Startup experience: 6 months in

This is a blog post aimed at other start-ups – especially those who, like us, really had no idea what the heck they were doing when they got started. We want to talk about how things have gone in our first 6 months. Along the way, we’ll drop in our own advice.

If you’re unfamiliar with Tenon, read this “Executive Summary” on AngelList first for some background on who we are and what we do.

Background

Tenon’s official release to the public on March 1, 2015 after an approximate 6 months long Open Beta period. The initial public look at Tenon, featuring a single page demo and mailing list sign-up was in February 2014. Tenon is 100% bootstrapped by Karl Groves and Asa Baylus. We both build, design, and market the product, with the assistance of a handful of 1099 freelancers with whom we’ve forged relationships. All of the money Tenon pays to our developers comes directly from income.

As a bootstrapped company, all expenses are paid either by founders or company income. The founders made initial loans to the company of approximately $20,000 which have gone directly to expenses such as hosting, software, 3rd party SaaS services, lawyers, and accountants. We began generating income immediately after our public release and shortly reached a point where SaaS income is sufficient to pay all recurring bills. Further Elite SaaS sales have made it possible to pay down legal bills and afford more developer time to speed up creation of new features. The founders have not yet taken any money out of the company and have not repaid themselves for their initial loans, opting instead to continue investing in development. However, at the 6 month mark, we became acutely aware that our burn rate is exceeding growth. More on that later.

Traction

We put up a single page demo, similar to the one now on our homepage in March 2014 and quickly followed up with a sign-up form for mailing list announcements. Mailing list sign-ups reached 600 by the time call for Open Beta went out. An additional 900 registrations occurred prior to the full release.

Registrations and other stats

Registrations

To date there are 2098 registered users, approximately 50 of which are sub-members of Elite SaaS plans. Non-Elite SaaS subscriptions are now reaching a point where they pay the company’s bills themselves. For competitive reasons, we won’t disclose exact sales numbers.

Usage

Paid customers have submitted well over 200,000 requests against our API. Visitors have logged 24,000 visits to our online demo from 111 countries. Visits to the site grow approximately 16% each month. We’ve experienced a summertime lull in web traffic, though API and demo traffic does not appear to have been impacted by summer.

Lessons and Impressions

Finding our place among startups is difficult. Our model has never been to try to grab VC funding to launch a product and somehow exit with a gazillion dollars from a buy-out. Asa and I don’t really consider Tenon to be a “start-up”. We created a product and are working to sell it to a broad audience. So while a lot of people in the startup world are focused on those things – and that might be what’s right for them – we’re interested in different things, which makes reading about stuff like funding, valuation, and all that stuff a bit irrelevant for us. We’d rather focus on pricing strategies, converting free trial users to paid users, reducing churn, and other things that concern established SaaS businesses rather than finding investors.

What we’ve done right

Looking at our accomplishments & traction vs. “What we’ve done wrong”, below, its hard not to think about possible lost sales due to our mistakes. But we’ve done a lot of things right. The most notable thing we’ve done right is to stick to our philosophy. There’s no mistake that Tenon’s core message is an idea that resonates, and our Enterprise sales pipeline proves this. Larger competitors are already reacting to our unique approach. This indicates that they see value in what we offer, too.

We’re undeniably disruptive

Tenon is driven by an entirely new (and overdue, in our opinion) ways of thinking for the accessibility industry. The speed with which we started seeing traction is evidence of this, but even moreso is the fact that the entrenched competitors are already working on rival products. We’ve also already had entrenched competitors talk to us about investing in us or buying us. Big Blue recently joined the fray as well.

Being disruptive isn’t paying the bills but there’s a certain satisfaction to see far bigger companies scramble to catch up. During our first in-person meeting, our internal advocate at one of our customers (the biggest software company on earth) said to us: “They [an entrenched competitor] are scared to death of you”.

If Tenon ultimately winds up failing as a business, it will have succeeded in starting a revolution in the market for web accessibility tools.

We haven’t ignored mistakes

The other thing we’ve done right (admittedly a little late) is choose to aggressively deal with what we’ve done wrong. At this point our product is stable, performing well, and generating revenue. We’ve transitioned to a point where we can begin adding features, iterating on performance and quality enhancements, and generally doing things to improve sales prospects. It’d be nice to never make mistakes, but at least we’re learning from them and fixing them.

We have great developers

Another important thing we’ve done right is in bringing in the right help. Right now we’re working with 2 freelance developers and 1 freelance devops engineer and they’ve been integral in building the product. We didn’t cheap out and get green developers, these guys are top-notch and we pay them real money for high quality work. It is worth every penny.

Advisors, Lawyers, and Accountants

Early on we hired a great full-service law-firm, Gordon Feinblatt LLC and a great accounting firm, KatzAbosch. They’ve given us top-notch service and have prepared us for long-term sustainability. We’ve also been sure to seek the advice of others. Mike Paciello, Kel Smith, Sina Bahram, and Adrian Roselli have been great friends to us as we navigate our way through this adventure. They share their unique perspective with us and, most importantly, don’t pull any punches when they give us feedback.

What we’ve done wrong

Getting better absolutely requires you to eliminate mistakes, and we’ve made a few.

We assumed too much

After we unveiled Tenon, it took an extraordinarily long time to get from “cool demo” to “paying customers”. We caught a bit of Perfectionitis and decided we wanted to build a ton of features. We’re proud of the features we’ve built, but many of them were built without feedback from customers telling us what they actually want. Among the assumptions we made was that people would just use the API. It turns out that there are a ton of people who like to test using the Tenon website only. They don’t really care about the API – or they may want to verify the product’s usefulness before writing their own API-based integration. Either way, we need to do less assuming about what users want and more asking.

Asking, by the way, isn’t really enough. From the very beginning we’ve continually stated in our mailing list messages that we love feedback, but a lot of people don’t have time for that or just aren’t interested in giving feedback. We’ve found that getting people to reach out on their own is pretty difficult, so we’ve begun being more proactive in contacting people directly to get their input and this is a practice we plan to continue.

We forgot the website’s role in sales

Because we’re bootstrapped, we don’t have the money to hire a bunch of developers to help with the product. Consequently, everything falls on the shoulders of Asa and Karl. This is especially true of things like marketing, sales, accounting, etc. In our somewhat myopic focus on the product, we ignored the website’s role in sales. The website’s landing page does a particularly poor job of communicating what Tenon is and does. This adds a risk that we miss out on potential registrations from people for whom Tenon might be a good fit. Addressing this is a high priority in the 2nd half of 2015.

We were too optimistic about early adopters

The initial enthusiasm around Tenon left us feeling as though we’d be able to convert more users than we actually did. With 600 registrations on our mailing list and our official release taking place at the beginning of the largest conference in our industry, we though for sure we’d convert about 10% of those off the bat. The first week was indeed pretty exciting. We got a handful of registrations within hours of our press release. The initial excitement didn’t carry us as far as we had hoped. Part of that was likely due to our next issue.

We went Freemium

Our initial belief was that by offering a limited but free plan, people would be able to kick the tires, see how awesome the product is, and upgrade straight away. Instead, we got a lot of free registrations that didn’t convert, possibly due to the significant limitations of the free plan. We’ve recently shifted to a Free Trial model. During the free trial all features are unlocked. This in itself isn’t a direct “fix” for the low conversions of free users, but we’ll be taking advantage of the unlocked features to show free users what the product is all about and will increase our marketing to those users.

Start-up advice: Giving away a product like ours doesn’t work. Products like Slack have a far broader appeal which means they can make up the free usage rather easily. They can get the free users to drink the Kool-Aid, then upsell to those who’ve found it useful enough to pay to allow multiple users, multiple integrations, etc. The same goes for GitHub and anything else that has a huge appeal. For Tenon, free doesn’t work because (unfortunately) accessibility testing isn’t something most people do on a day-to-day basis, so people are perfectly content to sign up and use it sparingly. These people ultimately don’t see the value of the product and, to be blunt, we’re aiming at a much loftier goal: Truly changing how people work with accessibility. Truly getting the most out of Tenon requires higher amounts of usage than the everyday tire kicker.

We took a passive role in sales

Because all of the business of the company is handled by Asa and Karl – both of whom are also hard at work on the product itself too – we’ve made the mistake of spending more of our time on the product. We’re both developers, not businessmen, so “making cool shit” is always more fun than selling. We lazily allowed social media, automation, and our mailinglist to become our sole effort when it comes to selling. Our enterprise sales pipeline is pretty sizeable and it all comes from inbound sources, which is great, but there’s no denying that we could be doing more. This is especially true of SaaS sales.

One of the reasons why we went with SaaS is that it allows us to reach customers that are underserved by our competitors: small businesses, design agencies, non-profits, higher education, and budget-constrained state government agencies. Our competitors’ pricing strategies (easily researched on the GSA schedule) locks out those with smaller budgets. With a (current) maximum price under a dollar-per-user for SaaS customers, there’s literally nobody out there with better pricing. It may even be too low.

Start-up advice: You have two jobs – developing cool shit and selling it to others. It doesn’t matter how cool the product is if nobody is buying. And, if the product is really cool, then you need to be telling people about it. No matter how cool the product is, it won’t sell itself. You need to always be selling. It is critical to strike a balance between product development and product sales. They feed each other.

Our guidance for other startups

After six months of actual business we’re not able to quit our day jobs, move into a big fancy building in the Valley, and drive to work in our Teslas and this is good news. As a bootstrapped company we’ve learned a lot about being lean. We’ve made mistakes and we’ve had successes. The experience has taught us a ton, though we clearly have more to learn. Here are the biggest things have to share for others.

Don’t panic

At this point, I think I’ve had as many panic attacks as SaaS upgrades. It is hard not to panic when you have so much of yourself invested in your start-up. There are plenty of things to panic about, especially when you’re bootstrapped. Servers, bugs, new features, customers, sales, everything. None of that is worth panicking about. Server’s crashed? SSH into it, reboot and move on. Customer yelling at you about a feature they really want? Ask them to pay for it or (if you agree with the feature request) give them an honest assessment of when you’ll get to it. Either way, don’t panic. This includes when facing competition.

Ignore competitors

If you have a good idea, you’ll have competitors. If you don’t have competitors then you don’t have a good idea. This was one of the first things I had to learn. When I first caught wind of the plans of one of our big competitors, I freaked out and called my friend Kel Smith. This competitor has so much more money than us, so much more market presence, and we’re just two guys and I was freaking out. Kel’s advice was simple: Focus on what we do best. If the competition is reacting, it is validation that we’re kicking ass. Keep going. Ignore the competition and do what you do.

Start selling now. Already Selling? Do More

This can’t be said enough, which is why I’m saying it again. If I had it to do all over again, I’d be selling all the way back to the day we launched our free single-page demo. Emails are not enough, you need to get old school and start pounding phones. Talk to people who fit your customer profile and literally ask them for money.

Stop trying to be the next unicorn

I spent quite a few years in the music industry when I was younger. I played in bands, I was talent buyer for a club, I was a show promoter, and I was a booking agent. Though some of my bands were on major labels, most were on large indie labels distributed by major labels. One of the traits shared by both bands and start-ups is that they both think they’re going to be the next big thing. Massive success is just around the corner. All they need is that big break and they’re sure they know exactly what the break is. For the bands, maybe it is signing to a major or getting an opening slot on a massive tour. For start-ups its getting into an prestigious incubator or something like that.

Maybe my advice is no good here, but it seems to me that your chances of being the next Uber or Airbnb are about the same as being the next Katy Perry or Taylor Swift. That doesn’t mean you shouldn’t try. The truth is, Katy Perry started in music in 1999 and signed with a tiny indie label in 2001. It wasn’t until 2004 that anyone paid any real attention to her and it wasn’t until 2008 that she had her first big hit. Along the way, she was surrounded by teams of people like producers, publicists, A&R teams, talent agents, and managers to develop her career. In other words: years of hard work and lots of help. And in that time countless others have come and gone, fizzling out, never really taking off, or giving up in their dream to be just like her.

Maybe the better option is to not worry about whether or not you’re building a unicorn. Instead, build something that solves a problem (the bigger the problem the better, of course) and make a difference. Then, sell sell sell and see where it goes.

Avoid burnout

This last thing is the most important one. You must avoid burnout. Burnout is real and it will destroy you. I’ve reached burnout 4x in my life: two of which in the last year. As a bootstrapper, I have basically two full-time jobs – my day job and Tenon. I also have a house, two dogs, two very busy kids, and a wife, all of which also want (and deserve) my attention. At that pace, burnout is hard to avoid.

By the time you start thinking “I feel like I might be burning out”, it is already too late. As soon as that thought hits you, aggressively dial back on everything. Unplug from work stuff, increase your sleep, and stop doing anything that is non-critical. When you think you’ve recovered, keep relaxing. Personally, I find that not being busy drives me nuts, so having a hobby helps change the pace and change your focus.

With that, its time to watch a movie with the wife.

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