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
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.
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.