Failures inspire young developers

Jason citron created many products.

These products flopped.

Microsoft offered $10 billion for one of these products.

He rejected the offer since he was so confident in his success.

Let’s find out how he built a product that is currently valued at $15 billion.

Early in his youth, Jason began learning to code.

Jason's father taught him programming and IT.

His father wanted to help him earn money when he needed it.

Jason created video games and websites in high school.

Jason realized early on that his IT and programming skills could make him money.

Jason's parents misjudged his aptitude for programming.

Jason frequented online programming communities.

He looked for web developers. He created websites for those people.

His parents suspected Jason sold drugs online. When he said he used programming to make money, they were shocked.

They helped him set up a PayPal account.

Florida higher education to study video game creation

Jason never attended an expensive university.

He studied game design in Florida.

“Higher Education is an interesting part of society… When I work with people, the school they went to never comes up… only thing that matters is what can you do…At the end of the day, the beauty of silicon valley is that if you have a great idea and you can bring it to the life, you can convince a total stranger to give you money and join your project… This notion that you have to go to a great school didn’t end up being a thing for me.”

Jason's life was altered by Steve Jobs' keynote address.

After graduating, Jason joined an incubator.

Jason created a video-dating site first.

Bad idea.

Nobody wanted to use it when it was released, so they shut it down.

He made a multiplayer game.

It was released on Bebo. 10,000 people played it.

When Steve Jobs unveiled the Apple app store, he stopped playing.

The introduction of the app store resembled that of a new gaming console.

Jason's life altered after Steve Jobs' 2008 address.

“Whenever a new video game console is launched, that’s the opportunity for a new video game studio to get started, it’s because there aren’t too many games available…When a new PlayStation comes out, since it’s a new system, there’s only a handful of titles available… If you can be a launch title you can get a lot of distribution.”

Apple's app store provided a chance to start a video game company.

They released an app after 5 months of work.

Aurora Feint is the game.

Jason believed 1000 players in a week would be wonderful. A thousand players joined in the first hour.

Over time, Aurora Feints' game didn't gain traction. They don't make enough money to keep playing.

They could only make enough for one month.

Instead of buying video games, buy technology

Jason saw that they established a leaderboard, chat rooms, and multiplayer capabilities and believed other developers would want to use these.

They opted to sell the prior game's technology.

OpenFeint.

Assisting other game developers

They had no money in the bank to create everything needed to make the technology user-friendly.

Jason and Daniel designed a website saying:

“If you’re making a video game and want to have a drop in multiplayer support, you can use our system”

TechCrunch covered their website launch, and they gained a few hundred mailing list subscribers.

They raised seed funding with the mailing list.

Nearly all iPhone game developers started adopting the Open Feint logo.

“It was pretty wild… It was really like a whole social platform for people to play with their friends.”

What kind of a business model was it?

OpenFeint originally planned to make the software free for all games. As the game gained popularity, they demanded payment.

They later concluded it wasn't a good business concept.

It became free eventually.

Acquired for $104 million

Open Feint's users and employees grew tremendously.

GREE bought OpenFeint for $104 million in April 2011.

GREE initially committed to helping Jason and his team build a fantastic company.

Three or four months after the acquisition, Jason recognized they had a different vision.

He quit.

Jason's Original Vision for the iPad

Jason focused on distribution in 2012 to help businesses stand out.

The iPad market and user base were growing tremendously.

Jason said the iPad may replace mobile gadgets.

iPad gamers behaved differently than mobile gamers.

People sat longer and experienced more using an iPad.

“The idea I had was what if we built a gaming business that was more like traditional video games but played on tablets as opposed to some kind of mobile game that I’ve been doing before.”

Unexpected insight after researching the video game industry

Jason learned from studying the gaming industry that long-standing companies had advantages beyond a single release.

Previously, long-standing video game firms had their own distribution system. This distribution strategy could buffer time between successful titles.

Sony, Microsoft, and Valve all have gaming consoles and online stores.

So he built a distribution system.

He created a group chat app for gamers.

He envisioned a team-based multiplayer game with text and voice interaction.

His objective was to develop a communication network, release more games, and start a game distribution business.

Remaking the video game League of Legends

Jason and his crew reimagined a League of Legends game mode for 12-inch glass.

They adapted the game for tablets.

League of Legends was PC-only.

So they rebuilt it.

They overhauled the game and included native mobile experiences to stand out.

Hammer and Chisel was the company's name.

18 people worked on the game.

The game was funded. The game took 2.5 years to make.

Was the game a success?

July 2014 marked the game's release. The team's hopes were dashed.

Critics initially praised the game.

Initial installation was widespread.

The game failed.

As time passed, the team realized iPad gaming wouldn't increase much and mobile would win.

Jason was given a fresh idea by Stan Vishnevskiy.

Stan Vishnevskiy was a corporate engineer.

He told Jason about his plan to design a communication app without a game.

This concept seeded modern strife.

“The insight that he really had was to put a couple of dots together… we’re seeing our customers communicating around our own game with all these different apps and also ourselves when we’re playing on PC… We should solve that problem directly rather than needing to build a new game…we should start making it on PC.”

So began Discord.

Online socializing with pals was the newest trend.

Jason grew up playing video games with his friends.

He never played outside.

Jason had many great moments playing video games with his closest buddy, wife, and brother.

Discord was about providing a location for you and your group to speak and hang out.

Like a private cafe, bedroom, or living room.

Discord was developed for you and your friends on computers and phones.

You can quickly call your buddies during a game to conduct a conference call. Put the call on speaker and talk while playing.

Discord wanted to give every player a unique experience. Because coordinating across apps was a headache.

The entire team started concentrating on Discord.

Jason decided Hammer and Chisel would focus on their chat app.

Jason didn't want to make a video game.

How Discord attracted the appropriate attention

During the first five months, the entire team worked on the game and got feedback from friends.

This ensures product improvement. As a result, some teammates' buddies started utilizing Discord.

The team knew it would become something, but the result was buggy. App occasionally crashed.

Jason persuaded a gamer friend to write on Reddit about the software.

New people would find Discord. Why not?

Reddit users discovered Discord and 50 started using it frequently.

Discord was launched.

Rejecting the $10 billion acquisition proposal

Discord has increased in recent years.

It sends billions of messages.

Discord's users aren't tracked. They're privacy-focused.

Purchase offer

Covid boosted Discord's user base.

Weekly, billions of messages were transmitted.

Microsoft offered $10 billion for Discord in 2021.

Jason sold Open Feint for $104m in 2011.

This time, he believed in the product so much that he rejected Microsoft's offer.

“I was talking to some people in the team about which way we could go… The good thing was that most of the team wanted to continue building.”

Last time, Discord was valued at $15 billion.

Discord raised money on March 12, 2022.

The $15 billion corporation raised $500 million in 2021.

After 10 years of working in scale-ups, I've embraced a few concepts for scaling Tech and Product teams.

First, cross-functionalize teams. Product Managers represent the business, Product Designers the consumer, and Engineers build.

I organize teams of 5-10 individuals, following AWS's two pizza teams guidelines, with a Product Trio guiding each.

If more individuals are needed to reach a goal, I group teams under a Product Trio.

With Engineering being the biggest group, Staff/Principal Engineers often support the Trio on cross-team technical decisions.

Product Managers, Engineering Managers, or Engineers in the team may manage projects (depending on the project or aim), but the trio is collectively responsible for the team's output and outcome.

Once the Product Trio model is created, roles, duties, team ceremonies, and cooperation models must be clarified.

Keep reporting lines by discipline. Line managers are accountable for each individual's advancement, thus it's crucial that they know the work in detail.

Cross-team collaboration becomes more important after 3 teams (15-30 people). Teams can easily diverge in how they write code, run ceremonies, and build products.

Establishing groups of people that are cross-team, but grouped by discipline and skills, sharing and agreeing on working practices becomes critical.

The “Spotify Guild” model has been where I’ve taken a lot of my inspiration from.

Last, establish a taxonomy for communication channels.

In Slack, I create one channel per team and one per guild (and one for me to have discussions with the team leads).

These are just some of the basic principles I follow to organize teams.

A book I particularly like about team types and how they interact with each other is https://teamtopologies.com/.

What they'll do is scarier.

My acquaintance recently joined a VC-funded startup. Money, equity, and upside possibilities were nice, but he had a nagging dread.

They just secured a $40M round and are hiring like crazy to prepare for their IPO in two years. All signals pointed to this startup's (a B2B IT business in a stable industry) success, and its equity-holding workers wouldn't pass that up.

Five months after starting the work, my friend struggled with leaving. We might overlook the awful culture and long hours at the proper price. This price plus the company's fate and survival abilities sent my friend departing in an unpleasant unplanned resignation before jumping on yet another sinking ship.

This affects founders. This affects VC-backed companies (and all businesses). This affects anyone starting, buying, or running a business.

Here's the under-the-table approach that's draining VC capital, leaving staff terrified (or jobless), founders rattled, and investors upset. How to recognize, solve, and avoid it

The unsettling reality behind door #1

You can't raise money off just your looks, right? If "looks" means your founding team's expertise, then maybe. In my friend's case, the founding team's strong qualifications and track records won over investors before talking figures.

They're hardly the only startup to raise money without a profitable customer acquisition strategy. Another firm raised money for an expensive sleep product because it's eco-friendly. They were off to the races with a few keywords and key players.

Both companies, along with numerous others, elected to invest on product development first. Company A employed all the tech, then courted half their market (they’re a tech marketplace that connects two parties). Company B spent millions on R&D to create a palatable product, then flooded the world with marketing.

My friend is on Company B's financial team, and he's seen where they've gone wrong. It's terrible.

Company A (tech market): Growing? Not quite. To achieve the ambitious expansion they (and their investors) demand, they've poured much of their little capital into salespeople: Cold-calling commission and salary salesmen. Is it working? Considering attrition and companies' dwindling capital, I don't think so.

Company B (green sleep) has been hiring, digital marketing, and opening new stores like crazy. Growing expenses should result in growing revenues and a favorable return on investment; if you grow too rapidly, you may neglect to check that ROI.

Once Company A cut headcount and Company B declared “going concerned”, my friend realized both startups had the same ailment and didn't recognize it.

I shouldn't have to ask a friend to verify a company's cash reserves and profitability to spot a financial problem. It happened anyhow.

The frightening part isn't that investors were willing to invest millions without product-market fit, CAC, or LTV estimates. That's alarming, but not as scary as the fact that startups aren't understanding the problem until VC rounds have dried up.

When they question consultants if their company will be around in 6 months. It’s a red flag. How will they stretch $20M through a 2-year recession with a $3M/month burn rate and no profitability? Alarms go off.

Who's in danger?

In a word, everyone who raised money without a profitable client acquisition strategy or enough resources to ride out dry spells.

Money mismanagement and poor priorities affect every industry (like sinking all your capital into your product, team, or tech, at the expense of probing what customer acquisition really takes and looks like).

This isn't about tech, real estate, or recession-proof luxury products. Fast, cheap, easy money flows into flashy-looking teams with buzzwords, trending industries, and attractive credentials.

If these companies can't show progress or get a profitable CAC, they can't raise more money. They die if they can't raise more money (or slash headcount and find shoestring budget solutions until they solve the real problem).

The kiss of death (and how to avoid it)

If you're running a startup and think raising VC is the answer, pause and evaluate. Do you need the money now?

I'm not saying VC is terrible or has no role. Founders have used it as a Band-Aid for larger, pervasive problems. Venture cash isn't a crutch for recruiting consumers profitably; it's rocket fuel to get you what and who you need.

Pay-to-play isn't a way to throw money at the wall and hope for a return. Pay-to-play works until you run out of money, and if you haven't mastered client acquisition, your cash will diminish quickly.

How can you avoid this bottomless pit? Tips:

• Understand your burn rate

• Keep an eye on your growth or profitability.

• Analyze each and every marketing channel and initiative.

• Make lucrative customer acquisition strategies and satisfied customers your top two priorities. not brand-new products. not stellar hires. avoid the fundraising rollercoaster to save time. If you succeed in these two tasks, investors will approach you with their thirsty offers rather than the other way around, and your cash reserves won't diminish as a result.

Not as much as your grandfather

My family friend always justified expensive, impractical expenditures by saying it was only monopoly money. In business, startups, and especially with money from investors expecting a return, that's not true.

More founders could understand that there isn't always another round if they viewed VC money as their own limited pool. When the well runs dry, you must refill it or save the day.

Venture financing isn't your grandpa's money. A discerning investor has entrusted you with dry powder in the hope that you'll use it wisely, strategically, and thoughtfully. Use it well.

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I had an online store. After a year of running the company alongside my 9-to-5, I made enough to resign.

That day was amazing.

This Instagram marketing plan helped the store succeed.

How did I increase my sales to five figures a month without using any paid advertising?

I used customer event marketing.

I'm not sure this term exists. I invented it to describe what I was doing.

Instagram word-of-mouth, fan engagement, and interaction drove sales.

If a customer liked or disliked a product, the buzz would drive attention to the store.

I used customer-based events to increase engagement and store sales.

Success!

Here are the weekly Instagram customer events I coordinated while running my business:

• Be the Buyer Days

• Flash sales

• Mystery boxes

Be the Buyer Days: How do they work?

Be the Buyer Days are exactly that.

You choose a day to share stock selections with social media followers.

This is an easy approach to engaging customers and getting fans enthusiastic about new releases.

First, pick a handful of items you’re considering ordering. I’d usually pick around 3 for Be the Buyer Day.

Then I'd poll the crowd on Instagram to vote on their favorites.

This was before Instagram stories, polls, and all the other cool features Instagram offers today. I think using these tools now would make this event even better.

I'd ask customers their favorite back then.

The growing comments excited customers.

Then I'd declare the winner, acquire the products, and start selling it.

How do flash sales work?

I mostly ran flash sales.

You choose a limited number of itemsdd for a few-hour sale.

We wanted most sales to result in sold-out items.

When an item sells out, it contributes to the sensation of scarcity and can inspire customers to visit your store to buy a comparable product, join your email list, become a fan, etc.

We hoped they'd act quickly.

I'd hold flash deals twice a week, which generated scarcity and boosted sales.

The store had a few thousand Instagram followers when I started flash deals.

Each flash sale item would make $400 to $600.

$400 x 3= $1,200

That's $1,200 on social media!

Twice a week, you'll make roughly $10K a month from Instagram.

$1,200/day x 8 events/month=$9,600

Flash sales did great.

We held weekly flash deals and sent social media and email reminders. That’s about it!

How are mystery boxes put together?

All you do is package a box of store products and sell it as a mystery box on TikTok or retail websites.

A $100 mystery box would cost $30.

You're discounting high-value boxes.

This is a clever approach to get rid of excess inventory and makes customers happy.

It worked!

Be the Buyer Days, flash deals, and mystery boxes helped build my company without paid advertisements.

All companies can use customer event marketing. Involving customers and providing an engaging environment can boost sales.

Try it!