Movers & Shakers
Finding the Key Risk in Your Product
Hiten Shah , Co-Founder and CEO Kissmetrics
Hiten Shah has been a good friend of ours for awhile now so it was good to have him drop by ZURB HQ for our latest soapbox. This was the first time that we had the opportunity to sit down and chew the fat on the various challenges he's faced over the years, from his early days to hitting it big with KISSmetrics.
Hiten was very candid about the failures that he and his partner Neil Patel had before KISSmetrics, such as burning through $1 million dollars creating a web-hosting site that never saw the light of day. He shared with us the missteps they took in developing that product and why they ended up wasting thousands upon thousands of dollars on products that didn't pan out. He also told us why figuring out the riskiest assumption in your startup or product can help save you from wasting a lot of time and money on something that'll only crash and burn.
Feel free to listen to the podcast below as you read through some of the highlights of the event below.
Checking Your Blind Spot
Before Hiten and Neil struck gold with KISSmetrics and Crazy Egg, they had ACS, a consultation firm, which ventured into products. They ended up building some 20 of them. The products didn't really pan out and fizzled out before they ever reached the hands of customers.
One of their earliest efforts was a podcasting advertising network. However, they failed to understand anything about advertisers and their needs. In other words, they didn't really grok the business they were trying to cater to — something they didn't realize until it was too late. Something that happens all too often to other business ventures.
There is a misinformation or a blind spot that you have that you don't actually realize.
Advertisers, Hiten said, weren't willing to shift from paying for radio spots to paying for ads attached to a podcast. The idea just wasn't a viable business model at the end of the day, said Hiten.
With their attempt at a social media tracker in about 2005, called Buzztracker, the failure was a different. Fear had gotten the better of them. As Hiten put it:
With that one, we were afraid to charge people. We made it free.
Other businesses were able to charge and thrive because of it, some picked up by Salesforce, said Hiten. But Hiten admits that the problems they faced with their early product attempts had to do with their approach.
The market just wasn't ready and we didn't really do our homework in understanding the user.
Pouring Money Into A Dream That Wasn't A Reality
Hiten and Neil took a huge hit when it came to their idea for a web-hosting site. They spent a $1 million on the idea before giving it up.
[We] kept pouring money into it because we were chasing a dream that wasn't a reality and never would be for us.
Along the way they made a lot of bad decisions and didn't really have strong leadership focused on the idea because they were focused on their consulting business, which was paying the bills.
Once again, they had a blindside when it came to the web-hosting marketplace. Or as Hiten put it:
"Like the other ideas, there was something fundamental about the marketplace that we didn't understand. Like we didn't know what our opportunities should be and could because we really didn't go figure out what the opportunity is in hosting."
They weren't really focused, casting too wide a net when it came to the hosting market.
We sorta blindly approached the problem and didn't really focus on a single customer paying. Or a problem that existed. And when you are in a really crowded market like that and you really need to solve a — you always need to solve a problem, but you really need to find a deep problem and an opportunity.
In other words, they didn't know who exactly would use the product and what the exact problem they'd be solving. Hiten said that a lot of other companies, such as Slicehost, ended up being successful because they focused on a particular niche and customer. Unlike Hiten and Neil, those other companies found an opportunity in a crowded market.
Going Lean and Seeing Patterns
Eventually, Hiten turned to Eric Ries' "The Lean Startup" and applied that philosophy to other ventures, such as KISSmetrics and Crazy Egg. That book along with other books and talking with fellow entrepreneurs allowed Hiten to see the patterns in his failures. There were also patterns in his success. When it came to hitting gold with KISSmetrics and Crazy Egg, here's what Hiten said:
You can call it a turnaround, but it's more so that if you try enough things, enough times something will work.
But also because you've tried so much, you begin to see the patterns in what you've done.
Because you've failed so much you have this inherent understanding of what you did wrong, but there's usually a pattern and the pattern is actually you didn't do the right thing at the right time.
Finding the Key Risk
One thing Hiten learned after looking back at his early missteps was ferreting out the wrong ideas without spending too much money or wasting anyone's time.
I personally hate wasting my own time, but wasting other people's time more than I hate more than I hate wasting money.
When it comes to building product, whether your Google or a startup, there's always a key risk with anything you're working on, said Hiten.
The think I've learned and the thing that helped us turnaround, if you want to call it that, or be more right is by actually figuring out what the risky thing is and addressing that first with the least amount of effort.
What other entrepreneurs can do to prevent wasting time and money on a bad idea is to break down what they're working on. They also should be honest with themselves about what the risky thing is, said Hiten.
To go back to the podcast advertising network idea, the risky thing there was that they didn't answer the question of "will advertisers pay for this?" Hiten said they never really addressed that, at all.
You have to evaluate and test whether your concept is valid. Think of it this way:
If this is not true, then I don't have a business.
"It's Never Too Early for Freemium"
We spoke for a brief time about the Freemium business model. As Hiten pointed out, every few years someone proclaims that Freemium is either dead or Freemium is totally the way to go. But as Hiten puts it:
It's never too early for freemium.
Hiten said there are several reasons to do free. If you think there are millions that can use it for free and you can then convert users to make a substantial amount of money, then Freemium might benefit you. Or you could use a free trial to get word of mouth, but that could backfire if the product isn't really that good. Going Freemium really depends on the situation.
Our conversation with Hiten continued as he talked about the acquisition of ShareFeed and KISSinsights by two different companies. As Hiten pointed out, companies don't really get sold, they get bought. Someone has to want to buy them. We want to thank Hiten for dropping by and giving us some great insights!