In my last post I urged all three of my readers to be more honest in how they talk about their failures in entrepreneurship. I have been quite frank in the past on this, but here's another for the record:
In 2011 I went to consult a great little company with a huge vision, www.alltegra.com, where I was privileged to later serve as CEO. Alltegra was a gutsy upstart with a huge vision. Its founding team were passionately driven to roll up an underserved market where both consumers and vendors were (and still are) horrendously disconnected: home maintenance. Except, they had so many ideas, they were struggling to execute.
The first priority was to clarify what we were trying to achieve. What type of company were we, and what was the pain we were really addressing? It was clear all of us hated the lack of relationship between homeowners and home maintenance professionals. It's a gap that doesn't need to be there and makes both sides suffer financially and emotionally. In my opinion, it's one of the most broken relationships of any industry. Could we remove it with a new approach: with new technology and a new business model?
The next step was to simplify the product to something that could be tested, and use lean methodologies to isolate and validate our assumptions. The product was an convoluted mess. We used all the feedback we had to date and some gut assumptions to create a much more simple product, which we then took to market in the most cost-effective way possible to test.
As we started to gain traction we needed to build the team. As CEO, once the strategy was taking root, talent and fundraising consumed me. In this stage I learned valuable lessons about hiring the right person for the job in terms of culture and approach. Stuff I was taught in business school took on tangible meaning in the real world: Hard skills, basic competence, are the first filter for any new hire, but the real test was whether the individual could self-motivate and maintain a flexible, passionate drive for execution according to our vision. I found that most people love the idea of working for a startup, but few understand the reality and have the fortitude to push the boundaries without a safety net. We burned through more people than we should have.
Next step was to grow exponentially by using the lessons we had learned to date to scale what we had nailed....except this is where the wheels came off the bus.
I closed the business after 18 months. Consumer tests, although broadly positive, also showed that our cost of acquisition was too high for our available funding. In other words, it was too expensive to sign people up and we didn't have enough runway to get to the next level.
This could have been for many reasons, but I believe this was caused by the kind of team that we hired—basically we ended up with too many operations and product people and not enough customer people. What this meant was that as we grew work went into swelling the product features rather than pushing it out and refining. Complexity magnified as more and more great ideas were added that the client would probably want, while fewer and fewer were cut or refined through direct interaction and field testing. The sale became more and more complicated, required more time, and cost more money.
It was clear we were heading in the wrong direction and we didn’t have the runway with the current team to turn it around, so I pulled the plug. That was the hardest call of all. But it was the right call.