The lesson here is that the worst time to raise money is when you need it. Your answer to "What will happen if this round doesn't close?" should be "we'll keep growing at 20% a month instead of 50% a month if we got funding" rather than "we need this round to come through to keep the company alive".
> Then in the fall of 2011 we failed to close a major financing round from the US. We basically had a deal with a top-tier San Francisco based VC. Our guys flew over to meet them at least two times. We (as a company) spent a lot of time on that financing round. We thought we would be able to close the deal, but something totally different happened. They stopped all communication with us. Suddenly. No explanations. No apologies. Nothing. We were in trouble.
Stuff like this is why I'm thankful for YC. Understanding the mechanics of raising a round has been incredibly helpful when evaluating what's actually going on. 2009 me would have thought two meetings with a VC was basically "a deal", 2012 me is much more capable of realistically evaluating progress towards a term sheet.
I think that's the kind of lesson one should learn fairly quickly if you talk to experienced entrepreneurs. I was at a panel fairly recently where literally every single panel member (including a VC guy) mentioned you should never make the mistake of thinking that talks, no matter how advanced, with a VC mean a deal is forthcoming, and that you should always be continuing to look for other options until the pen hits the paper. You don't really need something like YC for that lesson; just talk to experienced entrepreneurs or other VCs (assuming you have some contacts with either camp).
First thing, awesome job going out and launching, and trying things. It's not easy, so congrats on getting the experience under your belt :)
So a few other things. You keep on stating the reason for the service closing down was lack of funding / designer / focus / marketing money / etc. The real reason your service went down was lack of product / market fit.
Your products and pivots got stuck in a zombieland. You didn't hit some crazy traction that shows that you're onto something big. But you also didn't fail so hard that it is obvious that you need to kill it immediately.
You also got some misleading signals from business partners/advisors, and some early interest from investors. Funding events, getting partnerships with the NBA and soccer teams, advisors are all multipliers that help you if you have solid user engagement. So when you have a viral coefficient greater than 1.0, you'll actually get huge bumps by having all these user acquisition channels available to you when you have partners like the NBA etc. Inherently your product is social, and I'm surprised to hear that lack of marketing money is a reason you list for shutting down.
Measuring product / market fit used to seem arbitrary to me. One of the most helpful things I've heard is the "very disappointed" framework that Sean Ellis uses. The idea is that if 20% of some user group would be very disappointed if they couldn't use your service any more, then you've nailed it. You're onto the next phase of scaling out and reaching out to more people like that core user group. If you're not at 20%, then keep tweaking different pitches and user groups and refining your product until you do.
One of the most helpful things I've heard is the "very disappointed" framework that Sean Ellis uses. The idea is that if 20% of some user group would be very disappointed if they couldn't use your service any more, then you've nailed it.
I disagree. The biggest flaw with that survey is that it doesn't include pricing. Just because someone says they'd be "very disappointed" if your product disappeared does NOT allow you to conclude that they'd be willing to pay for it, let alone at a profitable price point.
Their product is social video. Their biggest problem was getting people to use the product and getting them to come back, not profitability. If they had users, then they could deal with monetization in the same way youtube and vimeo and other consumer video properties monetize.
I ban the word "pivot" from my startup. Seriously. It costs $10 to say that word.
Next, you and many others interpret "Lean Startup" wrong. It's not a race to launch something, it's a race to a GREAT PRODUCT. And "lean" certainly has nothing to do with how much money you don't have.
As has been mentioned here, your product failed, and your management failed the product. It had nothing to do with finding money. Sorry to be harsh (seriously), but these are important distinctions.
Is it common in the valley for VC discussions to just go stone cold of they for some reason they decide they no longer are interested? What sort of courtesy do most large VC's have at the we're no longer into you point?
Really depends on the VC - some of them are very courteous, others downright psychopathic - but radio silence is not unusual. As much practice as most VCs have had saying no it can still be hard, particularly after lengthy discussions, so sometimes they don't say anything.
I agree pbiggar. This rule applies to any business transaction. "No" is terminal, "silence" is not. Why say "no" and terminate a discussion when they can drag it on for as long as they want by saying nothing? I see it all the time in normal everyday business.
I think it varies depending on the VC firm, but the impression I've gotten (I haven't actually gotten to the VC round with my company, so this is all second hand from talking with VCs and other entrepreneurs) is that the radio silence scenario is far from atypical.
It's a real shame to hear this story. I met Toni back in 2010 at a mobile event called MEX and thought the concept was super exciting. It's a shame this happened... I hope the team go on to do bigger and better things.
Interesting, just saw another startup with the app version of this, AppTheGame, demo'ed recently. Will be interesting to see if SV & mobile first can do a better job than Europe & web first.
I think the capacity is there, but we might need to change our media-consumption / media-creation habits to see the small players too. In other words: it is a discovery problem.
