I Co-founded a Failed Y Combinator Startup — Here’s What I Learned Part I
StrattyX is a no-code strategy-creation tool for the stock and cryptocurrency market.
Now, the is has changed to was.
One of the greatest fears of any early-stage founder has become my reality. As I write this, I tell myself, keep breathing. I believe in embracing failure as a step forward, but failing somewhat publicly is not easy. Regardless, I believe it is worth sharing the lessons I learned so that others can benefit.
I’ve divided my thoughts into two main buckets: (1) the hard side of a startup (e.g., legal, team, etc.) and (2) the soft side of a startup (e.g., dealing with failure & stress, etc.).
Disclaimer: These thoughts and lessons are my own. I do not presume to know the perspective of other members of the StrattyX team. This article is also not to finger point but to share my own honest lessons and reflections from this exciting journey in the hopes that this will help other founders.
Make sure you and your co-founder(s) are passionate about the problem you are addressing and love the startup life
Building a startup is a roller coaster ride — with some of the highest highs and lowest lows you will ever experience. Surround yourself with a team that will stay with you for the entire ride. Heck, I probably spent more face time with my team than with my significant other.
Be sure to understand the reasons you and your co-founders choose the startup life.
Is it because of money? If so, startup life is not for you. The majority of startups fail. If you want money, go into banking.
Is it because you want to build something with a friend? That is a valid reason but shouldn’t be the only one.
Does each co-founder have a strong passion and dedication towards your customers? This is a must-have, especially if it will take a few pivots to get the right product-market-fit.
Does each co-founder acknowledge the risk in dedicating their life to a startup and actually enjoy the startup life? This is also a must-have for obvious reasons. You don’t want to build a startup with someone who will high-tail and run back to corporate when things go haywire.
Build Only for the Customer
StrattyX’s founding team was 100% women of color. My co-founder is African American, and I am Asian American. Since there are very few founders who look like us, we became a symbol of diversity for many of our peers and mentors. I’ve had countless people tell me how my work had inspired them and gave them hope that the Silicon Valley’s Boy’s Club was coming to an end. Don’t build a startup just for the sake of diversity.
Let your customers’ pain point be your guiding light. I built StrattyX for the sake of democratizing the investment playing field. Even so, telling others I had failed to live up to their expectations was still one of the most difficult things I have ever had to do.
Make sure the solution you’re building is a “need to have” and not a “nice to have.”
StrattyX was a nice supplement to already-existing trading platforms. It wasn’t a need-to-have.
The best way to determine if you are building a viable business is to ask, “Will my customers actually pay for this?” If there is an economic crisis, will people still pay for your product?
Make sure your market size is large enough to sustain a profitable business
Consider this equation:
# of customers [times] how much each customer will pay
Your target market could be made of a small number of people. But, if these people are willing to pay a lot for your product, your business will be fine. Examples are Superhuman and any B2B SaaS tool.
The amount each customer will pay is quite small (think about Netflix), how many customers will you need in order to break even and reach profitability? And how will you reach those customers?
Always, always put all founders on a 1-year cliff with a 4-year vesting schedule
Many changes will happen in a startup. One of the best ways to test each founder’s dedication to the business is to do the above. If a founder can’t make it past the first year or isn’t willing to stick it through for the first four, they are not a founder you should work with.
Don’t spend too much money on legal
You can find affordable legal help through platforms like Clerky or UpCounsel. Unless you are in an industry that requires it, don’t hire an established law firm unless they are willing to offer you a deferred payment system. In the early days, you should spend your money talking with customers and building the product, not paying off legal.
“Fake” traction isn’t real
Our application allowed users to create trading strategies based on Tweets and news. You can imagine the hype “trading on Trump’s tweets” would have, especially given JP Morgan’s Volfefe Index and articles like this. This hype carried our team to the Grace Hopper Conference and TechCrunch stage.
It took time for me to realize that people became fans of the concept but were not early adopters of the product. As you build a company, the only metrics that matter are derived from the actual customers, whether it be monthly active users, revenue, or something else. Don’t get distracted from this.
Always question what you hear and see
Mentor and investor whiplash is real. Especially if you are young. In the process of building a startup, you will be inundated with feedback. Your customers may also not know how to best vocalize their pain points (I highly recommend this book!). Take everything you hear with a grain of salt. This book is also a great resource.
Building a startup is an art — there is no single right way to make the next unicorn. Figure out what tools you yourself have and what would give you the highest ROI. Then pursue that with everything you have.
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Part II is here. ~ Please subscribe and give this article a clap if you found it useful!