Latest / Success Story with Scott Clary / Lessons - The Truth About Finding Product-Market Fit After 3 Exits | Shirish Nadkarni - Author of From Startup to Exit

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Lessons - The Truth About Finding Product-Market Fit After 3 Exits | Shirish Nadkarni - Author of From Startup to Exit · Success Story with Scott Clary

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  In this lesson's episode, explore how early stage founders can navigate the challenges of
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  finding true product market fit and turning risky ideas into successful ventures,
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  discover why timing and customer insight often matter more than innovation.
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  Understand how testing demand before building saves time and capital,
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  and uncover the strategic thinking behind knowing when to pivot, raise, or exit.
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  Some of the, obviously, some of the lessons that you learned in that first,
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  in that first company you founded are things you speak about in the book.
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  One of the things that are obviously like a big issue for startups is the fact that nine out of
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  10 of them fail, mostly because they don't find proper product market fit.
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  So how did you, how did you find that proper product market fit?
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  What was your, what was your strategy for that?
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  And also just to follow up question, I want you to give some context.
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  Did you, did you raise that money pre-revenue or did you wait until you were actually,
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  you found product market fit, you were selling to the market before you raised that 15?
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  Yeah, that's a great question.
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  No, this was during the crazy days of the .com boom.
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  And based on my reputation having worked for Microsoft, obviously, for the big help.
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  I had, you know, we had only developed beta software when I started running raising money.
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  And I raised, you know, $15 million in funding on a pre-revenue basis.
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  So we didn't have any revenue at that point.
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  And I raised it on a pre-money valuation of 23 million.
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  So it was totally crazy times at that time to be able to raise that kind of money
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  without really having any kind of revenue or customer traction.
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  But to answer your first question about product market fit,
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  what we discovered took us about six months to kind of iterate through various versions of our
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  software. We were able to sign up a lot of users, but we didn't really get good retention.
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  I think that was because people were still uncomfortable, you know, using email in the cloud,
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  and relying on some other company to store very sensitive corporate information,
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  which is your, you know, email information. And so it became clear to us that the original
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  idea was not working. And so we decided to pivot our solution to providing mobile access to
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  your existing email. This was the time when Blackberry was getting started. They had about,
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  you know, a couple of hundred thousand users. And it was a small, you know, form, you know,
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  like a page of form factor, Blackberry instead of the, you know, the smartphone form factor.
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  And at that time, you know, regular phones were becoming internet enabled.
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  And you had something called a WAP browser on your phone, which, you know, on a very small screen,
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  allowed you to access the internet. And so we decided that, you know, that, hey, why do you need
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  a specialized device like Blackberry, which can be expensive? Why not enable access to your email
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  on your phone? And that's what we did. We basically reverse engineered all the proprietary email
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  systems like Microsoft Exchange and Lotus Notes and AOL, Mail and Hotmail and so forth.
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  And we would allow you to access that email from your phone wherever you are.
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  Understood. Okay. And so you're your products. So that's a, that's a pretty crazy start of
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  story. So you, the fact that you raised 15 million for your revenue. So you were, you were playing
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  with investors money while still trying to figure out product market fit and you were iterating.
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  I'm just curious, would you have done it differently if you could redo it? Was that a lot of stress
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  with the 15 free revenue? Sure was a lot of stress. You have a lot of responsibility to your
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  investors. Yeah, I think I would have done it differently. I would have done a lot more,
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  you know, market research initially to validate whether the idea made, you know, sense at that time.
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  You know, today, you know, the idea of Teeman is something that is widespread.
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  So it was a matter of timing. So the idea was great, but the timing was not right,
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  because it took, you know, quite some time for companies to become comfortable with using software
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  on the cloud. And, you know, we were one of the first SaaS software, you know, introduced into
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  the market at that point. And so whenever you need to use a new concept, it takes, you know,
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  takes time for companies to adopt it. So I wish I'd done a lot more market research to really
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  understand, hey, you know, is this something that is ready, you know, in terms of market acceptance
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  or not? And what advice would you have for somebody who after you've learned and you've gone through
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  this to find that product market fit or to validate that idea before you take it to market?
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  Yeah. Yeah, I talk about that in my book from startup to exit. I've been a whole chapter dedicated
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  to, you know, achieving product market fit. And so it's not an easy, it's not a quick, easy,
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  a quick, easy thing. Yeah, what I recommend is obviously conduct a lot of customer interviews.
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  And don't even talk about your solution first or ask the customer, you know, they like your
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  solution first, you know, first, understand what are the top three or four problems that they have
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  in the domain that you're kind of researching. And if your problem that you're addressing is not
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  in the top three or four, then right there, you may want to pivot and understand, okay,
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  tell me more about your top three or two or three problems. And maybe there is a solution I can
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  build that is more of interest to you because if your solution, if your solution is not addressing
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  a top three or four problem, then even though they may be addressing and, you know, a need,
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  it may not be top of mind to customer. And as a result, your sales cycles will be extremely long
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  because the customer is going to say, I'm going to first address my critical problems. And then
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  I'll get to some other problems that, you know, I need to address. And so first, you know, focus on,
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  you know, the top three or four problems, make sure that your solution tackles that.
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  And the other thing that I recommend is actually testing, even before you built your software is
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  actually creating a website. And using Google SCM or Facebook ads, drive users to that website and
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  see if you can get customers to register for your solution. Because that will tell you,
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  you know, when you actually start marketing your solution, what kind of an uptake are you going to
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  get? And are you going to get enough users? And is it going to cost you how much is going to cost
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  you to really acquire those users? And can you build a profitable business where your lifetime
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  value to your customer is, you know, far greater than the cost of customer acquisition? So those are
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  two things I highly recommend that, you know, people fall in terms of the methodology for achieving
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  product market fair. That's very smart. And as as Timon grew, walk me through the growth of the
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  company and eventually your decision to sell it, I guess, is the best way to put it. So keep
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  me, keep walking me down your story. Yeah. So once we decided to pivot to providing mobile
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  email software, then we started marketing to wireless carriers because they had to install
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  a software and make it available to their customers. And we got traction with T-Mobile,
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  which is based out of here in Seattle. They were very interested in the solution that we were
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  providing. And then we also started talking to BlackBerry because BlackBerry at that time was
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  limited in its access to only Microsoft email software, whereas we provided access to a whole
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  range of proprietary email systems. And so as we started discussions on licensing our software to
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  them, they came to the conclusion that this was a very strategic for them and they would be better off
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  acquiring our company. And so in 2002, they made an offer to acquire T-MON and we decided to
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  at that point that given that BlackBerry was becoming quite well known and because they had
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  existing relationships with wireless carriers around the world that we could get much wider
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  distribution for our software through BlackBerry as opposed to trying to do it on our own.
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  And this was also a time when the .com busted happened and so raising money was very,
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  very hard at that point. So the sale to BlackBerry made a lot of sense for the company. And we did
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  extremely well. Our technology became known as BlackBerry Internet email and it grew to about
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  50 million BlackBerry users over time and so had really widespread usage within the BlackBerry
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  community. What are and when you were going through that process so they were thinking about
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  licensing it and then the conversation started around whether or not we should just acquire this
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  software. What were some of the things that you were thinking because when you build a company
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  there's different ways to exit, right? You can go for another funding round, you could technically
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  IPO it or you could just sell it to a company. So why did you, I think you sort of alluded to it because
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  the .com bust, it was harder to potentially take it in other directions. Is that the reason why
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  you decided to sell to BlackBerry or what other considerations should you think about when you're
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  trying to exit a company? Yeah, that's a great question because a lot of founders have to come to
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  that decision point at some point whether they are actively selling their company or whether
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  somebody approaches them for an acquisition. In our case, as I said, funding was very difficult
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  to raise. We did have actually an offer from our existing investors to continue to fund the
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  money, fund the company but the terms were not very attractive for us because the valuations
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  had come down significantly at that point because of the .com bust. The second consideration was the
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  fact that BlackBerry had relationships with all the major carriers around the world and so we
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  have been much more successful getting distribution for our software through BlackBerry than trying to
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  do it on our own. That ultimately worked out for us because as I said, our technology reached about
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  50 million BlackBerry users within a few years and was critical for BlackBerry because they were
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  able to not only reach large enterprises but also small businesses who could use BlackBerry because
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  of our software. Thanks for tuning in. If you found this valuable, don't forget to hit that
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  check out the links in the description to watch the full episode. See you in the next one.