Lessons from a failed startup: Your fundraising problem is really just a product problem

Most founders are hesitant to admit when their startup fucking sucks. I’m not one of those founders. Kaffeologie, my last company, sucked.

The company, which manufactured a reusable mesh filter for the Aeropress coffee maker, felt like a great idea at first. Our hypothesis was airtight, we thought: The Aeropress was a popular gadget among coffee fans and the paper filters it used were both expensive and wasteful. Building a reusable filter felt like a no-brainer.

Of course, this story didn’t end the way we thought it would. As I wrote in my last post, we ran Kaffeologie for ten years before shutting it down. Not even a pivot to coffee beans could save us.

As I continue to reflect on my experiences as a founder, I wanted to take a step back to think about what went wrong. Here’s what I came up with, and how you can avoid the traps I fell into.

I was too wrapped up emotionally

Just as no parent believes they have an ugly baby, no founder will invest blood, sweat, and tears into a company that they believe will bomb.

This isn’t surprising. Like countries and religions, most human endeavors can only persist via the belief and emotional investment that people pour into them. I loved Kaffeologie and intensely believed in what we were building. This made it easy to ignore the warning signs that something was deeply wrong with what we were building.

One of these signs was our inability to raise money. When we started the company, my co-founder and I contributed $1,000 of our own money for early prototypes. Cash outflow was the norm for the business. We had profitable years, but in the end, Kaffeologie pulled at least as much from our personal bank accounts as it gave back. Investors just weren’t interested.

Photo by Annie Spratt on Unsplash

Had I seen things more clearly I would have accepted the reality: Investors want returns, and if you can’t persuade them to invest, then there’s probably something severely wrong with what you’re trying to build.

I didn’t ask enough “whys”

I learned Kaizen at Amazon. I desperately wish I learned it sooner.

Kaizen is a root cause analysis tool popularized by Toyota in the 60s. At the time, Toyota was obsessed with figuring out the true cause-and-effect relationships behind the problems that it encountered on its assembly lines. The approach posits that underneath every defect is a deeper, more pervasive issue that needs to be addressed.

I didn’t use the “Five Whys” technique when trying to understand what was going wrong with Kaffeologie. Nate’s version was the “Two Whys,” which wasn’t nearly as effective (or catchy):

  • Why can’t Kaffeologie get funding? Because VC’s don’t fund coffee equipment startups.
  • Why don’t VC’s fund coffee equipment startups? Because they are low margin and low volume.

…and this was as far as I got. Had I gone further, I would have asked:

  • Why are coffee equipment startups low margin and low volume? Because there aren’t that many people in the world who want to spend a lot of money to make fancy coffee at home.
  • Why don’t many people want to pay for equipment to make fancy coffee at home? Because most people don’t care about fancy coffee, and the people who do care can easily walk a few blocks to get the good stuff from a local coffee shop.
  • Why don’t most people care if it’s fancy? Because, for most people, coffee is either fuel or a commodity. Either way, they don’t want to spend a lot of money on it.

Now that’s an insight. This is clear to me now, but what I didn’t realize at the time was that I was trying to build a luxury business in a commodity market. Long-term, I was swimming in a shallow pool and the faster I knew that the faster I could get out.

Here’s the bottom line: Failing to ask the hard questions doesn’t protect you from hard lessons. While belief can give you the courage to get a startup off the ground, belief alone won’t keep you afloat.

My advice: If your startup fucking sucks, then admit it. The truth will set you free.

Product @Drift Prev: Co-founder @Kaffeologie , Product @Amazon @PrimeVideo @WorldVision . @Seahawks, Seattle, WA. he/him