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

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.

  • http://techstbooks.wordpress.com Colin Dowling

    Interesting experiences. While everyone’s trials are different, I commend you for having the ability to cut your losses quickly on some/most of these when you decided for whatever reason that it wasn’t the future you wanted to pursue. I’ve had experiences that lasted years because no one had the heart to say “guys, this isn’t going to work” and everyone kept holding on far too long.

    The unfortunate part in such a thing is that most ideas are rarely “bad.” Even the ones that don’t look like they’ll gain mass adoption still can likely find some market somewhere. The problem is that keeping up the cash-flow and work-ethic to find those markets and execute well in them can be a daunting task. I think that the exciting part of building something is getting started and getting paid off. The middle part is usually the roughest by far.

    As an aside, I think we’re going to see more and more companies follow the path of 37Signals or Six Apart (for example) where the company builds/owns/admins multiple products that are loosely related. The days of “our company is called Google, it’s a search engine” may well be behind us. There are so many apps vying for attention that it strikes me the best way for an entrepreneur to ever get to critical mass is to build a handful of things useful to different people and keep them all under the same roof.

  • http://www.kakiloc.com Martin Dufort

    Your “one day of fame” idea has been somehow re-branded here: http://lookingrealgood.com/

  • Laura

    Some of my favorite business mantras are about failure:

    “Failure is simply the opportunity to begin again more intelligently.” Henry Ford

    and

    “If you want to increase your success rate, double your failure rate.” Thomas Watson, Sr (former IBM president)

    We only about a year apart in age (based on your time line), and I can produce a similar list. Be proud of it. :)

    Laura

  • http://www.StatTrack.net Chris

    I liked the One Day of Fame idea for sure – what stopped you on that one?

  • http://www.vestedventures.com Steve Poland

    @Chris — not sure really :) There’s a way to do it without charging money too — what I’m thinking now. Maybe the more people you get to sign-up/visit the website, the more points you accrue — and whomever has the most points at X point of the day, gets featured the next day. Something’s there… [to make it viral].

  • http://marlincreek.com Graydon

    re #9 – aboutcodes – How ’bout this… while watching tv through your “to be named set top box” you see something that looks interesting… just click on the “bookmark” button on the remote… what happens next I’ll have to think about, but much easier than calling some number.

  • http://marlincreek.com Graydon

    I was inspired…

    http://ideas.marlincreek.com/content/view/126/1/

    That’s a follow up to my comment from above.

  • http://FoundersCafe.com Jimmy

    Steve,

    I commend you for sharing your experiences. One of my favorite quotes is “Failure is the blueprint to success.” On my new blog, I will be starting to chronicle my startup (one that has been in the works for a few months) and share it with readers that might be interested in following it in a case study style.

    I’ve also posted something about embracing failure as long as you learn from it ( http://founderscafe.com/?p=22 ). I’ve enjoyed your blog tremendously and wish you nothing but the best.

  • http://www.thoughtandtheory.com Dennis

    Great stories. I really love the one day of fame idea. You should reallllly go through with that project even if its on a casual level.

    On another note, we’d love for you to post some of your stories on our site: http://www.weareonlyhuman.com. Its a site for just these types of lessons.

  • http://lesseverything.com/ Steven A Bristol

    Thanks for sharing your “scars” with us :). I just found a website that let’s people share there own scars and mistakes. And learn from others. http://weareonlyhuman.com I have been spending way to much time just going from story to story, it’s really cool.

  • Katie Martin

    Steve, you are an inspiration. Kudos for sharing your life lessons with us.

    There is one word to summarize this… innovation. Innovation is rapid reitteration. Trial and error. Learning from your mistakes.

    One of my favorite quotes to live by (and forgive me for I cannot recall the source), “Stupidity is doing the same thing over and over again and expecting different results each time.” Like Colin said, we commend you for cutting your losses quick. You know when something’s not working and you learn from those experiences… now only if we could all figure that out!

  • http://www.fliva.com Michael St. Hilaire

    Your first startup reminds me of the idea I had back around 1996-97 to sell custom PCs. I even had ideas for a website where people could custom-configure their pc-s to order, and a few friends signed up to help me paint them various cool colors.

    At the time, it was very hard to get a good rate from a credit card company for a website, and I was looking at giving up most of my profit margin in paybacks to them.

    Also the website was going to be super-cool, but was going to take a long time to build, and I had a full time job to maintain. Eventually I decided the time commitment wasn’t worth the risk, and quitting my job for this startup didn’t seem like the prudent thing to do either.

    I still wonder if I could have been a Dell Jr. if I had just stuck my neck out a bit more.

  • Naresh Mulchandani

    Wow, just wow!! You won’t believe how many similarities I share with you –

    We are probably the same age – I was also 16 in 1996 (I am 31 now). I’ve had a bunch of failed startups / ideas in my life just like you. At one point I used to joke that I have had so many failed startups it’s a wonder how I get out of bed every morning.

    Some ideas were only on paper while some had moved on to the next stages. Not only were some of our ideas very similar but also the learnings you have mentioned are on the same lines as mine – don’t startup with friends (my once-best-friend hates me now because we once attempted to start a company together); don’t leave your job till your startup starts making money (I was in my last company for five years even though I hated it on day one); boot-strap rather than borrowing; plus other learnings on what to do and what not to do.

    Good to know I am not the only one riding this boat (even though it has felt an awful lot like there possibly couldn’t be anyone else).

    I am currently between startups (I think) while working for a top tier business consulting firm on the side (don’t like it here either) and intend to move on to my next idea soon.

    In any case, thank you for writing this (well about some 3+ years ago). I think I am going to wake up a lot more positive tomorrow morning!

  • http://twitter.com/JohnTorresII John Torres

    Great story. Lessons learned are definitely more valuable than the monetary gains. It is also nice to know that it takes a lot of mistakes before you understand how to start you own business. Love the spirit though, you never gave up and all the ideas sound very promising.

  • http://kareemahmed.com Kareem Ahmed

    Loved reading this. I’ve got a bunch under my belt and I’m only 25.

    Would love to talk about it sometime. Add me up on Skype: kareemSahmed