Welcome to Part II of my Standout Jobs postmortem review.

If you’re new here, please check out Part I (but you can read Part II without reading Part I.)

For context, in 2010 I wrote a postmortem about Standout Jobs, which was a startup that I co-founded in 2007 focused on the HR/recruitment space. After ~13 years, I’ve decided to revisit the postmortem and each of the key points I made and see if they still hold true today. It’s been a thoroughly enjoyable, but also frightening exercise, to go back and reflect on my time as CEO of Standout Jobs. Although I had started a company before, Standout Jobs was the first one where I raised venture capital. Going from bootstrapped startup to venture-backed startup is eye-opening to the say the least.

I hope you enjoy Part II, as I go through everything I learned then, and what I’ve learned since.

Raised Too Much Money, Too Early
I raised too much money, too early for Standout Jobs (~$1.8M). We didn’t have the validation needed to justify raising the money we did. Part of the reason for this is that the founding team couldn’t build an MVP on its own. That was a mistake. If the founding team can’t put out product on its own (or with a small amount of external help from freelancers) they shouldn’t be founding a startup. We could have brought on additional co-founders, who would have been compensated primarily with equity versus cash, but we didn’t.
I had never raised venture capital before. Raising the money felt like winning. It felt like all (or most of) the justification we needed. It set us on a path of building a bigger product than we should have, and committing (falsely) to our own assumptions of what would work, without fully testing them.
Having said that, I also realized at some point in the process – especially as a result of the recession – that in order to survive we would have needed a lot more money and a lot more time. I estimated about $5 million and 3 more years. That wasn’t going to happen. But as we got deeper into the market we recognized that to punch a real hole in it would require lots and lots of capital. So while we raised too much, too early, we also weren’t in a position to raise a lot more, later when it would have made more sense.

Oh boy. Let’s break this down…

I don’t think I raised too much money, I just didn’t spend it wisely. If you can raise $1.8M and buy yourself 18+ months, do it. My mistake was not knowing how to manage the money and feeling like I had won because of the fundraise. You see this a lot—people celebrating a fundraise. I’m OK with that, it’s a big milestone, but it is most certainly not winning. Celebrate a little (🥳️) and then get back to work (🤯).

Sammy Abdullah, co-founder @ Blossom Street Ventures recently published a postmortem on a startup he invested in. Very rare to see VCs open up like this. Here’s a pretty poignant blurb from that post:

Cash inefficiency. When we invested, the company had about $60k of MRR but was burning $170k a month. It was an oversight on our part to get involved with a business that burned nearly $3 for every $1 of revenue, but we definitely learned our lesson (and learning is expensive). Today we wouldn’t look at any company burning more than $0.50 for every $1 of revenue, and generally we want to see a revenue to burn ratio better than 3:1. Many other VC have a similar mantra, so keep the burn ratio in check.

When my co-founder and I started Standout Jobs we were new to the VC-backed startup world. Definitely naive. In hindsight we probably could have built a solid MVP on our own, but with the funding everything ballooned. I’m now the co-founder of a venture studio that builds startups with co-founders (often solo founders.) So I would like to retract my statement that if the founders can’t build the first MVP they shouldn’t start a company. That’s not true. But if the founder(s) can’t build the MVP on their own, they need the right kind of help around them to make that happen quickly and cost-effectively (which I do believe a venture studio model can support.) This is 100% going to be a controversial point, and I’m fine with that. Debate away in the comments!
What I’ve learned since Standout Jobs is just how challenging fundraising can be. Once you start, it’s hard to stop. And the timing is incredibly tricky. You raise too little, you die quickly. You raise too much and you get complacent or over-spend, and you die too quickly. Unfortunately in startup-land there’s a lot of ☠️. Getting everything just right when it comes to fundraising is a crazy balancing act with a healthy dose of luck.

In the “funny not funny” category, I want to share this tweet thread from Aleksandr Volodarsky (CEO & Founder, Lemon.io) listing 10 startups that raised over $1B and failed:

Aleksandr Volodarsky 🇺🇦 @volodarik

VC funding doesn't guarantee success. Here are the 10 startups that miserably failed despite raising over $1B:

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Investor Management
I had a great group of investors. This included Montreal-based venture firms and angel investors in Montreal, New York and elsewhere. Unfortunately I didn’t manage and leverage my investors enough. From a leverage perspective, I didn’t do enough to extract value from my investors. I didn’t engage them enough for introductions to potential partners and customers. I didn’t follow through as frequently as I should have.
I think the key to successfully managing and leveraging investors is consistency. You need to be consistently knocking on their door, asking for help with specific issues, and providing them the ammunition they need to promote your startup. Investors are busy people. Venture capitalists are managing portfolios and chasing new deals. Angel investors are doing the same, and often times have their own startups they’re working on. You need to earn mindshare and attention.
On the flip side, you can’t listen to everything your investors tell you. They’re not infallible. If you disagree with them you need to step up and say so. It’s not easy, especially for first-time entrepreneurs, but it’s critical. The relationship between investor and entrepreneur isn’t parent-child. It’s partner-partner.

All of this still holds true for me today. And I’ve experienced all of this as an investor as well.

In a recent newsletter I wrote about how to send great investor updates. That certainly can help you engage more proactively with investors. And the key is to be proactive—when the 💩 is hitting the fan, it’s easy to clam up and hide. Try your best not to. Most investors are pretty damn understanding. This tweet from Damien, Global Managing Partner at OMERS Ventures is quite appropriate:

damiensteel @damiensteel

Had sobering convo this week about a company that may run out of $.This will be reality for many next yr. As investors we should never pretend to understand the pressure a founder feels when their backs are against the wall.Even if the money runs dry be there for them to the end

Big Pivots
At some point in mid-2009 it was very clear that Standout Jobs was in trouble. The recession was still holding a death grip on the economy, we were running out of cash and traction was middling at best. It was a difficult time. I don’t remember the exact order of events, but we decided to pivot in a big way. This was an “Odeo into Twitter” moment, where we were prepared to shutdown Standout Jobs as we (and everyone) knew it, and resurface with something completely different (although still relevant and emergent from our experience.) It was an exciting point and truly re-energized the founders and the team. We had some rough ideas, brainstormed furiously and put together a super-basic prototype of what we envisioned. It was a B2C play around identity, referrals and recommendations. There are a number of startups now that are playing in that space.
We pitched the concept to our Board of Directors but a decision was made to “stay the course.” I have no clue if the new idea would have generated any traction, but I should have fought harder for it. We certainly didn’t have much to lose at that point. I don’t think many startups really go through this kind of massive, transformational change. It’s scary. And inasmuch as people talk about pivoting (although this was more like a “scrap and restart completely new”), I don’t know that most entrepreneurs and investors really have the stomach for it.

“Stay the course” was not the right move, but what we were proposing didn’t make a ton of sense either. This wasn’t a pivot, it was a complete reset. We had learned some things in-market that gave us some confidence in our new idea, but we hadn’t done anywhere near enough customer discovery. We didn’t really “get out of the building” and engage potential users/customers to validate things. Once again we had the hubris to think, “We’re smart, we know this space is big, surely we can come up with something.” (It takes awhile to learn some lessons!)

New things are fun. Chasing shiny objects can be fun too (but don’t do it!) Getting energized to try something different isn’t the same as being smart about the the thing you’re looking to pursue. Using this newsletter’s namesake: we had plenty of chaos, but not a lot of focus.

Since 2010, pivoting has become a well-used (and misused) term. We know that many, many startups go through big and small pivots. Some do it properly, through genuine learning and insight, and those sometimes work. Many just wing it—sometimes those work too, but more often than not, they fail.

Good resource: Jason Shen is writing a very comprehensive series of posts about pivoting. I would encourage you to check out The Pragmatic Pivot.

I also tried a few smaller pivots. I relaunched the website and repackaged the product into a few different offerings. Also added a service layer on top of the product. The goal was to take what we had and try to find a market. I also wanted to simplify things and focus on lead generation as much as possible. These smaller pivots and market adjustments actually generated positive response, but I didn’t have the time or resources to execute on them aggressively enough.

This is more genuine pivoting — incremental changes based on learning that you believe will improve your business. I’ll be honest, I don’t remember all the pivots and experiments that we ran, but the key lesson holds true: don’t wait. Be intellectually honest when things aren’t working and act fast, through rigorous experimentation (and pivoting.) Note: I’ll most likely write more about my experience with pivoting in the future.

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Bullshit & Politics
I’m not a fan of bullshit or politics, but unfortunately these are both realities when running a startup – particularly one that’s not performing well. You have to be prepared for it. I’d recommend having one or two very strong outside advisors – experienced entrepreneurs that have “been there, done that” – to lean on when you get to this stage.

If you asked me now, “What was the bullshit and politics about?” Honestly, I don’t completely remember. They say time heals all wounds.

But the recommendation is still sound. Find external advisors or mentors that can support you above all else. You’re looking for people that don’t have a vested interest in your company, and are there simply because they want to help. Building a startup, even with co-founders, can be a lonely and difficult experience—find a support group.

Founders should also bring on strategic advisors, people that can legitimately help you move things forward. Not big name “celebrity advisors” or domain experts/industry gurus for the sake of it. Not well-connected people that promise lots of intros. (Both are valid if they legitimately help, but I’ve seen lots of disappointments here too.) Note: I’ll write a future post on advisors.

Here’s a great thread from Stevie Cline about her experience with a failed startup. A great deal of the challenges expressed are around founder conflict (which is real, and happens pretty much all the time.)

stevieis… @steviemctweets

Last week I did a massive deconstruction of my last start-up to dig deep on what I could have done differently. I kept going back to myself and my co-founders because I think to be a good investor you need to recognize how much the founders impact the success of a company.

Perseverance
With all of the mistakes I made and all the difficulties faced by Standout Jobs, I’m still pleased that we (and I) persevered. From the fall of 2009 until the acquisition closed, Standout Jobs was really just me looking to get a deal done. Sort of a “last man standing.” Ultimately it was too little, too late, but I’m still glad I went through it.
Having said that, I think founders have to be very cognizant of their startup’s lifecycle. When it’s time, put a bullet in it and move on. Whenever I had the “should we kill it?” conversation with my co-founders, investors or Board of Directors I always felt that I could extract more value. And I wanted to try. The experience was worthwhile.

I don’t want to sugarcoat this experience. For anyone that’s shut down a startup, it’s fucking brutal. You feel like a failure. You think others are looking at you weird. You’re probably in the hole financially, with real challenges ahead. It’s a shitty, shitty experience. We should not celebrate failure. We should talk about it more, and learn from it, but not diminish how brutal it can be.

In the end, I was literally in an empty office (having let go all the employees), by myself, in the dark (why bother having the lights on, I guess), staring at a computer screen trying to figure out what to do. If starting a company is a lonely experience, killing one is even lonelier.

Two key things for me, and they’re somewhat counter to each other:

Your job as a founder is to create value. If you cut and run too early and give up, you’re not pushing the opportunity to create value far enough. When everyone had written Standout Jobs and me off, I kept going. I ended up selling the assets and returning “cents on the dollar.” My investors lost most of their money. But some of them recognized the effort I put in right until the end. I think the way Standout Jobs ended had a positive impact on my reputation (to some degree) and encouraged people to keep working with me, and I appreciated that a great deal. But…
When it’s time to shut things down, shut ‘em down. Founders have a hard time calling it, and they end up working on zombie startups that have almost no chance of being resurrected. Your investors have likely written off the investment already. They’re in the portfolio game, and they expect to lose (a lot), so your loss hurts a lot less to them than you might realize or feel (unless you’re FTX, but even then Sequoia is like, “meh, no biggie.”)

So how do you know when it’s time to call it?

It’s an incredibly tough question to answer. Founders need to be as intellectually honest as possible with how things are going, while maintaining a reality distortion field around themselves (to buffer against naysayers and the constant ups and downs they’ll face.) Unfortunately too many founders live too comfortably inside their reality distortion field…and by the time they hit the wall, crash and die, it’s too late.

I found this blurb from Danny Roosevelt’s postmortem on Rate That Meeting helpful:

We offered vitamins instead of painkillers. When software is presented as a solution to a problem, users want a one-click fix. But improving meetings at work takes more than a couple clicks. The long-term solution requires buy-in from upper management and continuous self-reflection from the entire organization. Technology can certainly help here, but there’s no silver bullet — this took us longer to realize than it should have.
As a result, we had a lot of customers who liked Rate That Meeting but very few who loved it.

And this:

#1 — Prioritize finding conviction above everything else
Conviction should act as the guiding star during the early stages of product development. There were times when we lost sight of securing conviction in our product as our top priority, and that was a mistake.
This lapse in proper prioritization drove us to build features we were excited about but that didn’t move us closer to proving our hypotheses or finding product market fit.
We got caught in the trap of thinking that by signing up new users we’d be able to learn more about how they’re using the product, instead of staying focused on delighting our existing customers and turning them into passionate users — focusing on both at the same time didn’t work.

Gary Darna has a great perspective on this topic as well:

Gary Darna @garydarna

On January 12, 2018 my startup failed after 5 years and $2.1 million raised. Sadly, many founders will experience this in 2023. It's awful, but there's one last decision for a founder to make at the end of a company's journey. A thread on how to fail with integrity and respect:

What came after Standout Jobs?

After Standout Jobs, I joined three other people and founded Year One Labs. We were an incredibly early stage accelerator leveraging Lean Startup methodology (as it was just emerging with Eric Ries’ book.) We called it Year One Labs because (a) we were focused on the first year of a startup’s existence; and (b) it was a 1-year experiment. We made 5 investments (all of which happened to be consumer businesses), three of which raised follow-on capital, one of which was acquired (Localmind was acquired by Airbnb), and one that actually still exists.

Truthfully, after Standout Jobs, I’v never wanted to be a CEO again. It took me until 2016 to co-found another startup (Highline Beta) and I’m still not the CEO. The failure of Standout Jobs had a deep impact on me.

I hope this review of my original postmortem, the lessons learned, and some of what I’ve learned since will help you on your startup journey.

If you found this helpful, please consider sharing this post with others. Thank you!

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Startup failure stories worth reading:

Here’s a quick list of startup failure stories (many of which are linked in this post and in Part I):

Failory - 200+ interviews with founders sharing their startup failure (and success stories) by Nico Cerdeira
Autopsy of a death in our portfolio by Sammy Abdullah
Success and Failure at Pebble by Eric Migicovsky
Play by your own rules (Gowalla’s failure) by Josh Williams
Lessons learned from a failed startup by Danny Roosevelt
Postmortem of a Venture-backed startup by Brett Martin
Everything Must Go: The Inside Story of a Startup’s Sudden, Agonizing Collapse by Mark Matousek (registration required)
Failure is just a data point by Jordan Dutchak
Kite is saying farewell by Adam Smith

And finally, a great Twitter thread from Yin Wu, founder at Pulley, who provides advice on how to shut down a company:

Yin Wu @yinyinwu

There's a lot of advice on how to scale a startup... But there's little on how to shut down a company when things aren't working. Here are the tactics for dissolving a startup, and what to tell investors to get them to fund your next bet 👇

I want to thank a number of people for sharing stories with me and links to relevant startup postmortems: Darby Sieben, Anuj Adhiya, Alex Palmer, Gary Lin, Decoder Ventures.

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