How To Make It as a
First-Time Entrepreneur

I remember reading the first few pages of Steve Blank’s book, Four Steps to Epiphany, and thinking two things:

• This is not exactly a page-turner
• This is a really smart way of thinking about startups

Soon after, I started attending the Lean Startup meetup in New York and reading Eric Reis’s writings. I was believer.

One of the main principles is to release an early prototype of your idea to potential users to get their feedback.

But, despite being all in on the Lean Startup movement, we didn’t do that.

Why Didn’t We Release an Early Prototype?

Our current idea, Yipit, would find all the deals happening in your city (sample sales, happy hours, retail discounts) and would send you an email with the best 7 based on your interests and your locations.

It would have taken us just a week to have launched an early prototype.

We could have measured success based on whether people opened and clicked on the emails. We could have manually created the emails with deals we found and used MailChimp to send them out. There was no need to build any tech infrastructure.

But, we came up with all sorts of excuses why we just couldn’t release an early version.

Six painful months later, we finally put out the product. It didn’t work which was okay. What was not okay was realizing that our excuses for not releasing earlier were all wrong.

The Excuses We Came Up With

The bright side is that, 6 months later, when we iterated Yipit into a daily deal aggregator, we learned to ignore the excuses and released a prototype in 3 days that took off right away.

Below are the excuses we had and how we realized they didn’t matter:

• It wasn’t good enough yet. We thought manually sending deals wasn’t good enough. We were guessing and didn’t really know. It turned out that six months later, the automated version full of features wasn’t good enough either. We could have learned why it wasn’t good enough 6 months earlier and spent that time actually trying to fix it. Instead, we just guessed why it wasn’t going to work and guessed wrong.
• We didn’t want to give a bad impression to those early test users. I can safely say that this doesn’t matter. Those early test users just don’t care. After we re-launched as a daily deal aggregator, we got exactly one email from a user saying they missed the sample sales. That’s it. In fact, many of those early users enjoyed seeing our product develop.
• It needed these extra features. We thought we had to have a web view, people had to specify where in the city they lived, it needed to have links to the source of where we found the deal. None of these were right. We were guessing. Had we launched in a week, we would have quickly realized these features weren’t going to make a difference.
• It was going to take us a few months to build the tech back-end. We shouldn’t have built it. We should have just used MailChimp to send the emails. For the next iteration of Yipit, we didn’t build the back-end. Users don’t know what your tech back-end looks like. Focus instead on getting the user experience right.
• It needed to scale to accomodate hundreds of thousands of users. No, it didn’t. We weren’t going to get hundreds of thousands of users. Not anytime soon. We should have just been worrying about getting our first 1,000 users.
• Someone will see what we’re doing and copy it. If our idea had any merit, then there would have been at least 10 other groups of people out there also actively working on it. In fact, there were many groups of people working on a daily deal aggregator. But, because we launched in 3 days, we were the first ones and got most of the press attention.
• A potential investor will see it. I’m not sure if an investor actually did see it. But, even if they had, it’s not a bad thing. Investors like to see the progress you make as a product and as a team.
• TechCrunch will write about us when we’re not ready. They won’t. We spent a bunch of time trying to get people to write about us and they didn’t. Also, in some crazy scenario where someone writes about our terrible prototype, I can safely say it won’t matter in the long run. Startups succeed because they have a good product and not because they got good launch PR.

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.

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If you want your start-up to become the next big thing, it’s not good enough to just build a great product. Unless you can afford to buy users, you’ll have to grow virally.

The difference between getting one of your new users to convince one friend to sign up and that person getting two new friends, is huge. Assuming you start with 1,000 new users, after 9 months, it’s the difference between having 9,000 users and 511,000 users!

Below are 9 ways your start-up can grow virally:

Get Your Users to Spread the Word

• Get users to tell others about your app simply by using it.  This is probably the best on this list and one of the hardest to achieve. It’s generally true of communication and content-creation apps.
• Tumblr. People create their tumblrs and link to to it on their email signatures and Facebook and Twitter profiles. When those visitors come, at the top of each tumblr page, is a pitch for the visitor to “Join Tumblr”.
• About.Me. Users can create beautiful landing pages for themselves. Like Tumblr, they link to their about.me pages on their social media profiles. But, as you’ll see below, there’s a reason why Tumblr has grown much faster than About.Me.
• Get users to push content they create on your app to Facebook, Twitter. This is a recent and huge phenomenon. However, users won’t just push any content they create, just content that they are proud of or think their friends will find interesting.
• Instagram.  Probably the best example of a site taking advantage of this trend by enabling their users to take beautiful pictures which they then share on Facebook, Twitter.
• Foursquare.  People want to tell their friends where they are, especially at high-profile locations like sporting events and music concerts.
• Tumblr. When people create a new post, they share it on Facebook/Twitter.
• Get users to generate content that you optimize for search engines. While this isn’t traditionally thought of as a viral growth strategy, it’s very important. Millions of potential new users are searching on Google and, if your users create content that addresses these search needs, you’ll be able to pitch those searches to join your service.
• Wikipedia. Probably the best example of this. Wikipedia users create massive amounts of really strong content that Google searchers access every day.
• Yelp. Did an amazing job of turning local business reviews into great business listing pages that Google often places at the top of their search results.
• Quora and StackOverflow. Users answer questions that are then presented on Google search results for the millions of people asking those same questions.
• Make it in your users’s best interest to invite their friends. If your strategy is to ask users to invite their friends just because, they won’t.
• Twitter. By giving every user a follower number, it encouraged people to tell others to “follow them on Twitter” including many users that hadn’t yet signed-up for Twitter. Twitter also became a way to retain fans so that they could push content to them at a later date. The same dynamic applies to Facebook pages.
• Kickstarter. When people create their Kickstarter project, they email all of their friends and families to contribute to the project.
• Groupon and Gilt. Since both services have a high-enough user value, they can afford to give their users a referral credit for telling their friends.
• Dropbox. Gives users extra memory for their dropboxes in exchange for inviting friends.
• Get celebrities to use your app. Celebrities have huge followings. Early Facebook didn’t take advantage of this as it was all about just your friends but, with fan pages, they have tapped into this strategy.
• Twitter. Twitter has done an amazing job of courting celebrities to use their service with some of the most high profile celebrities having millions of followers.
• MySpace. While they have done many things wrong since, they created THE page where bands resided online and, with bands, came their legions of fans.
• Get content created on your app to be newsworthy. If the content created on your app becomes interesting for journalists to cover, you can tap into something more valuable than traditional PR.
• Twitter. Celebrities are constantly tweeting things they shouldn’t and journalists have a field day every time it happens.
• Kickstarter. Successful projects on Kickstarter like the Robocop statue in Detroit transcend the service and are covered by journalists and bloggers.
• Groupon/Living Social. Whether it’s Amazon, Whole Foods or GAP, these deals will get covered by journalists.

Increasing Conversion

• Adjust your product to become more mainstream. It won’t help much to have all your users constantly telling everyone about your service but most people aren’t interested. If you want to reach millions of users, millions of people have to potentially want your product. For instance, About.Me has very strong viral potential (as described above) but not everyone wants their own about.me page (at least not yet) and so their conversion rate suffers.
• Instagram. This could have a been a niche product but by making it so easy that even an absolute beginner could take a beautiful picture, it went from a niche to a mainstream product.
• Tumblr. Blogging platforms have been around for a while but Tumblr makes it so easy to blog that they’ve been able to convert many from non-bloggers to create a Tumblr.
• Get your users to use your app everyday. The more your users visit your app, the more likely they are to invite their friends, create content, etc. A great example of this struggle is Plancast which, while being a product that created content, it wasn’t content that was created everyday.
• Groupon and Gilt. Because there’s new content every day, they email their users everyday.
• Optimize your sign-up and referral funnels. If you are getting one extra user a month and optimize your landing page and referral funnels, you’ll cross over into viral territory. It’s not uncommon to see conversion rates double after a few optimization experiments. (At Yipit, we use Google Website Optimizer).

Conclusion

Building a great product is only half the battle. Take the time to think through how you can build in as many viral growth opportunities. It’s worth the effort to go from linear to exponential growth.

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Two users. That’s it.

It had been a week since we had announced to friends and family our latest idea, LinkFalcon, and only two of them had bothered to try it.

I thought LinkFalcon had some real potential. It solved a real problem for me and one that I hoped others had.

Complete disaster. Failure. Six months down the drain. Back to our real jobs.

That’s what should have happened; but, thanks to the Lean Startup movement, that wasn’t the case at all. Here’s why.

The Idea

I had the idea for LinkFalcon while watching a very terrible version of the highlights of an Arsenal soccer match on YouTube.

I knew there had to be a better version of these highlights but didn’t really want to go searching for them. And, that’s when I had an epiphany. What if there was a browser extension that would detect the highlights I was about to watch and offer to redirect me to a better version of the highlights?

It didn’t just have to be for soccer highlights, it could be for music videos, movie trailers, speeches, anything! The internet needed a better video redirector!

What’s Our First Version?

Certainly, we needed to build a system that, if given a url of a video, it would return a url with a higher quality version of that video.

We could build a very sophisticated algorithm that would crawl videos and figure out better version of them. The only problem: I had absolutely no idea how to build that.

Alternatively, we could build a crowd-sourced system where users would recommend better version of videos. Perhaps we could start with a small niche like movie trailers and slowly expand to other verticals. This seemed reasonable though it would be a ton of hard-work building that community and the tools they would need.

But, there was a third option: what if we didn’t build the system?

What was the first assumption we need to prove to ourselves? Was it that we could build the system? Was it that we could figure out a way to monetize it? While those were issues down the line, none of those were the first challenge we had to overcome.

The first assumption we needed to prove was that people actually wanted to use LinkFalcon.

Providing this service was not going to be easy so we needed to make sure people really wanted it.

We needed to see that people would actually go through the trouble of grabbing our bookmarklet and using it to get higher quality versions of videos they were watching online.

We Launch Our Experiment

So, we launched a simple landing page with a bookmarklet saying it would return a better version of the video they were watching.

But, when the user submitted a url, we didn’t actually have a better version ready.

The system would just email us the url and the user who submitted it. We would then frantically search for a better version and email it back to them.

Why did we do this? We wanted to find out as quickly as possible whether people actually wanted to use the product. If they really wanted the product and submitted hundreds of URLs, we would be willing to spend the months building the backend that would actually deliver the product.

By not building the system, we were able to test our key hypothesis in one day of coding and not six months of hopeful coding.

We weren’t launching a company, we were conducting a simple but very important experiment.

The Results of the Experiment

After one week and just two submitted URLs, we knew our hypothesis had been wrong. People didn’t really need this as bad as I had thought. It just wasn’t worth continuing to work on the idea.

But, that was okay. We had many other ideas to work on. And, because we tested this idea in just a week, we could actually get to those ideas. (One of them was Yipit, a three-day experiment, that turned into a VC-backed startup. (We’re hiring!)

An Important Other Benefit

Almost every entrepreneur has heard the advice to get user feedback as soon as possible. But, many don’t for many reasons. One of the biggest reasons for me was fear of failure. What were my friends and family going to think?

But, by thinking of it as a quick experiment, that fear tends to go away. The beautiful thing about experiments is that disproving your hypothesis isn’t thought of as a failure. It’s thought of as progress. And, getting early user feedback, even negative, is definitely progress.

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One of the hardest decisions you have to make, as an entrepreneur, is deciding when to give up on your current struggling project. It’s made especially difficult because you always seem to have an exciting new idea rattling in the back of your head.

The difficulty of the decision is further exacerbated by:

• Conflicting accounts from previous startups. On the one hand, you hear about how AirBnB struggled for years before finally making it. But, then you also hear how the founders behind Stickybits, after struggling for almost a year, dropped the project and built Turntable.fm.
• Sunk cost. You’ve spent so much time on your current project, can you really walk away now? Do you want to tell your friends and family that you’re, yet again, starting on a new project? Do you want to admit you “failed” again?
• New ideas seem better than they are. Your new idea is in the “informed pessimism” stage. It probably has all sorts of complications you haven’t thought about.

What if you quit right before your startup was about to take off? What if that other idea in your head is your Turntable.fm?

You Need a Framework

With such an emotional decision, it’s best to try to be as systematic and rational about it as possible.

The key to making this decision comes down to: (1) quickly iterating the product based on learnings and (2) consistently measuring each iteration based on a defined success metric.

Since things like frameworks work better with examples, I’m going to imagine I had the idea for TaskRabbit, the app where you can post tasks for people to do at a price, and that I was just getting started with the idea and struggling.

Defining a Success Metric

There are many possible success metrics and it depends on your business.

One of the more popular generic success metrics is the net promoter score. Basically, the score tells you how likely your users are to recommend your app. If the majority of your users aren’t “promoters”, you’re not going to make it. For more on this metric, see Eric Ries’s excellent post.

Here’s the net promoter score of some well-known apps:

But, you can use almost any metric like:

• Conversion rate of people who, after clicking on a facebook ad, create an account after demo-ing your product
• Percentage of people that invite friends on your “invite” friend step after they’ve used your product
• Percentage of people that return to the site a week after signing up
• If you are selling something to consumers or businesses, then your success metric is percentage of people who agree to pay for the product

For my fictitious case study (TaskRabbit), I would go to craigslist and find people asking for help and tell them they should put their request on my new site TaskRabbit. My success metric would be the percentage of people who added the task and perhaps, after putting the task up, I would give them a net promoter score survey.

With my success metric defined, I’d be ready to start iterating.

Why You Need to Iterate

Where some entrepreneurs stumble is they are never willing to iterate their product. They have an idea for the product, they put it out, people don’t like it and they throw in the towel. It’s incredibly hard to get it right the first time. You have to iterate.

Other entrepreneurs believe their product will magically work after a while. Unless they are iterating, it’s very unlikely it’s just going to magically take off. You have to iterate, you have to do so quickly, and you have to make sure the iterations are significant.

The changes you need to make must address the fact that your project must not be delivering enough value to the user at the cost you are requesting of them. For example, your emails aren’t valuable enough for them to bother opening. They don’t like it enough to recommend to their friends. They didn’t like it enough to take time out of their day to check it again a week later. In my fictitious TaskRabbit case, it could be that just a few people on craigslist are actually putting up their tasks on TaskRabbit and my net promoter score is negative.

At this point, people will tend to think they have a marketing problem. Not enough people know about it. But, it’s almost certainly that you have a product problem.

Iterating

Before you go trying to fix your product, you should diligently note down where you currently rank your chosen success metrics. You need to make sure you get a big enough sample size to make sure your stats are accurate which can be hard to do by just talking to people in person.

Once you’ve noted your metrics, your goal is to find out why you have a product problem. You need to dig deep into the user psyche and pull out that reason.

You can give people online surveys to take, you can pay people $10 to get on the phone with you and, even better, you can bring in people to talk to you in person (via craigslist, buy their coffee at starbucks, etc.).

In my fictitious case, I finally muster up the courage to find out why TaskRabbit isn’t working. It turns out that potential users don’t trust the people who will be doing the tasks.

So, you go back to your apartment, implement a fix to the problem and release it again.

Compare Success Metrics for Each Iteration

Whatever methodology you used previously, you should do it again with new users and measure where your new product ranks on your chosen success metric.

You may find that your success metric is hugely improved and the product is taking off.

More likely, you’ll find that your success metric improved a little bit, stayed flat, or depressingly gone down.

Regardless, you need to get in touch with these new users and find out why they still don’t really want/need your product. You may find that you didn’t actually solve the problem you thought you were solving.

In the TaskRabbit example, I could have added a small bio next to TaskRabbits to make them seem more trustworthy. But, if the metrics didn’t improve, then I was wrong. I either didn’t actually address their concerns or there were other concerns that I didn’t know about. So, I could do something more dramatic like stating that all TaskRabbits have undergone a thorough background check.

Back to your apartment to iterate again.

Target States

With your various iterations, you’re trying to get to two potential states:

• Success metric takes off. Your product will take off along with it. For net promoter score, it becomes positive.
• Your success metric improvement stalls. You’ve iterated several times and, while they slightly improved your metrics, it hasn’t been enough. You’ve also run out of ideas on how to continue iterating. It may be that people don’t really have the problem you’re trying to solve. Or, the way you’re solving the problem is too demanding on the user and you don’t know how to make it easier for them.

It’s Okay to Start Something New

Hopefully your various iterations will take your project to where it needs to be to take off with your audience.

However, if you are iterating, your metrics aren’t improving and you’ve run out of ideas on how to address your users’s concerns about the product, it’s okay to throw in the towel and start working on a new project. You’ll have learned a tremendous amount from your first go around and will be in a much better position to make your next idea successful.

See discussion on Hacker News.

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Hustling from our shared workspace cubicles

“So, what do you do?”

Ugh. I hated that question.

The truth was that we were trying to start a new venture but we hadn’t really made any progress.

But, instead of just muttering something, I would force myself to enthusiastically pitch our current struggling idea. They would nod along but the skepticism on their face was hard to ignore.

And, when I was done, they would sometimes hit me with: “So, is that your full-time thing?” Ugh. What that really meant was: you’re trying to tell me that you spend all your time working on that ridiculous idea?

The Grind

We left our finance jobs in the summer of 2007, and we worked really, really hard. By February of 2010, it had been over two and half years of hustling on no salary. What did we have to show for it? Nothing.

We hadn’t made a dollar of revenue. We had been rejected by every investor we talked to. We hadn’t been able to recruit anyone to join our team. We hadn’t gotten traction with any of our ideas.

We had failed to get more than 10K monthly unique visitors for Yipit for the last two years despite trying several ideas with it. We were going sideways:

On a personal level, my life savings was disappearing. I kept getting hit with late penalties on my credit card. Not because I didn’t have the cash to pay it, but because I just didn’t want to think about it. It was too depressing to look at my depleting bank account that I had worked so hard to build up. I remember withdrawing all the money from my 401K account and having to confirm that I did, in fact, understand the massive penalties I would incur for doing so.

In all honesty, I probably would have given up earlier. The only reason why I didn’t was out of loyalty to my co-founder, Jim, who had also quit his finance job. He had passed up many amazing job opportunities to work alongside me and I wasn’t going to quit on him.

Everything Changes

So, it’s now February of 2010, over two and half years since we started, and we have yet another idea: build an aggregator for the early but quickly growing daily deal industry. The idea was sound, timely and right up our alley since we had been doing local deal aggregation for the last 9 months.

And, in just three days, everything changed.

We launched the new idea in a three-day scramble, got some initial press, users loved it, and four months later raised $1 million from amazing investors. A year after that, we’ve raised $6 million, made real revenue, attracted hundreds of thousands of users, and recruited amazing people to join our team (we’re hiring! join us!). And, best of all, we’re just getting started.

So, what happened in those three days?

I’m convinced that if we had the idea for a daily deal aggregator back in 2007 or 2008 or even 2009, we wouldn’t have gotten traction because we would have messed it up.

But, after two and half years of failing and learning, we knew exactly what to do:

• Product strategy. We had become a part of the lean startup movement. I had gone to the New York lean startup meetups from the beginning, read Four Steps to Epiphany, and knew we just needed to build a minimum viable product.
• Coding the prototype.  I had taught myself web development over the last few years and Jim had taught himself front-end development. We didn’t need to find an outsourcer, we just quickly built it ourselves.
• Designing the user interface. We had already designed a bunch of prototypes. We knew how to design the landing page to collect user email addresses, the sign-up flow to collect preferences and to ask our new users to spread the message.
• Getting initial press. We knew how to craft our story in a way that would get journalists interested. We got featured on TechCrunch and Wired giving us a strong initial boost
• Getting investors interested. We had built relationships with many New York angel investors over the last few years and we were able to quickly drum up some interest based on our traction since they already knew who we were.
• Building buzz. We had become involved in the New York tech community and our friends in the industry really helped us build initial buzz for Yipit

Now that I look back, I realize that I was wrong to think that we had nothing to show for two and half years of hustling. While we didn’t have outward signs of success, we had learned something very important: the art and science of starting a new venture. It took us almost three years to know what exactly we had to do during those three days.

And, so, to everyone out there who’s struggling and feels like they have nothing to show for it, I hope this post keeps you going. You’re learning every day. And, when the inspiration strikes, you’re going to be ready to pounce on it.

Back in November of 2006, before NY Mag and TimeOut put startups on the cover, before the “tech bubble”, before Twitter and Foursquare were popular, before working at a startup in NY was considered a reasonable thing to do, I was a private equity investor for a $1.6 billion fund called Quadrangle Group.

It was just my third year out of college and I made a little over $250,000. For a Brazilian immigrant who spent most of his childhood kind of worried he would have to do physical labor, I felt like I had really made it. My job was challenging (making investing decisions always is) and I worked with some really smart and motivated people.

But, beyond “making it”, I was comfortable. After a year of private equity investing, I felt like I was good enough to do it for the long haul. While I’m sure there would be a few unexpected twists and turns, I sort of knew what the next 20 years of my life were going to be like and it looked pretty good.

There was only one little issue. It turned out that I didn’t really love money.

After 18 years, my mom had successfully passed along an immigrant guilt towards buying anything lavish for myself. So, my expenses weren’t really growing in proportion to my income. And, at least for me, I didn’t see money as a metric of success the same way Warren Buffet does. When it’s all said and done, I didn’t want to be measured by how much money I had accumulated but by what I had built.

But, when you’re making more money than you know what to do with, you tend to procrastinate on any big decisions. Well, at least until you’re reminded of what else is possible.

How I Woke Up

My company, Quadrangle, organized a private conference every year for the media and telecom industry. This was not just another conference, it was ridiculous.

I realized how ridiculous it was when I got an email with the list of attendees. Every major media company executive was coming. Brian Roberts from Comcast, Steve Ballmer from Microsoft, Jeff Zucker from NBC and media celebrities like Katie Couric, Jerry Seinfeld and Harvey Weinstein. While journalists weren’t allowed to cover the conference, Andrew Ross Sorkin, of the NY Times, was given permissions to write-up a quick blurb about the conference.

I was really excited and had barely slept the night before. The dress code was business formal and I walked into the Pierre Hotel wearing my best suit and power red tie.

I soaked in the scene for a few seconds trying to find the first person I was going to talk to. And, then, it hit me. Why would they want to talk to me? They were the heads of major media companies, I was a 25 year-old finance guy. They didn’t want to talk to me, they wanted to avoid me. I wasn’t doing anything important, anything that could impact their companies. They didn’t care about my suit or my power red tie.

So, for the next 30 minutes, I just awkwardly walked around the room trying to listen in on the conversations people were having. When the panels started, I took a lonely seat in the back.

After listening to a few panels comprised of 50+ year-old media executives, the audience was looking forward to the fresh perspective of the next panel on new media.

The two guests were in their 20′s. I almost couldn’t believe that two people roughly my age had been invited to talk in front of all of these important people. And then, even more shocking, they had all of their undivided attention. All of the 50+ year-old media executives were mesmerized, excited and scared of what they had built and what it meant for them. One was Chad Hurley, fresh off his recent sale of YouTube to Google, and the other, wearing sandals, was a still unknown pre-”The Social Network” Mark Zuckerberg.

When the panel ended, media executives came up to them to talk about working together, get advice on their business. I just stood in the background watching.

I was floored.

They were building something. They were changing how the world communicated. And, they had done it in just a few years without raising significant capital to get started. They willed their services into existence.

What was I doing? Could I do what they had done? Could I build something as significant as they had?

Yeah, right.

I had never built a tech startup. I had never even built a website. What did I know about product management, web development, and user interfaces?

I had a high-paying finance job. I was on my way. It was too late. I had no idea what it meant to start a company and the most likely outcome was failure.

On an expected value basis, the obvious decision was to stick with finance.

I was where I should be.

But, as the days went by, I kept thinking back to the conference. A scary idea started creeping into my thoughts: what if I could build something? Wouldn’t I always wonder? Wouldn’t I regret it? Wouldn’t it eat away at me over the years?

And, that’s when I realized that I didn’t actually know if I was good enough because I hadn’t really failed in life (at least not professionally). Most people don’t really fail. We tend to take the job that we think we’ll succeed in. We are hesitant to reach. And, if we do reach and succeed, then we don’t reach again.

The only way to know how good you might be at something is to fail trying it.

And, that’s when I decided it was time to test my limits. It was time to really reach. It was time to quit my safe job and walk straight into almost certain startup failure.

I had no idea how to start a successful tech company, but I was going to try. I was going to step into that arena. And, whether or not I triumphed or got knocked down, I didn’t really care much. I wanted to know the bounds of my abilities.

So, What Happened?

It’s now 4 years since I left Quadrangle. Did I fail? Hell, yes. I got knocked down many, many times. For the first 2 years, I had no idea what I was doing and was just swinging blindly. But, every time I fell, I learned why.

After two and a half years of failure, we launched the third version of Yipit and it took off. We’ve now raised funding twice including the most recent $6 million round this summer. Yipit is growing, we have a strong vision of where we’re going and we’re building an amazing team (join us!).

But, perhaps, one of the sweetest moments was that I was invited to the latest Quadrangle conference. Not as a panel speaker, we’re nowhere near that. But, as part of a session where three startups pitch Barry Diller for 3 minutes and then he grills you with questions in front of the entire audience of media executives. It was clearly terrifying but it went well. At the end of the session, Barry picks the startup he thinks is most like to succeed and he picked Yipit.

When I stepped off the stage, still kind of shaking from the presentation, media executives came up to me talk about what we were working on and how we might be able to work together. I couldn’t believe they were coming to me (and I wasn’t even wearing my power red tie).

Adam Smith, in Wealth of Nations, talked about an ”invisible hand“.

Basically, by businesses pursuing their own interests, they end up helping society much more than they had intended, led by an “invisible hand”.

“…he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

This same “invisible hand” is behind the success of many of the most popular web and mobile services that exist today. And, by understanding how it works, it can dramatically change your initial product decisions.

What is the Invisible Hand of the Internet?

The best way I can explain is to use an example almost all of us are familiar with: Delicious.

The amazing thing about delicious wasn’t that it allowed you to save and tag your bookmarks on a site. I liked that functionality and it was useful. But, ultimately, not everyone really needed that service.

The truly remarkable thing about delicious was that when enough people saved and tagged their bookmarks, you could see what the most popular bookmarks were for a tag like “python“. That collective wisdom was truly amazing.

But, users weren’t really uploading their bookmarks to the site and tagging them so that others could benefit from them. They were uploading their bookmarks out of their own self-interest. People wanted to save a bookmark with tags so that they could easily search for them next time they needed it. If people really didn’t need to tag their bookmarks, most of them wouldn’t have done it just for the benefit of the overall site.

The self-interested actions of delicious users ended up promoting the interests of the delicious community much more than they had intended to, led by the same “invisible hand” Adam Smith talked about in 1776.

How Does it Affect You?

I was recently talking to some struggling founders. They were telling me about how great their startup was going to be.

Founder A: “Once users start doing X, imagine how awesome the aggregated data will be for everyone.”

Me: “That does sound interesting but why would a user do X in the first place?”

Founder B: “Because they will be contributing to the aggregated data.”

Me: “But, if you assume they are selfish and busy, why would they do it?”

Founder A: “I guess we’re still working on that.”

People are largely driven by their own self-interests. As entrepreneurs, it’s too easy to fall into the mentality that people will use your product because it will help the overall community of your product. They won’t.

Do not get caught underestimating how much your product needs to personally reward a user for their actions. People’s time is a zero sum game and you’re competing against Facebook, YouTube, pictures of LOLcats, and way much more.

Before you can start thinking about how big your network effect will be, you need to really nail the single player interaction.

And, hopefully, if enough people use it, you can create an even more powerful service by leveraging all of their individual uses, just like Delicious did.

How do you know if your startup idea is the next next big thing?

It’s easy. It isn’t.

Most Great Companies Started With Bad Ideas

Most great companies started off with very different ideas that were either not very good or impractical. Very rarely does a startup actually start with the idea that makes them the next big thing.

Here are just a few examples of successful companies that had very different and troubled initial ideas:

• Initial idea: Allow groups of people to band together to accomplish a goal called ThePoint
  • Eventually: Groupon
• Initial idea: HTML5 supported location-based service
  • Eventually: Instagram
• Initial idea: Web-based massively multiplayer online game called Game Neverending
  • Eventually: Flickr
• Initial idea: Compare two people’s pictures and rate which one was more attractive
  • Eventually: Facebook
• Initial idea: People to share photos and get grouped based on locations in an app called Color
  • Eventually: To be determined

At Yipit, our initial idea was a local search site focused on furniture in New York. Today, we are the leading aggregator of daily deals like Groupon, LivingSocial and the 485 others.

What Does This Mean For You?

When you stop expecting that your startup idea has to be the next big thing, you can draw some valuable conclusions:

• Stop waiting for the perfect idea. The perfect idea isn’t coming. You just have to pick a problem you are passionate about and start working on it. Over time, you will evolve your startup into the next big thing
• Your idea isn’t the real value, it’s you. The value lies in your ability to learn from potential customers, iterate based on those learnings. Those iterations will determine whether or not your startup will be successful, not the initial idea
• Don’t worry that your first idea will fall flat. It falls flat for almost everyone. Your idea is based on so many assumptions, it’s bound to be full of issues. Figure out what’s wrong and fix it.
• Get your prototype out there as soon as you can. Don’t spend six months releasing your first prototype. It’s going to fall flat. Instead, get a prototype into the hands of your potential customers as soon as you can. You need to learn as quickly as possible what’s wrong with the idea so you can fix it.
• Don’t write a business plan. Within a month, your business plan will be irrelevant. Instead of spending that time writing a business plan, spend it getting your prototype into customers hands.

Your initial startup idea isn’t the next big thing and that’s okay. Just get out there and start working on a big problem that you’re passionate about and you may eventually turn it into the next big thing.

Your launch will have very little to do with your startup’s eventual success and you probably spend way too much time worrying about it.

That being said, a successful launch can be used to gain thousands of early users if you did your job right when they show up. It won’t make or break your startup, but it will help.

There’s great advice out there on how to pitch a tech blogger. My favorite is this post by Mark Hendrickson, a former TechCrunch blogger.

However, it can also be helpful to look at actual examples of pitches that worked. So, I’m including here two tech pitches that Jim Moran, my co-founder, and I submitted to TechCrunch for two projects we worked on before Yipit.

A Little Background

Before we launched Yipit, we worked on two side projects called 140it and UnHub. We built both in a weekend and were looking to get some broader exposure for them.

The problem was that we didn’t have an “in”. It’s always best to get a warm intro to a blogger from an investor or friend. We just didn’t have it.

So, we decided to try TechCrunch’s startup submission form which didn’t look promising. I pictured the other side as an endless stream of terrible pitches that TechCrunch authors dreaded and probably didn’t look at.

Less than an hour after submitting 140it via their form, we get out this email from TechCrunch writer Jason Kincaid:

Hi Vinicius, looks cool, am trying it now and writing up a post.   Please lift the password in around 20 minutes or so (let me know once you have).

Thanks,
Jason

It was up on TechCrunch shortly after and thousands of people tried out the site, got the bookmarklet, tweeted about it, and started using it. While we never intended to turn 140it into a business, it was a great experience and gave us the confidence to keep pushing forward.

Months later, TechCrunch also covered UnHub.com, another weekend project of ours. Again, we applied via their submission form.

Key Tactics

I’ve included both TechCrunch pitches below but wanted to highlight the key tactics we used in our submission:

• Tell a Story. For UnHub, we reference the much talked about new Skittles corporate website had just launched as a decentralized experience. UnHub was a way for anyone to create that Skittle experience.
• Ride Current Trend. For 140it, in 2009, lots of people were building Twitter tools to “fill holes”.
• Reference Blogger’s Previous Posts. For both UnHub and 140it, you’ll see that we picked out a previous TechCrunch post where the author had made a point that was consistent with the project we were pitching.
• Exclusivity. TechCrunch would much rather cover a new startup that hasn’t been covered before. So, we password protected both 140it and UnHub and told them we wanted them to cover our project first.
• Concise. Do not go off and write huge essays. Get to the point of what your startup does right away.
• Humility. With both 140it and UnHub, we were careful to admit the simplicity of the project.
• Admit competitors. You have competitors, admit them. The blogger will have to look them up if you don’t. That means they will have to do more work reducing the chances they cover your startup.
• Give them assets. If the site is private, give them beta invites. Create a demo video so they can add it to their post about you (we did that for both 140it and UnHub). They don’t have to be professionally done. Just record yourself using the site with a voiceover. If it makes sense, create an example account on behalf of the blogger as we did with UnHub for Michael Arrington. Throw in some screenshots if you don’t have a demo.

Below are the two pitches we submitted.

140it TechCrunch Pitch

Company Name: 140it
Website: http://140it.com
Submitted: January 26, 2009 at 11:55 AM PST

Description: 140it helps twitter users reduce their tweets to less than 140 characters.  It abbreviates words, converts company names to their StockTwits ticker and shortens URL’s using bit.ly.  Its intended use is as a bookmarklet so that the user can use 140it without ever having to leave Twitter.  Please see our demo video at http://140it.com (The password for the video is 140.)

Note:  http://140it.com is currently password protected.  The login credentials are:
username: friends
password: 140

Additional Info: This was a weekend project for us and we aren’t trying to make money off of it.  We just wanted to give back to the Twitter community.

We were inspired by a recent Arrington post where he said:  ”this is the way to fix Twitter, directly via the user interface, not from a third party site that users will forget to go to.”

We built 140it to work as a bookmarklet so that the user would never have to go to our site.   We also made it a bookmarklet so that it would work on all browsers including Chrome which has become our de-facto browser.

Also, we would love to get 140it to as many people as would like it and are thus happy to have TechCrunch be the first to reveal the project.

Competitors: Twonvert: http://www.twonvert.com/
TweetShrink: http://tweetshrink.com/

But, unlike our competitors, we made our utility work as a bookmarklet.  We also convert company names to their StockTwits tickers and shorten URL’s using the bit.ly API.
Tags: twitter, utility, bookmarklet

 

UnHub TechCrunch Pitch

Company Name: UnHub
Website: http://unhub.com
Submitted: March 6, 2009 at 11:16 AM PST

Description: We were really excited about the new Skittles website, so we made a way for anybody to have one. Your UnHub URL allows others to navigate your profiles, photostreams, channels, etc with a persistent bar at the top of their screen. When we saw the Skittles’ website on Monday, we thought its user interface would work well for individuals who wanted to showoff their web presence; and, three days later, we are releasing UnHub.

Your UnHub URL makes a lot of sense for the “Web” entry on your Twitter page. As an example, we made one for Michael Arrington:http://unhub.com/MichaelArrington and we also made one for Josie’s Restaurant here in New York:  http://unhub.com/josies

Overall, we wanted UnHub to be a dead simple, lightweight way to display your “decentralized me” to others.   On that topic, we enjoyed your post (http://www.techcrunch.com/2008/03/30/friendfeed-the-centralized-me-and-data-portability/) and some earlier discussions by Robert O’Brien, Loic Le Meur, et al.

Additional Info: We don’t think UnHub is technologically remarkable in any way (iframes have been around for a long time). That said, we’re excited about it for the same reason we were impressed with Skittles: it could be a new way for companies and individuals to showcase their online presence.

In addition to individuals using UnHub, we also think businesses should take a page out of Skittles’ book. UnHub is a simple (and free) way for them to start.  A restaurant’s UnHub could include a link to their current web page, but also to a google map of their location (for directions), yelp profile (for reviews), menupages (menu), opentable (reservation) and seamlessweb (ordering online).  Seehttp://unhub.com/josies

Soon we’ll allow people to replace their UnHub URL with a custom domain name, which should make the experience more personal. We’ll also start delivering analytics.

Also, Twitter has temporarily disallowed iframes, so we’re redirecting to Tweetree for now.

As far as our backgrounds, please check our new unhub pages:  http://unhub.com/vacanti and http://unhub.com/jdmoran

The site is password protected, so please use the following login information:
http://unhub.com
username: techcrunch
password: techcrunch

We had a great experience with techcrunch announcing our twitter tool 140it and would be thrilled to have you guys announce UnHub.

Competitors: Social network aggregators, and there are some great ones like Chi.mp, Power.com and Friendfeed, pull in content from other sources to a single profile page. However, our goal is to “stay out of the way” of dedicated sites that specialize in a single aspect of your web presence (e.g., Flickr for photos, Youtube for videos, etc.). We’d never be able to replicate the functionality of these specialty sites, nor effectively marry their diverse user experiences. That’s why we don’t have an UnHub profile page, just a persistent bar that sits on top of the ordinary browsing experience.

Also, you can include any site in your UnHub (e.g., your company website that was built 10 years ago or your Halo 3 player profile), not just those sites up to speed with Data Portability. Aggregators are great at bringing content into a single place, but UnHub is about sharing multiple places at once.

In theory, another competitor is blogs: some folks devote a lot of energy on their blogs and think of them as their primary web presence. They can designate their blog as “home” on UnHub, so when people follow their UnHub URL their blog will appear – in addition to a persistent navigation bar with which to explore their other locations (Twitter, Yelp, Flickr, etc). Blog widgets / links serve a similar linking purpose, though if a visitor clicks to a blogger’s Flickr stream, it’s unlikely the visitor will go back and check out other sites the blogger has invested in.
Tags: socialnetworkaggregator, sharing, identity, lifestream, socialnetworknavigator

Hope you find these two pitches helpful. If people have examples of other pitches that worked, let me know below in the comments.