START-UP SCARS: 10 Times I’ve Fallen On My Face

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As a child, you learn that if you touch the hot burner, you’ll get burned — and definitely mentally scarred, if not also physically scarred. The same is true in starting a business — most times, if you do something and you get burned, you’re scarred for life and won’t ever repeat that mistake. Sometimes though, we have to touch the burner a couple times until it finally registers 😉

So here are some of my scars — and some overall background on my start-up experiences. Some were just business plans that were written, while others were full fledged businesses:

  1. SBM Computers (1996) — I was roughly 16, a junior in highschool, started this little computer company to build/repair computers. Bought an advertisement in my highschool’s newspaper. Not sure I sold anything from the ad, but overall via friends/family, I sold about 30 computers.
  2. Oceanrock Interactive (1998) — Started this web design company the summer after my freshman year of college with 2 good friends. The one was going to do sales, the other writing, and I was going to program/design. We had 1 client — we stopped this overall side project about 3 months into it and my two friends ended up passionately hating one another.
    • Lesson learned: Don’t go into business with friends (there are exceptions); and definitely don’t push people into going into business (make sure they put something up — such as money into the company, or buy supplies, etc; they need to be invested like you are).
  3. Rafflefrenzy (1999) — This was a fun one and would be highly profitable, if it were legal. I pitched this idea to Bob Kagle (VC at Benchmark Capital; on the board of eBay) back in 1999 at the age of 20 — those were the dot-com days, so getting into any office on Menlo Park was quite the feat. I learned that raffles/sweepstakes are illegal — but can be legal for non-profits, however it’s all on a state-by-state basis. So I researched/contacted 47 of the 50 states to find out more — learned that Kansas was the most lenient. I setup a PO Box in Kansas and planned to setup my own non-profit, then I was going to do all the online raffles via there, and then allow consumers to select charities that the earnings would benefit. I was going to keep 10% of the earnings towards administrative costs, then donate the remaining 90% to the non-profit beneficiary. However it got a bit complex — non-profit advocates thought 10% was too high, and then I wasn’t sure on the legality of everything (some states only allowed a non-profit to have one raffle per year — however, if I was the one doing a raffle through/for my non-profit, and then simply donated the funds to any charity — and if Kansas allowed that — then what was the problem?).
    • Lesson learned: the law is serious, and, look out for established communities (there’s a whole ‘nother world out there for non-profits — they have their own message boards and listserv’s — they could blacklist you from the entire non-profit world with one wrong shady move). I still love the idea and have it completely mocked up in actual HTML pages — I used the 1999 design from ‘mobshop.com’ (non-existent now) and customized it. I loved that design — it’d still be a great design in 2007.
  4. Inseconds (v1) – shopping aggregation (1999) — This was back in 1999 when most Etailers wouldn’t tell you the shipping costs. This website was going to aggregate all online etailers under “one roof” and allow the consumer to shop for everything from lawn mowers to DVDs to prescription drugs. The consumer would then have two options — fast or cheap. If they wanted the products shipped fast, then their order might come from 3 etailers. If they wanted it cheap, maybe their order came from 1 etailer (but took longer).
    • Lessons learned: This idea cost me a lot, and I’m still paying off these debts. I was calling up VPs in area businesses in Denver and taking them out to lunches and dinners, just to pick their brains and pitch them this idea. My business plan called for needing $300k. I basically did some “creative financing” using credit cards and lived off credit cards w/o a job for 6-months. Then the dot-com bubble bust, I had just taken a year off from college, and realized I should probably get that degree — just in case. Note: Don’t start a business without steady income. You’re most likely NOT going to become a millionaire from your idea, so don’t assume you will be — and thus, don’t get yourself in heaps of debt; particularly high-interest credit card debt.
  5. Inseconds (v2) – flood p2p networks with “crap” and deter piracy (2000) — I pictured myself on the cover of Business Week with this business idea, as becoming the most hated man online. I detailed out a business plan, but lacked the knowledge on how to execute the programming — it was going to require application development (i.e. C++), which I wasn’t really familiar with. Basically the idea was to get users to download my application and run it at all times. I’d store files on their computers and they’d be shared on the P2P networks — Napster, Limewire, Bearshare, etc. Since the user would be hosting files for me, I’d have control to put files on their computer and they’d be shared via these P2P networks. Thus, imagine if you will, having 10,000 “drop spots” across the USA (or globe) for corrupted/fake music and movie files. The fakes would look like the real ones; users would download from my users, they’d then become seeders of the fake materials, and eventually, no one knows what’s real or fake — and get so frustrated that they stop using the P2P networks for pirated materials. Lesson learned: I was in over my head; I had no clue about programming something like this — looking back on it, I should have started approaching some geeks in the computer science department at my college.
  6. One Day FameOneDayFame (2000) — this was a fun one, that my Mom still feels was my best ever. Essentially you could buy your own ‘one day of fame’. Each day, the homepage of this website would change to feature someone/something new. Each day was put up for auction — and then you could put anything up on the page if you won that day. I eventually was going to create categories and have different people/things for each category every day. There’s the whole curiosity thing with it — you never know what’s going to be at the website tomorrow. Much like how woot brings curiosity.
  7. Deja Vu Recordings (2001) — this was only a business plan written in college. The idea was that music can really bring you back to a time or place in your life — particularly live concerts. If you listen to a live recording of a show you were at, it can bring you back there. This idea was to do real-time recordings of concerts and sell them immediately after the show was over. Some competitors have sprung up, but not sure how well they’re doing — music is a complicated business (ensuring everyone in the food chain is paid).
  8. ResideNow (2002-03) — I took this idea far, to the point of setting up at an industry tradeshow and eventually signing on 8 clients. I developed the entire website over the course of the summer of 2002, went back to college for final semester and then worked on this business full-time from January 2003 til March 2003. Originally the business was called “College Cribs”, but after many calls into 40-50 year old apartment property owners/managers and them asking “cribs? like, baby cribs?”, I changed the business name to ResideNow. I learned that I didn’t have a business model after investing hundreds of hours programming this thing. The goal was to get all college-based apartments online — I wanted people to know exactly what was available to rent, along with photos and other details. Turns out the college apartment market is very cyclical — totally didn’t realize that while developing, but college students typically rent in March – May, for the upcoming August semester; that’s about it.
    • Lessons learned: Have a business model — know how you’re going to monetize something (have somewhat of an idea). Don’t just go out and build a website — ask prospective clients what they’d want to have in terms of functionality/features. Don’t build everything at once — get something out there. Even if you’re an introvert and programmer type — spend 50% of your time talking to prospective clients, or selling them; You have to call or go in person to prospects — I find going in person is easier, because someone has a harder time saying “no”.
  9. Aboutcodes (2005) — Loved this idea, and still do. Once again, I developed this entire thing without speaking to prospective customers — mistake. I figured they’d all buy into it; wrong. It’s a radical concept too — not something that consumers are use to; so there’d be a learning curve — teaching of the consumers. Basically, if you were watching TV and saw a commercial for a .. truck .. let’s say, that you were interested in checking out — typically you’d forget about that truck and continue watching your TV. This service allows you to pick up your phone, dial our toll-free number, and input a code associated with that commercial (or billboard, or newspaper advertisement, etc). So the commercial would have a code in it — you’d see the code, input it, and you’re done. The next time you’d go to your computer, you’d login to your Aboutcodes account, and all your recently offline “bookmarked” ads would be there.
    • Lesson learned: Speak to prospective customers; get their input; get buy-in. This idea would have required massive amounts of advertising dollars just to educate people on our brand and what our service was. Not to mention the difficulty of getting an ad agency to incorporate our logo/tag/code into their ad — that’d be a fight, they want their stuff looking good.
  10. Vested Ventures (2005-06) — this has been my consulting business. The true focus was Internet marketing, but also some web design here and there (considering my background). At its’ peak, it had 40 clients and 12 contractors that I was managing to do all the work. When the business was running full-speed, I realized, “WTF am I doing? I don’t even want to run a service business.” And that was that — I then started to cut clients (refer them elsewhere) and cut contractors. I worked on getting back to my own personal consulting. I don’t want to run a business where I’m paid by the hour — my next start-up needs to be some kind of web-based product/service that can really grow; not something that I’m limited to a specific hourly rate and number of hours in a day.

Whether you call these times I’ve fallen on my face — or invaluable real-world business start-up experiences … is all a matter of opinion. I wouldn’t trade these experiences for anything. Every single time, I’ve become more and more focused on knowing exactly what I want to be doing in my (work/career) life.

What scars do you have from the trenches? What lessons have you learned? If you have a start-up failure tale to tell (or just some lessons you’ve learned in business) — email it to me, I’ll compile some of them and make a post. Try to keep it brief — problem you were trying to solve, problems you encountered, etc … what made you finally call it quits, and the lesson(s) you learned.