My last startup failed. You may read that we were acquired, that it worked out well for our investors and team, and that we’re excited about new opportunities. That’s all true, but at the end of the day we still failed. More specifically, I failed. I didn’t move the needle for my investors, my employees didn’t make life-changing amounts of money, and our product didn’t make a significant impact on the world. We had all the right ingredients — funding, talent, relevant experience — but we came up short for one simple reason: we weren’t 10X better than our competition.
At HeartThis, our vision was to create the definitive online shopping site by putting all your favorite stores in one place. When we started, the market for shopping apps was already crowded, but our team had a secret weapon: we were experts at growing consumer services to massive scale without spending money on user acquisition (massive = tens or hundreds of millions of users). Viral growth was our 10X edge over the competition, but we failed to commit ourselves to growth at all costs. Every single action item should have been prioritized in terms of ROI on growth. Instead, we wasted time on product features and improvements that created an incrementally better user experience but didn’t directly drive user acquisition. We built monitors to make sure prices and inventory stock-info were accurate. We didn’t force users to follow friends on install because user tests showed that was a turnoff in some instances. We spent significant engineering resources ensuring that users always saw new content when they returned to the app. All nice features, but all 100% worthless without a 10X differentiator between us and our competitors. That lack of focus killed our company.
When raising a Series A or later round, investors aren’t willing to take a chance on a product that has a slightly better user experience and a slightly better growth rate than the competition, which is exactly what HeartThis offered. We would have been better served by putting more effort on growth and being able to point to an order of magnitude higher growth rate than all competitors even if that meant we had a merely adequate user experience. When it comes to post-seed investing, investors need a reason to believe that your company is a true outlier because they’re looking for the handful of superstar investments that return the fund[1].
It is extremely difficult to be an order of magnitude better than your competition at one thing, but it’s fairly easy to be incrementally better at many things. This creates a dangerous cycle. You feel a sense of accomplishment for each incremental win over your competition. As a result, rather than tackling the difficult task of turning a small advantage into a 10X differentiator, it becomes tempting to search for another easy win and the pleasant sensation of steadily increasing your value proposition relative to your competition. This will ultimately create a product that is slightly better than your competition in many ways…and then you will run out of money and your company will die.
Don’t fall into the trap of incrementally better. Figure out what makes your product 10X better than your competition and ruthlessly push towards that goal. Investors, employees, friends, family, and other well-meaning people will point out all of the other things you should be working on. Record all of their suggestions, then ignore them until after you hit your 10X goal. Users don’t abandon products they’re familiar with for incrementally better. Investors don’t throw money at companies that are incrementally better. Massive success isn’t born from incrementally better. If you’re not 10X better than you don’t matter. Once you are 10X better, then you can flesh out the rest. I learned that lesson the hard way, and I sincerely hope that you’re able to learn from my mistake.
Notes
[1] For more on how investors think, see Fred Wilson’s What is a good venture return?