Reflections from a failed startup

Over the last two years I was a founder. Today, I'm not.

It's an odd feeling throwing your entire self into your work only to see it fizzle into nothing. No more users of your product, no more support tickets to respond to, no more bugs to squash...no useful code to repurpose, no acquisition, no financial windfall...just a graveyard of 0's and 1's sitting on a server somewhere and a few years of memories and learnings.

I wanted to take a moment to share some reflections as a sort of "closing" of this chapter in my life. I learned a lot. I did a lot wrong. I did some things right. And, maybe you can learn from my mistakes.

I'm not a successful multi-time founder, so take my advice with a very large grain of salt. But, if you're a founder pushing a boulder uphill right now, maybe this post will provide you with a few data points.

In this article, I'll share what I learned from:

• Building a B2B SaaS startup in today's hyper competitive environment
• Failing to raise our Seed round
• Almost getting acquired
• Deciding to wind things down

I know being a founder can be a lonely journey. Whether I know you or not, I'm happy to chat about whatever situation you're dealing with at your startup...my DM's are always open.

So, let's get to it.

If you only have a few minutes to spare…

(borrowed this format from my favorite newsletter, The Generalist ??)

Here’s what I learned as a failed founder of a B2B SaaS startup.

• Fundraising is hard right now?–?lower your valuation and stay alive. No seriously, do it. We eventually lowered our Seed round valuation to below our Pre-Seed valuation, and we were met with far more investor interest. Had we done this sooner, maybe we’d still be alive. Quit waiting for the “market to improve.”
• Getting acquired is nearly impossible. In a down market, it’s even impossibler. You probably won’t get acquired, but if you want to maximize your odds: begin talking to potential acquirers now, get in touch with the most senior product exec, be moderately direct about seeking an acquisition, and target mid-sized (e.g. Series C —> E) companies that can get a deal done fast.
• There is a balance between figuring out your long-term vision and optimizing for tomorrow’s success. It’s hard to know which to focus on and when. Listen to YC’s advice: grow 10% week-over-week, and if you aren’t doing that consistently, zoom out and rethink the bigger picture. Then, zoom back in.
• Let investors help you focus on the right things. Investor feedback was like a heat seeking missile for finding the biggest risks to our business, and I didn’t spend enough time talking to investors early in our journey BEFORE needing to fundraise. Had I done this, our goals over the coming quarters would have been clearer.
• SaaS is so competitive now. It's harder than ever to stand out from the noise. Make sure SOMETHING about your product is 10x better for a particular audience/use case/etc. Without this, it’s nearly impossible to win over customers and convince investors you’re onto something. This sounds obvious, but take a good, hard look in the mirror. I bet you're still not focused enough.

Our journey building Corq?–?PIVOT!

I was the founder of Corq, a conversation intelligence tool for startups, or said another way, a sort of "Gong.io for startups." We helped customer-facing teams at growing SaaS companies extract key information from their customer calls – action items, CRM updates, product insights, deal blockers, coachable moments etc.?–?in a fraction of the time via our call recorder/note taker built on top of Zoom. That was our stepping stone to eventually better align the customer, customer-facing team, and product org to make better, customer-centric decisions.

That wasn't where we started, though. We pivoted several times.

My founder journey began in the summer of 2020 when I joined On Deck's fourth founder cohort. Back then I was fully in "explorer" mode looking for a problem worth solving or a founding team worth joining. (Btw I owe a lot to On Deck, and if you're a founder at the early stages of your journey or are considering founding something, I absolutely recommend joining.)

By late 2020, I picked up a few cofounders and we found a problem worth solving.

In a nutshell: being customer-centric has become table stakes, and busy product teams want to get in the minds of their customers. The problem is, they never have the time. How could we help companies get a rich, qualitative understanding of their users and target customers without the traditional burdens of user research?

That led us to build a video-based survey tool called Muze which empowered Product teams to gather user interview quality feedback at the speed and scale of a survey. Imagine a sort of Loom meets SurveyMonkey.

We raised a Pre-Seed round but pivoted away from Muze after a few months. Simply put, as we scaled it became too difficult to get end-users to respond via video and our product promise didn’t seem feasible.

So, we said "screw it" to surveys, and shifted our focus to live video calls with a tool that helped UXR’s and Product teams extract insights from moderated research studies. Analyzing conversations is extremely difficult and time consuming, and we believed we could speed up this process by helping you extract key information from your conversations and then help collate those into insights via an integrated note taker, call recorder, and research synthesis platform.

Unfortunately, we struggled to reach conviction that there was a venture-scalable business here, and our wedge proved ineffective. Though our solution promised faster analysis and better insights, users weren't actually willing to adjust some of their habits to achieve this (e.g. where/how they took notes). Of course, we should have predicted this.

This led to our final act. We began interviewing other teams that talked with customers regularly –?particularly Customer Success and Sales teams –?and we discovered a new opportunity that we were well positioned to solve. Many customer-facing teams at scale-ups and growth stage SaaS companies wanted to use a tool like Gong or Chorus, but these tools were simply "too much" in both cost and UX.

There was an opportunity to build a self-serve conversation intelligence tool for customer-facing teams that was lighter weight and easier to use. It would strip away 50% of Gong's features that smaller teams didn't need, and we would invest in other features they cared more about, like extracting information for better product decision making.

And that became Corq, which we started putting in the hands of our first customers in late February 2022.

But having raised our Pre-Seed in early 2021, we only had ~10 months of runway left. We were in a tight spot.

Trying to raise a Seed round in a down market, and scrambling to raise a Pre-Seed extension

We began testing the waters with our Seed round in April 2022, a few months after our launch.

Our product showed great early signals after our pivot –?users were retaining at high rates, engagement was growing among those engaged users, and some were even beginning to monetize. But, these were very early, not-at-scale signals. As the market moved away from us we got a lot of quick no's from investors.

Even if we wanted to scale the business to increase the odds of getting a yes, the product simply wasn't ready for that. We were hamstrung.

So, we iterated on the story, went back to more target investors we had been speaking with over many months, and got more no's.

And with the many no's, every once in a while we got an angel to say yes, or a non-lead investor to verbally commit to the round, and so we oscillated between being sad, depressed, excited, energized, and sad again.

In the end, you just need one lead investor to close the round.

So, we remained optimistic. But being in fundraising mode is incredibly distracting, and the longer it took, the less we focused on the business.

By July we had probably gotten ~100 no’s, but then some great things started happening. New user acquisition started picking up, we signed our first annual contract with a customer, a few customers switched off of competitors to Corq, and our engagement metrics kept breaking records week-after-week. Again, small numbers, but positive signals.

With only a few months of runway, we scrambled to raise a Pre-Seed extension to keep the business afloat another 9-12 months. We even offered terms BELOW our prior Pre-Seed valuation.

But by then we had spoken with almost every potential investor, and no one quite got to the finish line in time. Ultimately, we got a handful of verbal and wired commitments from existing investors and new angels, but we could never find enough commitments to fill out the round.

Looking back, we probably should have done more to stay alive. We should have sought an extension/smaller round/lower valuation earlier in our fundraise, but we had been eating shit for 18 months to get the business to the starting line. Scraping by to just barely stay alive another 9-12 months was an untenable situation. We regretted that when the business started picking up.

Raising money is about building FOMO. Honestly, there's not much more to it. But, in a down market you're not in the driver's seat anymore. Consider 2020-2021 a fluke. Building FOMO has become exponentially harder, and you need to demonstrate much more progress to investors.

In the end, it's your job to keep the company alive. Cut your valuation, raise the minimum amount necessary to get to the next phase, and optimize for getting ANY deal done.

Almost getting acquired, but failing to do so

When it became clear that our fundraise wasn’t going well, I began shifting my focus to getting acquired. An acquisition of the company, our IP, or even an acquihire was the next best outcome. Those are basically the three types of acquisitions.

We got pretty damn close.

We began our contingency plans in early 2022, months before actually running out of money. But even with time to spare, there is urgency. Acquisitions take time, and time is the best leverage a potential acquirer has over a startup running out of money.

How do you explore acquisition interest without sounding desperate? How do you build urgency when you're running out of time?

Here’s how: you must reach out early, make your intentions clear, and offer alternatives that make it seem like you aren’t desperate.

In January 2022, I made a list of potential acquirers that I thought might be interested in our technology –?everyone from CRMs to recruiting platforms to EdTech companies. For some of those non-competitive companies, I began trying to get introduced to those founders under the guise of an angel investment, partnership, or acquisition.

For example, here was an email intro I sent to a friend (which led to a discussion with Productboard):

This led to a lot more responses than expected...and this message achieves a few key things:

1. Begins your relationship with the potential acquirer
2. Lets them know an acquisition is on the table
3. Gives you some outs (i.e. avoiding desperation)

If you have lots of time, you can be more coy about your interest in being acquired. If you are running out of time, you must be more direct. How you play with that formula is up to you. (Side note: Of course they’ll know you want to get acquired. ??)

After getting introduced, we would try to get them on the phone, gauge interest, and try to keep them engaged. Eventually, we whittled down our target list to a shortlist of a few serious parties.

Note: big companies (i.e. public co's) will require months of partnership, or maybe even a strategic investment before even considering an acquisition. So, if you're seeking an acquisition in the near term, it's in your best interest to target later stage startups (e.g. pre-Series D/E).

We had a funnel of ~10 companies that had varying levels of interest. In all of those cases, I got in touch with someone at the C-level, and it became clear that the best person to speak with was the most senior person in charge of the Product (CPO, CEO, VP of Product, etc.).

From there, we would sign NDA's, do product demos, provide customer references, and even do code reviews. As you can imagine, this was all quite distracting, but since we were so early stage we could keep the conversations and diligence quite lightweight (relative to what you’d expect at a Series A/B/C/D startup). But alongside a fundraise, we were stretched pretty thinly.

As our “drop dead date” approached, I pressed two of our potential acquirers to make a move by setting an artificial deadline, and unfortunately they both resulted in “no’s.”

In the end, we got VERY close to an offer –?we spent many hours together with several acquirers in meetings/doing diligence/discussing strategy & synergies/product testing?– but nothing panned out. It's so hard for the stars to align, and it only gets harder as companies drop distractions to focus on their core business in a down market. In the end, your odds of getting acquired are low...like really, really low.

But even with the odds so stacked against you, as a founder it’s your job to find a soft landing.

Overall it was an incredible learning experience, but without an acquisition in-hand we began our wind-down plan, stopped paying ourselves, and helped offboard our customers to our competitors.

It was painful, and odd. One day you’re looking at metrics, shipping features, planning for the future, and closing customers. The next, you’re sending an email to customers and investors saying that the company is shutting down. But alas, it was time to close this chapter.

What I learned building Corq

Founding a startup forces you to learn a ton of things extremely quickly. This is my attempt at a brief summary of what I learned over the last few years.

Why we failed

I've been thinking about this a lot…

First things first, we chose the wrong market. At the time, we were riding the trend of remote work, but Corq struggled to stand out among the sea of competing conversation intelligence tools that launched post-Covid. And with so much competition, there were high expectations in our product's UX and base features. Looking back, I wish we choose a different or more niche market.

We tried to do too much. Not only did we need to nail call recording, transcription, highlight creation, integrations, and clip sharing, but we also offered note taking. So, SO much stuff to build, and call recording tech has high reliability requirements. Simply put, we bit off more than we could chew, and the user experience suffered because of it. We failed to adhere to the classic startup mantra of focusing on solving an acute problem for a specific audience. This is SO much easier said than done, though. Looking back, we overbuilt because our vision evolved, our target audience evolved, and we didn't have a clear enough understanding of what we were exactly solving and for whom. You've heard this a million times, but if you're at an early stage startup, I bet you're falling into this same trap.

Related to the above, we didn't have a clear enough vision and/or enough conviction in our vision. As we talked to investors and customers, our understanding of the world evolved, and so did our vision. This led to a lack of focus in product development and customer acquisition. At the same time, this can be a trap. There is some balance of “strong beliefs, loosely held” here that I don’t know the formula for…

Our go-to-market strategy was too difficult to pull off. Being bottoms-up/self serve is extremely challenging, but it was essential to our success. As Corq wasn't a fully general-purpose solution (e.g. vs. tools like Grain or Otter) being fully self serve was harder as were less viral than the competition. It was also too difficult to avoid sales-oriented conversations when competitors like Gong locked customers into one-year contracts. In the end, we made hand-wave assumptions about our GTM strategy that faced huge hurdles or were flat out wrong.

Too often, we lied to ourselves about our metrics. If I take a step back now, we demonstrated mixed success when looking at product metrics. Much of the growth was linear, some metrics would go up while others would be flat, and ultimately we would look for promising things in the numbers rather than soberly looking at what they were telling us.

We failed to effectively validate the demand for our product. There is so much guidance on “how to validate an idea”…get people to pay you, run user tests, sign LOI’s, get time commitments, read reactions, you just know…all of it is right, and none of it is. This feels like a whole post in-and-of itself, but we fell into the trap multiple times, and it’s why pivoted twice. I’ve learned a lot about idea validation. It really is an art and a science, and I wish did it better.

On fundraising

The market has changed?–?raising money is now hard. Like, really hard. Here are a few learnings I had from failing to raise our Seed round:

• If you're raising a Seed for a B2B SaaS startup, you need to get to $50k-100k in ARR before going to investors. Or, show some truly out-of-this world engagement/growth.
• If you can't get material ARR, focus on depth of engagement, not breadth of users. Investors aren't dumb, so don't try to “juice” the numbers by forcing growth in a product that isn’t working.Thousands of active users isn't as impressive as 100 people that literally cannot live without your product, so figure out how to prove that’s the case.
• Don’t be afraid to lower your valuation. Frankly, take a down round. If you raised in 2020-2021, don't even bother going out to raise at a higher valuation. Just get the round done. If we lowered our valuation early in our Seed fundraise, I think we'd probably still be alive.

On trying to get acquired

If I were a founder running out of money in the next 12 months, this is what I'd be doing:

• Make a list of potential acquirers
• Focus on those that are at the Series C --> Series E size
• Find the right people to get in touch with at those companies. If 500+ people, get in touch with the head of the department, if less than that, get in touch with the founder(s) or C-suite...never go through Corp Dev as a starting point. For most SaaS co's, you should get in touch with the CEO or most senior product person at the company.
• Begin reaching out under the guise of a partnership or strategic investment, but mention the option of an acquisition. How much time you have left dictates how straightforward vs. coy you should be.

What I would have done differently

Don't get me wrong, I think we did a few things extremely well. I am especially proud of the great list of supporters we curated and kept involved along the way. They proved extremely helpful in finding early customers, intros to investors, and countless other things (I highly recommend sharing investor updates with a network of friends/supporters).

...but every failure is a learning opportunity.

Next time I give the founder thing a shot, here’s what I’d do differently.

• Don’t raise a Pre-Seed round so early: In the future, I will try to make more progress with an idea/product/business before reaching out to investors to raise funds. We weren’t far enough along before “starting the clock,” and I think that cost us.
• Listen to the market and don’t be such a stickler for valuation: I now understand why people say “don’t worry about valuation too much.” Again, it's such obvious and prevalent advice, but so easy to ignore. In the grand scheme of things, giving away $600k at a $6mm valuation vs. a $5mm valuation is peanuts. Always optimize towards getting the deal done as fast as possible and with the best investors possible…but most importantly, DONE.
• Find better balance between figuring out your long-term vision vs. optimizing for tomorrow’s success: I get why YC tells you to just focus on growing 10% week-over-week. There is no better framework for knowing when to zoom out/rethink strategy vs. staying committed to the course. There are too many variables and unknowns, too many times you might question your strategy…and there’s just no right answer in terms of whether or not you should rethink your strategy, vision, etc. vs. stay focused on execution. I think it’s a great framework to simplify decision making.
• Do deeper, better discovery by paying your exact target audience for 1+ hour of their time: Oddly specific, but we took too long to (in)validate key things about our audience because we would get them on the phone for just 30 minutes (and struggle to get them on the phone again). And we later discovered that we were wrong about certain burning problems because we didn’t go deep enough in our discovery work. In the future, I will do everything possible to schedule 1-hour sessions and/or compensate folks for their time.
• Spend more time talking to investors about your vision/story early on (when not fundraising): The feedback we got when fundraising (especially the “no’s”) was so valuable. It is like a heat seeking missile for finding the biggest risks to your business. If we did a better job testing our story with prospective investors earlier in our journey, we could have spent more time de-risking those things.
• Spend more time in the solution space: I think Marty Cagan said it best...teams often spend too much time in problem discovery vs. solution discovery, and I believe we succumbed to that. Ultimately, I don’t believe we spent enough time developing and testing solutions, and it was partly related to not having enough design help. If we had an in-house designer, I think this would have been different. Still, we could have done a better job ourselves.
• When building something new, focus on making SOMETHING about it 10x better for a particular audience: Our product was only incrementally better than the status quo. We had some nice features, but nothing stood out as “wow that’s 10x better, and I will start using that tomorrow.”

There’s so much more I’d love to share, but this is enough for now. Building Corq was an incredibly taxing journey: relationships were stressed, my physical health deteriorated, and it sucked most of the time. But I wouldn't trade it for the world.

Looking back, there's a lot to be proud of:

• Raised just under $1mm from institutional investors, some great angels, and backed by On Deck
• Developed a publicly listed app in the Zoom App store
• Had hundreds of users sign up and use Corq, with 10k+ highlights created on the platform
• Reached low 10's of thousands in ARR

But, most importantly people actually found Corq valuable –?that was the best feeling of all.

If you had asked me 5 months ago if I would give it another go, I would've said no. But coming out of all of this, I think someday I will again be a founder. There's a level of fulfillment from building something from nothing that can't be replicated. Not to mention, I think it would be easier the second time around.

To our investors: thank you for believing in us.

To our friends: thanks for your countless intros, your willingness to help, and your positive words?– it kept us going.

To my cofounders Alexander Hanthorn and Chris Gosselin : you’re like brothers to me. Thank you for joining me in the trenches. I couldn’t think of better partners.

And to anyone else going through the founder journey, good luck. It's the most thankless, fulfilling job, and I am excited to see what companies make it out of this downturn. Like I said, if you want to chat, need some help, or just want to vent, my DM's are open.

What's next for me? More to come on that soon. ?? Until then, stay hungry.