Ask HN: Struggling startup. What should I do next?

[struggle]

This is a throwaway account. I need feedback/wisdom/advice/slaps to know what else can I do for my startup. Appreciate if anyone can give me some views on this as I am running out of ideas on what to do next and am on the verge of giving up. Thank you in advanced for your time and feedback.

//Background Info

- My co-founder and I started the company 2 years back fresh out of school.

- Both of us are technical, I am handling the frontend where as my co-founder is handling the backend.

- Other than frontend, I also handle the product and business side of stuff and deal with clients.

- We did a localized version of a B2B2C e-commerce web application when we first started.

- It's a very competitive landscape in the US but not so locally at where we are.

- A year later, we realized that the local businesses were just starting to warm up to the idea of e-commerce.

- Unfortunately, our industry is not sexy, hence it's difficult to get funding here locally as there are only limited funds available.

- We do not have any industry experience or networks to leverage on, hence that makes the already difficult fundraising process even harder.

- We kept our company really lean to survive, basically bootstrapping for the past 2 years.

//Present Days

- We have 3 complementary products now, one mobile utility tool and another mobile application.

- Our mobile application is picking up well.

- At the moment we are doing at least $20k per month since we launched our mobile app.

- Still, just the 2 of us after 2 years. We did some hiring but stopped them to keep the company lean.

- We are only paying ourselves to survive as we are trying to conserve our runway.

- Our receivables are pretty bad due to late payment from our clients.

//Our Problems

1. Lack of deep technical skills

We hacked our way through taking advantage of various existing frameworks, plugins etc

Unfortunately this have cost us a lot of money and time wasted because - Our first product is sort of completed but it can not be improved on due to the legacy codes were too messy to be untangled, hence we lost a lot of existing clients because of the lack of improvements. We were thinking of rebuilding it but it wasn't bringing in enough money to make that worthwhile. Of course, this is really a chicken and egg problem as having a better system will help us get more clients or at least have recurring clients.

- Our mobile app is currently built with a js mobile framework that is not exactly stable. My co-founder had been swinging from jquery mobile to sencha to Titanium to iOS and then to the current mobile js framework. These are great tools to get Minimal Viable Product (MVP) version up which had helped us get some initial deals. However, all these switching come with great cost. It has definitely slowed us down in terms of delivering a final/polished/non-crashing version (usable for the client and app store approval).

2. Lack of innovations

A lot of what we are doing right now are just parroting existing solutions in the market. Even if I want to venture into something new or fix what's broken in the industry, it's hard to convince my co-founder to do it. I think you can call it schlep blindness, "unconscious mind shrank from the complications involved"as quoted in PG's essay. My co-founder basically froze at the idea of new initiatives every time I talk about it. Perhaps it's due to the lack of technical skills or perhaps it's due to risk-aversion. I am not sure how to proceed from here anymore. Mobile solutions seem hopeful but nothing we do is revolutionary. It's getting more and more competitive and I do not want us to be left behind. We are only chasing after the tails of others. I find that somewhat tiring and tedious.

3. Competitions

Over the past few months, we have been approached by a few competitors (big public companies who have just setup their regional offices here) and want us to work with them. I take that as a validation that we are doing things right. We are unable to work with them as most of them are looking to get us to stop doing what they are doing or join their team. They are only open to working with us on our latest mobile offerings unless we cease our first product that is competing. We believe that we have a slight edge over their products at the moment (More well-thought and well-designed even just the MVP version). Unfortunately, we do not have the financial muscles to ramp up our dev team or sales team. Our receivables are bad, most of our clients only pay us 6-9 months. With our competitors' big money, very soon they might be improving on their products and will most definitely be ramping up their sales effort locally.

//Questions

1. How should I solve our technical problems?

2. Do you think that there's a need to chase after innovation or being revolutionary?

3. Should we stop doing what our big competitors are doing and work with them on our mobile offerings to leverage on their existing customer base?

4. Is it still worth fighting or should we just call it quits?

5. We have decided against fundraising as it's hard to get good valuation. We might need to give out more than half of the company if we want to go for a seed funding. After all the struggles, it makes it even harder for us to let go of the ownership. Is this stupid?

6. Any other comments/feedbacks?

[ssylee]

Just want to throw out the encouragement that you're farther ahead than most startups already, and you're following the guidelines of lean startups properly. I think you have more problems than just solving "technical" challenges. Here are my 2 cents.

1. I can think of only 2 ways to solve your technical shortcomings: (1) invest in yourselves by taking the time to self-teach the technologies PROPERLY (or hire competent programmers who can and is willing to tutor you), or (2) making the products as simple as possible technically before you hire someone to implement your product prototype. I don't know how urgent is your timeline for (1) to work properly, and you may face expense and IP issues with (2) shall you go that route. I don't know enough about your situation to comment properly. You will need to reassess what combination of the two you want to implement, since you're not at the point where you can hire beyond the founders permanently.

2. "Innovation" and "revolutionary" are just fashion trends in the tech industry. It's more important for you to be the first group to solve specific problems properly according to your customers. I believe your products are already a good starting point for you to collect feedback from your customers. Then you can use the feedback to improve your products, offer a new product that could tailor their similar needs, scale up the business you gain from your existing customers, or ramp up your marketing efforts to reach similar people.

3. Being too obsessed with your competition is a waste of time and effort. You need to be aware of what they are doing, but I would suggest making your customers happy first. I would also suggest solving your receivable problems before paying attention to dealing with the competition.

4. I wouldn't say I would recommend you to keep fighting or give up. I would however suggest you and your co-founder to take some time off (perhaps during the downtime if there are some). You sound like you really need the downtime (uninterrupted by distractions) to really reflect the following. Clarity in them would help guide your next courses of action:

- Can you remain the group who can solve specific economic problems in the society the best way possible for your customer demographic? - Can you remain lean and agile yet scale your market penetration in your current markets to the point of domination? - Do you have the technical ability to create the offerings for your market?

5. Your inability to let go of the ownership is understandable, yet I believe it's emotional. If you aren't confident about getting a good valuation, trying to get seed funding is indeed a waste of time (I believe you'll fare better if you execute 4 and 3 first). I recommend you to ask why you even want to fundraise through seed funding in the first place. Are you trying to sell the company in the future? Or is what you're doing just too difficult to make and scale without the money?

6. If you're still having trouble coming up with comfortably profitable ideas, I would recommend adopting a habit of talking to people as regularly as possible (weekly is a good starting point). You'll only get profitable if you tailor to enough people who are willing to pay to eliminate the problems. If you would like to discuss more privately, please feel welcome to send me a message at stanigator at gmail dot com.

[thedillio]

$20k per month sounds like a good problem to have for two people with little overhead.

I'd recommend getting out of town for a few days without an Internet connection to just rest and get some clarity. You sound scattered.

It's difficult to give you specific advice without knowing more about the ins and outs of your business. However I would suggest answering a few questions for yourself:

- Which of your three products is generating income? If it is the moble app then start there. Drop the others and focus your attention on what IS working. Read PG's article on ideas. To summarize PG you can only focus on one thing at a time. I think he is spot on.

- Why are you receiving late payment? Do you have to manually collect payments each month/year? If so, that might be your problem. Anything scalable should require little human interference, especially when collecting payments. For example, you want to download an app, you pay immediately with the credit card Apple already has on file; you sign up for a web app, you enter your credit card info immediately so when the free trial is done your account automatically gets debited. Any business where you must hunt down payments is not scalable. Perhaps that is what is stunting your growth. Not "features" per se.

Lastly, talk to your customers to find out what what you are doing right and wrong. This can't be discovered in a survey because it is too open ended. Call them, email them, whatever. Just tell them you wanted to see how they liked the product, how they use it, what they don't like, etc. if you do this enough you should see a trend.

Hope this helps.

[evolve2k]

'- At the moment we are doing at least $20k per month since we launched our mobile app.'

You're making money now which is way more than where many other start ups are at.

I think you would benefit from rallying around an established approach to business and development which is well documented and outlines some key principals and a philosophy for getting things done. 'The lean startup' and 'getting real' etc by 37 Signals come to mind and reading either of those books will help you progress.

Further it sounds like you collectively are at the classic trap outlined in the book 'the e-myth' where you are both working hard in-the-business but not taking time to work on-the-business. Have a strategic weekend away at a beach house or such like.

Sounds like you also are needing more assistance generally attend done more local tech events and startup events find other you can bounce these sort of issues off in person. Working a few days a week at a tech orientated co-working space can work well.

Finally let what the customers want inform you, get closer to your best customers, visit them if you can, focus on the features and tech approach that will help you best customers the most. The lean startup is great for helping you get this focus clear. Finally it sounds like you and your co-founder need to have a serious talk, might need to grab a beer together and just have an honest duscussion of where you are at and whats not working right now and what you could imagine it could be if you guys got a few things sorted, seems like ur not on the same page right now IMHO. Good luck

[struggle]

Yes, that's the consolation and driving force for us to continue what we are doing.

Of course, the big question remains "What's next after this?" and how do we go about building a business instead of being stuck at the startup stage.

We are pretty focus on customer development. However, we are also worried that our customers are not sure of what they really want, that's why we have been thinking what other innovations can be done for the industry.

Guess I am really burned out. Have stopped attending tech events quite a while now to avoid distractions. It's time to go back.

Thanks for the advice.

[teyc]

1. Quit jumping from framework to framework. There is no silver bullet. Commit to a platform for 3 years and work through its shortcomings. In fact, the older the platform, e.g. phonegap, the more likely you'll be able to find people to work on it.

2. Innovation or revolutionary is in the eyes of the beholder. Remember Eric Ries's talk about how they rolled out 3D election chat and no one came? How about using polished mockups to learn and test ideas?

3. Leverage - tough call. Try to figure out why they are talking to you. Do you have any defensible advantage? You did say B2B2C. Do you have customer lists, like Livingsocial? Whose customers are these, your's or the businesses?

4. Do you have a repeatable sales process? Is it scalable? If you are outgunned in engineering and in marketing, then what about relationships? Some businesses don't like working with BigCo.

5. Sounds like you need mentors rather than investors at this stage.

6. 20k per month for 2 guys sounds like a very long runway. Can you vary the billing method or business model so that you don't have to worry about the 6-9 month lag? Have you considered an early-payment discount?

[struggle]

1. We are working with phonegap at the moment, hope this doesn't change anytime soon.

2. Perhaps I shouldn't be too hung up on the idea of having to be revolutionary. We always produce polished mockups and test ideas often. That's in fact one of the edge that we have.

3. As for customer lists, unfortunately we do not own those, our clients(business) own them. They are very interested to work with us because our new mobile app would give them an edge over other competitors and of course trying to stop us from competing with them on the e-commerce web application.

4. We do not have a repeatable sales process hence it's very tedious as we have to win them from scratch again. It's definitely not scalable at this stage. You raised some good points, will need to re-look this.

5. We have not try any early-payment discount as what we are earning from each sales are rather minimal as we are doing constant testing of ideas. Guess we have to look into raising our price and also the implementation of early-payment discount.

Thank you for the good questions asked.

[teyc]

Are customers actively looking for a solution? If that is the case, can you educate them on youtube etc?

Also, consider reaching out to Patrick MacKenzie - patio11. I don't think this thread is getting enough attention.

[chucknibbleston]

1. I think you should consider dropping your first product. If it isn't bringing in good revenue and it's eating up your development time, you might be better off with just your mobile options. This would also handle #3.

You should pick a stable mobile framework to use (since I assume you don't want to go native). Make your backend code as modular as possible (for accommodating changes to their API).

If you're able to do a significant rewrite, I would decouple your data from your logic as much as possible. Write it with the option of offering it to your competitors as a mobile platform.

2. No, if you can reach profitability.

3. Focus your marketing on your mobile product. Devote your time to marketing and sales. Set a profit goal for the near future (well before your cash runs out). If you don't make it, write an API for your app's backend and offer it to your old competitors.

4. If you aren't 100% committed, then you should quit.

5. How much money do you need right now to stay afloat?

[struggle]

For item 5, just the 2 of us, we need less than $8k per month.

Edit: we didn't go native because we need to cater to other platforms. Also, my co-founder is not confident with going native

Thank you for the feedback!

[mchannon]

6. You may want to beg, borrow, or steal the funding to get a professional accounts receivable presence going (someone who patiently and persistently reminds those delinquent customers that they're behind on their bills). Reading between the lines leads me to believe that you'd be far happier with your situation (and in a far stronger financial position) if you didn't have your late payments problem.

You're making a comfortable pile of revenue each month, but unless you see an explosive growth curve ahead, you're not likely to ever get much further than ramen profitable. There's got to be a better way, and doing what you can to get acqui-hired by one of the bigs is probably worth thinking about; as long as they don't slap on the golden handcuffs for too long you can come out financially ahead, while you work out your next big startup that has a bigger exit strategy.

Go big or go home, they say. I'd try to go home first, then try to go big with something new.

[struggle]

That is actually our main problem, we are stuck due to that and are unable to expand accordingly thanks to all the late payment.

Definitely agree with going home first. Will re-evaluate the option of getting in bed with the bigs carefully.

Thank you.

[dylanhassinger]

I think you need to figure out your personal goals, then work backward to redefine the company goals

once you've got the company goals re-defined, partner or pivot to make it happen. Don't stay on a path that is making you miserable

A weekend out of town might not be a bad idea, good to clear your head

[struggle]

You are right to touch on personal goals. Personally i feel that what we are doing is rather superficial and it doesn't really impact the world.

I did went through this exercise before and was on the edge of leaving the company after realizing the company will not be aligned with what I want to do in life. Unfortunately, I ended up staying as the company was just about to pick up and I am too invested to just leave.

Time to rethink I guess.

[debacle]

If you're bringing down 20k/mo, why can't you continue to do what you do? 20k/mo seems like a reasonable profit for two people running a startup.

[xtiy]

Find another job?

[struggle]

Possible option of course. Will consider this after I exhaust all other options.