How To Make It as a
First-Time Entrepreneur

How to Make it as a First-Time Entrepreneur

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

In January 2010, I remember shaking Founder Collective’s Eric Paley‘s hand after pitching Yipit to him for an hour and struggling to smile as we left his office.

The meeting had been a complete disaster.

Founder Collective wasn’t going to be investing. Maybe nobody would. I remember thinking I had been so foolish for having been excited just a few hours before.

Getting the Meeting

Two days earlier, we had met with Chris Dixon of Hunch and Founder Collective and told him we were thinking of raising a small angel round for Yipit. We didn’t have traction but felt like over the previous year we had built a good enough relationship with Chris that Founder Collective might want to invest.

He introduced us to Eric Paley, his partner at Founder Collective, and Eric told us that we should meet with the next time we were in Boston. I immediately responded: “Funny, we’re actually going to be in Boston tomorrow” and we immediately booked two Bolt Bus tickets.

In retrospect, had he really been excited about us, he probably wouldn’t have said “next time you’re in Boston”. But, I guess I wasn’t looking for reasons not to be excited.

The Toughest Meeting We’ve Had

Going into the meeting, Yipit aggregated all types of deals including sales and happy hours in New York and then emailed you the 7 best ones we had found based on your preferences. We had been written up in the New York Times but had only gotten 2,000 users after 6 months.

Three minutes into the meeting, I knew Founder Collective was not going to be our first investor.

He astutely pointed out three critical flaws with Yipit.

  • Couldn’t scale to other cities. There was a lot of manual work combing blogs and business websites to find about all the deals happening in a city and it would be really hard and expensive for us to scale that to 50 cities.
  • We didn’t have a viable business model. While we could do some email advertising, we were never going to get bars, restaurants and other small businesses to pay us for each offer we sent out. The performance wasn’t trackable and building a local sales force is unbelievably expensive.
  • Groupon had way better deals than we did. Groupon was really taking off and their offers were superior to our happy hours. For us to beat them, he said we would have to have 10x more Groupon-type deals than they had.

In an hour, he had shaken every last bit of confidence I had in our startup ever working out.

On the long, silent, 5-hour bus ride back to New York, I wanted so badly to think he was wrong, that he didn’t know what he was talking about, but I couldn’t. He was right. I felt defeated.

Reacting to Criticism

No one likes hearing criticism. And, when someone is pointing out flaws in the thing you quit your job for, the thing you’ve invested all of your time into, it hurts.

Hearing Eric dress down our startup was tough. But, on that ride back from Boston and the days following, we went from feeling sorry for ourselves to brainstorming how to address the flaws he had pointed out.

We had met with Eric on January 18, 2010. Just three weeks and many white-boarding sessions later, we re-launched Yipit as a daily deal aggregator.

The new version of Yipit tried to address all three critical flaws he had pointed out in the old Yipit:

  • We launched the new product in 5 cities
  • If we were successful, we could get affiliate revenue from the deals
  • By being an aggregator, we had many more Groupon-type deals than Groupon had

In the next week, we got as many users as the old Yipit had gotten in the last 6 months. Three months later we raised $1.3 million of funding. A year after that, we raised $6 million, moved to new offices and have expanded our team (we’re hiring!).

Getting Critical, Honest Feedback

It’s actually really hard to get people to criticize your startup.

People know how badly you’re struggling to get your startup off the ground and almost everyone will tell you they like your idea when they don’t. People think you need encouragement but what you really need is honest feedback.

Unless you have traction, your idea or your process is broken. You need to find out what is wrong.

When you get that criticism, I know it’s going to hurt. But, you should really be grateful for their honesty and start to dissect what they’ve said.

It’s also important to get multiple people pointing out issues with your idea. Rob Go, of NextView Ventures, a few weeks before our meeting with Eric had pointed out some of the issues Eric had identified. That really helped us avoid dismissing their advice given that we were getting it from two different and respected investors.

And, for everyone out there who entrepreneurs come to for advice, please don’t tell them you like their idea if you don’t. You’re doing them a great disservice. Tell them you believe in them but be honest about your opinions of their idea and how they are approaching it.

It’s those few meetings where someone really lets you have it that can help save your startup. It helped saved ours.

Vinicius Vacanti is co-founder and CEO of Yipit. Next posts on how to acquire users for free and how to raise a Series A. Don’t miss them by subscribing via email or via twitter.

  • http://MeetInnovators.com Adrian Bye

    maybe this could also be the writeup about how a startup gets its direction changed by investors to follow the current hot investing trend?

    • http://viniciusvacanti.com Vinicius Vacanti

      That’s sometimes the downside of listening to investor’s advice.

  • http://www.ombushop.com Ernesto Tagwerker

    Hey Vinny! Great article. 

    I totally agree, it’s hard to listen to hard criticism and not react negatively. 

    What you guys did was positive, you pivoted to a business model that addressed a real problem: Sorting the increasing amount of deals out there with a scaleable solution. 

    I always prefer feedback that criticizes or questions my startup’s business model than the other kind (eg. “Great idea!”) which sometimes is dishonest. 

    I guess investors are really good at this sort of feedback. 

    My question is: When do you decide to pivot? How long would you stick to your biz model until you decide to change it? A week, a month, six months?

    • http://viniciusvacanti.com Vinicius Vacanti

      That’s the hardest question to answer. I tried to write a post summarizing my thoughts on it: http://viniciusvacanti.com/2011/12/12/when-do-you-throw-in-the-towel-on-your-struggling-project/

  • http://lexspot.com/ Chris G. Shaw

    Great post Vin. 

    Eric gave us a pretty fantastic dress down on LexSpot too. The best way to think about a meeting like that is that it’s fantastic advice. There many investors (angels, VCs, whoever) that say they love your idea and love your team, but don’t want to invest. When you ask why, they give some vague answer, but in reality tell you very little that helps you to improve. I will ALWAYS take the “no” with thoughtful reasons why–even if their perspective or reasons are “off”*–because it gives you a data point. Whether you use the data to change your model, your team, your pitch, whatever, there’s nearly always something you can gain from actual constructive criticism. 

    *That’s not to say Eric’s thoughts were off, in our case, similar to Yipit, his thoughts were mostly on-point. 

    • http://viniciusvacanti.com Vinicius Vacanti

      Wish more investors gave critical feedback. I wonder if it’s fear that entrepreneurs will bad-mouth that investor to other entrepreneurs?

      • http://kurt.karmalab.org Kurt Schrader

        I’ve heard many times over that years that an investor is an asshole, and it almost always boils down to “he/she told me that my startup is a dumb idea” when you really dig into it.

        • http://viniciusvacanti.com Vinicius Vacanti

          That’s too bad. Entrepreneurs acting that way prevent investors from giving real advice.

  • http://reward-realty.com/ Kevin Codey

    Sometimes it’s so hard to take the blinkers off and realize a small pivot can mean literally save your start up.  As entrepreneurs we get so caught up in how great our idea is, we tend not to look at other ways of implementing it.

    Also, it’s always hard for us entrepreneurs to get critical feedback, because no one, I mean no one, will be as passionate and excited about the product more than the founder.  It’s hard even to hear someone say, “yea, sounds cool.”  When you are expecting, “That’s the greatest idea ever!”

    Great post

    • http://viniciusvacanti.com Vinicius Vacanti

      So hard to not be emotional when getting feedback.

  • http://twitter.com/fettemama fettemama

    HEY GUIZE! I MAEDE A WEBSITE! I R CEO NAO OF A STARTUP NAO!

  • http://hireflo.com/ Rudy Lacovara

    Nice post, good points, but right when it got to the good part you brought it to an end.  So you received the criticism that your business had critical flaws… but that’s not what saved your business.  What saved it is how you acted on that criticism.  If you decide to do a follow up post, I’d love to read it.    

    • http://viniciusvacanti.com Vinicius Vacanti

      That’s a fair point. I wanted this post to emphasize how important it was to get criticism from others and for people to give it out. I’ll think about the process we went through and write a post in the future about that.

  • http://andrewbryk.tumblr.com/ Andrew Bryk

    Really enjoyed the post. What do you think are other factors in deciding whether to pivot or persevere with one’s company? Other than receiving multiple critiques from respected in the early days of Yipit, were there any other events that made you decide to change Yipit into the deal aggregator it is today?

    • http://viniciusvacanti.com Vinicius Vacanti

      I tried to write a post on the matter: http://viniciusvacanti.com/2011/12/12/when-do-you-throw-in-the-towel-on-your-struggling-project/

      • http://andrewbryk.tumblr.com/ Andrew Bryk

        Didn’t see that. Thank you very much

  • Han Gu

    Great Post, and good comment from Kevin Codey. At times, I feel like I want to find the most critical and pessimistic person alive, and pitch ideas to him/her. If I can convince that person, then I can probably convince anyone else in this world. =)

    • http://viniciusvacanti.com Vinicius Vacanti

      Always recommend finding that skeptical friend to get feedback from. But, also good to have that friend that like everything you tell them :)

      • http://www.facebook.com/Landcrawler Han Gu

        very very true. lol
        They are equally important

  • Anonymous

    Wow!  Your candid and vivid description of the roller coaster ride that is fundraising, was truly gripping.  Do you recall any of the internal dialog that helped you pick yourself up off the ground and pivot following such a swift (albeit needed) kick in the gut?  How did you convince yourself to restore your will to fight?

    • http://viniciusvacanti.com Vinicius Vacanti

      After the emotions go away, getting critical feedback is kind of awesome. It’s like getting the answers to your current problems and gives you something to iterate on.

  • http://twitter.com/StartupStay StartupStay Team

    Phenomenal post Vin. Really encouraging. We’re a few weeks away from launch. Thanks for sharing man

    • http://viniciusvacanti.com Vinicius Vacanti

      Get it out as soon as you can so you can start iterating based on some tough user criticism.

  • http://profiles.google.com/bryanadams Bryan Adams

    Loved this post.  This should be required reading for potential TechStars applicants.

    • http://viniciusvacanti.com Vinicius Vacanti

      Getting rejected by TechStars can be demoralizing. I wonder if they give criticism to the ones that make it to the final rounds.

  • http://www.addinsocial.com/ Mike Potter

    Thanks for writing this post and expressing what a lot of us feel – honest feedback from investors is the really the only way to improve and develop an idea that may end up being better than the original one.

    • http://viniciusvacanti.com Vinicius Vacanti

      Investors are a great source of feedback, especially on product strategy and process. I still think customers are a great source of feedback on the actual product itself which is why you should always try to talk to them.

  • Your Brother

    Advice
    from potential investors seems invaluable and is rather distinct from the
    advice a potential customer would provide. What are your recommendations for those
    entrepreneurs who don’t have access to potential investors (other than going on
    that Shark Tank TV show)?

    • http://viniciusvacanti.com Vinicius Vacanti

      ha! Do not go on shark tank TV aside from getting good marketing for an existing, functional product.

      The three best ways to get an investor to meet with you:
      - If you know someone who knows an investor, ask them for a warm introduction (don’t just email them blindly)
      - Aim for the very junior people at the VC firms, the associates. They can actually give really good advice and you can reach them
      - Get a product out there that has real users and growing and they’ll come to you

      • Michael F

        Would like to meet with Founders. My idea seems in line with whom they invest. Any advice on how to get a meeting? I dont know anyone there.

        • http://viniciusvacanti.com Vinicius Vacanti

          You should find someone you know who knows them. Grab coffee with them, tell them about your work and see if they’ll introduce. The other good way to get their attention is to release your product, get traction and then reach out.

  • Charles Brun

    Thanks for your post! Harsh criticism is always hard to stomach! As you mentioned, once you recover its the best remedy to move forward.

  • http://twitter.com/Sirwan Sirwan Qutbi

    Harsh criticism isn’t hard to stomach.. you should count yourself lucky that you get the time to pitch your idea in the first place… *notice how this is harsh criticism* where do we draw the line of given constructive feedback ?

  • http://twitter.com/bkparikh Bhavin Parikh

    Awesome post!  Love how you bolted up to Boston (pun intended) for the meeting. Even if you weren’t “ready”, I’m sure that’s the type of hustle that’s made you successful.  I also love the transparency and vulnerability you showed.  When I was raising my first round, I definitely walked away from investor meetings feeling dejected.  And then I became overly reactive to every criticism.  It took a few go’s to realize that I needed to look for consistent themes in the criticism and use that develop the business, the happy medium.  Thanks for sharing your story! 

    • http://viniciusvacanti.com Vinicius Vacanti

      Good point about looking for consistent themes.

  • http://centricsocial.com/ Lisa Mogull

    Great post.  I had a similar meeting on Monday although it required a plane ticket!  After I finished wincing I was able to absorb the criticism it was incredibly helpful.  The investor was honest and some (not all) of his feedback will be really useful.  One thing you omitted — very important to write a gracious follow-up note and ask if you might be able to come back in a few months to show the greatly improved start-up.  Investors want to know that if, in the future, you build something they want to put time and money into that you will be easy to work with and willing/able to weather the inevitable storms.

    • http://viniciusvacanti.com Vinicius Vacanti

      That’s a great point. Very important to build a relationship with the investor and then show your improvement.

  • Kristen

    excellant post… I especially like the last part about giving criticisms yet still being supportive at the same time. Can you give me any advice on my new startup? http://www.indiegogo.com/projects/85104?a=516694 Thanks a lot

  • http://www.facebook.com/steve.quinn.921025 Steve Quinn

    Really great story. Thanks for your transparency. I just checked out “Yipit” and I am totally impressed. It’s obvious that you and your people are both professional and creative. Also, the photos for the “fitness” deals in my area are “edgy” and really draw me in. The photos make me want to go there and do whatever it is they are doing. Also, I just read about you in the New York Times. That’s how I ended up here. For anyone interested the title of the article is “Moving From Wall Street to the Tech Sector Proves Tricky”. One more thng – thanks for this blog-site so that others may learn from your experience.