Earlier this year, Kristo Ovaska, Varun Singh and I decided to work on a startup together. It didn’t work, but for the right reasons. Here’s the tale of a failed “lean startup”.

How it started

Funrank started from a simple wish: we were three friends who wanted to work on something exciting together. We have been friends for a while, and share deep, mutual respect. Kristo is a charismatic go-getter who’s been working hard on changing Finland’s ecosystem. Varun is super smart, has a brilliant track record in mobile development, with several patents under his name, and I’ve done rather well as a founder and mentor in the region. The three of us are able to communicate well, and are able to  argue without hating each other, so we were off for a good start!  We decided to look for an idea that would be fun to solve, but could have some algorithm work involved too. We came up with Funrank during a simple discussion: it was a really hot Summer in Finland, both Varun and I wanted to go to the beach on that one Sunday, but we didn’t call each other because we didn’t feel like calling everyone we knew or post that as a Facebook status message. So we figured it’d be a good idea to create a service where you could find others who’d like to do this, or join in what others are doing.

Validation

It turned out that people in Finland are pretty shy (!), and that they don’t bother to ask their friends what might be fun to go and do. If they do, it’s always the same thing: drinks / restaurant / movie. People who wanted to do something more original (karaoke, paintball, karting…) couldn’t find friends who were interested. So we decided to build a service that would show you what’s going on near you. But we didn’t want to have *everything* in there, because we thought that if people could post anything, it would result in too much junk.

Customer development

We spoke with both Tina Aspiala (Eat.fi) and Teemu Kurppa (Jaiku) who recommended focusing on curated content, in order to make sure that we have quality in place.  It doesn’t make sense to have 500 recommendations when only 5 good ones matter. This meant going to the event organizers. Kristo did a great job in  reaching out. We managed to get partnerships with Megazone (laser tag), Jolly Dragon (the most active organizer of fun events in the Helsinki region), Tiketti (a big local ticketing service) and SK Ravintolat (a huge chain of  night clubs). We had an agreement to list their events with Funrank, and eventually get a commission from each user that came in through us. We essentially had a mixture between an affiliate model and the Groupon model. An advertising model wouldn’t work, because people would need a service like this only a few times a week.

Competitors

We were sure that there was a need for this, and there was no major player yet. What worried us was that a lot of people were thinking of solving similar problems, all around the world. Goby, Foound, A Day’s Outing, and of course Upcoming, Yelp and Plancast are already active. There was also the possibility that Facebook would start such a feature. Indirect competitors were group messaging apps such as GroupMe or Beluga. Just in Finland, we had three competitors: Ditto (recently launched by Jyri Engerstrom of Jaiku fame, check it out and his lessons learned from launching), Rele and GoAct. We didn’t see this plethora of competitors as something to worry about too much though. We were confident we could execute a good site, build partnerships and do our thing, so we saw this as validation.

Development

As we started to build out,  We managed to secure funding from Tuli, which enabled us to hire an external programmer.  This was a big help because Varun is not a frontend coder, and he was busy helping put the content and brainstorm. We ended up getting Mooncascade to do the development. I was pretty happy, because we managed to deliver a working prototype in 2 weeks. So far, we had gotten in the Aalto Venture Garage Bootcamp, secured funding, good partnerships, and executed the product. We did a test event at Megazone, where we were able to get 30 people to attend on a Thursday night, when normally only for or five would. We thought this to be an impressive first attempt. We then launched the service officially during the Aaltovg Bootcamp, and saw more traction and people attending events.

Going international

Unfortunately, We started to realize this wouldn’t work when we went to Silicon Valley. So far, we considered that we had pretty much proven that we could make this work in Finland, given the right marketing. The problem was that doing it there meant having a business that would make  around5000-10000 euros per month. Hardly a growth business. So we’d have to go do other markets as well. We mistakenly thought Silicon Valley would be the best place.  But, didn’t need the service. They said that for fun, they’d simply attend events, or look at Yelp or Plancast, or simply shoot a message on Twitter. That was quite strange to us, but in retrospect it made sense: Yelp does much more than Eat.fi, and early adopters are already using Plancast (and/or Facebook groups), so our offering was not different enough for them to get it.

No market fit

The other problem is that working on a curated model was fine in Helsinki, but not in San Francisco. It would have taken a year to build the relationship with everyone, or VC funding with a considerable sales team. The alternative was to switch to a user generated content, or to focus on a specific vertical. For example, movies, happy hours, and sports. We found both ideas underwhelming, because we didn’t believe those would make interesting scalable cases that would turn into a business.  This also meant that we weren’t able to agree on the next steps needed. Essentially, in order to get to the US market, we would have had to dump the old product and start a new one. We were fine with that, but we weren’t sure which path to take. Instead of doing customer development and iterating, we weren’t able to deliver a version 2.

Lessons learned

1) Location, location, location. Get out of Finland (or your home market). and get to your target market as fast as you can. It’s easy to be successful at home, but none of the progress you make there validates what you want to do in the long run.

2) Have a balanced team early on. We were able to execute partnerships and to network very well, but we couldn’t ensure long term progress, because we didn’t have a full-time, in-house coder. We didn’t spend enough time finding that person. You’ll notice that seed accelerators such as Y-Combinator really stress the importance of hackers in the team.

3) We were surprised by how smoothly the public funding process went. The Tuli program that funded us was straightforward, helped us bootstrap, and didn’t object to our goals of pushing to the US market. There was no interference or unrealistic milestones. In addition, being in a seed accelerator was a good way to kick our butts and make sure we delivered.

4) Communication, especially in the learning stage, is everything. All of us had outside commitments that would take priority over this. We were not able to establish an ongoing, reliable channel between us and also externally with the users.

When it was all said and done, we agreed to pull the plug. In the end, we managed to create a product quickly, test it, realize it wouldn’t scale as such and decided to kill it.  Even though 15,000 Euros in public funding were spent in the process, we believe we’ve learned enough for it to be worth it!