A lot happened in 2019, but most notably it was the year we have learnt how to turn failure into success, and trust me there was a lot of failure!
During 2019, my co-founder Tim and I went from working full-time contract jobs to working full-time on our product VEED with a small team making a meaningful amount of monthly recurring revenue.
To set the scene, Tim and I where both working full time contract jobs in London. Spending mornings, evenings and weekends working on VEED.IO - Just 12 months later we had managed to build VEED into a profitable bootstrapped company. As of the last day of 2019, we where at $150,000 ARR (Annual Recurring Revenue) and continuing to growing 40% month over month.
I imagine for the outside observer it looks like we did everything right and that it was a smooth journey. But I just want to let you know it was f***ing hard with many times when we thought it was all over.
This blog post is an extended version of a semi popular post from my LinkedIn a few months ago (for me anyway). As many are falling on hard times due to the effects of COVID-19, I wanted to revisit this post in a little more detail in the hopes that it will help others turn current failure or misfortune into opportunity and/or success.
Failing 1: To raise seed funding - Q1 2019
We assumed that raising funds was what successful startups did right?
So in late 2018 early 2019 in an attempt to transition from full-time jobs to working fill-time on VEED we attempted to raise funding. At this point we had an MVP, a good number of free users and a product that was extremely buggy.
We reached out to our most active pre-seed and seed firms in the UK and a few in the US. After what seems like months of exchanges of fluffy emails and the odd call, all correspondence ended up with pretty much this response.
Non of the investment firms said "hard no". They all had used the terminology along the lines of "For now" AND "not at this time" OR "Part of this batch".
However, they did reassure us to "keep in touch" and "Do let us know if we can help".
I really don't blame the firms that rejected us, we were an incredibly high risk startup ran by two incredibly naive founders. In addition, we must have came across as desperate, at that point we needed them much more than they needed us.
This was an incredibly frustrating time.
Should we keep trying to raise? Will someone say yes sooner rather than later (sunk cost fallacy). Or should we just focus on building a better product and growing our user base?
Fortunately (in hindsight), we felt there was not other option, but to chose the latter option.
We worked our contract jobs during the day to build up our runway and then worked all nights, mornings and weekends building VEED. Just 4-5 months after those initial rejection emails we had built VEED to 35,000 MAU and a good few months of runway in the bank.
Our Failure: Raise Funding for our startup.
Turned into success: Save up money and work evenings and weekends.
Failing 2: Failed YC application - Q2/3 2019
In June 2019 we got rejected from Y Combinator. We had already written about this before in a post called How we tried to hustle our way into YC after we got rejected so i don't want to go into too much detail, but this was the rejection email.
Instead of getting down about the whole thing, we spent the next 48 hours implementing a paywall and once it went live, we immediately got our first paid user at $5 a month. fast forward 9 months, we now have over 2K paid users.
Our Failure: Get into YC
Turned into success: Immediately got our first paid users.
Failing 3: To meet payroll - Q3 2019
In August we had less than 1 month's runway left in the bank. Our growth was good and we where adding new customers everyday, but our revenue was not enough to sustain the whole team of 4.
We made some basic calculations in advance and concluded that we would not be able to make pay roll on time. We where about 4 weeks off course from where we needed to be.
Our options where the following.
- Ask around for $
- Miss payroll
- Double our prices
We did not want to ask friends and family for money, mainly because we did not know anyone that had any and simply because it just didn't feel right. We did not want to miss payroll, the team had put so much into VEED, it would be a sure fire way to shift our culture in the wrong direction. As founders, it is our job to make sure everyone gets paid. Finally, we did not want to put prices up as we thought this would stop new users singing up all together.
Startups are incredibly fragile in the early days, but fortunately, when you have limited options and little time, you have to make hard decisions fast.
We decided to double our prices, and surprise surprise, this ended up having no effect on new user growth. The following month we had our best month yet, our churn went down dramatically and best of all we managed to meet payroll needs just in time.
WOOP WOOP, the journey continues.
Our Failure: To have enough money to meet payroll
Turned into success: Doubled our prices, reduced churn, met payroll and became more profitable.
Our Filter: Running out of money
Turned into success: Had our best month yet
Failure is part of life, don't be scared of it too much. What matters is is how you bounce back from it. I am super proud of the talented team and culture we have built at VEED and we are excited to continue the journey.
If you are interested in learning more, I have also spoken with Omer Khan on the SaaS podcast on the topic of "Overcoming Failures" do check that out too!