The 5 Early Mistakes That Almost Killed This Founder’s Startup — and How He Survived

The 5 Early Mistakes That Almost Killed This Founder’s Startup — and How He Survived

Businessman sitting on concrete steps with head in hands

After Clark Benson sold his company eCrush in 2007, he had two choices: He could either take a sabbatical or he could jump right in and start building his fifth company, Ranker, a site that would crowdsource rankings of everything from movies to athletes. Feeling self-inflicted pressure, he chose the latter — and, in his words, it turned out to be a colossal mistake.

“I didn’t take nearly enough time off to unwind after 12 years of an all-in entrepreneur lifestyle. I also didn’t take enough time to think in much more detail about the team I needed to hire and the resources we’d need before the pressures of overhead came into the mix,” says Benson. “I had this great concept, and I just couldn’t handle the idea of seeing someone do it before we did.”

This was the first of many mistakes he admits to — despite having nearly 20 years experience as an entrepreneur. Yet today, his company Ranker draws 19 million unique visitors a month, is considered a consumer data insights treasure trove, and is solidly in the black. So, what made the difference? In this exclusive interview, Benson shares the five biggest mistakes he made — that he sees other founders make all the time — and how he overcame them to turn things around.

Hiring ‘smart’ engineering talent that is wrong for your startup.

Because hiring talent at early-stage startups is so challenging, entrepreneurs often over-invest in expensive engineers who are not the right fit for early environments. Non-technical founders in particular should be careful about vetting candidates that look good on paper — even if it requires bringing in outside engineering experts or advisors to interview them. Not only did Benson lack technical chops himself, he was starting Ranker in Los Angeles, where he didn’t have a good network to source skilled engineers.

“I spent a good amount of time interviewing senior engineers without fully knowing what I was talking about,” he says. “I hired solely based on limited outside advice, my gut feelings, and asking questions like, ‘Do I like this person? Would I get along with them? Do they seem really smart?’ I wasn’t testing their coding skills in the right ways.”

What he discovered too late is that ‘really smart’ doesn’t always translate into being able to execute quickly and iteratively. “I let internal and perceived time pressure push me into making hasty decisions,” Benson says. “You should never settle for someone to fill a role ‘in the meantime.’”

Hiring the wrong person for short-term gains will double down your problems in the long-term.

He learned this the hardest way possible: He hired a costly CTO while he focused on product and operations. He assumed he needed an engineering leader to supervise his offshore development team. So, even though his top three candidates fell through, Benson moved forward with the fourth.

“That was a huge mistake on the overhead front,” he says. Not only did this CTO turn out to be the wrong fit for the role, but his particular strengths and weaknesses made him unnecessary from the beginning. When he eventually left, Benson realized he could teach himself how to effectively manage the offshore team. It’s vital not to hire the wrong senior people too early — they’re not only pricey, but when they’re a mistake, they’re a big mistake. It’s much better to rely on homegrown talent when you’re developing leaders early on.

There are other pitfalls that come with hiring extremely smart engineers upfront. You may think that they have the know-how and protocol to run product development on their own without much supervision. Benson knew that micromanaging wasn’t a healthy approach, but failing to demand concrete milestones led to disaster.

“When I asked for updates, my engineers would say, ‘Oh, I’m working on it, we’re close to something, or here’s a prototype,’” he says. “I had all this confidence in their knowledge, so I’d just give them an extra month to finish a project if that’s what they said they needed.”

This is a quick and easy way to burn a lot of cash. Because he wasn’t enforcing technical deadlines, and because he had a confident-seeming CTO who didn’t push back on Benson’s own mission creep, it took a whole year to launch the Ranker site. Even then, there were a lot of engineering problems that popped up after the fact. You have to have realistic product timelines that everyone involved has agreed to and is committed to hitting.

“The wake-up call usually comes when you haven’t made progress in 120 days and the bank account is a few hundred grand lower,” he says. “Ranker is where it is today with a little over $5 million in total investment capital, which is a relatively small amount given our traction and the complexity of what we are doing. We haven’t been blowing money left and right, but even with a scrappy mentality, unchecked development costs almost killed us before we had a chance with the public.”

When hiring engineering talent at an early stage, Benson recommends the following:

  • If you don’t have a strong technical background, find multiple people who do to vet candidates. These could be advisors, mentors, or someone recommended to you through your investors. Regardless, you probably want multiple technical people who you would die to have working for your company (but who you can’t afford) interview your first engineering hires.

  • Be extra careful if you don’t have a great local network. If you’re not knowledgeable about the talent pool in your geographic area, you’re already at a disadvantage. “There is so much nuance to engineering backgrounds that resumes only get you about 30% of the way there.” When you’re starting up in a new place, “You can’t rely on your own network to do back channel references on candidates,” Benson says. “So it’s better to wait for great referrals than to push through expensive hires because you feel like you need them now.” Take the time to build a local network by meeting people and asking for introductions from people you already know elsewhere. You need local experts you can trust.

  • Your CTO needs to feel comfortable pushing back. Especially if you’re a non-technical founder, you need to find an engineering leader who knows how long things take, exactly which features should be prioritized, and when someone is unnecessarily blowing through a deadline. “Your CTO needs to know how to prioritize tasks and be comfortable with saying, ‘no.’ Their initial focus needs to be building a minimum viable product.”

  • You want a hands-on engineering leader. Whoever you do hire as an engineering leader early on is going to spend the bulk of their time reviewing other people’s work and coding big chunks themselves whenever it’s more efficient to just get it done. This is even truer when you’re working lean. If this person proves to be lighter-touch and less engaged in the day-to-day work the engineers are doing, they won’t get the job done and they need to be cut fast.

Leasing a large office you don’t need.

The assumption is always the same: Your company will be growing so quickly that you’re going to need plenty of seats for all those incoming butts, and you don’t want the friction of moving when you’re charging ahead. So why not build future headcount into the decision? This was Benson’s logic when he first went shopping for space in 2008 and signed the lease on an optimistically large office.

With this experience behind him, he advises founders to take advantage of the new ecosystem built around shared office space for early-stage startups. “These spaces can hold multiple small teams for three to six months at a time,” he says. They can be the stop-gap you need at any smaller size.

When starting a new company, you have to keep yourself positive — but not at the expense of staying grounded in reality. Do you really need a bigger space? Will you hire (or do you need to hire) as fast as you’re projecting? There are multiple factors out of your control, so focus on the ones you can manage. Coming off of a successful startup exit, Benson admits he was overconfident about Ranker’s growth — and then the economy collapsed.

“A lot of this was bad timing. All of a sudden, I couldn’t go raise money on the concept, I needed to get a lot more traction and when the economy goes bad fundraising becomes exponentially harder. I found myself in this new space and financing everything myself,” he says. “When you realize there are outside variables that you can’t do anything about, that directly influence your startup’s progress, you need to prioritize keeping your burn rate in check over anything else.”

Speed and execution are not everything. Assessing the landscape to see the big picture is.

Prior success can beget future success — but sometimes it can lead to a myopic mentality and unmerited hubris. “The experience of launching a company with your own money during a horrible economic crash causes a lot of grief,” says Benson. “It led to a number of years of struggle just to keep things afloat, but it was also humbling in a way that has served me since.”

Spending tons of time thinking through product bells and whistles.

Ranker is one of those sites that leverages a massive data set — users add their opinions on top of layers of facts and an extensive database underneath it all. This poses multiple engineering challenges. But even with all this inherent complexity, Benson would find himself dwelling on fringe features and investing unnecessary hours in what he calls “product thinking time.”

“You have to step back and decide you’re only going to build features based on metrics and user behavior early on — look at things like where your customer traffic is coming from, where they go, what they are currently using.”

While Ranker’s core concept was based on crowdsourcing rankings within different topic areas by having users vote, Benson decided it would also be cool to let users rate items to give them a deeper level of granularity.

“That sounded great to me and no one else, but we still built the feature and it’s probably still sitting in the code somewhere,” he says. “What I should have realized is that this went against the simplicity of our voting system, which was already working well for us.”

Until you have your first few hundred thousand users, every feature you add must be an absolute necessity.

If you do decide to add to the current product, you need to take something else away, Benson says. Otherwise, you’re headed for feature bloat and complexity costs.

If you’re a founder, there’s a good chance you’re also focused on the big picture — you’ve seen what you want your product to look like in the mid to distant future, and it’s easier than you think to conflate that with the present. It’s actually a double-edged sword to have product vision. To dodge these types of mistakes, you need to be aware of this mindset and keep a clear, up-to-date grasp on where you are in the moment with the product and the business.

Before adding any new features to your product, Benson suggests the following:

  • Isolate your core product needs first. Establish a mechanism to prioritize them, and then focus on solving all of those issues first. Why do people come to your site? In Ranker’s case, people came to see stack-ranked lists that were relevant to their interests. This was complex enough. There was no need to branch into new territory before the userbase merited it.

  • Catch yourself before spending a lot of time thinking about long-term functionality. It’s tempting to iterate on things in detail that are part of your grand vision, but your time and attention are needed to solve immediate problems. If it isn’t something that can realistically be turned around in the next 45 days, put it on a “not now list.”

  • Table any and all detailed conversations about features that you know should be put on he back burner. Everyone involved in building a groundbreaking product gets excited about the possibilities and loves to talk about them. You don’t want to quash this enthusiasm, but you also don’t want to get “into the weeds” too early. “Talking about non-immediate features can easily turn into 90 minutes of excitable dialogue, which at the end of the day means each of those people got an hour and a half less done than they needed to. Cut those discussions off at 15 minutes by saying, ‘Awesome, let’s put the core ideas on the roadmap and circle back in detail when we get closer,’ and get back to the day’s work.” Even if someone wants to tinker on a feature in their extra time or during a certain percentage of their work, you need to put your foot down until you have enough traction with your core product.

Forgetting that all the product and engineering estimates need to be doubled.

There are many reasons why this happens — and it’s not necessarily anyone’s fault. Assuming that when something launches it will be bug-free is already a failure in planning and thinking, Benson says.

“For the first year or two at Ranker, I would ask people for deadline estimates, and I would think, ‘Great! That’s good — now I know we’ll be at X stage by Y date.’ Then we’d miss that deadline and there would be your typical, ‘Oh, we still need to do this piece. Here’s an excuse for this. There are these bugs we have to squash.’ My big mistake wasn’t that products didn’t launch on time. It was that I forgot that they never launch on time.”

Benson learned this ‘law’ at his prior startup, eCrush: If your product deadline doubles, your expenses double too, making you twice as likely to run out of money.

“I think there’s a pretty clear linear relationship,” he says. “It’s not an exact doubling of costs, but it is anywhere between 40% and 150% at any given time. The doubling law is a nice benchmark to make sure you protect yourself from that. Learning it wasn’t hard, but it’s easy to forget.”

Today, to make sure he never forgets again, Benson keeps a separate calendar where he marks where a deadline has been set, and also where he estimates it will actually land. That way he can operate with a cushion that he’s already accounted for without easing up on due dates. “This includes operating costs and salaries,” he says. “You need to make all of these timetables realistic.”

Being too busy to pay attention to marketplace changes.

Ranker launched around the time Facebook was blowing up, but it wasn’t the traffic driving behemoth it is now. At the same time, mobile started to be important for capturing and retaining users, especially with the advent of the iPad. All of this was going on, but Benson was working heads down every waking minute. “I was so focused on building Ranker that I would just go between the office and my house. I spent every waking minute on my laptop doing work. I had no time for anything else,” he says.

Most notably, he had no time for Facebook. He had no time to use a tablet the way a consumer surfing the web would. He had no time to play with apps for fun. What he didn’t realize was that his business depended on it. “There were a number of times early on when we were slow to market because I didn’t have time to think like our consumers.”

No matter how much you have to do, you have to also keep an eye on how technology in your category is evolving. “We have a killer mobile site now, but if I had been using the mobile web myself more regularly, we would have launched responsive functionality three or four months earlier,” he says.

I missed out on changes in the way people experienced the web because I had no time to experience the web myself.

Ranker is large enough now that the team can track and catch up on trends, but that’s only because product development isn’t taking cues from Benson alone anymore. There’s a common (and often proven) belief that startups take on the character of their founders. In this case, the founder was a hermit, and the startup became one too. Now, looking back, he sees that there were missed opportunities to change this.

You have to delegate “staying on top of trends.” Even if your company is so small and everyone is working so hard that they can’t come up for air, thereare people in your life you can tap into to understand trends that will impact you.

“You have friends who are on the bleeding edge of various tech trends. It might be your advisors, your spouse or your kids, or just someone you trust,” he says. “But whoever it is should keep tabs on the news. Find out what new products are launching and getting everyone’s attention, especially if they’re related to your market. And play with them as an actual user. As tech founders, we are unfortunately stuck in a perpetually disruptive environment and there is only so much time in the day. You need to know what’s happening in your world.”

Being persistent is one of the best qualities an entrepreneur can have, but persistence can also lead you far down roads that are really dead ends, Benson says. “If you’re too passionate about what you’re doing, you can fail to see the reality of your situation. It happens to the best of us. The only way to prevent it is to know your own limitations and remember the bigger picture. And ideally find some trusted friends or advisors to help you see what you don’t have time for, or what your blinders are blocking out.”

[First Round Capital]

June 30, 2016 / by / in , , , , , , ,

Leave a Reply

Show Buttons
Hide Buttons

IMPORTANT MESSAGE: Scooblrinc.com is a website owned and operated by Scooblr, Inc. By accessing this website and any pages thereof, you agree to be bound by the Terms of Use and Privacy Policy, as amended from time to time. Scooblr, Inc. does not verify or assure that information provided by any company offering services is accurate or complete or that the valuation is appropriate. Neither Scooblr nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising, for any error or incompleteness of fact or opinion in, or lack of care in the preparation or publication, of the materials posted on this website. Scooblr does not give advice, provide analysis or recommendations regarding any offering, service posted on the website. The information on this website does not constitute an offer of, or the solicitation of an offer to buy or subscribe for, any services to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful.