Don’t fall in love with your idea

I was recently invited to speak at Fuck Up Nights Toronto about my experience founding closiit (design case study is here if you're interested). I thought this would be a great opportunity to write the company's post-mortem, something I'd wanted to do for a few months now. Closure feels good, so here goes.

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Context

Back in 2021, I was building a merch agency I had co-founded a few years prior with my friend Sal. We were managing the brands of artists like Clairo, Aries, Omar Apollo, brakence, Felly and many others, from designing their web stores, to coordinating production, fulfillment and everything in between. The business was doing well! We had reached $1M+x in annual sales and I was making a living off my own business. But I saw issues scaling, and felt like building a product, something more innovative. So I was constantly on the hunt for a great idea.

In July of 2021, I got a call from our client Felly. He had made an instagram post telling his fans he was selling some clothes he no longer used, asking them to DM him their best offer. He ended up getting flooded with messages, and didn’t know how to manage the payment, fulfillment etc. So he asked if I could help.

“Eureka” I thought. This was what I was looking for, and I knew the problem space so well. Back when I was a business manager, our clients had multiple storage units around the country that were filled with things they never used, yet paid to store. And at our merch agency, we would constantly create prototypes for our clients that would subsequently become one-of-a-kind pieces because they’d never see the light of day.

All of these artists have insane fans who would pay top dollar to own a unique piece from their idol. And the supply is endless! Think of everything that’s used in music videos, on tour, in the recording studio, at home…

I told Felly we could automate this. He was on board, and would become the first customer of my soon-to-be startup, closiit.

I started diving in. I knew nothing about startups, so I read everything I could get my hands on, including staples like Lean Startup and Paul Graham’s blog. There’s obviously a lot of dense details from these readings, but that’s not the point of this blog post. I’m just going to list the lessons that pertain to this story:

• Develop a solid understand of the market
• Validate the problem as early as you can
• Build an MVP and ship fast
• Raise money ONLY WHEN/IF YOU NEED TO
• Become “ramen profitable”

I’ll add here DON’T FALL IN LOVE WITH YOUR IDEA. The consequences of such behaviour made me ignore some of the lessons above and fuck-up in the following ways.

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Fuck-up 1: going all in all too early

I was immediately convinced that I had just come up with THE new revenue stream of the creator economy. So I almost immediately decided to leave my merch agency to my business partner so I can fully focus on closiit. Looking back now, I didn’t need to do that. In fact, I shouldn’t have. Not only was my merch business going well, it would also have been a great funnel to acquire early customers and test the problem space. I would have failed faster than I did. Failing fast is good, because our most valuable resource is our time.

I later read in Adam Grant’s book “Originals” that Pierre Omidyar, the founder of eBay, didn’t quit his day job as a programmer until eBay earned him more money than his salary. I never got close to that.

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Fuckup 2: lying to myself

To validate my idea, I started talking to artists, managers, and agents alike, from rock stars like Serj Tankian (System of a Down), to my best friend Joe Friel (agent of Nine Inch Nails & Foo Fighters), and independent acts like Aries, Felly and Crywolf. Here’s how it would go:

Me: Hey I have this idea I want to talk to you about. I know you have all this stuff you don’t use. What do you think of auctioning it out to your fans? I know for a fact that they’d pay a lot of money for it.

Artist/Manager/Agent: oh yeah I have so much stuff. That sounds like a great idea.

It was so easy to explain and so easy to get them on board, it reinforced my conviction. BUT, if you’ve ever read The Mom Test, you know that’s the worst possible way of conducting research. Needless to say, I hadn’t read the book at that point.

Then I spoke to a highly regarded music industry executive and veteran, who had both run one of the largest talent agencies in the world, and founded multiple companies, including startups. I didn’t know him personally, but my friend Tess was kind enough to make the intro. As soon as we got on the phone, he understood exactly what I trying to build. It was a great conversation and he was very straight with his feedback, which boiled down to this:

1. I wasn’t solving a real problem, neither for the artist, nor for the fan
2. The market was too small, i.e. there aren’t enough artists out there
3. Consumers don’t like the auction model
4. Because it’s not a real problem, onboarding artists would require capital to pay them advances, which isn’t sustainable with my business model

After our conversation ended, I did what everyone in love with their idea does: I ignored his feedback. Instead focused on all the compliments I had gotten prior.

I want to stress that I’m not advocating abandoning an endeavour because of negative feedback, on the contrary. Every entrepreneur is going to hear “no” a lot, and those that succeed persevere through it to follow their vision. I also heard a wide range of TERRIBLE feedback which I knew immediately to ignore. However, you shouldn’t lie to yourself out of love for your idea. Instead, take the feedback, analyze it objectively, and leave what you believe is wrong.

Had I done this exercise, I would have concluded that while the above-mentioned executive wasn’t right about 3 and 4, he was definitely right about 1 and 2. More on that below.

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Fuckup 3: raising money too early

Paul Graham has stressed multiple times that you shouldn’t raise money unless you need to.

Well I didn’t need to. In fact, had I not raised capital, I would have quickly realized that I couldn’t become “ramen profitable” because of points 1 and 2 above (i.e. that I’m not solving a real problem, and that the market is too small). Like I mentioned, I could have started building the product and acquiring customers through my merchandise agency.

But again, I was convinced that I was going to change the music industry and build the new revenue stream for every creator out there. So I thought “Very insightful Paul Graham, but this is different because, you know, it’s an amazing idea and I want to build it well so I need money”.

Also, this was 2021 and everyone was raising money with a pitch deck, no product, and 0 traction. At least I had a few signals from early customers, so I was able to get into an accelerator that wrote me a $125k check. That convinced me even more that I was going to be the next Steve Jobs, so I topped that off with angel checks from industry-insiders, friends, and family. Take it from me, it’s a pretty s****y feeling to tell your friends that you can’t return their investment.

Here’s the thing about raising money: it gives you the illusion of success. Having investors and money in the bank doesn’t mean your business will be successful. It just means you need to start working even harder. But if you raise before you validate your business, like I did, you’re just dragging out the inevitable. My co-founder Benjamin and I also put ourselves on a $36k/year salaries to extend our runway, so we dragged it EXTRA long.

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Fuckup 4: ignoring red flags

So fast forward a few months to January of 2022. I meet Benjamin August who I convince to come on board as my technical co-founder. We worked really well together, and within 1 month we had our MVP and our first users. Felly launched an auction of 16 items, which were all sold, some at impressive prices.

I was elated.

We kept grinding, adding features here and there and got more clients. But there was one big red flag: we couldn’t retain users. Artists would launch a batch of auctions, but they didn’t know when their next auction would be. This meant that we had to start back from 0 every… single… month…

Objectively, you’d think “well this probably means our CLTV (customer lifetime value) is too low to sustain this business”, but what I firmly believed was “This is because we don’t have enough social proof. Once we get a critical mass of big name artists, other smaller artists will follow, and eventually they’ll realize how much revenue they can add to their careers.”

And then 6 months later, we had our biggest project: a collective of 40+ musicians, including Nine Inch Nails, TOOL, Blink 182, Slipknot, Billie Eilish and more, were auctioning out some collector pieces to raise money for their friend's medical bills. We launched in November of 2022, and sold $50k worth of stuff within a week.

One month later, we had Serj Tankian from System of a Down join the platform. We were closing 2022 on a bang, and I thought this was our time to raise a seed round, which I set out to do top of 2023.

And then it happened again: we were back to zero on January 1 and subsequent months. What I thought would serve as social proof didn’t do much, except shorten our sales cycle for new artists. Don’t get me wrong, it was easier to sell to new artists, and we kept onboarding them (including Chappell Roan before she became the world’s biggest star), but our GMV graph looked confusing as hell to investors, with fluctuations every month and a peak in Dec 2022.

And yet, I still believed our awkward growth was because we were just a team of 2. I thought we needed to grow our sales and product team to reach the tipping point of social proof.

Until this investor conversation I had with one of Patreon’s earliest employees. He told me that before he joined Patreon, he worked at a startup in the live music space, which he said couldn’t gain real traction because of poor user retention. “We had to start from 0 every month” he said.

Mic drop. Unlike with other negative feedback I had received, I took this one in, probably because I realized that I had unconsciously ignored that major problem that was right there in front of me for months.

I kept trying to raise, and in conjunction, we tried onboarding other types of creators, from YouTubers to OnlyFans models (story for another day), but it didn’t work. I got a couple of angel checks in, but nothing institutional, and at that I point I had too much clairvoyance to keep building the business. We had a year’s worth of runway, and considered a full pivot. It no longer made sense.

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So how did it end?

Ben and I had the hard conversation and decided to shut down. Luckily we were on the same page. We finished the auctions we had planned, including another large collective of artists (Metallica, KISS and more), and called it a day. I decided to focus on my newfound love for design and joined Clutch a couple of months later. We closed out at $230k total sales in 2 years, of which $150k donated to charity on behalf of our customers. Not bad for 2 dudes with laptops, but not enough to build a business (our take home was 10%, so you do the math).

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With all that said, I’d do it again

Obviously, as you may tell from the above, I wouldn’t do it the same way. And the only reason I know that is because I failed, which is invaluable. Building closiit taught me more than I could have ever learnt at any school or job.

There was a price to pay of course. I burnt out, ran through my savings (a $36k founder salary is tough to live off in Toronto), had to learn to accept failure, and tell investors and people close to me that I couldn’t return their money.

But the experience taught me to sell, both a product and myself. It gave me product sense. It taught me to be scrappy and move fast. It got me a job at Clutch. It helps me be a better product designer every day.

And most importantly, I don’t go to bed every night telling myself I should have tried.

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