The decision to sell a business is an agonizing one. It is particularly so when one has the feeling that there is opportunity left on the table; that the venture hasn’t had an opportunity to run its course; that breakout growth is around the next corner.
This is how I feel about selling StoryDesk.
Having had a bit of time to process my feelings, I offer the following retrospective for your reading enjoyment. I hope you find it useful.
StoryDesk began in early 2011 with the insight that content on a touch-enabled device (iPad) would be experienced, and created, differently than that of a linear medium. The lean-forward experience of a tablet would transform the way stories are experienced. Linear flows would give way to a non-linear storyline; flat images would be replaced by interactive, layered content. This was the idea, anyhow.
With that insight, we searched for a business problem to solve. After hanging out a shingle in the form of a SquareSpace site promising $99 iPad apps, we started getting inbound leads from companies looking to use the iPad as a sales tool.
Ah-hah! This seemed like a reasonable proposition. PowerPoint, the default choice in sales presentation software, had been around for 30 years. Everyone hated it but there weren’t any good alternatives. Businesses use PowerPoint to sell. Could we sell StoryDesk to sales teams looking differentiate their pitch?
We signed a number of customers almost immediately, including an almond farmer in California and a major fashion house in New York city. As an aside, I cold called into the fashion brand and closed them after two meetings. It was very exciting.
Each of these customers wanted a presentation solution, but when we dug deeper, it turned out what they really wanted was an app for presenting their wares and taking an order (like at a trade show).
So we built one. A bad one – because, frankly, no one on our team had much in the way of product sales & ordering.
Within a few months, it became apparent that we’d better go a different route. Each of the clients we pursued wanted a custom integration with their ERP system. And all of the workflows were different. So it was a business I saw as nonstandard, hard to scale, and most importantly, it was totally outside of my comfort zone. Other apps in market offered a similar solution and did a better job at it. I now realize that the custom integrations the clients demanded represented an opportunity to charge for services atop of the SaaS offering. But I was committed to a turnkey offering, for better or worse.
So we killed the catalog product and returned to the initial hypothesis: a sales presentation tool that let a non-technical user upload content to the web and arrange it using an authoring tool we’d built. The content would publish to iPad, appearing within beautifully designed templates. A nonlinear and interactive presentation tool.
This version of the product was also bad. It was clunky and unreliable. But the solution it promised – a way to create interactive content that was many steps beyond PowerPoint – touched on a need. We signed 5-7 customers on this product within the first few months of 2012. We spent the remainder of 2012 trying to refine this version of the product (web to iPad) and get it to a point of stability. It never happened. The core architecture was flawed and the guy we had doing the web portion wasn’t strong enough to deliver what we needed. I was slow to acknowledge and act on this. Our product was crap but I somehow convinced myself it was acceptable. My development team kept telling me they could get the product up to snuff, but they underestimated the time and manpower required. Leads were streaming in. Even Microsoft came knocking – in the form of product managers and patent lawyers poking around the product. This is how I knew we were on to something.
By early 2013 the market for iPad presentation software was heating up. Still, we were having difficulty converting a lot of our leads to customers. Part of this was because the product we had in market wasn’t good enough. But part of it was because there were a lot of “tire kickers” who were intrigued by the offering but felt no urgency to buy.
We continued to improve the web-to-iPad experience but still couldn’t get it right. By April, I’d had enough. In order to get the product to where it needed to be, we needed to rebuild the product from the ground up – making it an end-to-end iPad product. Our iOS guy was very strong, and so it made sense to leverage this capability. I fired the web guy and we went all-in on iPad.
By September 2013 we went live with the new product. It was beautiful. Easy to use, stable, elegant – everything we’d wanted. We were seeing 20-50 signups a day from the app store. Apple promoted it as a best new app. But the product still lacked some of the necessary features to convert trials into sales. Chief among them was an easy way to pay.
Through the end of 2013 we saw our MRR grow from $7000/month to $15,000/month. This owed in part to adding an inside sales guy to close deals. By early 2014 things were really looking up. That said, we still saw a yawning gap between leaded and buyers. No one was in a hurry to buy.
We rounded $20,000 a month in MRR by Q1/2014. We were adding 1-2 customers a month. We added several critical product features like Analytics.
I attempted to raise a round of capital but had no success. Investors didn’t believe that StoryDesk could deliver a venture-scale return. Or they didn’t believe we were in a position of breakout market leadership. Or whatever. I solicited ~80 investors but couldn’t secure a lead. It was baffling. We were in a big space, with an awesome product, and had enjoyed breakout growth over the trailing 6 months.
In April, 2014, my now-wife gave birth to twins. One of our children was born with serious, life-long medical issues and spent a month in the NICU. The stress and exhaustion of this was immense. I didn’t take adequate care of my own physical and mental health.
By May, 2014 things with the business seemed to have plateaued. Our inside sales guy was working hard as ever, and lead flow was decent, but alas we couldn’t seem to catch a break. With burn at $50,000 a month, I had to cut costs. One dev left, and I laid off the sales guy in June. In retrospect, this was probably a mistake but I didn’t really have any good options.
Our existing base of customers – about 30 corporate clients – were mixed in their post-sales adoption. About 1/3 were loyal and continuous users; about 1/3 were occasional but still happy users; and the final 1/3 paid for the product and never used it (but still renewed!).
Product development continued even if sales stalled.
In July, 2014 we released a much sought after feature called Roundtable.
In August, 2014 we released a feature that matched our competitor’s core offering.
But none of this stuff seemed to get the needle to move.
With cash reserves running low I began to fundraise even more aggressively – this time from seed and angel investors. The capital markets still weren’t buying the story. My stress level – coupled with insomnia – contributed to what I now realize was burnout.
With a number of high-profile deals hanging in the balance, I decided to drip-fund the business from my own pocket. After two months of hustling we still couldn’t seem to get anything to close (clients or follow-on investors).
So in mid-November I laid off the team and approached my competitors for a sale.
We still had happy clients using the product; there were ~20-40 people signing up for it daily; inbound sales leads were coming in at a steady clip. Which is particularly frustrating, as it’s evidence of demand. But a trickle of demand won’t support a software business. It needs to gush. I considered continuing to fund the business with my own money but decided against it. Given my obligations, I couldn’t take on that sort of risk.
We got four offers for the business. I took the best one.
I made a number of errors in the rollout of this business. Chief among them was not having a specific, expensive, and broadly understood problem to solve at the outset. I shoehorned an insight into an opportunity. As a result, we wasted too much time and money at the beginning trying to get the product right. I delayed making the necessary product decisions until there was adequate data when instead I should have followed by own instincts. By the time we actually got to the product we wanted, it was too late. And, frankly, it didn’t matter anyhow – because the solution it offered didn’t appeal to a broad enough (big enough) potential market for venture backing. But if we’d had more runway then I suspect I could have flipped it into a “lifestyle” business and grown it slowly over time.
So what are the specific lessons / takeaways from this experience?
1) Clearly identify a critical and expensive problem at the outset and solve for it.
(This is lesson 1-100 with StoryDesk. All of the other lessons are derivative.)
101) Make sure your solution addresses an acute and urgent problem. Anything less and you’ll be stuck in the tepid hell of extended sales cycles.
102) Don’t bet on external funding. Though StoryDesk raised some external funding, I could never quite decide what trajectory we were going to take. Sometimes I thought we’d bootstrap and grow slowly; other times it seemed like raising and growing would make sense. If I’d committed to one vector we’d have been better off. Next time I will bootstrap to profitability and then carefully consider seeking external capital for expansion/growth.
103) As a corollary to #3, focus on cashflow above all. Neglecting this in favor of growth with the hope you’ll raise external financing is a sucker’s bet. Cashflow is predictable; the only thing predictable about venture investors is that they’re fickle and full of shit until they write a check, which they only do a few times a year.
104) Fuck “Lean Startup.” Build, Measure Learn is a truly idiotic strategy. It should be Learn, Build, Sell.
Though I made many mistakes in my execution of StoryDesk, I believe that we did a number of things well. I am immensely proud of the product we built, the team we assembled, the customers we had the opportunity to serve (at some point I’ll write a post about the things we did right), and the investors who supported us. I miss them all, especially the team. Maybe it’s something only founders can understand, but there’s something incredibly satisfying – and addicting – in creating from nothing a business where wonderful, creative people can gather to do good work. It’s further fulfilling to go out into the world and sell our work-product to companies who want it. To me, it’s the most meaningful work I can do. And I’m very much looking forward to getting back to it.