Why didn't the fundraise work? Maybe because your business model doesn't appear to be working at your current scale, you're not scaling fast enough to make it work any time soon, and you didn't seem to have any clear plan to change this.
I don't mean to be harsh, it sounds like you gave it a shot and it went pretty right. But you got caught up in the unicorn-chaser Silicon Valley mindset:
1) Do something that only works if you're huge
2) Raise lots of capital based on the idea that you will one day be huge
3) Use that capital to become huge enough that your thing actually works
Sure, planning for your startup to be a unicorn is great if it works, but "big or bust" almost always ends up in "bust".
I was wondering about this too. Why does this product only work if you're huge? It sounds like something you and a programmer buddy could have started as a side project and grown organically.
VC's are only interested in high growth startups. That means they'll have to pass up on a lot of good ideas such as OP's. The whole thing boils down to power law that guides investment. VCs are hoping that out of 10, at least 1 would be a super-duper hit (think facebook, google) that'll offset the losses of the other 9.
In short - go with "disrupting" world-changing ideas to the VCs. If your idea is good, but not great, you're better off finding money on your own and growing it organically.
Wouldn't an investor want a "diverse portfolio" divided between low yield low risk (such as OP pre-unicorning) and high yield high risk such as you mention?
I'm not sure there is such a thing as "low risk." Most small businesses fail even if their attempts at "disruption" begin and end with selling pizzas to the local college students.
An angel investor would want a diverse portfolio. A VC wouldn't. VCs make all of their money from the one startup that becomes a billion dollar company and lose or break even or make a little on the rest. So they're really only looking for huge swings with enormous returns.
If you're a seed stage VC you're where a larger fund has allocated a portion of its capital to play insanely high risk/high reward investments.
No, because people who give the money to the investor (limited partners) can optimize their own portfolios. It is not the VC's mandate to do that. From the LP's point of view, investment in the VC fund is the risky component of their portfolio.
For the same reason Berkshire Hathaway isn't investing in your lemonade stand: they have billions to invest, so if you're only making hundreds of thousands on the best day, you're not worth the required effort.
The company I use to distribute my music is like that (DistroKid). Three employees and they turned the music distribution game on its head. I think the founder is active here on HN.
Seriously. I kept thinking about YouTube when reading the story. What Hardbound tried to do is get VC money for an early stage YouTube channel. That's just silly. The business model for a YouTube channel is to start with nothing, make a video, nobody watches it, so then you make another video. Thousands of videos later you have a few people watching. You get a few of those people to give you a couple bucks on Patreon. You invest the money in better equipment and polish your videos up a bit.
It's just a long, slow grind. It requires direct communication with your audience. You have to listen to what they want and meet their needs.
You're right -- it takes a long time for most media companies to get off the ground, and it's often near-impossible to raise money in the early days. But how many youtube channels that get ~7,000 weekly unique viewers are able to convert ~1,200 into paying monthly subscribers?
Consider this: you might not already know everything there is to know about my business by skimming one blog post!
A piece of friendly advice: I get that you're in a pretty low place right now, and that this is your baby, but don't take comments on HN so personally.
You're coming across as pretty defensive, which is understandable, but probably not helpful. People here can see this from a perspective that you can't, and if you're defensive, you're missing out on learning something.
Otherwise, why are you bothering to interact here?
I was in a really low place a couple weeks ago, but I actually honestly feel pretty fine now. I've given myself the space I need to process it. I definitely wouldn't have been able to publish this post when it first happened.
Also, I totally get that it seems like a total waste of time to engage with the comments here. A lot of people have told me the same thing on Twitter. But the thing is: I think it's really special that someone on the other side of a computer screen read this thing I wrote and is thinking about what they would do in my shoes. Even if they express it in a way that's kind of rude or condescending, it means something to me!
I'm sorry if it seems like I'm being defensive. When I think of what the word "defensive" represents, I think of someone who is totally unwilling to consider other points of view and is trying to shut out the world. I don't think that's what I'm doing. Nothing is more important to me than learning from what happened and growing into a better, smarter person. I totally appreciate the fact that I am just too close to the thing to really understand what happened. I need help from objective third parties to learn the most from this.
That's actually why I'm replying to the comments. There's the naive DHH-cheerleading reply to anyone who is "yet another dumb unicorn chaser". But I want to go one or two levels deeper than that. I don't think those replies are particularly helpful, but I think the people that write them totally could be helpful. They just need to actually have a desire to understand in more detail what my business is/was doing. I accept that most people here will never care enough to really dig in. But I think the probability is high that some people here actually might really care. So I'm engaging here while it's on the front page of Hacker News, because I won't get another opportunity like that for a long time.
Thanks for giving me the opportunity to think that through more. I hope it answers your question.
I'm sorry. It's all too easy to play backseat driver on an internet discussion board. It's far tougher to actually go out and build something with your real life and your relationships in the mix.
I've been part of a failed business that's left my father with a mountain of debt in his late middle age. I am in the process of retooling my life to go back to school and earn a degree. I recognize what it's like to face a crossroads in your life. It's not something that can be casually dismissed.
As a general principle I pretty much agree with your comment. But, in this case, the post is throwing around figures like 7K readers per week. That just isn't a lot for just about any sort of content creation that needs to pay its own freight. These days I'd be really skeptical about just about any business model built around selling content to individuals.
OP here. I'm curious, what makes you think that you know anything about what our plans were?
You're absolutely right that we weren't profitable at our current scale, and that our goal was to raise funding from VCs, and since we couldn't do it we had to make really tough changes. But this was a risk that we all accepted! Would I do it exactly the same way again next time? No, of course not. I learned a lot from this experience. But do I regret going for something big that I believe in, even if it wasn't a plan that was easily bootstrapped? Absolutely not.
You are smart, and you make a lot of good points. I could learn a lot from your way of thinking! But--you're also being a bit of a condescending know-it-all. This is a perfect example of why everybody makes fun of Hacker News comments.
I think many, many more people make fun of the startup mentality. Which is harsh, but justified.
It's nice that you chased your dreams. The problem is, this is how almost all startups end up, with the last guy wondering what to do next. If you get struck by lightning, you get acquired. If you get struck twice, you get VC money.
That you "accepted" the risk just means you took a very bad bet. If you learned from that, great. No shame in that. But it's not something people are going to be impressed by, especially this late in the game.
You're right that the probability of any individual "unicorn" type idea succeeding is ridiculously slim. But I think you're not appreciating the larger context. Consider this:
1) I have never had more job offers in my life than the past 24 hours. Like, really good jobs. Obviously that wasn't the goal, but it's not like I'm out on the street or really in any way worse off than I was before.
2) I learned more in the past two years than I have any other time in my working life. So again, I'm not in that bad of a spot. It wasn't a waste of time at all.
3) Even though there are very few massive hit VC successes, they do happen dozens of times a year. Just because something is low-probability doesn't make it stupid. Do you think people are dumb who write novels? Or become actors? Or open food trucks? Nobody should try anything that probably won't work?
To be blunt, you're the one who complained about the outcome in your blog post and the one who is angrily seeking validation in Hacker News comments by personally attacking critics and saying nobody understands your unicorn or your boldness in rolling the dice.
If your goal was to get some job offers, great. I got the impression that wasn't your goal, though. That you're fine, personally...well, I assumed that, given you bothered to blog about it. But yes, that's good. I hope that's true of everyone else involved.
But to answer your last question...it's the wrong question. The real question is whether it's smart to pin all your hopes on a really unlikely way to succeed when other approaches exist. Most people who write novels, become actors, etc. don't quit their day jobs until they actually start to make it. Food trucks that don't turn a profit don't tend to get investors to save them. Most new businesses aren't wannabe unicorns.
Sounds like you should be the platform and let content creators in. Pay them commission on sales and you can QC anything coming in until you can afford to pay someone else.
It's definitely something we considered! We actually were really focused on that for a long time, but didn't get a lot of traction with it, because creating content in our format requires illustration and animation, which is not easy to do. A lot of people said they wanted to do it, but very few followed through. We did some partnerships with media companies but we didn't solve a critical problem for them (the original inspiration was the end reader experience) so there was not very much urgency or willingness to pay. So we pivoted to a "full stack" model where we create the content and build the platform. It was working decently well (it's not easy to get 1,200 people to pay for access to content), but just not well enough.
Have you tried creating a 'creator's' software that's lightweight, easy to use and has lots of pre-loaded illustration packs (with a wide variety of themes) & drag-and-drop style animation presets?
> 1. Try to get acqui-hired and pretend I didn’t fail to fundraise, as is the tradition in our industry (“our incredible journey!”, etc). Hint: I’m not going to do this.
In the words of Oliver Cromwell: 'put your trust in God; but mind to keep your powder dry'.
Keep your powder dry probably refers to gunpowder... old flintlock rifles had separate gunpowder and bullets, and if the powder was really wet the gun wouldn't fire. So, have faith but do everything you can to improve your chances of success.
I know a guy who has run a small social gaming company for eight years and about four years in he moved to bigger, nicer offices.
I tell him I'm impressed with his success and he kinda downplays it. I've worked plenty of places that failed after four or five years. If you can keep the wheels on that long you must be doing an abnormal number of things right, and you should be objectively proud of that.
The ferrari thing was definitely a little distracting, for sure, but literally it was the only good free photo I could find of a car driving towards the horizon in the desert.
Yep, I understand that, I only saw it as "funny", I am sorry, but it is stronger than me, you depicted verbally something very like the final of Terminator (1st), "a storm is coming":
To the founder: you're equating the failure of your business/idea with the failure to raise money. They're not the same. Perhaps try to delve deeper into this thinking. That thinking is toxic.
You do still have the option of keeping your "vision" afloat and your business going (also, please, call it a business, not a 'startup'). Get a job, use the $2500/mo to keep producing content with the resources you can afford and work at 4xing that $2500/mo that you're currently making. You'll eventually be back in business, if you are flexible with how you think about this.
"Now, everyone has moved on but me, and I’m trying to figure out how to move forward. For the time being, we’re not going to be able to release any new stories (it sucks, I know), but the app and website will stay up. I am not ready to quit just yet. There probably will be some big changes, but I am not finished."
Also:
"The second option [continuing with our same model & creating all the content myself] is tempting, because I have no significant new data that changes my mind about Hardbound’s potential. Investors are wrong all the time. But if I just jumped into that, I would need to spend all my time working on new stories and I wouldn’t have very much time to learn from what just happened. So I have reservations about immediately jumping into this route."
When I reference "failure" in the post, I am referring to my failure to keep our bank account full.
I appreciate that! I mean, obviously I was wrong about _some_ things, otherwise I wouldn't have had to write that post. So I'm super open to new ideas and learning. That's also why I'm replying to all these comments. I'd rather reply with more detail so people can give better feedback. I just wish more of the commenters here would start from a perspective of asking questions, than thinking the answers to all my problems are glaringly obvious. Reality is extremely nuanced, in my opinion! I would love if more people were asking more questions, rather than making strong claims based on a very small amount of information that was more intended to communicate a very important life event to friends and users, than to be a detailed diagnosis of everything that happened.
I'm really wondering how VC money was supposed to make this business profitable. Sure, the idea is let them last long enough to grow their customer base, but with "millions" of pages read, they were making ramen-profitable-for-one-guy money from something that required a team of people. I imagine it didn't seem clear to investors that there was a big potential for growth, and they'd need big growth just to survive, much less provide a return to investors or drive off into the sunset in a Ferrari.
Actually we had a pretty detailed financial model for how we expected to get to profitability! We currently have ~1,200 subscribers, and about half are paying us $1.99/mo (our old price point) and the other half is paying $3.99/mo. Our growth model is based on people sharing our content, and so we can predict pretty well how many new customers we'll get every time we post something new. With a $15k monthly content budget (a couple writers, network of freelance designers) we were pretty sure we'd be able to bend the growth curve to the point where we'd reach profitability (~15k subscribers) in about 10 months, assuming modest improvements in conversion rates and share rates (we'd obviously be doing a ton of experiments to move these numbers).
At the end of the day, investors weren't convinced, so you certainly have a point! There may have been something seriously wrong with the plan. But I challenge your assertion that we'd need "big growth just to survive". Yeah we'd need pretty good growth, for sure. But not "unrealistic, crazy unlikely" growth.
And on the upside, once we got there, all growth would be pretty much pure margins after that! We don't think we'd need to dramatically increase our investment in content.
I'd assume most investors are not really interested in you reaching profitability. In fact it's probably a negative for them.
What they want of for you to reach a high valuation which allows them to get a +10x return on their investment. What they want is for you to need more money from them in order to survive, so if they believe in the play they can increase their stake.
At some point they want liquidity. But that doesn't have much to do with your profitability.
Honestly, you probably know better than me. But this has been my limited experience.
"But I challenge your assertion that we'd need 'big growth just to survive'"
You say this while literally telling me that your big hope was to get a pile of money so that you could "bend" your growth curve towards reaching bare profitability after about another year. When would a realistic assessment of your actual growth curve say you'd reach that point? Was there enough customer base that you could actually reach to get to that point, much less beyond?
I won't call your plans "dumb", but the whole startup approach is one that almost always fails, even compared to starting other businesses. It's really hard to call it "smart".
I feel like your pricing is too low, and you needed to be closer to Audible prices.
I feel like your marketing plan relied on too many perfect things to happen. You should also consider that the more you exploit a specific marketing channel, the less it tends to work. I think it's a tough sell to convince investors to put money into something that will only get you to your targets if your conversion and share rates improve.
I feel like your pricing is too low, and you needed to be closer to Audible prices.
I feel like your marketing plan relied on too many perfect things to happen. You should also consider that the more you exploit a specific marketing channel, the less it tends to work. I think it's a tough sell to convince investors to put money into something that will only get you to your targets if your conversion and share rates improve.
That analogy really didn't work for me. "Crawling towards the horizon" seems to correspond to option 2, continuing to run the business at a much slower pace. Options 3+4 are more like stopping to look at the car, take a breath and re-evaluate whether it's designed right.
You should never have raised money in the first place. It sounds like this was not a business that was compatible with the goals and requirements of a venture-backed business. The moment you accepted your first investment you were committed to that path. I agree - not all businesses are VC businesses, and many startup failures are a result of pursuing the wrong model for assuring continued operation and not a reflection (necessarily) of the "business".
Assuming significant investment, I would agree. On the other hand, they might have just raised $50k from an angel or two, which wouldn't really cause issues with bootstrapping...
...unless they used it to bump up burn rate to the point where another round or layoffs were inevitable, because profitability before out of runway was never feasible. That's what it looks like, but hard to tell from outside.
Ok, here's some advice from an Internet random person.
1. Yes, if you can take some time.
2. Do some crying. You probably feel depressed, burnt out, stressed out. Crying is a great release.
3. You don't need to do anything right now it's ok not to do anything right now.
4. If you're under personal financial stress try and resolve that. Perhaps move somewhere cheaper.
5. You probably don't need to think too much about what went wrong right now, maybe take some time first?
Realize that there will be a time when the stresses of this business will be long behind you, and you won't feel it with the same intensity anymore. Maybe read some good books, it can really help you feel alive again.
All this is very biased. It's based on how I would be feeling, if I'd gone through the same process as you.
Thank you! This is very thoughtful. I'm definitely taking some time and thankfully not under too much financial stress. But honestly I actually feel really fine. This happened a couple weeks ago and I have had some time to process it. Writing the post was super cathartic.
Regarding #5, I humbly agree that taking some time might be beneficial. We all suffer from "Focusing Illusion": Nothing in life is as important as you think it is while you are thinking about it.
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[ 3.2 ms ] story [ 15.5 ms ] threadI don't mean to be harsh, it sounds like you gave it a shot and it went pretty right. But you got caught up in the unicorn-chaser Silicon Valley mindset:
Sure, planning for your startup to be a unicorn is great if it works, but "big or bust" almost always ends up in "bust".In short - go with "disrupting" world-changing ideas to the VCs. If your idea is good, but not great, you're better off finding money on your own and growing it organically.
If you're a seed stage VC you're where a larger fund has allocated a portion of its capital to play insanely high risk/high reward investments.
It's just a long, slow grind. It requires direct communication with your audience. You have to listen to what they want and meet their needs.
Consider this: you might not already know everything there is to know about my business by skimming one blog post!
You're coming across as pretty defensive, which is understandable, but probably not helpful. People here can see this from a perspective that you can't, and if you're defensive, you're missing out on learning something.
Otherwise, why are you bothering to interact here?
Also, I totally get that it seems like a total waste of time to engage with the comments here. A lot of people have told me the same thing on Twitter. But the thing is: I think it's really special that someone on the other side of a computer screen read this thing I wrote and is thinking about what they would do in my shoes. Even if they express it in a way that's kind of rude or condescending, it means something to me!
I'm sorry if it seems like I'm being defensive. When I think of what the word "defensive" represents, I think of someone who is totally unwilling to consider other points of view and is trying to shut out the world. I don't think that's what I'm doing. Nothing is more important to me than learning from what happened and growing into a better, smarter person. I totally appreciate the fact that I am just too close to the thing to really understand what happened. I need help from objective third parties to learn the most from this.
That's actually why I'm replying to the comments. There's the naive DHH-cheerleading reply to anyone who is "yet another dumb unicorn chaser". But I want to go one or two levels deeper than that. I don't think those replies are particularly helpful, but I think the people that write them totally could be helpful. They just need to actually have a desire to understand in more detail what my business is/was doing. I accept that most people here will never care enough to really dig in. But I think the probability is high that some people here actually might really care. So I'm engaging here while it's on the front page of Hacker News, because I won't get another opportunity like that for a long time.
Thanks for giving me the opportunity to think that through more. I hope it answers your question.
I've been part of a failed business that's left my father with a mountain of debt in his late middle age. I am in the process of retooling my life to go back to school and earn a degree. I recognize what it's like to face a crossroads in your life. It's not something that can be casually dismissed.
We're all human and doing the best we can.
- mechanic is scalable with more resources. Throw in more computers, programs and get more output immediately with a much higher rate compare to human
- organic is good but it take time. If you need quality work of human, it doesn't scale easily. It's possible to grow slowly with low cost.
You're absolutely right that we weren't profitable at our current scale, and that our goal was to raise funding from VCs, and since we couldn't do it we had to make really tough changes. But this was a risk that we all accepted! Would I do it exactly the same way again next time? No, of course not. I learned a lot from this experience. But do I regret going for something big that I believe in, even if it wasn't a plan that was easily bootstrapped? Absolutely not.
You are smart, and you make a lot of good points. I could learn a lot from your way of thinking! But--you're also being a bit of a condescending know-it-all. This is a perfect example of why everybody makes fun of Hacker News comments.
You can see that, right?
It's nice that you chased your dreams. The problem is, this is how almost all startups end up, with the last guy wondering what to do next. If you get struck by lightning, you get acquired. If you get struck twice, you get VC money.
That you "accepted" the risk just means you took a very bad bet. If you learned from that, great. No shame in that. But it's not something people are going to be impressed by, especially this late in the game.
1) I have never had more job offers in my life than the past 24 hours. Like, really good jobs. Obviously that wasn't the goal, but it's not like I'm out on the street or really in any way worse off than I was before.
2) I learned more in the past two years than I have any other time in my working life. So again, I'm not in that bad of a spot. It wasn't a waste of time at all.
3) Even though there are very few massive hit VC successes, they do happen dozens of times a year. Just because something is low-probability doesn't make it stupid. Do you think people are dumb who write novels? Or become actors? Or open food trucks? Nobody should try anything that probably won't work?
That's a really sad life outlook.
If your goal was to get some job offers, great. I got the impression that wasn't your goal, though. That you're fine, personally...well, I assumed that, given you bothered to blog about it. But yes, that's good. I hope that's true of everyone else involved.
But to answer your last question...it's the wrong question. The real question is whether it's smart to pin all your hopes on a really unlikely way to succeed when other approaches exist. Most people who write novels, become actors, etc. don't quit their day jobs until they actually start to make it. Food trucks that don't turn a profit don't tend to get investors to save them. Most new businesses aren't wannabe unicorns.
> 1. Try to get acqui-hired and pretend I didn’t fail to fundraise, as is the tradition in our industry (“our incredible journey!”, etc). Hint: I’m not going to do this.
In the words of Oliver Cromwell: 'put your trust in God; but mind to keep your powder dry'.
I tell him I'm impressed with his success and he kinda downplays it. I've worked plenty of places that failed after four or five years. If you can keep the wheels on that long you must be doing an abnormal number of things right, and you should be objectively proud of that.
>There’s an image in my head that helps me make sense of this:
><image>
>I’m driving towards the horizon in the desert.
Wait a minute, a man can dream, but the image in your mind is driving in a Ferrari towards the horizon in the desert.
And right after:
>Instead, the car ran out of gas, and it’s just me now.
Maybe if you had an ordinary pickup with a couple jerry cans in the back you would have gone further?
https://www.youtube.com/watch?v=5C6GZQ7UNaU
and I visualized that (or any of the movies where the car is a battered old car, possibly an old jeep or a pickup) before noticing the Ferrari logo.
Maybe this one would do (not a photo, but a painting) to better explain what I visualized:
https://www.flickr.com/photos/alberto_ollo/5229651715/sizes/...
You do still have the option of keeping your "vision" afloat and your business going (also, please, call it a business, not a 'startup'). Get a job, use the $2500/mo to keep producing content with the resources you can afford and work at 4xing that $2500/mo that you're currently making. You'll eventually be back in business, if you are flexible with how you think about this.
$1B or nothing is fool's errand.
"Now, everyone has moved on but me, and I’m trying to figure out how to move forward. For the time being, we’re not going to be able to release any new stories (it sucks, I know), but the app and website will stay up. I am not ready to quit just yet. There probably will be some big changes, but I am not finished."
Also:
"The second option [continuing with our same model & creating all the content myself] is tempting, because I have no significant new data that changes my mind about Hardbound’s potential. Investors are wrong all the time. But if I just jumped into that, I would need to spend all my time working on new stories and I wouldn’t have very much time to learn from what just happened. So I have reservations about immediately jumping into this route."
When I reference "failure" in the post, I am referring to my failure to keep our bank account full.
Maybe focusing on opening the doors for content creators is what they need to create _enough_ stories for user demand
At the end of the day, investors weren't convinced, so you certainly have a point! There may have been something seriously wrong with the plan. But I challenge your assertion that we'd need "big growth just to survive". Yeah we'd need pretty good growth, for sure. But not "unrealistic, crazy unlikely" growth.
And on the upside, once we got there, all growth would be pretty much pure margins after that! We don't think we'd need to dramatically increase our investment in content.
Basically, it might not be as dumb as it seems.
1. Are those numbers inclusive of Apple taking a 30% cut?
2. You have a $15k per month content budget, but what about other overhead? Does the 15k subscriber number for profitability cover that too?
3. How is churn?
4. What's your CAC and LTV?
Most importantly: you talked to dozens of investors, some of them probably smart and experienced. Why did they say they didn't think it would work?
They might be wrong, obviously, but I'd be curious to hear their main objections.
What they want of for you to reach a high valuation which allows them to get a +10x return on their investment. What they want is for you to need more money from them in order to survive, so if they believe in the play they can increase their stake.
At some point they want liquidity. But that doesn't have much to do with your profitability.
Honestly, you probably know better than me. But this has been my limited experience.
You say this while literally telling me that your big hope was to get a pile of money so that you could "bend" your growth curve towards reaching bare profitability after about another year. When would a realistic assessment of your actual growth curve say you'd reach that point? Was there enough customer base that you could actually reach to get to that point, much less beyond?
I won't call your plans "dumb", but the whole startup approach is one that almost always fails, even compared to starting other businesses. It's really hard to call it "smart".
I feel like your marketing plan relied on too many perfect things to happen. You should also consider that the more you exploit a specific marketing channel, the less it tends to work. I think it's a tough sell to convince investors to put money into something that will only get you to your targets if your conversion and share rates improve.
I feel like your marketing plan relied on too many perfect things to happen. You should also consider that the more you exploit a specific marketing channel, the less it tends to work. I think it's a tough sell to convince investors to put money into something that will only get you to your targets if your conversion and share rates improve.
...unless they used it to bump up burn rate to the point where another round or layoffs were inevitable, because profitability before out of runway was never feasible. That's what it looks like, but hard to tell from outside.
1. Yes, if you can take some time.
2. Do some crying. You probably feel depressed, burnt out, stressed out. Crying is a great release.
3. You don't need to do anything right now it's ok not to do anything right now.
4. If you're under personal financial stress try and resolve that. Perhaps move somewhere cheaper.
5. You probably don't need to think too much about what went wrong right now, maybe take some time first?
Realize that there will be a time when the stresses of this business will be long behind you, and you won't feel it with the same intensity anymore. Maybe read some good books, it can really help you feel alive again.
All this is very biased. It's based on how I would be feeling, if I'd gone through the same process as you.
Good luck!