This was first written and published in May of 2020.
This essay is a retrospective about my journey founding a food discovery startup called idk over the course of the past of 2019. I have written the tldr of the major lessons I took away right below, and if you’re interested in the longer form narrative, keep reading, hopefully you’ll find other useful nuggets.
TLDR:
- Have one founder, (hopefully the CEO), whose sole responsibility is to raise money so that your startup can get off the ground.
- Start thinking about potential investment partners as early as you think about a startup and prepare for the long haul (6months - 12months) of fundraising.
- As a first-time founder with no-exit, realize that 9/10 investors will look at you skeptically and so make sure either your product blows them away, you have revenue numbers to show off, or engagement numbers to show off.
- If you decide to self-fund, make sure you have at least 12 months of living expenses covered -- among your founding team -- so that you put yourself in a position to make solid headway with your product.
Over the course of 2019, I worked on a startup called idk. I began working on this project when I got together with my co-founder, who was a childhood friend of mine. We both had grand ambitions about succeeding in technology and becoming very rich. Other than this grand ambition, we did not have a clear-cut idea of what to build, how to raise money, and how to monetize the product we were building.
It seems obvious, in hindsight, that these should have been topics that we should have spent considerable time breaking down, but because of our preternatural bias towards action, we felt that if we continued to build, talk to users, and just keep making progress day by day, that these issues would resolve themselves. Or more likely, we felt that we would have a better mental model and framework with which we can come up with solutions to the questions above.
I went to Stanford and studied Computer Science as an undergrad. Everyone in Silicon Valley and beyond knows that countless tech entrepreneurs came out of this storied institution and founded iconic companies from Google to Snap to endless others. Still, as an undergrad, I was focused on obtaining the technical skills necessary to build these companies. I had mistakenly believed that all it took to build great technology companies was technical prowess. Basically the idea that I can build a great software product with the CS skills that I was learning, and commercialize that product and make a lot of money.
Part of the reason that I had this mistaken belief was because I knew that having great technical chops was necessary to build a great software startup and that those who did not have these technical skills had no chance succeeding in founding a technology startup. Most of the widely heralded founders and CEOs that I observed in the tech press I was consuming -- from Zuck, to Sergey and Larry, to Jeff Bezos and Elon -- were all highly technical people with a software background at some point in their lives. So I had this conviction that there would be absolutely no way to make it in technology as a startup founder unless one had experience building software at some point in their lives.
Furthermore, from reading dozens of essays from Paul Graham, I picked up the idea that traditional business-minded, MBA types, were held in disdain by the tech community. So I was committed to not having a business co-founder when I pursued my tech startup at some point. My plan was to pursue an enterprise or B2B unglamorous startup that was very product and software heavy.
However, when I got together with my co-founder in March of 2019, he had a very consumer-centric mobile app idea and it became clear to me that he hadn’t even explored the realm of non-consumer ideas. He was even more of a novice than I was. He had never seen how products are actually built in a startup or software setting and so he came with a layman’s understanding of what was possible. His background was in door-to-door sales selling copiers to local businesses on foot.
I hadn’t obviously built my own startup before, but I had built software projects with teams composed of product managers, designers, data analysts, and many top-notch engineers at some of the top companies in Silicon Valley and I had a good sense of what was technically required to get our product off the ground into a usable stage.
We were first-time founders and convinced that we needed to get the product live out to users before we had any shot at raising money from angel investors and early stage venture capitalists. So we built and built and built some more for about five months and we launched our first product to public users in September of 2019. During our launch day, we had about four-hundred people download and use our app, mostly people that my co-founder knew from social media.
We had a toast to celebrate our first launch, and immediately several things started becoming very clear about our business. First, we realized that we were geographically limited. Our food discovery app only served people in a particular geographical location at a time. It was not a photo-sharing app that can be used by anybody anywhere in the world. So even though we were getting downloads from across the United States, we knew that the usability of our app was limited only to folks living in the southern California area.
Secondly, we now wanted to know what it took to raise money. I had talked to friends that had raised money without getting as far into a launch as we had gotten and had the idea that all we needed was to just check off a bunch of checklists and thresholds and we would eventually become acceptable to investors. I was conditioned to having this mistaken idea from my experience getting into college or other highly competitive programs where the application was clearcut and all one had to do was make sure she meets all the pre-specified criteria.
But I soon realized that the venture capital world was different. The entrepreneur not only had to go out and sell the product, but more importantly she has to relentlessly hustle and sell her vision to a peculiar group of people who hear ideas and pitches hundreds and sometimes thousands of times a year. Finding the door and connections to decision-makers that can potentially invest in your company is actually intentionally not clear cut at all.
At this point it became abundantly clear that raising money was going to be difficult no matter how much we improved our product. The investors and accelerators we ended up meeting all wanted to see significant traction in the way of users or revenue. As our personal savings were dwindling down with no investor’s in sight, the rate of our product iterations also began to suffer. We were concerned that we were going to run out of runway, we didn’t have any investor meetings lined up, and our product was getting stale to our users and we were spending lots of money on paid traffic in order to satisfy the whims of a potential angel investor who wanted to see 10000 users before he can make a decision to invest. Just like a guy trying too hard to woo an attractive girl, we began to reek of desperation and to see the writing on the wall.
IDK did not work out because we couldn’t figure out how to pursue building the product while providing for our living expenses. In other words, we ran out of money -- our own money.
Like most people, I thought if we got a product out, that would signal to investors that we were ahead of most of our early stage competition and investment dollars would follow. But that was actually quite foolish. Investors are more than anything looking for a battle-tested team, social validation from other investors or notable accelerators, and a history of getting impressive things accomplished. To be clear, having the technical chops necessary to get your product out is a necessary condition, but not a sufficient one to impress the investorati. So my advice to my current and previous self would be to focus more on getting the overall vision, and storyline, and investor connection set up right, before hunkering down and writing the first line of code.
