Episode 3 - Raising £750k for a SaaS that had no product/market fit

Seed to Success

Lessons on the importance of passion, market validation and how a good network can actually work against you.

Episode overview

In this episode of Seed to Success, Alastair chats to budding entrepreneur Andrew Jordan who reflects on his start-up journey as a solo founder. His vision for Connect4, a meeting management platform, stemmed from his experience in management reporting and business analytics, although he soon realised there was a lack of passion in his mission.

From the importance of embracing failure to navigating challenges in product development and fundraising, Andrew's experience offers a raw and candid look at the realities of starting a tech business and highlights the emotional and financial commitment often made by founders.

If you’re an aspiring entrepreneur eager for insights into the complexities of start-up life and the reality of all the setbacks – this one’s for you! Andrew’s honesty and openness make this a must listen for those looking to implement valuable lessons for their own start-up.

00:01:06 (Alastair)

Welcome to another episode of Seed to Success, and in this episode we welcome Andrew Jordan, founder of Connect 4, to the show. Andrew Jordan, great to have you on here.

00:01:15 (Andrew)

Thanks, Alastair. Good to be here.

00:01:17 (Alastair)

I'm really excited in this episode because I'm hoping we unpack loads of lessons learned, because I think, in your own admission, Connect 4 never got to where you wanted it to get to. So in your eyes, and maybe this is me putting words in your mouth, but it was, from a product sense, it was a failure. Maybe in terms of life and lessons, it was quite the opposite. And of course, the product's still going. But before we get into all that, can you give us an elevator pitch on what exactly Connect 4 is, was or still does?

00:01:49 (Andrew)

Yeah, absolutely. Past, present, future tenses. Well, Connect 4 was… the vision of Connect 4 was to be a meeting management platform. So we were trying to turn meetings into actionable events because we felt the hypothesis was that too many meetings, and we focused on accountants, were pointless. They weren't coming with actionable outcomes. And later on in our journey, we really focused on client meetings. So our elevator pitch, so to speak, was to make meetings actionable.

00:02:19 (Alastair)

Make meetings actionable. And I think we can all agree that meetings do suck time, right? They can be very wasteful. So, great in principle, in terms of the vision or the elevator pitch, but take us back to how you started this, because you were previously at a tech company, Fatho. What enticed you to make the jump from that which you'd been there for a number of years, probably quite early stage in the UK when you joined them I think, to being a founder of a tech business and having all that pressure on your shoulders? And also never, I don't think, ever running or building technology before.

00:02:56 (Andrew)

Yeah, good question. I think so, yeah. I was working at Fathom, which was a management reporting business analytics platform, selling into accountants, and I was living out in Australia prior to working for them. And I set up the UK operations and they're a B2B SaaS company and they were doing very well and we did very well in the UK with Fathom, built a team out and things just… we just hit targets month after month.

00:03:21 (Alastair)

Were you the first person in the UK then?

00:03:23 (Andrew)

Yeah, so I set up the UK operations and I went back to Australia.

00:03:26 (Alastair)

How many did you get it to in the UK by the time you left?

00:03:31 (Andrew)

So we had got to about £2million ARR on the UK ops, and maybe slightly under at the point I was leaving and they were really... I got on with the founders really well there. So, Dan, Dave and Jeff, who are based out of Brisbane, knew them well and I spent a bit of time working with them in Australia and they were pretty encouraging with me going out on my own, so they allowed me to go part time.

00:03:53 (Alastair)

So was this an itch you had for a while before you went part time then?

00:03:58 (Andrew)

Yeah, I always wanted to start my own thing. I think also when you're slightly entrepreneurial and you're working in a tech company which is HQ’d in another country, gets frustrating because you're a little bit away from the action. So maybe some of the listeners kind of can understand that when you're expanding overseas, you're trying to bring on entrepreneurial people, but then they're away from the office viable, the product decision…

00:04:25 (Alastair)

It's also really difficult to bring entrepreneurial people on, which is what you want in the spirit of the business, to identify new areas of opportunity. But actually, if they're so entrepreneurial, they want to go off and do their own thing as well.

00:04:37 (Andrew)

And I think a lot of founders that I know accept that. Like, if you've got someone launching in other countries, like a new country or an expansion manager, you kind of accept they're only going to be with you two, three years because, yeah, it's their nature and they might absolutely crush it. We had someone else, at Fathom, who set up in the US, who did a great job. She was there for sort of four years and she went off and did her own thing. And likewise, so did I. So I kind of got to a point in 2020 where I realised now was the time to do my own thing. I thought I had a solid hypothesis. Fathom, the founders they were open to me doing this part time and testing things. Financially secure by this point in my career was a qualified accountant, had earned a bit of money. I was like, now's the time. So that's how it started.

00:06:19 (Alastair)

Okay, all right. And obviously, 2020 was the big year of change in the world. What sort of impact did that have on either doing it or making it harder? Or did that actually prove that there was a huge market because you saw all these other kind of meeting tools or video tools popping up?

00:06:40 (Andrew)

Yeah, I had a couple of, couple of effects. In terms of me wanting to start a company, it was kind of the impetus for me to get that going. I had started a few months prior, but my wife's a respiratory doctor and she was working every hour of the day in the hospital, so I had my evenings free and you couldn't go out and do anything. So I was like, right, now's the time. I'll start in the evenings. So that's how everything kicked off. I was working Fathom in the day, on Connect 4 in the evenings, and then later on went part time. In terms of what did it mean for the hypothesis or kind of getting product market fit feels, what had changed in the market? It did feel like there was going to be a gear change. I think that hasn't actually turned out to be massively true for the category, but we'll come on to that later. But it did mean that we did get conversations early on because there were knee jerk reactions to how are we going to talk to our clients digitally? How are we going to interact with our team digitally in a better way? So it did pique interest early on for us and helped with fundraising as well.

00:07:38 (Alastair)

So you're a non technical founder, yes. Your background, you say you're chartered accountant. Had you ever picked up or written a piece of code in your life at that point?

00:07:47 (Andrew)

No, I hadn't coded at all. I was pretty tight with product decisions at Fathom in the leadership team there, but never coding.

00:07:55 (Alastair)

Okay, so you had experience of running the product side of things or inputting into the product side of things. How did you go about starting it then? So you're working part time. What was the first step for you to either market research, speak to people or validate the idea or get into a bit of code?

00:08:17 (Andrew)

Yeah, good question. So validating the idea, I felt my beachhead market was going to be accountants and I was selling into them already. So I had a huge kind of network through working at Fathom of trust…

00:08:29 (Alastair)

Trusted, credible?

00:08:30 (Andrew)

Yeah, exactly. So potential customer base… and I'd worked a bit in the US, South Africa, Australia. So I had this network of accounting firm owners that I could tap into. So I had that. And so I kind of felt like my market research was done in my previous role, paid job. So that was helpful in terms of what did I do…

00:08:49 (Alastair)

So market research was done in a previous role or you had a good trusted channel to call upon to do the market research with?

00:08:57 (Andrew)

They were kind of interlinked. So going deep into kind of the accounting firm world now, but there's this shift from kind of… generic shift that's going where you want to talk to your clients more and move away from the compliance based work only. And so there was a trend going in the accounting space and I knew that trend quite well from the proposition with Fathom. And actually the next logical step that was coming out from all these conversations I was having around Fathom was actually we need to talk to our clients more and we need to do that in a structured way and we need more members of our team to do it, not just the business owner or partner. There was a pain point there that I felt, and I think that pain point probably still exists, but, yeah. So that's how I kind of felt like I was testing the hypothesis in a different role but serving the same market that I wanted to sell to.

00:09:49 (Alastair)

Yeah, okay. So at a macro level, there's a pain point and there's a direction of travel, there's a trend, but maybe correct me otherwise… but maybe not market research specifically on, hey, I'm coming up with this product design and what's the feedback on this specific product concept?

00:10:11 (Andrew)

Yeah, and I think the product concept evolved quite a lot, quite quickly and I think a lot of founders find that. I think no, I was probably well… I went part time so then at that point I already had a developer working with me which was outsourced. So I did start testing before I fully let go of Fathom.

00:10:31 (Alastair)

So one foot in, one foot out?

00:10:32 (Andrew)

Completely, completely.

00:10:33 (Alastair)

Which actually is quite difficult, I think. And you obviously made the switch, made the kind of the full time switch at some point, but it's quite difficult to be kind of half in, half out I think, isn't it? Because you're never really fully convicted because actually you've got a fallback.

00:10:49 (Andrew)

Yeah. Yes and no. Like I was financially committed, I had spent, I don't know at this point maybe £40k into the company and it was something I still really wanted to do. And Fathom… I'd built the setup now for the UK and I had an amazing team at Fathom in the UK. Kind of wasn't needed, so I got to a point where I'd done the graft at Fathom, getting it up and running and actually it was great. I got to a point where I wasn't really needed for the cog to turn.

00:11:20 (Alastair)

So I heard you, you invested £40k. Was that yours?

00:11:25 (Andrew)

Yeah yeah, I ended up investing quite a bit more..

00:11:27 (Alastair)

Of your own cash?

00:11:28 (Andrew)

Yeah, of my capital yeah. So I invested £100k of my own money in the end, which was like for me that was fine. And I think because I… you know I'd got to at this point I was late twenties and I'd had some reasonably well paying roles and had a house, got married. Everything was kind of stable that I was able to do that basically.

00:11:51 (Alastair)

Yeah man, that's a lot of money to invest in your own project. You got a lot of conviction to do that so hats off to you to do that obviously because we'll get into what transpired later. But that is full conviction. I guess that also brings other investors along the journey with you if you're fully committed. So initially £40k. I guess you're paying a developer with that 40k? I'm not sure kind of what the costs you might have had but where'd it go from there in terms of kind of support, hiring and product development?

00:12:23 (Andrew)

Yeah. So we started with outsource so a local technology consultancy firm, so it was outsourced. So they were building the prototype. That worked for a while, then I hired a junior developer and then I was working with a freelance designer and a freelance marketer. That designer ended up coming on as an employee. So things started rolling quite quickly then. And then probably it was about that point, so about two people, three people, where we got a first paying customer. So I'd probably invested, maybe I'd spent rather than invested £25k before we had a paying customer. So it wasn't like I was throwing good money after bad, like I was trying to hit milestones, yeah.

00:13:05 (Alastair)

I mean, first paying customer is a high five moment, right? In any business, like somebody's actually paying for something that I have come up with in my mind and manifested into reality through developers and conversations and kind of pitching it. And so what sort of traction did you have after that? And the paying customer, was it a family member or as in someone really close or kind of, was this kind of arm's length actually someone's using the product because it resolves the pain point that they have.

00:13:38 (Andrew)

Yeah, funny story. Our first customer…. so our approach was to start with the UK customer base, get to know the UK customer. But our first customer was from Arizona and a bookkeeping practice in Arizona that came across us online and a guy called a guy in Arizona who…

00:13:59 (Alastair)

An early adopter.

00:14:00 (Andrew)

Very early adopter. And he was a very interesting character. And he signed up to an annual plan through our website. We got this ping up in Slack saying someone's just taken out an annual plan and we're like, no, they haven't…

00:14:12 (Alastair)

Oh we got an error here.

00:14:13 (Andrew)

Yeah, and then it turned out they had, so we had that validation and we had quite a few…

00:14:17 (Alastair)

How did he come across you?

00:14:21 (Andrew)

I think he was probably through… what was the connection with him? It was somewhere in the Xero ecosystem. So presumably I'd done a webinar or a piece of content that he'd read.

00:14:35 (Alastair)

But still a high five moment. First paying customer, that's great. And how many months into either you starting or going… were you full time at this point?

00:14:43 (Andrew)

No, I wasn't full time. Part time still, yeah. So this was… I think I incorporated the company in March. This was late September.

00:14:53 (Alastair)

Post incorporation?

00:14:55 (Andrew)

Yeah, so it was about five, six months, whatever.

00:14:57 (Alastair)

Okay, cool. So where does it go from there? So first paying customer, you've got a few people on, you spent £25 k. I guess at that point, are you going, okay, a few more customers now go full time?

00:15:08 (Andrew)

Yeah, basically. And this was kind of almost one of the traps, I suppose. Things went really well early on and…

00:15:16 (Alastair)

A victim of your own success?

00:15:19 (Andrew)

Well, sort of. I think usage was tracking upwards, product development was going reasonably well. We did have one real problem that kept throwing up bugs. That drained a lot of our developer time over… certainly going into the future it did, but things were going quite well and we added more customers. We set up a seed partner plan and a seed partner light plan. So we were just trying to get usage through the platform and that worked. So when we went to raise an angel round in January, we did an ASA, advanced subscription agreement, it wasn't difficult to fill because metrics were good.

00:15:58 (Alastair)

Can you just explain ASA for people that might not?

00:16:01 (Andrew)

Yeah, if you're in the US or something, it's a safe note. If you're in the UK, it's an ASA. Basically, it's a promise that if you reach certain criteria that you will, well, you take the money at that point and then they will get shares at a later point. In our instance, we gave, I think it was a 10% discount on the round that you raise within six months.

00:16:27 (Alastair)

So it kicks a lot of the paperwork and valuation down the, down the line?

00:16:31 (Andrew)

It does, it can be great. But don't forget, seriously ramps the pressure up on you raising that next round, yeah.

00:16:38 (Alastair)

Yeah, yeah. Okay, and so at that point you went out, you raised how much?

00:16:41 (Andrew)

So that was, I think I was going to do like £100k, ended up £160k.

00:16:46 (Alastair)

Yep, and how many angels did you raise that across?

00:16:49 (Andrew)

Maybe 10.

00:16:50 (Alastair)

10 angels. And is that your only funding round or did you do one after?

00:16:55 (Andrew)

No, so that £150k we took in January and then we took about another £400k that summer. And then we did one final last ditch of 100 and a bit from some investors and then, no.

00:17:15 (Alastair)

So, let's go through the money that you raised in a couple of different tranches there under the ASA. And I guess you're also putting more money in via director loan… was your money director loan or was your money…

00:17:29 (Andrew)

It was genuine share capital. I kind of did that for a few reasons. One, it just gives confidence to investors, shows you're committed, shows you're engaged. And I believed in it and I think it was the easiest way to keep the cap table clean. Easiest way, if we ever wanted to raise institutional funding, that debt would get converted anyway. So that was my premise with it.

00:17:50 (Alastair)

Yeah, okay. So by this point you'd put in £100k?

00:17:53 (Andrew)


00:17:56 (Alastair)

If you don't mind asking, how did your wife feel about that?

00:18:00 (Andrew)

Have to ask her. She was okay with it. I think that it made a lot of sense for me to like, if I'm in, I'm in. And I think being financially in was part of that. So yeah, that's what happened. And I think I did it in tranches. It wasn't more money than I could lose, we still were living comfortably and I was still being paid at Fathom on a very good salary up until the December, and then the raise happened in Jan and then I took a salary. So yeah, it was a lot of capital to go in and there's not a lot of investor protection as well on loss relief for investors… anyway.

00:18:44 (Alastair)

So probably about 700, 750, if my rough math is correct, is what you raised over that period. And so I'm assuming your burn rate ramped up and then ramped down again when you were kind of making some of the costs and monitoring cash burn, what did you get to the peak? And kind of because the time period we're talking about isn't that long, is it? So what did your burn get up to?

00:19:07 (Andrew)

Burn was high, so we were going at it hard on the thinking we were going to raise VC money. And so I had a very experienced CTO who joined as a co-founder in Feb, January time actually. And he cost a lot of money, but I thought that made sense because.

00:19:25 (Alastair)

He was pure, pure salary. No, kind of…

00:19:27 (Andrew)

So he had… there were options, but I always was of the view, if this is a success, salary doesn't best… it's much better to do salary than share options also meant that decision making could happen a lot quicker. So that's what happened. And then I had a third co-founder, Sarah, who was leading on the operations side, and she again, very experienced previous CRO, and Ben who joined, he was previous chief product officer at Cognizant. So two very capable co founders, and so that ramped burn…

00:20:03 (Alastair)

So you got… at this point you've got the vision and understanding the market, which is you. You've got operations, which is Sarah. And you've got product and tech, which was Ben. And so you've got a few bases covered there in terms of the leadership team, but it was costing you?

00:20:23 (Andrew)

Yeah, it was costing us, and they weren't the only people in the business. We had others as well. We had a guy leading on product design, we had a head of sales. Later on we had a number of developers, we were outsourcing some development. So yeah our burn, at this point was… trying to remember now, but it was around £35k a month, £40k a month, which for an early stage startup with like £4K MRR is high.

00:20:49 (Alastair)

How… being a former or once you charted accountant, you're always charted accountant, right? But being a chartered accountant, normally they're risk averse. How did that sit with you and how well did you sleep at night from knowing that, hey, we got £35k going out and we got £4k coming in?

00:21:10 (Andrew)

Well, I think it depends if you're trying to run a startup or a lifestyle business, and I think for me I was trying to run a startup, and you can either run something as a lifestyle business and say, right, this is going to take us five years to get anywhere, and that's fine, that's the decision you can make, or you can run it like a startup. And those sort of burn rates are very common for startups, particularly many startups are loss making for a number of years.

00:21:38 (Alastair)

I see some of our clients, that ten x that.

00:21:41 (Andrew)

Well, that's it, that’s it.

00:21:42 (Alastair)

But nonetheless, if it's on your shoulders, it's still one of those things that you've got to be super mindful of, especially when you're in for six figures as well.

00:21:52 (Andrew)

Yeah, it's scary, it's scary. And I think that clock starts, you're always thinking about that cash burn clock, what's the runway left. And there's a lot of assumptions you make, and this is one thing that really hurt us at the end. You're kind of assuming the market's going to stay as it is, and that didn't happen in the last two years, you know the market's gone very different in terms of fundraising. I know some, lots of friends who've run into trouble with this in the last twelve months, that you kind of have a runway and a thesis based on market conditions that are going to stay the same, but then they haven't, so it's difficult.

00:22:27 (Alastair)

I'm assuming you're alluding to investment market conditions, but what about market conditions relating to the product itself? How did they evolve? Because I guess kind of ultimately, well, maybe more in your words, rather than me putting words in your mouth, what happened? So you burned this cash, obviously you didn't raise VC money in the end, so you got the £750k from angels. So what ultimately happened, which was the demise of the kind of the startup, the idea?

00:23:01 (Andrew)

Well, ultimately the reason for me to sell Connect 4 was a choice. We could have continued, we were in a position to raise again and we could have. I started to lose confidence in our hypothesis, didn't have the energy to pivot again, basically. And I think that's often underestimated on the startup journey. If there's other founders listening, you got to be so on board of your mission that even in the dark times you want to go again at it. And so I just wasn't, I think I got to a point where I'm like, I'm really bored of talking to accountants. I'm really bored of…

00:23:39 (Alastair)

I understand that.

00:23:40 (Andrew)

Yeah, exactly here we go. Funnily enough, I'm still doing it now. But anyway, yeah, so what was the demise? We weren't hitting product metrics. We didn't let go of some technical decisions quick enough. And then basically the big players were starting to build the functionality themselves, so there was a need... It still sounds sensible, turning meetings into actions, it sounds sensible, but the reality is the big players, the Microsoft's, the Zoom and the Zap store are doing that now. So yeah, the ability for a small player to kind of get into that space is really hard.

00:24:21 (Alastair)

So you ran out of energy or excitement or passion? All of the above? Was it for the product or was it for the fact that you were carrying it all yourself or did you think it was going to be easier? I’d quite like to get inside.

00:24:39 (Andrew)

I didn't think it was going to be easier… I think I thought once the curve starts going up, it doesn't stop going up. Like in terms of MRR growth, new logos. I felt like you started on that. So we got to 25 customers pretty quickly and I felt, oh, we've done it then, haven't we? We just keep going.

00:25:06 (Alastair)

What was the MRR for those 20?

00:25:08 (Andrew)

So it still wasn't high. So probably around £5k at that point, maybe slightly more, probably about eight or something. So it wasn't high and we weren't obviously anywhere near breaking even, but you could see the trend going up. And I think we got to about April or May of the following year, and then churn started to come in.

00:25:28 (Alastair)

Because they're on annual subscriptions, were they?

00:25:30 (Andrew)

No, some were on annual, some were on monthly. The churn came in because we couldn't resolve some bugs and actually we weren't as sticky as we thought and we were really struggling with adoption. So the problems started coming in. And so when those problems started coming in, then my strategy started changing basically, and that moved me into a new phase of thinking, all right, well, I'm pretty invested in this. Got a bunch of investors who I get on well with, want them to get a good outcome. I want to now try and move towards break even profitability and looking for a trade sale, and so that was the next phase.

00:26:01 (Alastair)

Yeah. The investors that you had… right now it's pretty difficult to get investment or there's a tightening or a reflection period maybe from VCs right. Tell me about how easy or hard it was to get that, I guess what was 5, 600k across a couple of dozen of investors? Tell me a little bit about that story and how you went about that and painting the picture of, I guess, the vision of this product.

00:26:32 (Andrew)

I think, yeah, this story is interesting because I've got some friends kind of at the early stage of this journey who are really struggling. And I think I had a network from working at Fathom that helped for sure. And so I could like for example, Guy Pearson, who's the founder at Ignition, was an early investor and having someone like that investing early, you get people follow just because it's him. And he was incredibly helpful just as a friend and also and as an investor. So getting one person like that can really help. And so, yeah, him investing x resulted in y, z and everything else kind of coming in. So that helped. We also pitched to, for example, angel groups like the Cambridge Angels, and I said that helped, that brought another channel in.

00:27:23 (Alastair)

Because you are based in Cambridge?

00:27:24 (Andrew)

Yeah, I live in Cambridge yeah. So I'm not saying it was easy, but it wasn't too difficult to get those angels investment in, much harder to get VC money in for something like us, which was sort of looking at a vertical. VCs don't like it when you go vertical too early because they don't think the market's big enough.

00:27:46 (Alastair)

But interestingly, Guy’s product or brand was in a vertical a few years back and is now, I'm not going to say dominated, but very well known in that vertical, and then he spread across other verticals, right? And what was it that Guy saw on the product… or any of the other angels, what was it they saw in the product? I guess kind of where I'm trying to come from here is, did they invest in you? And how much due diligence did they do on the product versus… and I don't know the average size here, but…

00:28:19 (Andrew)

Early angels don't do due diligence like due diligence, they don't expect to. There was one, maybe a couple, one particularly who wanted to do some, and that was fine, did it with him, but…

00:28:30 (Alastair)

Sizeable ticket?

00:28:32 (Andrew)

No, he wanted to do £50k and I said… this was in the first one, I brought him down to 20.

00:28:38 (Alastair)

Because you didn't want the concentration with that one angel?

00:28:44 (Andrew)

Yeah. So this individual, I don't think he’d mind me saying. He'd exited to Sage, and he therefore had some cash. A lot of this is the story of a lot of my angels had exited and had cash. And early on, he wanted to be pretty involved, and I didn't feel comfortable having him…

00:29:06 (Alastair)

Too many cooks?

00:29:07 (Andrew)

Yeah, a little bit. Although I really respected his input. And also I kind of felt a little bit, obviously, I had a lot of capital involved, but for him, it's an insignificant amount. But I still didn't want to be too concentrated with a couple of individuals, and there were some with ticket sizes more than that. But for me, I didn't want him to be heavily weighted. Yeah. And I had a number of investors like that, like Jamie's, who sold Hubdoc to Xero, they were really supportive early on, and they were investors. Yeah. And later on, a number of others in the industry came on board, which was great.

00:29:46 (Alastair)

So you had these 20 or so angel investors, you’ve got two co founders. you're carrying majority of the equity in the business and probably the majority of the challenges in the business, and you're taking those to bed each night really. Where did you go for support, and did you have a mentor that you used regularly? What sort of structure did you have around you to support you as a founder?

00:30:13 (Andrew)

Yeah, I probably didn't do this as well as I could have. I think I kind of felt like I had this group of angel investors who were my support network, and they were like, they were brilliant. And so that helped. I also had David Tuck, who founded a company called Chaser in the same space and then had left that business, he was providing quite a lot of kind of weekly catch ups.

00:30:40 (Alastair)

That's interesting. So what was powerful about those weekly catch ups? What did they do?

00:30:47 (Andrew)

Someone who'd been there done it. Things had gone well, things had gone bad, kind of riding the wave with someone. So I think that was really helpful to keep you sane.

00:30:56 (Alastair)

And accountability to move you along? Or is it more kind of…

00:31:00 (Andrew)

I wish it was more that I think. I wish it was more that because we didn't do enough of that, I think it was more like therapy. But I think I did need more accountability, and that's one thing angels won't really bring you. You will get people kind of ask how things are going, but angels don't bring the same...

00:31:20 (Alastair)

Well, you probably tell them a story, a story you want to tell them.

00:31:24 (Andrew)

And I'm good at that. That is part of the role of the CEO. But also, you need to know the true health of the business.

00:31:32 (Alastair)

Were you providing updates to angels? I mean, it's quite early on there, but were you providing kind of updates in terms of customers, in terms of feedback, in terms of product milestones?

00:31:42 (Andrew)

Yeah, doing all of that. So we were in quarterly cycle at that point. When things got a bit tougher, I went to monthly. So, yeah, was doing that and then got different… We did tended to do a loom video, it would be me and one other in the team would do one each quarter and it worked well. Yeah, that side of things was good and I think that was it, because on the front I was doing all the right things, everything looked good. The actual product was struggling. So I could kind of, through good practice, kind of hide that a little bit, which I knew it in my heart. So I had this little bit of a disconnect with what I was saying and what I felt was going on in the fundamentals.

00:32:19 (Alastair)

So it sounds like you had founder and market fit, but you didn't have the product. The third part of that, in terms of the product. So there was a pain in the market. You understood the market and had an incredible network, so much so that you can sell to it and you can also raise money from that same market. But the product itself didn't hit the sweet spot. Is that…

00:32:42 (Andrew)

Yeah, and I think, well, there's a few things on that. So in terms of what happened, I think firstly we invested a lot of our time and our tech ability in something that was already built. So we tried to build our own video. Basically it's already built, it's commoditized, it's done.

00:32:59 (Alastair)

At the time, Zoom's share price was gone through the roof.

00:33:03 (Andrew)

That's it, and later on we did pivot a bit, but it was a bit late. But we felt like to make a real difference in the market, we wanted our own video embedded and to make it look like our own. So that was one of our thesis, to have web video really sounds simple to do, but it's not when you start building your own technology around it. So that was a massive time sink. Probably didn't need to do that. So we spent a lot of technology time on that. And then the second was we really struggled to get into sort of the top three pain points for any sort of ICP, any ideal customer. Everyone thought that's a good idea, give that a go. But the pain was never really enough to be in the top three. And then there's so many software choices at the moment, it's hard to sell if you're not in top three.

00:33:46 (Alastair)

Do you think your network actually hindered you because you didn't get open and honest feedback? Because people like you and people know you and they're going to be nice to you? So that hindered you at all?

00:33:58 (Andrew)

Probably, yeah, probably. I reckon they probably did, I never really thought about it like that because, yeah, I wouldn't have got going without them. But I think getting that brutal kind of feedback, that this really isn't that valuable to my business. If someone had told me that, rather than people going, I really think you're onto something. Do you want to use it? No, not quite yet. But they're still paying me for it because they've kind of did me a favour. And so that sort of thing happened quite a bit. So that probably hit a few things.

00:34:29 (Alastair)

Was there a point in time when you thought, you reflected and you said to yourself, that's it, we need to change direction completely from growing this to either selling it or shutting it down?

00:34:46 (Andrew)

Yeah. So we had a team away… so we had an outsourced development team by this point in Poland and we had an away day.

00:34:52 (Alastair)

Good or bad, with having an outsourced development team?

00:34:55 (Andrew)

Really good. Well, I say outsourced, they were actually employees, but they were based in Krakow. Really talented blokes, an ex founder… ex founder of a failed forecasting tool that was VC backed in Poland. Really good guy, and a couple of his colleagues came with him, so again, bolstered the team. So what happened after that, we had this really good away day, or a week, a couple of days, and then I came back thinking, we're not going on track here. We didn't really come away without a clear new product direction. So then I had to make off the back of that really tough decision. So I restructured the business and let sort of half the team go.

00:35:38 (Alastair)

So what was it? Sorry to interrupt. What was it, the away day? Was it at the away day or was it reflecting after the away day? And what was it exactly that you said that kind of made you think, we need to make drastic changes right now?

00:35:54 (Andrew)

I think it was on me and I think the product vision had got lost and I think it was partly because product ownership was being shared across almost three people at this point, which is never really a good idea. And I think that causes some confusion. And I think we were starting to lose focus on where the value was we provided to customers. And I think as soon as that started happening, we started merging into another category, which is practice management software. I wasn't prepared to build practice management software, because that category was different to what I wanted to be in. So I came back from that thinking, okay, we're a practice management add on. That market doesn't really exist yet, we're five years away from that. Firms are already struggling to adopt this category, let alone ours. So I came back thinking, all right, I'm going to have to let people go. I'm going to have to try and get to break even. We should sell to a practice management software.

00:36:48 (Alastair)

So what did you do next then? I'm assuming you made those redundancies, but how did you then approach the market? Which is… we shouldn't scoot over that, really, really fucking difficult conversations to have with people. But how did you then approach, well, who could buy us?

00:37:05 (Andrew)

Yeah, letting go of people is the toughest thing ever, especially when you've been going, people have been putting their life and soul into your staff as well. So that is really tough, and I don't think… that was probably the lowest point of the journey, the lowest point of the whole thing. I think it's worth mentioning as well, real life carries along at the same time. So I got back from that and I found out we had a miscarriage at the same time...

00:37:29 (Alastair)

Sorry to hear that.

00:37:30 (Andrew)

That's okay, but it's worth commenting that real life goes on alongside your startup journey. So I had that going on and then I needed to let go half the team, so that was a tough time. And I think it's worth bearing in mind when you go on the startup journey, real life is going to happen alongside. So that happened, and then in terms of what we did, the market was starting to identify who could be exit routes, basically. And what I ended up doing was raising a little bit more capital….

00:37:58 (Alastair)

Was this you on your own that was identifying, or is at this point you gone out to your angels and said, hey, we need to change, this is what we need to do. Or was it with your co-founders?

00:38:06 (Andrew)

So I let go of the co-founders, and basically kept middle management for want of a better term because they were cheaper and it made more sense at that point. So this was really me, this was my strategy. Angels kind of let you do what you, well, not let you, they were helping and….

00:38:25 (Alastair)

They knew what you were doing at that point?

00:38:27 (Andrew)

Yeah, I was communicating all of this, and even to the team, I was communicating this. Look, very transparently, these are our numbers.

00:38:33 (Alastair)

But also when that gets out to the market that the team is downsizing, then it's kind of a snowball effect really, isn't it? Because customers start to, or prospective customers start…

00:38:43 (Andrew)

You say that, but most software companies in the last twelve months… well I think you can hide that sort of thing. I don't think, yeah, overweighting that, but I think, yeah, we decided we were going to exit. I decided to raise some more money and I did that by identifying some practice management software CEOs, one of which we were already integrated with, and he actually ended up angel investing in the next round, it was an add on round. And so I thought we were then on track for at least an okay outcome. So then I was in a happier place that we were going to get an okay outcome.

00:39:24 (Alastair)

You're kind of engaged to someone that might, they've put some money in so you kind of got some sort of relationship there and it looks a little bit better that they'll make an acquisition then, and have you as a feature of their product rather than a product on its own.

00:39:39 (Andrew)

Yeah, we discussed different options whether we be an additional paid for add on or whether it would increase the feature set. So yeah, that conversation progressed really well and we started building our product and brand and everything around that and I think that was the right strategy, I don't regret that at all. I think that was the right strategy at that point. Unfortunately, the market then shifted and that all fell over. So I went… my wife and I went to Cape Town for a month and at this point I was sort of… it was going to go one of two ways, either it was going to sell or it wasn't and I was going to shut it basically, or find an alternative buyer. And then the downturn happened, the potential acquirer wasn't going to work. They had to let go of 30% of their staff. So then, yeah, that's what happened on that.

00:40:31 (Alastair)

And at this point has it gone through your mind… I mean, you've obviously let go of staff, you've raised like £500, £600 grand from other people, small tickets, but you personally... and they've grown businesses and exited them in most cases, I'm assuming from kind of how it's been described. So they probably got some excess capital, although capital capital… but it's at this point you're in for quite a bit of personal cash. Where does that feature on the, oh shit?

00:41:02 (Andrew)

Not really, I don't think it does.

00:41:04 (Alastair)

It's already sunk from your perspective?

00:41:06 (Andrew)

Yeah, I wasn't bothered about that. I think you get to a point where your mental health and your future earnings is more important than capital you put in a year.

00:41:15 (Alastair)

That's a great approach and way to view, I think.

00:41:19 (Andrew)

Yeah, definitely. I think it's important that, and I have seen, well, founders, successful founders, and unsuccessful founders who put their business priorities over their own mental health and stuff. There's been, like, anecdotally, it's a terrible story, but the founder of TSheets, Matt Rissell, who I pitched to as an angel investor, the guy who exited for £300million, yeah, was clearly in a very unhappy and dark place related to or unrelated to what he did in business life, I don't know. But he ended up taking his own life a month ago, so it just shows that you do have to prioritise your own mental health, your family life. And for me, that always gives me the bigger picture over a business endeavour and said that was okay for me.

00:42:03 (Alastair)

Yeah, I think you can get stuck in the day to day, but you need to put in perspective as to what's really important in life, I think, don't you? So at this point, you raise a bit more, but that transaction doesn't happen ultimately?

00:42:15 (Andrew)

Yeah, that fell over but got strung along for a long time.

00:42:19 (Alastair)

You had everything pinned on that?

00:42:21 (Andrew)

I did, because there wasn't really another viable alternative. Like, I'd. I'd met with a few other practice managers, but that was going to be a much longer time frame. And quite frankly, we didn't have the runway to build the integrations with their platforms and test it, validate. So I was pinned my hopes on this, and that fell over, at which point I was like, okay, job done.

00:42:42 (Alastair)

Shut up shop?

00:42:43 (Andrew)

Pretty much. So at that point, once I'd kind of communicated that to customers and staff, and then a couple of options came forward, basically.

00:42:55 (Alastair)

Okay, and obviously one of those options was Sumatec, headed by Nathan, who bought the product. What were the other options?

00:43:07 (Andrew)

None were competitive…well, none were competitive, full stop, really, if I'm honest with you, it wasn't a successful enterprise. We didn't achieve our business aims at all. But I felt like, well, let's keep the product going. We do have customers who wanted to use the product, and just reputationally, it sounds better that you…

00:43:25 (Alastair)

An exit is an exit, right. Well, have you ever disclosed how much it was sold for?

00:43:32 (Andrew)

No, I'm not going to disclose, but it was certainly not a good return.

00:43:37 (Alastair)

Yeah, I think probably the saving grace from it is that unfortunately, a lot of money was spent and people were let go, and you put your blood, sweat, and tears in it. But actually, this product still exists, and that's probably something that you can still be proud of, that you created something and it's still going, rather than it being shut up completely. So that must give you some sort of sense of pride?

00:44:07 (Andrew)

Yeah, I'm proud about the whole journey if I'm honest with you. And I mean, it sounds. Well, we didn't get the…

00:44:14 (Alastair)

Sorry, I didn't mean to diminish the journey because…

00:44:19 (Andrew)

Just before this, I was messaging one of the head of design. We're good mates now. We're going for a beer next week. We still meet up, Sarah met up with her on Friday. Yeah, obviously we didn't achieve the financial outcomes, but you've got to enjoy the journey to some extent because your odds aren't great starting a startup, and I was very aware of that at the beginning. And so I take pride in the way I dealt with having to wind things up. I take pride in the way of communicating with investors, take pride in the fact that I didn't invest anymore personally. There's lots of things to take pride in. And I think, yes, the product hypothesis was wrong, or the way we went about it was wrong, but I kind of feel like that will be fuel for a later endeavor.

00:45:09 (Alastair)

I think after I heard the news, I dropped your LinkedIn and said, hey, shame for you what's happened, but actually, so many lessons learned along the way, and there's a huge amount you'll have taken from it. What was the biggest lesson that you took from it?

00:45:24 (Andrew)

Yeah, I mean, just on that, I probably got about 100 messages more like yours, which is really encouraging and recommend you to do that to other people if their business hasn't gone the way they wanted it. What was my biggest learning? I think for me, I think I needed real excitement around the problem I was solving, which I had for a while, but I think it was a little bit surface level only. Some people don't need this, by the way. Like, some business owners really don't need an emotional connection with what they're doing. I know people who really can just turn on the business idea, understand that, and they don't need to be motivated by it. But for me, where I was kind of like a solo founder, in this example, I didn't really have an emotional connection to what we were trying to do. And I think that was because you have to, as a CEO of a company, of any company, you have to repeat the same message hundreds, thousands of times, and you've got to be kind of passionate about what you're saying unless you're a very good actor to do that. And so for me, if and when I go again, I really want an emotional connection to the business mission, I think, yeah.

00:46:35 (Alastair)

So that brings on to the next question, which is, do you have another one in you then?

00:46:40 (Andrew)

100%., yeah, I've just gone 31. I think I certainly will, certainly will try other ideas in the future. At the moment, I'm working full time in a private equity backed business and comfortable doing that for now, and it's great learning and I'm enjoying the role. But I imagine at some point in the future, could be a long way away but…

00:47:05 (Alastair)

Still got that creative spirit. You talked about a bunch of metrics as we've gone through this, which are, one was cash burn, one was MRR, ARR, churn, a few others. What was the biggest or the most important to you as you were kind of building the product in the early part of the product, what was your most important metric?

00:47:26 (Andrew)

Yeah, and I think it's very important in the early stages, obviously, we never got to the growth phase, so we were in the really early stages of product building here. In the first hundred customers, you need to have a lead indicator, not a lag. And I think that's really important that even MRR for us wasn't going… so we ended up going with the North Star framework and that's really a product metric. So are people using the product in the way you want them to, to prove your hypothesis? So for us, that was taking actions on our tool whilst in a meeting. So that was our key metric. it was a North Star metric. Obviously, we didn't start trending the wrong way at some point, but I think if you're in the early stages, you need a leading indicator, not a lagging one. So, yeah, bear that in mind when you're thinking about KPIs internally. Obviously it's all different story when you're going to raise money, then you have to tell the spin story yeah.

00:48:20 (Alastair)

Andrew, you've been extremely open and transparent about your journey, I really appreciate it. Thank you very much for doing this.

00:48:25 (Andrew)

Not at all. Cheers, Alastair.