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Building a House in a Hurricane - Market(r) Is Resetting

By
Tristan Tarpley
Building a House in a Hurricane - Market(r) Is Resetting

Ten weeks ago, Tyler Cobb and I (Tristan Tarpley) launched Market(r). Six weeks ago, COVID-19's reign of terror on the world's population, healthcare systems, and economy went into full throttle with the beginning of mass lockdowns and quarantines. This was the perfect storm for our fledgling little startup. Startups are, of course, never easy. They're especially difficult amidst the worst 6-week economic span in modern history.

First, some backstory.

In 2017, I left the music industry and started marketing consulting. For years I had wanted a tech company, but I chose marketing consulting because:

  1. I was good at digital paid ads
  2. I needed money and couldn't wait until I could develop a product
  3. A friend of mine had a small agency and wanted me to come in as a partner.

Well, 2 of those made sense. The third didn't go so well. The day after my last day at my day job, she and I had a falling out and I was left with no money, no clients, no partner, and not even a logo or a company name (that was the easy part).

The thinking was that I could build clients, revenue, brand, and experience to leverage for market research, customer development, and learnings that I could parlay into a powerful SaaS app.

I built a clientele, had some success, boosted my personal income to 6-figures, had some employees, and was feeling pretty good about myself. Over that time, I met my soon-to-be business partner, Tyler. We hit it off from day one and quickly began meeting up weekly just to talk startups, tech, books, marketing, and video games. He was the only person I had ever met who had listened to as many startup books, listened to as many podcasts, and read as many case studies as I had. Ultimately, he was the only person I had ever met who wanted this life as badly as I did (and still do).

After a while, he left his job to pursue a startup with a friend of his. After 7 months, it became evident that his company was not a good long-term investment. I saw my opportunity. I snatched him up and convinced him to partner up with me on Market(r). We were off to the races.

We began building product, testing, doing market research, and got a product to market (above). Over a few weeks we reached $6,000 in monthly recurring revenue (all of this is without investor dollars), had some happy customers, had some verbal commitments on investor dollars, and were riding high.

Okay, you're all caught up now.

Over the 6 weeks since COVID's expansion, our $6,000/month was whittled down to just $1,200/month, with a lot of uncertainty around the remaining revenue continuing. Tyler and I made the immensely painful decision to deactivate all of our users' accounts, get jobs, assess what went wrong, and give it another shot over nights and weekends-- going back down to $0.

The pandemic didn't kill us. It exposed us to the wilderness and we weren't prepared to survive in the elements.

There are loads of better companies that are thriving right now, or at least holding strong. We were not one.

There's no doubt in my mind that if times were good we could have continued the growth, built a decent company, and survived until the next crisis. But it wasn't recession-proof. At that rate, it would never be a once in a lifetime company. It would never be great. It would always be a grind.

Why? We didn't have true product/market fit. We thought we did, but that was just because the unscalable things we were doing to satisfy users and my direct sales were masking our fundamental issues. All of this might have been fine, except that we made the early decision to charge an absurdly low rate ($85/month/campaign -- which is another issue entirely...this pricing model sucks) to force us to drive down our costs and drive up our efficiency.

Some core, fundamental assumptions we made and what we learned.
  • Assumption: The Lean Startup is the Bible! Every week, Tyler and I would design an end-to-end user story, I'd sprint and develop a prototype, we'd test with customers (when we could) and then iterate on feedback given. This was the best way to rapidly develop the product and get an MVP (minimally viable product) to market and start generating revenue. Do unscalable things! Build a mechanical turk! As long as the user gets a taste of the north star experience, you can develop product market fit and reinvest profits into fixing your tech/product debt.
  • Reality: The software market is insanely competitive. Most SaaS apps out there are pretty damn good. Your customer base has thousands (literally, thousands) of other options. It doesn't matter that we thought we were the best option (I still have some stubbornness in me that says that we were still the best option), the fact of the matter is that you are only an option. What was considered minimally viable when The Lean Startup came out is not viable today. What might be considered minimally viable in manufactured goods or dropshipping is not viable in software. You have to ship a seriously good product. This got us to a minimum viable product, but not a minimum delightful product.
  • Assumption: We built the company to be a hybrid of services and software. The software would continue to drive down cost-to-service until it was >90% automated. We called it giving "superpowers" to our implementation staff. Ironically, around this time was when Justin Kan's company, Atrium, closed up shop. They were applying an eerily similar methodology to the legal services industry. I wrote all sorts of rationalizations for why this wouldn't be us and how we were different. Foreshadowing?
  • Reality: Our users didn't care about the tech we built. They ultimately cared about what services were actually being done. A service business is distracting. Unless you are hyper-disciplined, you consistently take work that you wouldn't otherwise because...well...the paychecks can be fat.
  • Assumption: Our UX prowess was such that we could design an app where users are so satisfied with their dashboard that they get all of their service-related questions answered in-app. This was a key area of optimization for us. The most costly aspects of a service company is client relations. When something goes wrong, they email you and say, "Can we set up a call?" 
  • Reality: Users don't understand hybrid. They understand software and they understand services. They don't understand both. Hell, we barely understood hybrid, how could we expect them to?
  • Assumption: We would convert our consulting clients to the software and have a great launch and existing customer-base.
  • Reality: These are fundamentally different experiences. When a relationship is built firmly within one paradigm, it's very difficult to get a client (who doesn't really care that much to learn what they need to learn about the transition) to a user. In fact, doing this presents serious risks. The client often sees the software as a distraction from their account. They all want to feel as though they are your only client. When you talk too much about your product, they feel less and less like your only client.

In Rand Fishkin's "Lost & Founder," he says-- in my brutal paraphrase-- that there are 3 reasons consulting businesses don't typically transition well into product businesses (Rand did exactly that when we was building Moz).

  1. Reach - They're not used to marketing beyond a niche, highly-specialized group. Typically in these groups, word of mouth is enough to grow a business.
  2. Scalability - Services is inherently unscalable and often reliant on the founder or principal. As their time goes away from being focused on other clients or CEO stuff, so too does the growth.
  3. The clients you have for your consulting business today may not be a good representation of the clients you need for your product. You have to get good at attracting and serving a different customer segment (services vs. product-focused customers). We had several clients who were not target market for our software.

Well, check, check, and check. I even read the book before we launched.

What are ya gonna do?

So, we decided to use it as an opportunity to change those things. Here are a few of them.

I'm not going to write a line of code until we have the entire app in a clickable wireframe and user-tested. We're going to ship a seriously good product. We're not going to cut corners and do unscalable things on product. Yes, I will always believe in doing unscalable things with marketing and customer acquisition, but not anymore do I believe that for product.

We're going to actually launch to an audience, instead of waiting until the product is ready. My whole background was in marketing for companies who had a product to sell. That's fundamentally different than bringing a product to market.

Fundraising can be a massive time-suck. It's all about your momentum. I took 6 weeks early on to spend 80% of my time on fundraising. Doing that, though, delayed our momentum with our go to market. This was a mistake. Investors are all about signaling. Has the founder done this before? Who are the other investors? Traction? I should have spent this time focusing on the business. Investors will follow a growing business.

Native integrations are worth it. Market(r) has a lot of API integrations (ad platforms, data feeds, CRM data, etc.). We decided to use a third-party ETL (extract, transform, load) provider to act as our middle man to load this data into data warehouse. As new users came in, we would hookup their account in the ETL dashboard, select the tables we wanted to transfer, then it would sync over 24-48 hours and then every 24 hours after that. I'll write another blog about the engineering challenges here, but this saved us hoursssss of development. It also severely reduced the possibilities for features. We're going to spend the time actually writing native data integrations on this go.

Offshore labor is awesome, but hard. We had a writer and designer in the Philippines-- both of whom we had to lay off. I cried when I had to do that. A huge value prop of offshore labor is being able to leverage asynchronous communication. You send a message and then get back to work until they can answer it (Philippines is +13 hours of Houston, where we live). This also requires an immense learning curve in management.

Even if you think you're developing a desktop app, build for mobile first. We felt pretty dumb when our first 3 signups came in on mobile and complained about the UI.

Gather >=3 datapoints on every suggestion before you implement it. Everyone has an opinion, and most suck. As you get suggestions, wait until you hear it >=3 times before you actually implement them-- even if it seems obvious. I spent a lot of time implementing features based on 1 datapoint that nobody else ended up using.

Onboarding seriously matters. You need to give the user value all along the way, not just once they're 6 weeks into their experience. Again, I'll write more about my engineering lessons on developing a great onboarding flow, but most of them circle around leveraging your features infrastructure to give breadcrumbs of value that entice the user to keep on going. This is your first impression with the user. Make it a delightful experience, not just a means to an end.

Top talent is not looking for you. They have their own things going on. The CEO is always recruiting.

Don't be so addicted to shipping features that you forget to polish. We shipped a lot of really dirty features under the Lean Startup mindset. You know what? These features weren't used. Because they were minimally viable, not truly viable.

But, don't be so addicted to polish that you forget to ship features. It's a really difficult balance.

Over-communicate with your investors and customers. If you're out of sight, you're out of mind. People really don't think about you as much as you think they do ;)

Square pegs in round holes rarely fit. Tyler and I both hate services. We're product guys at heart. We thought we could fake it with services long enough to afford to finish the transition. It didn't work that way. Know your weaknesses but optimize for your strengths.

Users don’t just want the high-level info. Good entrepreneurs are highly-engaged in their business. They want the control and intelligence. They want to know how metrics are calculated.

Analytics shouldn't be a 1-way conversation. Let the user run simulations, model our scenarios, and experiment.

Why users sign up is not why they stay. Users sign up for Stripe because they want to take payments. They stay for analytics, API ease-of-use, invoicing, and customer data management. We thought we had ours. They would come because it felt like TurboTax for marketing, then stay because we would tell them exactly how much they should be spending on various marketing activities and how to spend those dollars. That just wasn't enough.

So, how will Market(r) V2 look?

We'll use our extensive experience on the consulting services side where we learned what problems keep people up at night, our incredible learnings from (basically) failing on the first pass, and new clarity on our vision ahead to do the following:

  • We'll make this product an invaluable marketing power-suit for executives.  
  • Market(r) will be revisiting every user flow - nothing is sacred.    
  • We'll build robust, native integrations and authentications directly with the channels everyone uses (or should be using)-- making it much easier to work seamlessly with Market(r) and give instant, real-time analysis and recommendations.
  • We're investing heavily in continuing to codify CMO-level decision-making and recommendations-- developing the framework for tactical decision-making algorithms that can spot the trends, analyze your market position, and make smarter predictions than a human can on what you should do next and why. What the computer can do, we'll do no matter the cost. If it's truly impossible to do it only with tech, we will ship it out to our affiliate marketplace (below).
  • We'll be standing up a scalable marketplace of managed services that will allow busy founders and small business owners to grow in the marketing channels that are most profitable for them as if they were 10x their current size. To aid in this, we will be using the data infrastructure already built to vet the service providers and match them appropriately with companies.

The decision to go this way was one of the most difficult of my life. Multiple times over last week, I would break down crying. It was devastating to lay off our 2 employees. It's terrifying to enter the job market (I've been self-employed my whole life).

But, we have the unique opportunity to use information gathered from real customers and a real product to do things right this time. We will level up personally as founders. We will take our discipline to the next level. Great companies are built during recessions. We fully intend on being one of the success stories coming out of the COVID-19 crisis.

Stay up to date with us! We'll be sending updates as we rebuild stronger and make a lasting impact on the marketing tech space.

Sincerely,

Tristan TarpleyTyler Cobb

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