Thoughts From Failed Startups - Cake Financials
Key thoughts from my reading of HRB article : Steven Carpenter at Cake Financial
Cake Financials is a great case study when it comes to building a platform that has a wrong assumption about its end users and unnecessary dependency on large companies. The company focused on the industry conversion rather than on building strong company identity to stand itself out of its rivals.
Optimize early on for large usage of your platform. If you can use other platforms to complement your service with a little more more money, do it while keeping in mind that you will build it when you have enough resources later on. It is tricky since you need to keep an eye on this dependency as you grow your user base. Cake Financials could have bought the data fromYodlee instead of focusing on the backend service till the model is proven right. Mint did use Yodlee at the beginning btw.
Use focus groups or surveys to understand your customers. You need to prototype or build a light weight product and get it in your customer's hand to play with it and validate your ideas. Don't go big on your initial implementation!
Build too early a large engineering organization. This will prevent you from pivoting fast and releasing faster!
Drive a PR campaign before you figure out who are your users. Once you're on the media, it becomes more difficult and complicated to pivot. It confuses the media and drives them away from covering further developments with your idea.
Focus on the user experience and added value to your end users. This is the opposite of the first point of the Don'ts section. Keep your eye on adding the value while keeping the right balance between your independence and augmenting your service with external services. Google, for example, used Yahoo in its early days to build its search index.
Make the product manager your first hire. Don't start with engineers. You need to know what and why you're building before you get into the how. Software engineers can get productive very quickly with the tools and Cloud platforms available today. So don't worry about hiring engineering team early in the exploration process.
Focus on the users who are willing to pay you early on and optimize for them. It is tricky because you don't want also to optimize for a user base that is too small to make your start up fly.
Always probe the status of your business and customers' satisfaction. Engage active feedback from your customers in your planning using analytics and the proper metrics. Don't just depend on casual discussions with anticipated partners, customers, or friends.
Build your business identity rather than focusing on industry conversion. In the first perspective, you focus on specific problem to solve with clear goals and success criterial. In the 2nd perspective, you're building your startup on your predictions of industry changes or you're envisioning to change an industry with your startup. Don't do that. It will defuse your efforts and make your problems too big to solve.
CHALLENGES AS YOU BUILD YOUR START UP
No golden rule on when to just quite and find a new start.
If it is not a $1 billion dollar business, should you sell, stop, or pivot to make it a $1 billon dollars business?