Startup Mistakes that almost put Slidebean out of business
If you're new to this channel, my name is Caya. I am the CEO of a company called Slidebean. Slidebean is my third startup. The other two failed and left me with a sad face and a few thousand dollars in debt. Today I am going to talk about the mistakes I made, the hard lessons I had to learn, and how they translated into the success of this new company. This is startup mistakes. I'll be talking about three specific mistakes in this video,
On my first company, Outsourcing the development On my second company, the main issue was, we had undefined terms that led me to owe over $15,000 in credit card debt. Finally, on Slidebean, business model iterations that almost ran the company out of business. Mistake #1: back in 2010, I decided to start a classified site. Bear with me here, I hail from Costa Rica, and the only classified sites back then were pretty awful.
I started this company alongside two co-workers, and it was, honestly, my first entrepreneurial experience. If you've seen any of our videos at Slidebean, you might figure that I'm a savvy guy in this whole startup stuff. Well, in 2010, I had no idea what a 'startup' was. I really had never heard the term before. Anyway, we figured we'd make THE COOLEST classifieds site. The core differentiator was an extremely
Easy UX, which was undoubtedly unavailable in any of the other competitors. There were two very significant problems with this business, that I can see now. It was solving a local issue, that was already addressed in other parts of the world. So the market size was really small. Our supposed core differentiator, UX, was not a skill we had in the team. I don't like talking about this example, because we made every single mistake in the book.
We hired an overseas guy to do a first MVP for about $1,000. Luckily, we figured things weren't going good about halfway through the process, and we pulled the plug. I did learn a few handy things in this process. I learned how to host a server, how to upload files via FTP, how to set up email accounts for the team. They don't teach any of that stuff in school. Alright, second company. My second company was a mobile gaming platform
Called Pota-Toss. This was 2011. We came up with the concept of doing a location-based gaming platform. Wherever you were playing, you would get a game level based on your city. This may sound boring now, but back in 2011, mobile gaming was a wide-open market. The concept was cool and sexy. The characters were fun (I did those myself, thank you very much). We raised a Kickstarter campaign. We got accepted into a relevant accelerator.
Got covered by Techcrunch- so the promise was great! Funny story: when the guy from Techcrunch, Josh, called me, I had never heard of Techcrunch before and I'm still very much ashamed of how that conversation went. This was my crash course on entrepreneurship. Living in NY, interacting with fellow companies, leaving the tiny bubble, fish tank that is Costa Rica- this is what truly expanded my mind into the whole startup world. It was an absolutely life-changing, life-defining year for me.
Another funny side-note: Nas, from Nas Daily, was also in that accelerator program and that's how I met him. We also did a lot of things right. We did amazing PR work. We got people talking about it. We turned our Kickstarter backers into evangelists. We were lean about the development and did the right amount of tests before launching the product. Even the Kickstarter campaign was the first test of whether people would be interested in something like this. Why did the company fail? Because we were too naive. We figured that our backstory was so
Great, it was going to be enough to raise money. It wasn't. Unless you are a gaming industry mastermind, you are not going to raise money unless you show incredible stickiness and monthly active user growth in your game. We spent the summer pitching investors and getting no for an answer. An insane amount of pitch practice, for sure! The time spent adjusting these pitch decks sparked the concept for Slidebean! – so not a waste of time, by any means, but mistakes were made.
We got carried away with the possibilities of raising money. By the time we launched the product, we were already broke! Not a lot of people know this story, but I crashed the couch of the accelerator office for about a week because my lease had expired and I hadn't found a new apartment that I could afford. Anyway… running out of money was the biggest mistake. More importantly, not agreeing on bootstrapping terms or when to stop.
I funded the company out of my credit cards for about 4 or 5 months. That meant my expenses and company expenses. At some point, I had maxed out three credit cards with over $15,000 in debt, which might not sound like a lot to you, but remember I'm from Costa Rica. We did all of this assuming that a round of funding would eventually come in. Not raising money wasn't really a possibility in our minds. Again, we were too naive. I made a video on the necessary founder agreements you should
Have in place as you get started with your business and a lot of those learnings I got from that experience. Crawling out of a failed startup and crippling debt is one of my most significant achievements- and I managed to do that, really, thanks to the success of Slidebean. There are a lot of lose/win stories in Slidebean history, but the most relevant one was our business model experiments back in 2017.
We already made a video about that, so here is a younger me talking about it. These are our actual numbers for the period between mid-2016 and mid-2017. We had just closed around $400K in funding and we started scaling. We hired a bigger team, scaled our office and launched more aggressive marketing campaigns. Our revenue for July 2016 was $50K a month, and our subscriptions were growing double digits per month. Perfect metrics to raise money, but with the evident pressure of being able to maintain or increase that monthly growth after closing a round.
And so we did. Before raising this follow up round, we kept our monthly burn below $10,000. We had money in the bank from our first convertible note, which allowed us to burn some cash every month as we invested in scaling the business. This is how our team looked before July 2016. And after we scaled, this is how our team looked. With the extra money, we set our goal burn rate at $30K/mo, which we could comfortably sustain for 12 months or so.
With the money we had just raised. By the end of 2016, our subscriptions had continued to grow at 10% MoM. and as revenue scaled we scaled our expenses, to stay around that $30K burn rate But a problem we had put off came to bite us in the ass. Churn is cancer for a startup. In 2016 the churn rate for our product was 15%. That means every month we lost 15% of our customers.
Still, our marketing efforts had been so successful that we were adding 25% of new customers every month, which netted to that 10% growth. Adding +25% of customers is a fantastic metric. But every month it gets harder and more expensive. We couldn't keep up. Churn was an issue that we knew about, but we had put off for too long. We decided to change our business model in an effort to stop people from canceling.
Back then our presentation software was $19/mo for the base plan and $29/mo for the premium plan. Around 3% of our signups were subscribing to a plan. They were paying. One in three paid customers purchased a monthly plan and canceled within that first month. Their cancellation reason: we like the product, but we don't need it anymore. At least not enough to justify a monthly subscription. To tackle that we decided to change our model to: A pay per presentation option, for $25.
You could create as many presentations as you wanted, but to export/download/share them, you'd have to unlock it. This was meant to target occasional presenters. A subscription model priced at $49/mo. The higher pricing was supposed to be a barrier of entry. We only wanted people who really needed presentations often. And therefore would justify a $49 a month subscription. I still think the logic was solid, but this failed drastically.
We changed subscription, predictable revenue for money we'd need to chase each month. The subscribers would still cancel out quickly because the cost was too steep. With revenue stagnant and the larger team, we were seen a deadline closer and closer together, so our only choice was to let some people go. It was probably the hardest time we had at the management team. We are a startup, and when we hire someone, we are trusting them as much as they are trusting us to make the right decisions for the business.
We had made the wrong decision, and this cost people their jobs. It's the worst kind of guilt and probably the worst part of being a founder. With our cash reserves shrinking, we pivoted the business model again. This time to more affordable plans. Base plan at $12/mo, premium plan at $19/mo. This was still more expensive than your PowerPoint and your Google Slides, but $5/mo is a price point where we absolutely could not compete. This kind of worked. Retention increased. The NPS score, a metric relating to the satisfaction of your customers,
Started to improve as well as people became less sensitive to the pricing. Churn hit single digits for the first time in months if not years, but this was still not enough. A churn rate of 8% means that the average customer will stay with the platform for about 12 months. At $12/mo, that's a lifetime value of $144. Better, but not where we wanted to be. During this time we started considering a freemium plan. Some features free, some paid. We had tried this before, but we had gotten rid of freemium plans years ago to become a premium-only product.
Freemium potentially means a lot more people using the platform, which translates to virality and more organic growth as more people get exposed to our presentations. Our first bet was on freemium- so we decided to launch it in one single country to see what happened. Now, what happened? Paying customers canceled when they found out the features they used were now available for free. There was a wave of new sign-ups that activated their accounts, but few upgraded to the paid version.
The worst part was our WAU or MAU metric, which was supposed to increase. It was static. Nothing. If there's been one right decision in our history, was pivoting out of Freemium when we did. Maybe in 2016. Other competitors in the presentation space have failed to scale because of this- a couple of startups have gone out of business, which is inevitably sad for us, in the end, they are like-minded trying to solve the same problem and couldn't figure this out on time We didn't choose to become a profitable company.
We had to become one or go out of business. We had our chance at scaling budget, but our experiments didn't work. As we changed the business model and scaled the team down, we landed on a very delicate balance of $70K or so a month in revenue and around $65K in operation costs. Fast forward a year from that, our company is on track to a $2MM ARR, with a bigger team and a much brighter future ahead. I've said this before, but a startup is a race against running out of money.
So, don't run out of money. Hope you found those tips useful. If you want to try our platform we always add a promo code. The first 25 people to sign up with the link in the description, will get 3 months free on any of our plans. If you like our channel, hit that Subscribe button, hit that comment and we'll see you next week.