Lessons Learned from a Software Developer’s First Attempt at Launching a Startup

This is a guest article by Karl Falconer. Karl is a software engineer with more than 10 years of experience who specializes in agile web development and web services integrations. He authors a software development blog at http://www.falconerdevelopment.com/.

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There comes a time in a software developer’s career where they reach a crossroads and ask themselves, “What next?  What should I do next to keep my edge?”

When I arrived at this crossroads, I did not feel challenged by the software projects I was working on and began seeking something new. After much internal debate, I made the decision to step out of my comfort zone and shift my from the hard skills of software development to include more soft skills like marketing, and business development, with the ultimate goal of starting a software company.

Throughout 2010, I studied the ins and outs of launching a product by reading books and blogs and talking with friends and colleagues. I paid particular attention to articles about failure, so I would not make the same mistakes with my own product. In midsummer of 2010, I began work on my first product, which would later become MicroMaximus.

The Product
MicroMaximus was born out of my own frustrations with my business checking accounts and the minimum number of monthly debit card transactions. After searching the web, I found there was no existing software product I could use to automate these transactions. I quickly realized there was a larger potential market with a different type of banking product called a Reward Checking Account (RCA).

RCA’s are special checking accounts that offer high-interest yields on a maximum balance if you are able to meet a set of monthly requirements. One such requirement was to use the RCA’s attached debit card a minimum number of times, typically 10-15 transactions. They were typically offered by community banks as a way to compete with larger national banks.

The business model was to offer consumers with RCA’s an alternative to meeting their monthly transaction requirements that could be scheduled for a small amount of money, $1. If MicroMaximus was able to generate revenue of $1,000/mo it would be a huge success in my eyes.

Since I already had an interest in Personal Finance, I was very familiar with many of the blogs around the topic, which is where I first learned of RCA’s years earlier. These blogs provided me a starting point in researching my product idea.

I set up a Google Alerts for terms relating to my product. The frequency of alerts showed me how “hot” this topic was, and allowed me to reach out to both bloggers and commenters about the product, most of whom provided very positive feedback.

I also found that the company, BancVue, which markets Reward Checking Accounts to banks was on the 2010 Inc 500 list with an impressive 2170% 3-year growth. Armed with what I believed was product validation, I set out to do what I do best, build software.

 

Lesson #1: Marketing Is More Than Just Making Customer Aware of Your Product
Like most of the advice I’ve read, building the product was the easy part. Marketing was the real challenge. Although I did set up a landing page to collect e-mails, in my rush to actually launch MicroMaximus the pre-launch landing page was only available for a few weeks prior to the launch.

After launching, I reached out to personal finance bloggers with the following message:

Greetings,

I am reaching out today because I think you and your readers would be interested in finding out about a service I’ve recently launched called MicroMaximus. It is specifically designed for reward checking account holders, or those who are interested in finding about reward checking accounts and maximizing their savings. I created it out of my interest and passion in personal finance and my experience and skill in programming and development. The website is www.micromaximus.com.

Here is a short blurb about MicroMaximus and its benefits:

MicroMaximus is the only online scheduling system that puts the power back in your hands. You can schedule your 10 debit card transactions for the month – eliminating the #1 account holder complaint – and ensure you get the highest return month after month. No long-term plan, no high fees, no hassle.

If your readers have reward checking accounts or are interested in personal finance, I think they will benefit from this. If you agree and would like more information, here are some ways we could work together:

  • Review: I can send you whatever information you need to write a product review
  • Guest blogging; I can provide you with a guest blog post
  • Interview: I can provide you with an interview on MicroMaxiums and why it was created

If you are interested in these options or have any other ideas, please don’t hesitate to reach out. Thank you for your time and consideration in helping me spread the word about MicroMaximus. Please let me know what questions or comments you have and I look forward to hearing back from you.


Karl
Founder, MicroMaximus
Email: karl@micromaximus.com
Twitter: http://twitter.com/micromaximus
Website: http://www.micromaximus.com/

I was optimistic this approach would provide MicroMaximus with exposure to its target market, however, the solicitations yielded no positive feedback. [Editor’s note: Approaching bloggers cold these days is not a viable marketing strategy.]

Next, I started with banner ads on six different sites, all with respectable amount of traffic and site rankings. The ad campaign ran for several months with only a few click-throughs, and even fewer sign ups.

Despite the poorly performing banner ads, I decided to continue my marketing efforts with afew sponsored blog posts. I made arrangements with several bloggers to use the software and write a review of MicroMaximus. Here are some of the reviews:

The reviews were well received on their respective blogs and while this approach did help present the product to many targeted customers, and continues to have a positive impact on my SEO, this strategy did not result in many new customers. Simply put, MicroMaximus didn’t solve a problem many people were looking to have solved.

Lesson #2: Reduce External Dependencies
The business case of MicroMaximus has a few flaws that I was never able to overcome.

Although I never specifically targeted people without Reward Checking Accounts, I could see a demand from people who would like to use these accounts but were put off by the monthly transaction requirements. Even though I had people in this target market tell me that a service like MicroMaximus would be very useful, no one ever signed up. Opening a new checking account and transferring funds is not a simple task and could take several days to accomplish, so many people would never get past this part.

Even today, RCA accounts offer great interest rates when compared with alternative investments. RCA interest rates have been steadily declining over the past 3 years, however, driving some people to close their accounts. The business model of MicroMaximus depended on high interest rates that would entice consumers to opt for RCA’s over other types of liquid investments.

I pictured my market as moderate net-worth individuals who turned to RCA’s as an alternative to previous high-yield accounts like CD’s and online savings. It seems as though most of these people stayed away from RCA’s — most likely because of the monthly requirements.

Lesson #3: Create a Painfully Simple Value Proposition
I did my best to craft the value proposition in a clear, concise manner, however I think many people still struggled to see the connection of how using MicroMaximus (spending money) actually earned them more money.

It seems that no matter how the copy was written, most customers saw the value proposition as “I spend a dollar with you, and get nothing in return.” In reality, customers had no reason to trust that MicroMaximus was offering a legitimate service that would put money in their pocket.

I also made the mistake of assuming my customers would understand the service and see the value of MicroMaximus if only they were made aware of the product. What I didn’t consider was how difficult it would be to market a product that disrupts a customer’s current behavior of reaching their monthly requirements. It didn’t matter than MicroMaximus offered a more cost effective solution.

Conclusion
While the financial goals of MicroMaximus were not realized, the launch did succeed in providing me valuable experience, lessons that I believe will allow me to succeed in the future. I learned the importance of building strong relationships: personal, professional, online/offline, and customer relationships.

With this network in place, there are resources for mentorship, product feedback and motivation, all of which will keep you focused and on a better track to success. Even as a solo-founder I depend on other people to help me create a successful product.

 

Launching a startup is risky — being the first to create a niche product is a huge risk. In the future I intend to focus on mitigating that risk by allowing other businesses with capital to validate that a market exists for my software. Knowing who your competitors are will enable me to build off their success and further reduce my risk.

It is rare to hit a home run with your first product, and the greatest lesson I’ve taken away from MicroMaximus is to learn from the mistakes I made, and make another attempt at launching a startup.

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15 comments ↓

#1 Ereid Gjergji on 08.24.11 at 10:42 am

It is amazing the amount of valuable information I am getting by reading to all your points on this topic, thank you so much.
I am launching a start-up as well http://www.drungli.com
We are currently doing most of the things you already did: reading enormous amounts of blogposts applying for start-up competitions and conferences.
Learning everyday something new and useful.
And the best result so far is what direction we want to go and we have ideas and work enough for the coming years.
Thank for sharing.
Wish you all best with MicroMaximus

#2 Ray on 08.24.11 at 12:34 pm

Hi Karl,

Great post – what’s your thought on micropayments tally up to a lump sum donation to charity of RCA holder’s choice bi/annually?

#3 Adam on 08.24.11 at 12:47 pm

Marketing has always been my weakness. As a developer, building the actual application is easy, getting people to use it is hard.

Interacting with people in person is an amazing way to spread the word. When you try to contact people via email, blog comments, etc it just doesn’t have the same affect as when you talk with them in person.

#4 Andrei on 08.24.11 at 1:00 pm

Perhaps a simple widget that actively shows users how much money they’d make could help.

I’m thinking asking users to enter a checking balance, their RCA interest rate (you could give some typical numbers here), and the minimum amount of payments. Then you’d spit out how much they’d make per year, compared to what they’d spend with your service.

That way, they’d get the point quickly. There’s nothing more visceral than showing users the dollar amount they’d save (see insurance companies’ ads).

#5 Greg Finzer on 08.24.11 at 1:10 pm

Karl, don’t beat yourself up too bad. Remember the Paredo Principle; 80% of the things that you try in business will fail, 20% of the things that you try will work. If you look at my site, you will see that I have many wonderful useful products. 20% of the products bring in 80% of the money. Can you guess which two products people actually buy?

#6 senthil on 08.24.11 at 2:27 pm

@Greg, My guesses are .NET email validation and .NET FTP libraries ?? I would actually be very interested in knowing what your top sellers are?

#7 Greg Finzer on 08.24.11 at 3:18 pm

@senthil, 80% of the profit from the business comes from AccessDiff and the .NET SFTP Library. Everything else makes up the remaining 20%. The email validation library sells about twice per YEAR. The Unused Stored Procedures tool sells about once every two YEARS. 🙂

#8 Karl @ Falconer Development on 08.24.11 at 4:10 pm

Thank you all for the comments, and feedback. @Andrei, I that is a great idea. I do have a spreadsheet version of what you are suggesting that I use to evaluate RCA programs featured on the blog.

@ray, This could be another approach. This would involve me making the transactions, and holding the funds in my account until they are donated, doable, but gaining users trust would be a hurdle

#9 Chad on 08.24.11 at 10:46 pm

Hope this is helpful, it is meant to be constructive. This is how I would have done this site:

#3 is what stands out to me the most to me – if this were my site the landing page copy would have a big calculator simply communicating:

$25k bank balance
1) Normal rate = $boo
2) Reward rate with MicroMaximus = $yay

Annualize the numbers then say “Make $variance more by using MicroMaximus” as your call to action.

There is way too much text and copy on your site. This is the simplest possible business model ever, communicate it as such.

#10 Was this guy fastlane or did he just take a wrong turn? on 08.25.11 at 7:34 am

[…] this guy fastlane or did he just take a wrong turn? Lessons Learned from a Software Developer’s First Attempt at Launching a Startup | Software by… Conclusion While the financial goals of MicroMaximus were not realized, the launch did […]

#11 John on 08.25.11 at 10:49 am

Hi Karl, i really appreciate that you have shared with us where you see and feel that you made mistakes. You have though gained so much understanding and clearly this will help you with your next startup.

I wish you the best for the next one, im glad that plenty of people are willing to share with others this type of information, its nice reading about successes, but in our very real world we know that there are plenty that dont make it first time around.

Wishing you future success.

#12 Ades on 08.25.11 at 11:04 am

Thanks for sharing your experience, it’s very much same with what I am experiencing at the moment. I have newly launched a startup called Bloapp (http://www.bloapp.com) and it’s been challenging to market the product to say the least.

#13 links for 2011-08-25 « that dismal science on 08.25.11 at 3:34 pm

[…] Lessons Learned from a Software Developer’s First Attempt at Launching a Startup (tags: startup entrepreneurship marketing) […]

#14 lakshendra on 08.30.11 at 5:39 am

Hi karl software development is a good pashion it’s very much same with what I am experiencing at the moment.

#15 Ted on 09.03.11 at 12:43 am

@ Chad – I think you are spot on with your copy suggestions – although I think it’s going to be hard to get people to sign up for a service like this without first established some credibility – I think people are reluctant to give out any bank information or anything along those lines to a website/ brand they’re not familiar with.

@ Karl – I think it’s easy for a developer to overlook how important and hard the marketing side of things can actually be – just like a marketer may underestimate the development side. I get a lot of product review pitches for one of my blogs and I almost always delete anything that doesn’t start out by addressing me by my name. I don’t like responding to automated or template e-mails- it may have worked a lot better if you used a template e-mail but customize each e-mail to the person you’re trying to reach.

What about repositioning the product as a white label product for banks?