Why This Startup Lost $2 Million (And How To Avoid The Same Fate)

Hi Aleksandar,

It was included because it backs up point number 12 - you don't need a great product or solution to grow big. It's proof that it isn't always necessary. Maybe it comes across more relevant in the full article.

Of course does that mean you don't want a great solution? Absolutely not, a great solution is always preferred. But if you don't have one, then it's not worth it to spend a lot of time and money trying to create it. Go with what you have and focus on generating revenue.

Thanks for the feedback, seriously, it's great to talk and discuss this.

thanks

Chris

Hi Alexander,

Great name by the way (my youngest son is called Alexander) :-)

That's a good question and here's the answer.

Product-market fit is a bit of a distraction to be honest with you. Yes, plenty of businesses use it and it does work, but as I say in the article it’s not necessary and actually puts startups at risk of running out of money.

The BLUNT Method is all about efficiency. Can businesses be built and succeed without it? Absolutely yes. Plenty are. But, as I detail and prove in the book, selling a BLUNT belief is the most efficient way because it aligns itself with the way that the human brain has evolved to be persuaded and make decisions. To repeat the analogy that I use in the book, selling a BLUNT belief is like swimming with the current in a river whilst not using it is like going against the current. Can you get somewhere by swimming against the current? Of course. But it’s going to take more effort and time and you probably won’t get as far.

So, to answer your question directly, what Quest/Cooper should have done was forget about the product and find a BLUNT belief to sell instead. A number of companies have started with a BLUNT belief only and built products after and I actually need to write an article about them because they will be more relatable to many people than case studies like Salesforce and HubSpot.

Anyway, back to Quest/Cooper, this belief might have been related to their initial product (the idea that people’s professional networks were becoming too impersonal might have had potential), or it could have been unrelated - it would all have depended on the first step of the process that I detail in the book: research. They would have needed to research what their target audience’s (aka potential customer’s) desirable outcomes were and what they believed the best way to achieve their desirable outcome was. That information could then be used to create a BLUNT belief that contradicted their existing belief about the best way to achieve said outcome (which is what a BLUNT belief is supposed to do).

Ideally for me, they would have done this before ever building a product, but they could have done this at any point before they ran out of money. The earlier they did it, the more money they would have kept in the bank to keep the business afloat.

Once they had the BLUNT belief, they could have then focused on selling it to potential customers. Once potential customers started adopting their belief then they would be able to sell them anything they want (as long as they could show that it would help them implement that belief in their lives. Obviously, they would still need that to ensure that their audience could implement the belief without needing their solution. This is the characteristic N of No Product Required. This, as I explain in more detail in the book, counter-intuitively makes the belief much more persuasive and makes it much more likely believers will buy the company’s products).

Depending on the belief they ended up selling, they could start with simple products such as small software or even information products (that they could create and sell whilst building their audience at the same time - to create instant revenue) or consulting. From there they could build up a whole ecosystem of products from a range of different categories, all tied together by the common thread of their belief. This has two advantages:

1. It’s cheap to build at first (saves money, keeps their runway long).
2. The more complex the ecosystem eventually as they build more products, the more money they can make from their existing customers and the harder it is for competitors to copy them (easy to copy one product, hard to copy a whole ecosystem).

I hope that makes sense and answers your question. Really, the point I’m trying to make is that it’s audience first, not product first. But, unlike traditional audience first approaches, the idea is to build an audience around a BLUNT belief, not a generic idea.

The traditional audience first approach looks something like this. You want to sell an email marketing solution (for example) so you build an audience around email marketing. You create content about email marketing and teach your potential customers about email marketing strategies and tactics. The problem with this is that there are a million and one pieces of content online that teach the exact same thing. The audience that you build is exactly the same as the audience that any one of your competitors can build (and probably has). There is nothing about your audience-building strategy that leads them to want to buy from you only.

When you build an audience around a BLUNT belief, that audience is for you only. They are believers in your idea. Let's say you have a brand new belief about how email marketing should be done. Building an audience around that belief means that audience is exclusive to you. To put it another way, if you want to learn to cook then you can buy a cooking product from anyone. But if you want to learn to cook just like Gordon Ramsey, well you can only buy from him.

Again hope that makes sense. I'm going to stop now as I sense this is turning into a ramble and my Covid brain is only going to make that ramble more confusing!

Best

Chris

Hi Andrea,

Thank you.

To answer your question, it absolutely does apply to small SaaS. Just to use an example from the book, when HubSpot started using it, it was a small SaaS company with little to no community/fanbase.

However, I guess you mean a very small SaaS that is in your situation (still building an MVP).

So, I’ve just replied to a previous answer in this thread that I need to write an article about smaller companies like yours as there are plenty that have used this strategy very successfully. I have focused on the bigger companies in the book because I guess they are ‘cooler’ but the reality is that you might well not be interested in building a huge company like them.

That being said, rather than telling you to wait for the article, let me explain right now how this strategy applies to you.

If I were you I would focus on building a BLUNT belief first and foremost. This will then allow you to build and sell any product you want to sell to your target audience. You won’t have to worry about product-market fit because you will be fitting the market to your product (believers will want to buy a product that will help them implement your belief in their lives more effectively).

Let me give you two examples of this.

The first will be a company that started off outside the software realm without any product and then built non-software products first before creating a software application.

The second will be a pure SaaS example like you that started with an MVP.

Starting with the first - The Bullet Journal.

A designer called Ryder Carroll had created a way of organising his thoughts and journaling that he called bullet journaling. This was a belief (and a method) that had all the characteristics of a BLUNT belief but two. It was brand new, it added an element of unfamiliarity into people’s lives, it didn’t require any product to implement (you could do it without spending money).

The only characteristics it was missing were ‘traction’ (existing demand for the product) and ‘leading’ (that the belief led back to what made the company’s product unique). And the reason it was missing those characteristics was that Carroll had no products to sell. But that doesn’t matter. You can launch a BLUNT belief into the world like that and build products afterward to align with those elements.

And that is what Carroll did. He created a website and started promoting the belief.

In Carroll’s case it went viral and it became a bit of a phenomenon. From there he created a book, a course and started selling notebooks. He also now sells an application to help people take notes. His company now does $8 million a year. And, if I’m not mistaken, it increased the sales of pens and notebooks in general by something crazy like 10%. (You can imagine an executive at Bic or Parker Pens kicking themselves for not coming up with it themselves!). If someone believes in the bullet method then Carroll can sell them anything as long as he ties it into helping them do bullet journaling more effectively.

Of course, you don’t need to go viral for this to work.

Take SaaS company You Need A Budget (YNAB) for example.

This company was also started from a BLUNT belief. Like Carroll, the founders didn’t do this deliberately, they just stumbled upon the method organically and it was a huge success for them.

YNAB is basically a belief about the best way to do budgeting. The founders created a belief that says in order to budget effectively you have to follow four rules:

1. Give every dollar a job
2. Embrace true expenses
3. Roll with the punches
4. Age your money

Obviously, I’m not going to go into depth about what those mean but suffice to say, this belief and methodology is brand new, it leads back to what makes YNAB solution unique, it has unfamiliarity (target audience is not an expert at budgeting), it can be implemented without any product (you can use pen and paper or a free spreadsheet) and the product(s) that YNAB sell had existing demand before they started selling them.

The founders came up with this belief and approach to help them at home with their own budgeting. And they created a spreadsheet to help them implement this belief in their own lives. They then eventually started selling this spreadsheet to others because they were struggling with money. Note that this spreadsheet was so basic that they had to refund customers because it didn’t work on Mac.

Eventually they made it into software and that’s the main product the company has. It also sells a coaching program as well where people can become certified coaches to help others implement the YNAB method in their lives. As far as I can tell the company does around $8 million a year in revenue though that could very well be more as there is conflicting information that suggests much higher.

Nobody buys YNAB because they need budgeting software. They could go to Mint or any other financial application. The ONLY reason that people buy from YNAB is because they first and foremost bought into the belief and methodology that YNAB sells. Once they’ve bought into that belief, they aren’t going to buy from anyone else but YNAB. Of course, they don’t need to buy YNAB software to implement the belief and method in their lives but it’s this (the characteristic of No Product Required) that makes it, for reasons I detail in the book, more likely for them to buy it.

So, in summary, don’t think that you need to do a whole song and dance like Steve Jobs to implement this method. As you can see you can start with zero product or a barebones MVP and still use this method successfully. In both cases, it was selling a BLUNT belief that enabled them to build an audience of passionate customers. They didn't start with a huge audience - both started with no audience at all. As such, the strategy and steps that I detail in the book are just as effective for businesses with lots of customers already to those with zero.

Hope that helps.

Best

Chris

I'm guessing founders who have "a functioning business model" aren't typically the ones to look for seed/pre-seed funding, because they want to keep all their equity to themselves.

So there's a drought for these founders who are open to taking in money during the seed/pre-seed stage, and thus investors bet instead on people, ideas, markets.

Hi Mick,

Absolutely not crazy at all.

Though it makes sense why it happens when we see how and why investors invest their money - they invest primarily in people, not products or ideas. Of course that's not the case for everyone, but in general, they put their faith in the team and trust that they will find a viable business model.