4 May 2019

Learnings: My first startup, Paper.

An archived version of the final website (started as Paper Furniture, ended up being called Smoke Furniture Co.) before we switched it off is here.

1 Team Team Team

Cofounder Cofounder Cofounder. Team Team Team. I can’t stress this enough, and is the main point of learning I’ve brought. Cofounders should best-case come before the idea, because the idea will change. This was the case with us – my cofounder left the team when the idea was changing and we weren’t finding traction. If we’d been more used to working together beforehand, maybe this would have been different. Below our first product:

2 Problem problem problem

Find a hair-on-fire problem (vitamins vs. painkillers). There should be no substitution, and extreme urgency to try your project.

Various problem statements we could have solved –

Or is it the problem of folding?

3 Hardware is hard.

Let me rephrase that: for your first startup, hardware is hard. Hardware is capital and liabilty intensive. For your first startup, maybe look at software: you can stand shoulder-to-shoulder with the big boys if you know how to write code. Most new billionaires began with software companies, even if they ended up advancing into hardware. There’s a reason that so many founders these days (especially young ones) started with a software project – there’s no overhead and you can pivot infinite times without the sunk-cost-fallacy that hardware and minimums bring.

We found a leaner way of doing hardware in that a transportation factory agreed to sell us their off-time on their CNC machines (which most days of the week were just sitting there). They’d accept orders of 10s and 20s instead of the 100s and 1000s we’d need to order from Estonia (where the big wood mills are).

4 Give yourself enough time.

The chances that you’ll find something that takes off withing 6 months is small. Even if you do find something great, traction takes time. Word of mouth and actual revenue takes time. Make sure you have runway for multiple pivots. We had time for 2 pivots in retrospect (from cardboard to CNC milled furniture to high-end furniture), and found out that the second product was the one that sold best. We’d have needed more time to react to this.

5 Don’t incorporate until serious money is flowing.

Get initial, free traction. Do free tests. Ship now. Resist the urge to get feedback from paid marketing, resist the urge to incorporate/sort out naming/ etc – this will all change and only increases overhead. Be lazer-focused on one thing: is there a problem customers will pay for, and can you make money off it (in our case there was something customers would pay for, but we couldn’t make money from it as the up-front investment was too much to bear). This comes off the last point – is there a business case? Do your unit economics work? Do an initial test.

6 Plan ahead so you’re not forced to raise money

We did raise money in the end, but were not in a strong position: we were about to run out of money, and had sunk all of our money into hardware. We should have planned ahead. Hardware is hard for a reason: you need to sink capital in.

7 Take advice from the right people.

Be careful who you take advice from – we had bad advisors telling us to make 3-year financial projections. We had funders giving us advice on marketing. All of this is irrelevant – and massively distracticing. Do one thing and do it well.

8 Your customers may be completely different from who you think they are

Sure, our initial sale came from marketing stunts like displaying in a highly-trafficked corner store. A marketing guy who thought this was amusing was our first customer. But quickly we realized that another customer base actually had a need for what we were building, and bought multiple times, and kept recommending it to their friends: Friends’ mothers, who then recommended it to her friends. Initially we thought they were just being nice, but we soon realized we were actually soliving problem for them! Empty nesters needed a second table for when the kids came home that they could fold out. They didn’t want cheap feeling IKEA stuff. They didn’t want to lug around furniture at their age. They had the disposable income to afford our designs. They appreciated the aesthetics. They liked that they could have our designs mailed to their house, or mountain chalets (this is a thing in Switzerland), and didn’t have to lug it up there themselves. In short – we’d found our initial early adopters. Not the Yuppies we’d thought they would be – but a completely different customer base, which frankly came out of left field.

9 Do things that don’t scale

Paul Graham’s famous trope. We tried things that scaled like Facebook campaigns, and got not-so-clear results. Who knew if we were actually improving our phrasing? We definitely weren’t selling any product through this channel. Below a marketing Facebook campaign snippet. We had A/B/C tests running most days. Funnily enough, most of our friends had heard of us after a few days – awareness marketing definitely works through Facebook.

What really lead to sales however were our marketing stunts.

Our first pop-up window stunt where we sublet a window in a corner store in a dingy but hipster neighborhood of town. This lead to our first online sale.

Our second, more “professional” pop-up window

We also tried “tests” in two Impact Hubs in Zurich, from which we were working. At the time we thought that the “green” crowd who works from Impact Hub could be our audience. This was false and never lead to sales – obvious in retrospect as the audience is too undefined.

Establishing trust is the main initial problem for a company selling physical goods. For this, we may need a physical location.

Final thoughts

I still think the lightweight/sustainable furniture space is interesting. We needed more interations on this concept however, and we didn’t have the time/runway to do so. This was our fault. We should have planned better, to provide more time for iteration. We should also have built less until we knew more. And I should have picked cofounders more carefully.

Those are the main learnings I’ve taken away so far from my first company. In all – not bad for a first experience in startups.

Original Pitch Deck

For completion, I post below our original pitch deck which lead to us raising 100K in a convertible note.

Investor assumptions.