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My Mistakes and Lessons Learned from 4 Years of Startup-Life

Cristian Mudure Posted on January 27, 2016 0 Comments
I have always dreamt of creating a technology company - perhaps due to my technical background, among other things. It was actually much more than just a dream, because I always had in mind that my regular consultant job at that time was just a stopover on the road to fulfilling my passion.

It even seemed that this kind of dream was compatible with earning enough money really fast, as one might think that a technology company, which offers a SaaS platform, would be easy to build and that its concept would offer the ideal conditions for creating a “digital money printing machine”.

The entire world population can be reached with a single click and these people are as easily able to find all different kinds of companies, therefore it shouldn’t be a great problem to find enough customers. But things could have not been that simple, and our way to paradise has quickly turned into a round trip to the SaaS-Hell.

The Start

In 2011, when the idea of Stackfield came to my mind and the first outlines were drafted, it was perfectly clear how everything should look like and what kind of tool should be designed: a message-based collaboration software with a decentralized communication structure, through which rich content can be exchanged, and not only text messages. For example, a proposed date would have been automatically checked with the calendar for availability, and so on - representing an advanced/intelligent development of the e-mail.

The first prototype of Stackfield evolved initially in parallel with my work as a consultant. After a short time, I found a private investor, directly founded the company in June 2012 and at the same time I was also able to hire the first employee. At that stage, the development advanced as scheduled and we made great progress towards the creation of a comprehensive and encrypted collaboration platform. After about 1 year of development we proudly released the first version and started with the beta phase.

We spent no time thinking about the business model, because we were sure that our tool will outshine all other tools, quickly attracting lots of users from other platforms. Therefore, we offered our tool in the basic version for free right from the beginning and pursued the Freemium-Model, in which additional premium features could be purchased. However, at that time we barely had any premium features, which implied that the entire tool could be used for free by having the basic account.

Edward Snowden

From the very first second, Stackfield offered an end-to-end encryption for all relevant data, as our tool was designed to protect confidential information. A historic event and, at the same time, a lucky coincidence, led us to believe that nothing could go wrong:

Edward Snowden revealed to the entire world that almost all data is being spied by the NSA – and we were at that time (and still are) the only collaboration platform offering that type of encryption.

The press was enthusiastic. The television talked about us, we were the startup of the week in the Wall Street Journal, and a short time later we received the unofficial title of being the “Insider’s Tip of CeBIT“.

The Abyss

In the midst of all the attention, after countless praises and numerous new users on our platform, the great disillusion came; and it felt like a really hard fall:

Amid the jubilation, we realized that something was wrong. We lost almost all the users after a short time and we were not able to compensate this loss with new users.

The Human Behavior Is Very Difficult to Change

What went wrong? What did we do wrong? At first, we were all perplexed – how could all voices be thrilled, and yet no user used our platform on the long-term? After a while, we found the problem: we tried to change the behavior and the learned practices by moving the users from a decentralized communication to another. Designed as an email replacement, Stackfield was into direct competition with it. We had planned to eliminate the entire email traffic for companies, without realizing that this is way too much to ask. No one will completely replace the e-mail at work for another tool with the same features, as the e-mail is simply omnipresent and learned. Therefore, a second tool, besides the company’s e-mail system, that pursued the same decentralized structure was unusable to everyone.

A Tool That Can Do Everything, But That No One Understands

Or so we can describe Stackfield retrospectively. We offered a tool that literally had no limits set. All functions could be freely combined and adapted – and this is exactly what users were forced to do in order to use Stackfield efficiently. The feedback from our interviews was crystal clear: the users had no idea for what to use Stackfield. As described above, everything was possible, but the users had too many decisions to make or even to recognize the benefits of Stackfield on its own in order to integrate the tool in the daily workflow.

The Human Being Is and Acts Paradoxically

In this situation, our users also acted incredibly paradoxical. The platform was too flexible and too extensive, but new users continued to demand even more features, without having a real need for them. We were under pressure and hat to figure out what we needed to change, therefore we implemented the features that were frequently requested. However, just as fast as we’ve added them, they were discarded, because nobody used them - despite the explicit requests.

We conducted many more interviews, but were unable to get a clear picture: I see it like a song that listeners do not like. Everyone knows that they do not like it – few can explain why this is so – almost no one can improve it. The situation is similar for SaaS platforms, such as Stackfield, but the software topic may appear a little more tangible and is easier to criticize, but this is not the case.

No Focus on a Target Group

The Freemium-Model complicated another aspect for us as well – the definition of a target group. The free accounts, with a decentralized structure, proved usable and useful for virtually everyone. From consumers to friends that just wanted to communicate to each other, and to business partners that wanted to exchange large files in an encrypted manner – all different kinds of target groups were using Stackfield. At that point, we failed to define the ideal user.

All these resulted in a less promising combination: a tool that wanted to change behavioral patterns; was too flexible; was paired with a Freemium-Model for which virtually nobody was willing to pay; and that had no precise target audience, which meant no one knew what Stackfield was designed for. Welcome to hell.

The U-Turn

After many extremely long working days and weekends, countless pizzas and gin bottles, we changed the entire concept. Unfortunately, during this time, many other aspects and social contacts in regards to our team members have been neglected – the stereotype of startups has been met here completely. An important and supportive factor through this process was our investor who always believed that we can move the product in the right direction – and so it finally happened.

What Did We Change?

The elimination of the decentralized structure and focus placed on business customers:

Stackfield could be used by anyone in conjunction with any other person on Stackfield. There were no limits set on collaboration. This led, however, to a disorganized Stackfield structure, especially for the users belonging to the same company. All members had to be added individually to a workroom and had to be removed similarly when retiring. Stackfield did not offer any kind of overview, so it was no different than a regular e-mail system. The introduction of an organizational structure and team, along with Compliance Guidelines, clarified this area.

Simplification and fine-tuning of the product:

This sounds almost too trivial, but this aspect is incredibly important for the SaaS segment. The competition level of our product is huge – there are new tools launched almost every day. Therefore, you cannot afford releasing semi-finished or half-baked products on the market. This was definitely our case at the beginning and this is why we have lost a lot of users. It is often advised that startups should start with an MVP (minimum viable product). However, at least in the SaaS area, the level of MVPs has increased in such a way that the term became almost misleading. The quality of the majority of the tools is so high that you can't expect the users to be excited by your solution if it's just 80% complete.

Trial instead of Freemium:

The appreciation of the product was simply not present when using the Freemium-Model – just as the motto says “a tool that costs nothing is worth nothing”. Moreover, Freemium usually burns more money than it earns: I am not fundamentally disregarding the Freemium-Model, because it can definitely be a good strategy for obtaining reach. But for us it just did not work. Almost every company is investing a lot of money with this model at the beginning, before it really starts earning money – and this is only possible with a very solid financial position.

Where Are We Now?

Our sales grow by double digits every month and this is obtained in the absence of purchased sponsored posts and banners on websites. The conversion rate of testers to paid users is really good and has a double digit value.

Conclusion

Our experience and journey taken so far led us to the conclusion that the number of users and the media hype are no guarantees for success. The only parameter that ultimately measures success is the monthly recurring revenue.

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About the Author:
Cristian Mudure is the Founder and CEO of Stackfield. He loves digital business models and spends his spare time on the tennis court.
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