95% of the World’s developers don’t have the skills or experience to work for a Series A (or later) company.
Most ideas (even the good ones) don’t make for sustainable businesses.
Like “Dave’s” (not his real name) who sat across from me at a cafe in Kyiv, nearly falling out of his chair with excitement. He was a very fit, middle-aged London banker who had an idea for an iOS app and had hired an outsourcing firm in Ukraine.
$150,000 into his yet-to-be-launched app, he kept saying “I’m certain.”
It doesn’t occur to many first-time product founders that success in this game is all about the team you have. Your ideas are for sh*t.
But here’s the dirty truth outsourcers don’t want the public to know:
Outsourcing is a grueling business that relies on tier B talent managing tier C talent, with 10% to 25% margins, and that doesn’t account for the constant churn as developers leave you for better-paying positions.
Almost every outsourcer I know is working on their own product, hoping one day to leave outsourcing. That’s why 99%+ of apps developed by outsourcers fail.
If outsourcers could build successful products, they wouldn’t be outsourcers.
Dave became upset when, instead of joining in his excitement, I told him “Dave, you’re a great guy but if I could short startups, you’d be first.”
I really got to work on my tact.
However, a few months later Dave sent me a Facebook message with the all too common, “John, I should’ve listened to you… hey can you meet up for coffee?”
What About Marketplaces That Attract Top Talent?
Marketplaces that allow anyone (like Dave) to become a customer do not attract top coders.
Why would top developers be looking to work for someone’s side-hustle idea when elite coders can make 3.5x more (with benefits) working for a VC-funded startup or an Amazon (which hires coders globally and lets most devs work from home)?
Nothing about the claims of online marketplaces (“Hire ex-Googlers to work!”) make logical sense.
Consistent Mini-Pivots Means Killing The Puppy. Often.
Too often founders or PMs hold onto an idea because they’re squeezing it slowly to death like a newly adopted puppy instead of quickly finding a new puppy that actually has product market fit.
Call it luck or psychotic determination, but both of my startups have had profitable exits and nearly all of my clients who I’ve been a growth advisor to have had: an IPO, a Series A investment, or been acquired.
Who knew this website I designed for my first startup in 2004 would become a $Billion company?
When I think of why “luck” has been on my side, my belief is that it has to do with one core habit I’ve developed with my colleagues over two decades of building, advising and investing in new software projects that I call the CMP model:
Every successful project is a product of Consistent Mini-Pivots based on a relentless collection of data.
Too often I hear younger founders say something like, “We failed because of _______ but we learned a lot!”
I don’t believe failure is anything to celebrate. And most of the time I’ve seen that it could’ve been avoided with CMP.
At my first startup Five9 we were the David versus multiple Goliaths, so we had to come up with a 10x better product with a 3x better marketing strategy using the CMP model with our engineers and marketer.
Based on CMP grew from $0 to $10 Million in annual recurring revenues within 24 months. $20 Million in just 35 months. Quite frankly it felt easy, it was fun (while our competitors used words like “grinding,” to describe their lives).
It just happens that CMP is the exact opposite of how outsourcers operate profitably – they have to give you the cheapest developers for the highest price taking the most amount of shortcuts.
At DoctorBase (our second startup) we beat our direct competitor nearly 3:1 in sales even though they had raised 30x more than us. 30. X.
A very, very famous angel investor passed on investing in DoctorBase because he said “HealthXX has raised so much money we feel they will run away with the market.”
I printed his email and taped it to my laptop.
I removed it when we got acquired. The CEO of HealthXX and much of the founding management team quit.
They were in love with their idea, heck they had raised so much money from so many well-known VCs that they may have even been in love with themselves.
We were in love with the act of searching for product market fit.
In 2009 my buddy Mischa and I wanted to make a ding in the healthcare universe. We were both pretty fed up with the status quo for consumer health, and felt like we could build a communications app that made it much easier for doctors and their patients to communicate digitally.
We learned some really harsh lessons about the American healthcare system. Namely, some of the powers-at-be who want to maintain the status quo can make Russian mobsters look like pussies.
If you work for Russian organized crime business, please know that I have the highest respect for your craft – no insult intended.
DoctorBase was also a lesson in competing with better-funded competitors as a bootstrapped startup by sticking to your passion for building the best damn product with superior marketing tactics – and ignoring the VC hype machine.
Our closest competitor HealthXXXX had raised 30x more money than we did, but at the time of our acquisition we were a totally employee-controlled company and was doing over triple their revenues with nominal churn.
VCs had passed on us because, well HealthXXXX had raised much more money and (according to their formulas of prediction) that meant they were going to win.
A very famous VC told us that “HealthXXXX is going to run away with the market.” I printed out his email and taped it to my desk so I could stare at it every Saturday when I showed up to the office.
We eventually raised $1 Million via Angelist only after we were profitable (as a cash cushion) and at a healthy valuation that kept us founders in total control of the company.
When other digital health founders ask me how we did it, the short answer is that we approached our startup differently than our competitors – we treated software development and product marketing as the same discipline.
Many folks assume my first startup Five9 was more important to me because it became a much larger company, but in truth my time at DoctorBase were the best five years of my life (even better than college!). I think it was because we all felt like we were on a mission, and the team was small enough to feel like family.
At the time we sold the company we had about 18,000 doctors communicating electronically with nearly 9 million American patients. We were small, but we were a badass gang. I mean, not as bad as Russian mobsters, but still.
My core team and I set up a [software development + product marketing] agency in Kiev, Ukraine. If you have a digital health project in mind, drop us a line. Or you can email me at john@jetbridge.com
