In this article I’ll share some hard lessons learned from my first ‘go’ as an entrepreneur. Plenty of mistakes were made and many million-dollar lessons (literally) were learned the hard way. Had it not been for the incredibly talented team at Orchard, things might have ended differently.
After recently starting my new company, Clyde AI, I took some time to reflect on what we did right and – more importantly – what we got wrong at Orchard. Here are those thoughts distilled. I hope they’re helpful to other entrepreneurs either starting their journey or who haven’t learned these yet.
Some quick background on me. I co-founded Orchard Systems in my Junior year at Dartmouth back in 2015. I served as the company’s CEO from its “what if we built X” days through its acquisition in Aug 2019. I’ve since held various consulting roles serving as an expert on credit cards and payments. I am currently lucky enough to lead Clyde AI where we offer free personalized credit card recommendations based on how you spend.
Lesson 1: The Hard Way Isn’t the Best Way
Because something is hard it doesn’t intrinsically mean it’s worthwhile. In fact, the companies that seem to do the best – as defined by becoming the largest companies – usually don’t offer something complex. A few examples:
PayPal
Facebook
Stripe
Bookings.com
If they do, they’ve grown into that role over a long time. I can guarantee you their first product was simple. It had to be because startups are constrained by resources when at the beginning and yet your initial product still needs to be better at one thing. It’s better to work intensely to make that thing the best you can before expanding your reach.
If you’re too ambitious to begin with, it’s likely you’ll overbuild your product and end up with a half-built bridge.
At Orchard, we over-invested in our product. We had a beautiful suite of SaaS products but at the expense of almost no marketing or sales budget. It felt like we were heading in the right direction because we were working really hard and solving hard technical problems along the way (like building a custom linux operating system). In short, we had a superior product but were not gaining as much market share as competitors.
The lesson learned is to take the most direct path to sales and users.
I fell victim with the belief if you built the best product users would come. I promise you that is never the case. For every early stage product, there is going to be significant costs to get your first users. Doing something simple will ensure you can polish your product and get people to experience the value in your vision.
Lesson 2: Don’t Get Caught Up With “How Is This Different From X Company?”
Don’t get demoralized when people ask you “how is this different from X company?” When I started Orchard we launched an online ordering website in the small college town where Dartmouth is located. This was 2015 so about 1.5 years after DoorDash had launched. Grubhub had been around too.
I would always be asked “how is Orchard different from Grubhub” which at the time used to really bother me.
I’d come up with a complex answer but looking back the difference was good ‘ol distribution. We were in Hanover and they weren’t.
This was something we did right at Orchard. We realized that not every market is winner-take-all and it’s okay to offer a similar service. Great companies win over time by making their solution better.
It’s true that you should still strive to differentiate your product. However, when you’re starting out there’s no way you’ll have the best-in-class solution. You build that superior experience from years of reinvesting into the most popular features of your product.
I love the example of Google. When they started in 1996 Yahoo, Altavista, InfoSeek, LyCos, MSN, and Excite were the major search engines. Over time, Google simply built a better experience that users came back to again and again.
It’s better to get started than to wait for that ‘perfect idea’. The companies that seem to offer the perfect solution now didn’t get there from an initial ‘ah hah’ moment. That doesn’t do justice to the countless hours of refinement and optimization of both the business model and product.
For that same reason there’s no sense in being disheartened if there’s a similar idea in the market. Every company has competition. Those same competitors also started from zero at some point. In my opinion, a founder’s job is to ensure you’re delivering the best service possible.
Lesson 3: Your Key Metric Paves the Way
It’s hard to find what your key metric is but once you find it, your other problems will fade away.
It needs to be more specific than “get users” or “increase revenue”. A great example is for facebook their key metric was famously getting new users to add 7 friends in the first 10 days. This allowed them to both grow the business and increase retention through higher user engagement.
The key metric we found just before Orchard was acquired was to get new channel sales partners to install 10 POS systems in their first 6 weeks of partnership. This grew our sales without increasing our burn (which was high given the large engineering team) because channel sales didn’t increase our sales headcount.
Establishing monthly minimums to carry our product created predictable subscription revenue and educated the channel on how to sell our differentiated product. Furthermore, it self selected our 80-20 of which partners were worth investing time with.
This saved our company and gave us enough time to negotiate a sale to an incumbent competitor.
A strategy I like to help move towards your key metric is buying paid traffic — even when your product is in early stages.
If you use paid traffic combined with a tool like HotJar you can turn on product feedback whenever you need it (btw your friends and family will be too supportive to give you honest feedback).
Simply pay Google to send traffic to a newly released feature. Watch how the users interact with it (or don’t) and make assumptions from there. At the very least you’ll get valuable data – like what your users search to get to your site, what their demographics are, etc. – that will inform who your ideal users really are.
Most importantly, you’ll start to see common behavior once they reach your site. Anyone can buy paid traffic. The competency is converting the traffic through a superior experience. Seeing what users interact with is the most sustainable approach to optimizing your site.
Cut what they don’t like and invest in what they do. Rinse & repeat. This process will take some time to figure out so be patient.
We haven’t found Clyde’s key metric yet but feel free to try it and let me know what you liked best. Here’s how it works.
(Bonus Lesson) There’s An App For That
This one’s simple. There are so many great SaaS tools to make your life easier.
Use them.
The best investment of your time at this stage is figuring out what you’re really building and who wants it most. It’s worth it to pay for services that make operations easier. Internet reviews have made it really easy to determine which products can help you most.
At Orchard, we spent countless hours trying to pinch pennies — like writing technical requirements in google docs vs a collaboration tool — when we could have made our lives easier. Take the easy wins where you can get them.
Cheers,
Thomas