June 10, 2009

Worst case scenario

When you start a company it's common to write out a best, expected and worst case scenario analysis to see how many yachts you'll be able to buy if all goes well. And how bad it'll be if nothing goes according to plan. The worst case analysis is often just the best case with little or no sales. "The worst that could ever happen is that we create a product, and not a lot of people will buy it" This is often wildly optimisitc.

This is a true story involving theft, pregnancy, heart-attacks and ruined friendships of how bad a worst case scenarion can be. All names and traceable details have been left out to protect the innocent.

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Some years ago a friend of mine made a small social website that got him invited to a lot of parties. It was a great idea, and it was wildly popular among his peers. He had no intention of scaling it up and making it into a commercial company, so I asked him if I could use the idea and try to make a company out of it. He didn't mind, so I got started.

I wrote out a businessplan and a budget, and approached a designer I knew and asked whether he would be willing to do the design for a cut of the company. He agreed. We had a couple of meetings about the look and feel of the site, and he started working. Or so I thought. After a few weeks where nothing had happened I confronted him and asked whether he was motivated to do this. He excused himself with other projects, lack of motivation and a grudgy girlfriend, and agreed to prioritise it. A few weeks later there was still nothing. I had tried supporting him as well as I could but to no avail. In the end he conceeded that he probably wouldn't get it done, and we parted as friends. I talked to another designer I knew second-hand and he agreed to give it a shot. The same thing happened, and after a few weeks it was obvious that he wasn't going to follow through. Again we parted as friends, and still have beer sometimes.

Next I did something I'm normally against - I contacted an old friend I've known for more than ten years and asked whether he wanted to go into business with me, and do the design part of the site. He has an amazing talent when it comes to design and usability, and has a cunning strategic mind. But I'm extremely wary of mixing business and friendship, often one of them will suffer severely. We went ahead anyway, and he got down to some serious design business. Unfortunately he isn't good with code, so I agreed to learn HTML and CSS and do the front-end code. He delivered some amazing designs, and we picked one. We were getting a good feel for how the site should look, feel and function.

Next I contacted a programmer I knew from two previous upstarts where he's been absolutely amazing. Codes anything from assembler to PHP, delivers code that is virtually bug-free, does so on schedule, is a member of Mensa, and overall a great guy. I always liked him, and the feeling was mutual, so it was easy to get him on board. He thought that he could do the back-end code in a month if I did the front-end code. I'd been learning HTML and CSS and didn't find it too hard so I started doing the front-end and he started doing the back-end. After three weeks there was a break-in at his house. They stole his server, his laptop, and even his sofa. Everything was stripped. Including the closet where he kept his backups on DVD's. Everything was gone.

So we started over.

After a a few weeks where things progressed as planned the poor guy had a heart attack. We were almost done rewriting the whole thing. I obviously backed off, and gave him some slack thinking that he had more important things to deal with. We spoke on the phone, and agreed to wait a month and see how he was feeling. In that month I finished up the front-end and got pretty good at HTML and CSS in the process. I also had a lot of discussions with the designer, primarily related to how much to include in a version 1.0. My stance was to include as little as possible, his was that there was noway it would work without this and that feature.

I didn't want to initiate contact to the developer, thinking that he should take his time to get well before we started working again. When he called me he would be ready. That happened after two months. Having known him for a long time I could hear that he wasn't up to his good old self. But he wanted to go ahead, so we did. Things went a bit slower this time, and I didn't want to push. After a while he stopped answering my e-mails and didn't pick up his phone. I was torn between pushing for some code and thinking about the guys health and well-being which obviously wasn't good. Eventually I got an e-mail stating that he had to pull out due to personal reasons. I understood completely and wished him well. But I was back to square one.

I didn't know any other programmers that might want to do this, so I put up notices on the net to find potential partners that would want to program the website. I found a girl that seemed like a good match - smart, had gotten a lot of stuff done in her life, and very down-to-earth. We agreed to the terms, and she started working. After a while she called me up and told me she was pregnant, and that she would have to stop working on this as she wanted to devote time to her husband and future kids. I tried to persuade her, but to no avail.

So I put up another notice on the net looking for a partner. Eventually I found a guy that wanted to do it. After a few meetings I started noticing that his experience and knowledge wasn't quite what I was used to. I shrugged it off, and told myself that if he was motivated, which he was, he would be able to do it. Eventually he did get it done, but it took months, and I had to tell him how to structure his database, after having learnt how to do it myself.

During this time I saw my friend the designer becoming more and more grudging and angry. He was blaming me that things didn't work out as planned. I tried to calm the waters, but maybe I had oversold the promise of fame and fortune. We started falling out and not speaking as much as we used to. It was starting to cost me a friendship. And it was hard for me to keep up the optimistic facade after this cascade of problems.

But the programmer churned away, and one day we had a working site.

My plan for marketing was to contact a whole lot of powerusers of some of the popular sites in the same category and convince them to help us make this work. Normally I'm good at social engineering, and have a knack for turning people over to my ideas. However, all this trouble had taken its toll, and I was starting to feel it. I was the one that had to keep up morale, and constantly convince the developer and the designer that everything would work out. And now I also had to convince strangers to use the site. It was hard, and I was pretty alone.

But I carried on.

A few weeks after launch something terrible happened. The programmer had made a mistake when programming up against the phone carrier API, and one night a whole load of overtaxed text messages were sent to a large number of users of the site. One user received more than 100 messages. Each with a pricetag of $2. The first problem with this was that once an overtaxed textmessage is sent it can't be retracted, and only 50% of the money goes into our account. The rest is charges for the carrier. So this would cost us some money. The sceond and more serious problem was that we lost all credibility with our users. Since we relied on overtaxed textmessages I had all the phonenumbers of the involved users. I got a list from the developer and had to bear the heavy burden of calling each one of them, telling them that this was a mistake and that we would reimburse them the money. Some of them were nice, most were not. The site suffered severely.

Two things happened that definitively killed it. First, the sites I was using to draw in users blocked my profiles, and I had been too stupid to back up the information and contact info on the users I was talking to. So I couldn't contact a lot of them, and worse they had put mechanisms in place that prohibited me from making new profiles. So I had no way of contacting new users.

Second the income model we were using was made illegal because of a new law that was hurried through parlaiment due to issues unrelated to us. This was the definitive blow. With no near-term prospect of turnover in a country where it isn't easy to go out and get external investors aboard there's nothing more you can do.

Now that's a worst case scenario.

If you made it all the way to the end you must have found it interesting.

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6 Comments:

Anonymous Anonymous said...

3: Starting a project with no money and hoping to find people other than you who will work on it for free is never going to result in a successful business - of course people lose interest. That's life. They have bills to pay and we've all seen "great idea" websites come to squat a zillion times.

12:11 AM  
Blogger Max Tobiasen said...

Well, that's how startups work - some people get together and try to pull something off. If one of them loses interest along the way then he probably shouldn't be sing startups.

FIY, most successful startups start with a bunch of people working for free.

1:00 AM  
Blogger Alexander said...

You have lots of patience: I would forget about the project within 2 months, being in your shoes.

If the stuff goes wrong that much, I'd better start doing smth else.

1:17 AM  
Blogger showoff said...

Man, this is really a sad story, but good to have in mind. Thanks for sharing. I work in a web studio, in 7 years we made over 600 websites, and from begining till now our world and perspectives on business had changed many times.

1:41 AM  
Anonymous Anonymous said...

Max, you should learn how to either learn to program (10+ years) or pay the people you want to program.

You created your own problems and wasted your own time, and now want to create the sob story. The worst case scenario would be getting sued for the liability created because of your ineptness.

Your business plan didn't include startup costs?

6:06 AM  
Anonymous Phil Rae said...

This could have been simply avoided if you had actually paid for a designer/developer. We've got mouths to feed, mortgages to pay, grumpy girlfriends to keep happy (just to quote your initial designers problem of course). Therefore don't be surprised that a non-paid designer/developer will not feel motivated or highly prioritise your project.

Secondly; with the advent of free online backup storage such as Dropbox, et. al., there should be no excuse for losing work due to a robbery, even if backup DVDs are stolen.

My sympathy is with the guy who had a heart attack, that is just bad luck. However, if you'd decided to pay your programmers from the outset, that should have been avoided.

Sorry if I sound harsh, but that's business for you.

12:21 PM  

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