Juho Makkonen and his co-founder Antti Virolainen started working on Sharetribe back in 2011, after spinning it out of a university project they had been working on since 2008. In 2012, they tried hard to get funding but “luckily investors said no,” Juho recalls.
Here are his key lessons about why not (!) getting funding actually saved their company, as shared by Juho on episode #015 of the Startup Milestones podcast.
By Florian Kandler
We didn’t know Lean Startup principles
Juho and Antti were working on their peer-to-peer sharing platform for neighbourhoods and communities. The idea was, that closed communities like neighbourhoods or university campuses could share anything among each other in a trusted environment: anything from tools, to rides, to services.
(Un)fortunately, they got the University of Helsinki as a first customer and managed to win pilot projects with the City of Helsinki and an insurance company. So they soldiered on until they received feedback from their pilot customers and others that their solution was not really solving a big relevant for them. They saw that people thought it was a nice idea, but few people would actually use the platform and share things on it.
Asked about the lessons, Juho says: “we had not discovered Lean Startup back then. Today, startups know all about it. But we did not write down our assumptions and the problem we were trying to solve. Instead, we built this and that feature and expected that we would eventually succeed.”
“If you try to be for everybody, it’s not really useful for anybody.”
“But there was something wrong with our core assumption: is it a problem worth solving? Is there really a market for that kind of problem? We should have been quicker to realise that we have to change”. Juho mentions the lack of focus their product. “It was a platform for sharing anything. What really works in the sharing economy, though, is to focus on a narrow vertical. If you try to be for everybody, it’s not really useful for anybody”.
“Luckily, we did not get funding.”
After starting the company in 2011, all through 2012 Juho and Antti tried to raise seed funding for their “broken” idea. “Luckily, investors said no. And today, we are happy they did that. Had they given us funding, we would have continued on the same path. But without money, he had to do something drastically different” – otherwise they would have been broke by September 2013, having used up all their savings.
Early 2013, Juho and Antti started working on the new idea: they pivoted from being one marketplace for everything; to being a CMS system that anyone (e.g. startups, individuals trying to build their online shop, etc.) can use to build their own, specific p2p marketplace solution. They quickly won the first customer and managed to secure an investment to prove this new track.
The key takeaway here really is: don’t scale prematurely. And most of all: don’t let inexperienced investors let you push into doing ‘more of the same’ when you clearly have the feeling that you haven’t found the real breakthrough innovation yet. Stay true to your startup path, keep digging, keep trying, keep validating your assumptions until you (hopefully) hit gold.
Florian Kandler launched the Startup Milestones podcast to get experienced European founders to share their struggles, stories and success secrets with the European startup community. Florian founded or co-founded three companies to date, two of which received a total of over 3 million euros in venture funding.