ever be able to sell/transfer an iOS app – that 60% of the market we quit our jobs to build just disappeared before our eyes and we had not even launched yet!
But do you know what? We didn’t quit. We didn’t walk away. Most importantly, we never thought about giving up on each other. We both went home early that night, did whatever we needed to do to get the anger and sadness out and we came in the next morning ready to go. Ready to be an entrepreneur and solve a problem. Not only did we build a solution to this issue with Apple, but we launched a couple months later and gained a lot of traction.
All I would say to other entrepreneurs is don’t be naïve. Terrible, terrible shit will happen to you. And it’s ok to be sad, its even okay to be out of control angry. Just don’t give up, and don’t turn on your partner. Take a day, process the entire situation, and then do what you do best. Get creative and find a solution. That’s what separates the really rich, really successful entrepreneurs, from the wannabes.
In the first 3 months alone Apptopia have sold about $200,000 worth of apps. They are just about to close a very sizable seed round of funding, and are growing rapidly (about to be double digit employees).
Fetchnotes is a mobile note taking solution that fits your busy lifestyle.
Chase Lee – Co-Founder
My co-founder Alex and I were prepping an email to send out to all of our users. We had just migrated to a new system, and Alex forgot that we had to toss in the line break HTML tags manually, so he sent out the email as a whopping block of text – not pretty.
I didn’t mind, but to Alex this was a travesty and we needed to resend. But first we needed to test the line breaks on our local server. So we made a test email with line breaks and sent it out.
Unfortunately, we sent it using the remote server to all of our users due to some overzealous URL auto-completing. Even worse, the email read “This is my test bitches.”
We frantically manned the live customer chat and email battle stations and spent the whole night replying to everyone. Turns out, 99% of folks found it hilarious and we tripled engagement.
By following up with everyone personally and publishing an open post about the results a few days later, Fetchnotes turned a PR disaster into a great outcome for their team, a lot of user love, and some nice press.
Scott Handsaker is the co-founder and CEO of Attendly, an investment backed event registration startup.
Since graduating from University in 1999, Scott has shaved off his dreadlocks, run for parliament (lost), obtained a black belt in Taekwondo, gone sky diving, built websites, managed IT help desks in Singapore, setup an Asia Pacific call centre in Malaysia, travelled the world and avoided consuming meat and fish.
Scott is the proud father of Otis and Harry and the lucky partner of Alice. He hopes you will like Attendly enough to tell all your friends about it.
Over 8,500 American startups are joining the Startup America Partnership. Get your free membership here:
Opinions and statements expressed by guest bloggers are theirs alone, not opinions of The Startup America Partnership.