Full Disclosure: I used to consult Sourcekibitzer in 2006/2007 on marketing. Since I knew the team from before, I thought that their story is impressive and would be filled with good advice for everyone.

We talk about serial entrepreneurship a lot, but in truth there are not that many people that qualify for the title. Far less than how many have the name on their blog or LinkedIn profile. Today we want to touch upon a true story of failures, pivots and migrations. Something that hopefully you can learn from and apply in your own beginnings.

To do so, we had a long interview with Mark Kofman from Import2, a data migration startup. Previously Kofman and Anton Litvinenko, long time friends and business partners, started Sourcekibitzer (Later known as Programeter) and 300.mg, so it is fair to call them a true serial entrepreneurship team.

SourceKibitzer was started in 2006 and was a tool that would make tracking developers and development easier for managers with no programming knowledge. They introduced a lot of metrics to be able to measure code and progress effectively.

The team started looking for funding. At the time, there pretty much were no accelerators, incubators or an active startup-ecosystem in Estonia. But after putting together a few 30 page business plans, they got seed funding of 200 000 EUR from Ambient Sound Investments and Rate.ee’s Co-Founder Andrei Korobeinik (Serenda Estonia).

Contrary to what you might think it was not that hard to get the funding at that time since there was a lot less competition and a lot less startups looking for money.

As usual, the next stop was Silicon Valley, USA. There, Kofman said that they learned about the importance of branding which lead to their first “pivot” (Not a common term at the time). They rebranded towards Programeter with an easier to remember name and a target market of large businesses managing many developers.

This is where the first piece of advice from Kofman comes: “Think clearly about the problem you are solving and who your customer is. Make sure everything including the name, product, style is working towards solving that specific problem for that specific customer.”

The company was profitable, but the money generated was not enough to scale and the investors were not ready to invest further. So the thing to take away here is to understand “world domination and market expansion” costs. Investors have to always consider their own risks and benefits and having a good profitable product may not always lead to secondary investment rounds.

But you also need to be aware of how much equity you are giving away and how to valuate your company. For example, Kofman notes that the Estonian investors tend to give very little cash for insane valuations. We could not get the exact numbers on the Sourcekibitzer deal, but I think you get the point.

The reason that this happens, is probably because they simply know that they can get away with it. Which is in turn a problem because of low ambitions and hence valuations of entrepreneurs, so when you talk to investors, please do some extensive research on how to valuate your company.

“We made Programeter in Estonia and it was targeted towards the largest software companies. In Estonia that is the government, Skype and a number of consulting companies. So the whole market is just a couple of companies. We worked with most of them, but we could not find a way to scale.

We could have exported to other markets, but that would need considerable investments.”

Kofman also talked about the product and noted that they made it way too complicated straight away. For instance Github, on some level, is a simpler version of SourceKibitzer, this is somewhere they could have turned up if they were sticking to making a minimum viable product.

But what about before all that? How do you really start? Kofman notes that it is perhaps the most crucial moment and if you already have a prototype then you may have made the biggest mistake already. “It means that you came up with something and nobody paid for it” he says.
For instance at Import2, they started the other way around. They first made a sale, then came up with an idea of how to solve the problem and only then did it. After they got transferred the money.

They also created different landing pages such as “Highrise to Salesforce Migration” and “Wordpress to Tumblr Migration” where there were a few form fields and large “start button”. People clicked the big button, and eventually somebody also proceeded to payment for a full migration. This was when the idea was verified and they started writing code.

This is the “fake it till you make it” part. In Kofman’s own words:

“There was no product to speak of, we did not say how it would be done, people migrating from services expect it to take weeks. So we did the migration in a week by writing the code that would do it. Nobody really knew that we had nothing ready for it. Of course we had a back-up plan that we could always do the migration manually. We always knew that we will be able to satisfy the customer in the end.”

When asked about how he would start at the idea stage, Kofman replied:

“I would try to sell the final product before doing anything. Of course there is a difference between B2C and B2B companies. With B2B you can go and ask if this is a problem they need to solve and if they do, you can come back in a week and show a draft product that solves a part of the problem and ask for say $500. If they pay – then you can continue working on it.”

At SourceKibitzer, they started with an idea. The second time around, they started with a problem (300.mg), however it was a market problem, not a user problem. Finally the third time around they started with getting some money in first to validate the demand. In my own opinion, this is probably the best way to go in B2B markets, however similar concepts can be applied to B2C as well.

Out of the three, they “failed” twice, but as you probably heard so many times before: “fail fast” and move on. But what most people don’t tell you is that it is truly disappointing, there is no way around that. As Kofman notes:

“It’s disappointing. The important part is not to wait for too long. If you realize it and move one quickly, its easier. However we are all people and it is still difficult to make yourself think rationally. To realize that what you did is actually something nobody needs.
Its easy to say in an interview that its not a big deal. That’s what startups are all about. But in reality it leaves its toll.”

Currently Mark Kofman and his team are working on Import2 which is a simple and easy to use data migration service that works with a click of a button. One of their first clients was the Estonian based Pipedrive and they currently manage all of their customer data imports.

Their vision is very simple – Data migration should be as simple as clicking a button. Migration hassle should not stop you from using new or better software solutions. Nowadays, data importing is typically done using .CSV files. Which means that once you buy into a new vendor, you need to manipulate files of the previous vendor and create compatible .CSV files. Import2 would do this all for you instantly and automatically. They launched in summer 2012, started making money from Day 1 and are currently doing hundreds of migrations a month.