Traction Isn’t Everything
It’s summer 2012, I am running the UX-Web Design Studio I set up over a year ago and things were going ok-ish. We have enough work, not a cash cow, but we share a nice office and work on projects we like. But it’s consultancy work, not scalable, not repeatable and the business model is straightforward: selling hours.
Being in and out of Mainland China for the previous 10 years, I had a QQ and Weibo account but trying to follow Weibo without know-how to read Chinese is tough. Few are posting in English, and why would they? Weibo was still growing in users in China with no big focus on going abroad. So while the platform was growing fast, I was curious on what people shared. But going from the Weibo App, copying the post, switching to the Google Translate App, translating and switching back again was just cumbersome. Why hasn’t someone integrated the two yet? An all-in-one app where you could view your Sina Weibo timeline, have a direct translation from Chinese to English (machine at first but with a roadmap to human translation) and integrate other potential Chinese language platforms.
Although I’ve been an entrepreneur almost all of my working life, I pitched the idea to an accelerator. I did that because so far it’s all been in the “We have a skillset, let’s market the sh!t out of this”-consultancy style business. And I figured I needed some help on customer discovery and making things scalable, Lean Startup style.
We got accepted into the first Hong Kong-based accelerator: AcceleratorHK, now discontinued. This was summer 2012, the book from Eric Ries, The Lean Startup, was just published in September 2011. Not everyone (outside of the Bay area) knew what a Lean Startup was and accelerators still had a huge added value in “teaching” these principles.
The operational side of the deal: 3 months program, no (side) day job allowed, at least one tech and one business co-founder. Every Monday, we had to check-in with the program directors; and every Friday, all teams came together with weekly pitching and presentation skill set training. All of this would be in a coworking space paid for by the accelerator. The financial side of the deal: USD18,000 in return for 8% equity. Not bad for the first real accelerator in Hong Kong in 2012, while accelerators in the US were still giving the same deal. Nowadays, the whole accelerator model in broken and programs have to find other ways to add value besides USD100,000 cheques.
So I made the arrangements for the UX-Web Design Studio to have it run by itself. I could do an occasional pitch to a potential customer, but I made sure I could spend more than 10 hours a day on the startup. I found a technical co-founder, Angelina Yan, an (almost) fresh PHD grad from CityU. And we were off!
We started building Surround App, “We enable Chinese social media for people who cannot read Chinese”. We got a logo, a marketing website, business cards, stickers, heck we did even have t-shirts!
We started to build the product. We added two other founders to the team, a marketing person and an UX person. We had all competences available: tech, design, marketing and business. We did customer discovery; we worked on the product; and we prepared for demo day. We didn’t have a product yet, but on demo day we had booth babes, stickers, everything! Due to demo day, we got write-ups in the press, around 600 email signups “for when we launch” and a lot of: “I need that!”
We got some outside investments after demo day and started hiring staff. We crunched out the first version and launched it with a great party. People could download it that evening. We were shipping a new version every week. We got a lot of traction, we also got a lot of users from South East Asia (SEA) which surprised us. We found out that K-pop was popular in SEA, and fans were following them on Sina Weibo. They used our app to translate the posts by the stars and bands to English. In the first few months after the launch, we were on 2,000–3,000 downloads a month. When I handed over the app in August 2015, we were on almost 50,000 downloads.
“Handed over? But it was going great! Lots of traction and people said, ‘I need this!’”
Ehhhh yes, but we made some mistakes.
Not a reason for failure: running out of money
Because of all the mistakes below, we were not able to get to the next funding milestone: revenue and/or mega traction (millions of downloads).
Often people give “running out of money” as a failure reason, but that is a result of not getting (enough) traction or revenue. If you have millions of users or a healthy revenue stream, there is always additional money to be raised. If you are not able to raise money it’s because your startup is just not good enough.
While it’s ok for a hobby to cost money, it should not become a bottomless obsession. So in summer 2015 when a language learning startup wanted to take over the app as part of their promotion and onboarding (we still got on average 60 downloads a day), we made the decision to say goodbye to it.
Although we also did a lot things right, this post is about the lessons learned at Surround App. I learned the most from the things I did wrong, so I will share ours here:
Being in love with your product Oh boy, we were so focused on the initial idea — an app to follow Weibo with translation — that we were only looking for answers that validated that. There was no room for a pivot, even though there were some telltale signs we should.
Peaked too early in our exposure Coming from “market the sh!t out of your product”, we were looking for publicity way too early. No need for a logo, stickers, or media before first validating your assumptions. A minimal viable product (MVP), a single landing page with subscription tiers, and focus, that’s all it needed.
No revenue model We thought we would be able to sell extra services or subscriptions. Turns out, people expect translations to be for free, thank you Google Translate…
Wrong audience We were targeting consumers, but we found out (after launching) that consumers didn’t find the Chinese social media that important that they would spend hours on it, let alone pay for it.
Work too long on the wrong direction We were determined to make it work, and here is where the age-old dilemma comes into play: continue or pivot? When do you know you turned into a dead-end street if the street is curvy and you cannot see the end of the road? You see the next curve so continue to that or make a U-turn now? At one point, we also created (besides the Android and iOS app) a web browser “dashboard”. This was an attempt to follow the money and pivot into the business-to-business market of doing marketing on Sina Weibo.
Create Intellectual Property It’s easy to put together some services / APIs / platforms / etc, but there has to be something that isn’t easily copied by someone. We worked (a bit too late) on a crowdsourced slang database to improve the imperfect machine translation of Chinese.
The content platforms This was not a mistake but something that worked against our value proposition. While Sina Weibo was still up-and-coming, it was difficult, and sometimes impossible, to open an account on Sina Weibo for foreigners. Only a handful of country code phones numbers were allowed. Also, WeChat was on the rise. Unfortunately, WeChat didn’t have an open API so we were not able to get the chat between people inside our app to have the translation function (something they introduced themselves in mid 2014). Weibo was also under pressure from censorship.
Next time an MVP would suffice to test the value proposition; the level of entry must be as effortless as riding a bike downhill; no media exposure until at least version 1.0; be open for the most strange pivots (follow the users, not the idea), make sure you have a revenue model; and last but not least, create intellectual property (IP).
I use these learnings, and the ones I had (and still have) during my almost 20-year career as an entrepreneur, on a regular basis when I mentor, advise, and invest in startups.
About the Author
Jeffrey is a Hong Kong-based entrepreneur. He recently started a new venture called Recime.io, a cloud-based developers platform for bots. He also founded the annual Postmortem Conference, Hong Kong’s very own conference about startup failure. Besides that, he also advises family offices and high-net-worth individuals about investing in early stage startups. With his common sense and his Dutch no-nonsense attitude, he helps companies and startups prepare for investment, product launch and growth.