This evening I attended the SDForum SEM SIG, featuring Jason Feinsmith, CEO of Accomplice. Jason gave an excellent no holds bar talk on his lessons learned from starting a company. Accomplice started operations over 2 years ago. The company has developed and commercialized an innovative “virtual assistant” software product and service which has won acclaim from industry leaders, press, bloggers, and thousands of customers. Sound good?
To my surprise, the Accomplice hype and buzz was far from the truth. Positioned as an ad driven free service for small/medium business professionals, the company only had 18,000 users. I say “only” because in order to be a successful venture backed ad driven website, a company must generate $50 million dollars in revenue a year. On average, this is equivalent to to 1 billion page views a month. (ref Jeremy Liew of LightSpeed Ventures on “Three Ways to Build an On-Line Media Business to 50M in Revenue“)
Three key insights I took away from Jason’s talk:
- Fail early: Make sure you have enough savings to attempt this challenge because most likely you will fail. Set minimum goals at 6 months, one year, and 18 months. Set goals that you believe you must achieve to validate signs of progression. Otherwise you can get so engulfed in the project that one day you wake up and realized you have lost everything. Jason knows people who have taken a second on their mortgage, used up their savings, sold off all of their belongings, and maximized credit cards. He recommends that you set a budget with a time table and stick to it. If you have not reached your minimum goals, it would be a good sign to stop.
- The truth about raising capital: Jason observed that “raising money without paying customers is a false dream. I am a perfect example. I may not be a name brand executive, but I have held various executive management positions with an attractive track record. I have a Stanford MBA and have several strong relationships within the investor community.” Jason could not even raise his first round of angel money without a finished product and paying customers. He had also invested a significant amount of his own money to show is commitment to the business.
- Product Planning: Jason suggests that you plan weekly and make sure your engineers get the job done on schedule. Try to secure your early market customer commitments by making the customer pay for the feature before you build it. If you cannot finish the feature and release it in two weeks, drop it, unless you have a customer willing to pay and wait for it.