A Postmortem of a Startup(buildwithtract.com) |
A Postmortem of a Startup(buildwithtract.com) |
1. What have you learnt since we last met and how has that altered your priors?
2. What do you now believe is the most important problem you should be solving?
3. What's currently blocking you from solving that problem?
4. How do we overcome those blocks?
Crucial to this process is that Q1 is not what have you done, it's what have you learnt. I do not give a shit about anything you've done if it's not in the service of learning.
I also run a retro every 3 months with founders where we ask the following questions:
1. What would you want to tell yourself 3/6/12 months ago (essentially, all the lessons learnt in italics) to save the maximum amount of pain?
2. When did you learn each specific thing?
3. When was the earliest you could have learnt that thing?
4. What changes can we make going forward to minimize that delta?
Extremely simple things but extraordinarily powerful when applied consistently over a long enough span of time.
I find a lot of founders ask for feedback, advice and just carry on doing what they were going to do anyway, perhaps convince themselves that the advice backs up their thinking when it doesn't. Not everyone of course but a lot, hence why I like your question.
> The more time I spend advising founders, the clearer it gets that 80% of my value is repeating "don't die, don't lie to yourself"
Startups are contrarian, many of the most successful ones are the ones "experts" are convinced are bad. I think in terms of the retrospective, assume we're at the point where the startup has shut down and the post-mortem is done and the reason was because it was a bad idea, how do we get there as fast as possible so there's time to pivot.
There was literally zero hope for success.
That’s probably the best you can do. Make it obvious to everyone including the bureaucracy what their externalities are doing, and either nudge them to go faster or divest some responsibilities to someone else.
It's great that they tried, though. But it strikes me that they seem to be 20 something students (not meant disparagingly) with no experience in this so perhaps lacked the insights and understanding of the pain points. It does seem that VCs were happy to fund based on an AI play, though ;)
Talking to government is a highly compensated skill set. That’s all lobbyists are.
I don't doubt that at least as important is who you know, and especially how well they know you.
Their business model made sense for America, where sprawl is embraced.
> Housing in Britain is expensive because getting planning permission is difficult.
Isn't the real problem that supply is artificially constrained because house prices and the economy are interlinked in a way in a special way in the UK economy, such that the majority of home owners don't want it changed (because more supply == downward pricing pressure)
I think the only entity that could meaningfully change this situation is government, and well it's easier to not upset your donors.
Edit: To be fair to the author, they do mention artificial supply constraints but I think my point stands - it is there by design, too much inertia forcing it to be that way that won't be changed by streamlining the bureaucratic elements
It's true that planning departments are very expensive, don't do much positively, and still seem to allow awful-looking things to be built, and I'd probably happily do away with them, but the fundamental driver is the incredible onboarding of people from overseas for years that crushes the combination of the existing population and the new people into a number of dwellings that isn't that dissimilar to the previous year.
You can't take on a net number of people each year that would require a new city the size of Nottingham to be built to accommodate, and say "well, it's all the planning process' fault."
There are properties going unused, for very many reasons. Second homes, holiday homes, etc. This also drives the price of properties up. This is one of the inputs to the problem. Planning permission laws is another input. The size and change of size of the people needing housing is another input.
There are simply too many people and not enough houses.
You have
A - Demand (immigration of 1 Million per year)
Or
B - Supply (building only 120,000 houses per year)
We MUST fix one or both of these sides of the equation. Holiday homes aren't going to add up to a row of beans quite frankly (and will have very negative effects on the tourism industry, not so bad in London - but might be quite an impact in cornwall for example).
For example, it doesn't include Beeston, West Bridgford, Stapleford, Clifton, Ilkeston, Arnold, Long Eaton, Hucknall and more.
Even though no outsider could draw a line where Nottingham city stops and most of them start.
> Granting permission takes the median hectare of land from £20,000 to £2.4 million - a 139x uplift.
I couldn't find one. However, I did run into some interesting viewpoints by a certain Paul Cheshire, Professor Emeritus of Economic Geography at the London School of Economics... "one of the world’s pre-eminent housing economists"
He has this to say about "Green Belts":
> Britain imposed its first Green Belt in 1955 and now, if re-zoned for building, farmland at the built edge of London has an 800-fold mark-up. There was no secular trend in housing land prices in Britain until the mid-1950s, but after Green Belts were imposed real prices increased some 15-fold. More than houses because you can substitute land out of house production. There is a similar pattern in Canada, New Zealand or the West and East coasts of the United States where policies restrict land supply.
https://www.newgeography.com/content/006358-lse-economist-pa...
A parliamentary publication from 2018 estimated the uplift factor to be 93x outside London and 287x inside [1]. Found via ChatGPT.
I would think that the north-south variation has flattened a little bit by now, but I can't immediately find any similar document from the last couple of years.
[1] https://assets.publishing.service.gov.uk/government/uploads/..., page 12.
[2] https://www.progressive-policy.net/publications/gathering-th...
FWIW I am never doing a 3-way marketplace again, hellish.
If anyone is interested - https://edjs.dev/blog/my-first-startup/
What I mean by understanding the economics of the value chain is you've to understand how your customers make money, how their customers make money & how their suppliers make money. From there - you can workout your value proposition - are you saving your customers money (means there's a cap on how much value you can extract) or are you allowing your customers to make more money (how much value you can extract is kinda uncapped - depending on mechanics)
The other mistake - which you correctly kinda alluded to is not understanding the incentives / dynamics of the industry. UK land is tricky since most wealth / power is packed into UK land. hence your part about emotion etc.
final mistake was equating success to raising money. Profit, if not revenue growth is the only measure of success. Raising money is not.
For tax purpose you need to differentiate between "profit" and "taxable profit". You can try to lower your taxable profit to minimise tax, e.g. by re-investing your profits, but ultimately it is better to turn a profit and to have to pay some tax on it that to have an unprofitable business.
This statement discounts how much random chance contributes to success & failure. Could the world's best founding team find and build a successful business in that field? Maybe. And even if they could, is it failure to be less good than the best? Not at all.
> Stay lean until you have proven revenue.
They raised a pre-seed round and used it to search for business opportunities. This seems like the normal way of doing a startup.
> TIME AND MONEY SPENT ON NON-ESSENTIALS - These included an office, website and branding, a trip to America, contractors, and unnecessary employees.
Having an office can boost energy and productivity. Taking a trip to US to connect with new advisors, investors, and other founders seems like a pretty normal thing to do.
I think these founders are being too hard on themselves. They got an amazing education in entrepreneurship. They don't need to feel bad about it.
One factor to success is timing, as someone who lives in UK around London and is seeing (slowly) greenbelt getting developed on perhaps the market might be moving towards you in the next 5 years.
It also aligns with other Y Combinator teachings, such as targeting growing markets.
> Scout was our most-used product. Its users weren’t our target market, but some were. We had vague ambitions to use it as an inbound marketing tool, but we never capitalised on it. This was a missed opportunity.
was applicable in a conservative industry like real estate and government as lots of open-core companies operate on this model (e.g. free open-source software and marked-up hosted solutions).
After identifying a very real, pressing problem, they made a business to solve it. They were then more focused on building that business rather than fixing the actual problem. It seems like the takeaway is: don’t worry too much about the problems where you are, instead move to the US and write software.
> If I were to start a startup again, I’d take more time and be more intentional in talking to potential customers before needing to raise money.
From the outside, this pretty much hit the nail on the head.
It's a feature, not a bug.
Capital after traction
I realize what I'm about to say will get backlash ... but I can't help but think is the time to write this postmortem indicative of how the business was run.
Meaning, who benefits from the output of this postmortem? Seems like mostly strangers (who might not even live in UK).
What other time/effort/resources was spent on things that weren't directly engaging with their customer ... because it seems extremely clear without knowing much about that market that this isn't a technical challenge per se - but a regulatory / social problem and the modest amount of capital they raised won't even scratch the service on solving this problem.
Note: not intending to be negative. It just seems like the elephant in the room is that the team was so ill-prepared and not understanding what actual problem they are solving - that my heart goes out to them.
Seems to be a piece of content marketing intended to help the two founders land a new role in the US so, in that sense, it does seem pretty strategic and well targeted.
Stripe hasn't fully fixed online payments but still made a good business of making things better.
At a high level, SaaS to help people filling out planning permission forms sounds like a viable business. Many thousands of people do this as their full time job, so their employers might be willing to pay £100 per user per month on something that makes them more productive.
I mean, they took on a heck of a problem. At least they tried, but I suspect it was an upward battle from day 0.
It isn't as sexy as doing the next Facebook or disrupting global healthcare but just copying an existing archaic & expensive product and doing it better can yield a great and stable business. There's a plethora of software products (offline & online) which cost way too much and work like crap - all you need to do is do it better for a more reasonable price (where those old companies have a big headcount and lots of mouths to feed producing a hard price floor for them).
- The UK has a very strong household wealth affect (consumption is tied to house price growth / decline). The US and UK borrowers borrow at a rate against household wealth not seen in other nations (look at the chart on page 6 - https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1117.pdf)
- It has had dramatic, sustained house price growth (400% real price growth since 1980) vs US (200%), France (200%), Germany (150%), Spain (Collapsed in 2008), Italy (Stagnant since 2008)
Some Links:
- https://www.bankofengland.co.uk/-/media/boe/files/working-pa...
- https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Uni...
Everyone relies on the property market going up. Beyond the obvious reasons, another important one is that fixed rate mortgages are not fixed for the life of the mortgage but only for, usually, 2 to 5 years after which rates jump so everyone is continuously worried about remortgaging.
With a sustained negative fertility rate over the past few decades, there could've feasibly been stable prices with no new houses built at all.
However in principle, as with many social issues, a motivated actor such as a startup could still have a chance of fixing it.
Not a fundamental cure, of course, but it sounds like a promising hack to squeeze out a few more building permits than would otherwise have been issued.
Building more houses won’t change this situation until the number of houses is greater than the number of tenants. At the point where the number of tenants equals the housing supply, the returns can still be made and prices will be bid up.
The problem is that is a competition between the rich buying as an asset vs the rest of us buying as a home. The only solutions are to reduce or eliminate the possible returns for the rich.
And as posted if the prices are then allowed to fall, the whole economy is in danger, because it is based on the creation of illusory wealth via asset inflation. Remortgaging a house that has risen in price feeds money into the economy, despite no wealth actually being created. And the entire economy is based on this, because the rest of the economy has been destroyed by neoliberalism.
That's wrong though. Building more houses eases this situation as it approaches the number of tenants. It gets better! Better is good!
And the (perceived) appreciation of houses is also part of the asset price, not just the rental income.
Houses are also assets in other countries. It's not uniquely a British thing.
If your definition of “solved housing crisis” is “everyone can buy a home,” a ban on corporate ownership could help a little.
If your goal is instead “everyone has a place to live,” no, corporate ownership is not inherently problematic.
Anyway, some of the scenarios we ran into are things like the 2008 mortgage crisis - what happens if you end up in a market where there is a lot of inventory that no one can afford to hold? In my market, it's starting to look like a lot of builders (read: corporations) built too many houses either that weren't what consumers wanted or demand has shrunk (it is a town with a lot of federal jobs that are evaporating at the moment...). So can a builder hold that inventory indefinitely (assuming they can afford that) as a corporation? Likewise, people often don't want to hear this, but landlords do create efficiencies in the market - there are people out there that either don't want to own a home or can't qualify for a mortgage, and a landlord makes it possible to provide housing for those people as a kind of intermediary. We can argue over what it takes to qualify for a mortgage, but that's really a separate issue. We of course get into the issue of vacation homes or even situations like can I as an individual own a place for my business and a home - after all, they are both real estate, so how tight can we make these rules around ownership? Point being - the basic idea is sound, and some states like CA apparently already have laws on the books, but it's a more complicated matter than just one person == one house.
The solution to me is to stop preventing people and companies from building homes.
https://www.youtube.com/watch?v=cjWs7dqaWfY
Effectively, goverments and nimbyism prevent houses from being built. Even when some laws change to supposedly allow it other laws continue to prevent it. It's got nothing to do with LLCs buying existing houses, it's got to do with not enough houses period.
And the types of cities (dense, highly-desirable urban cities like SF, London, Paris) where the NIMBY people complain most often also happen to be the most common markets for these investors to purchase/own multiple homes.
Why focus on single family homes? If corporate ownership is as bad as you are framing it then why is it OK for someone who lives in an apartment to be advantage of? Worse still, these entities would still want to invest in real estate so presumably they would invest even more in multi-family properties. If their ownership is what causes unaffordability, are you not making things even worse for people who live in multi-family housing?
Offer me a £500k passive investment that makes the same returns with the same guarantees, and I'll take that over a house.
Except they don't. No other investment comes close for the British middle classes with that sort of extra cash. And the UK government will tax you to the hilt on everything else.
Exacerbating the problem, is that you can get a bank loan for additional properties.
This means heavy handedly forcing local municipalities to change zoning.
A lot of people don't like that.
UK houses are a good investment, in fact the best investment for £500k, and also their price is additionally inflated by 'cheap money' and dual incomes.
Can't quite afford that house that's current 'under offer' at £500k? You might be able to find a bank that will lend you just that little bit more. 5.5x your salary? No problem. Congratulations, the bank has just helped push house prices that little bit higher. In the UK in the 1970s the single income 3x mortgage multiplier was on its last legs. Now it's 4+ times your joint salary. Madness.
"Farm" land, even in the SE is about 12K an acre, and you get 6-8 houses to the acre so you should be able build a three bed and sell it for £50K on the outskirts of London, Cambridge, Oxford or Brighton (just by example) still making a profit if we liberalised planning in those areas. That shows you how extreme this situation of fake constraint is.
It could therefore never be allowed to happen. The big house-builders wouldn't build and sell at that price, the locals wouldn't allow it as they've bought their houses for 500K, 10X as much and would literally all go personally bankrupt...
100% agree. This looks like another case of nothing more than arrogance - another case of somebody thinking they know it all, can revolutionise an industry, even though their experience within that industry is basically zero. Some of the choices of wording in there, e.g. "potential for venture-backed disruption", say it all.
It's not far from being that typical problem where someone, without domain knowledge, has that common simplistic thought: "why don't they just..." because it's always so obvious from the outside! In this case, why don't they just buy our software? Turns out it wasn't so obvious after all.
It feels like I've seen several stories on HN from people seduced by the idea of being called an entrepreneur. (Or more accurately, wanting to call themselves an entrepreneur.) Sometimes they keep failing, and just try a different industry instead of taking stock and changing their approach to one that starts with some real learning. Their blog posts make it clear that creating a startup is/was their goal. No understanding that to be successful, your business is supposed to be a means to an end, not the end in itself - do enough research first to create a viable solution to an actual problem. Though it seems in venture capital funding, businesses tend to get funding regardless... it's another world.
- Russ Hanneman
The thing that distinguishes a startup from a small business is that the goal is growth - not being "great and stable." That said, I've worked at startups for years and I would not agree that good startups are "ego driven." They may seem that way on the outside if you take LinkedIn posts at face value or only read blog posts by people trying to hack it through publicity. They often have more understanding of the business reality of the markets they're trying to enter (or create) than anyone else, the value they add is by saying "fuck that" to a particular set of assumptions everyone else in the market might live by.
Sometimes that set of assumptions can't be discarded, but if it can and the startup is right, the backers stand to make a fuckton of money all at once.
The successful ones will either have gotten very lucky, or know lots about the market as you say. In fact the first main success hurdle is to understand the market well enough to know it's actually a market, and that it can be monetized.
All that to say, I agree with both you and OP.
Our startup is basically doing this right now. Our thesis is basically if we can make a product marginally better than our massive competitors and be able to peel away just a sliver of their customer base and get rich by virtue of having just 2 people and not 2000.
The business itself it not sexy at all but there are still loads of interesting technical problems to solve from building the app to marketing.
I would say our biggest strength right now is just having me and my co-founder and no other folks to pay. When your burn rate is your monthly digital ocean bill (which runs ~$50), you can burn practically forever.
Tons of crazy shit in there waiting to be disrupted. The tricky part is to get the right financials to bid on the interesting stuff, a good pathway there is to combine multiple companies together and make a shared bid, reach out to me if you're interested.
No, I do not realize this. This is only possible because of limited supply. If the supply was not limited by government and nimbys then it would not be profitable for "corporate entities / investment vehicles / investors owning many properties."
It's also irrelevant, no amount of preventing "corporate entities / investment vehicles / investors owning many properties." will do anything to keep prices low as long as demand is high and supply is low.
I think the misunderstanding is to confuse this for "profit isn't desirable".
Sure you may try to minimise your taxable profit for tax purposes but that means you are turning a profit, and that may be impossible if you intend to pay dividends.
Occupancy ratings per house seem to be quite low on average [1], but weirdly I can’t seem to find any figures for overall occupancy.
[1] https://www.ons.gov.uk/peoplepopulationandcommunity/housing/...
Edit: clarification
On a national scale I'm afraid it's just not statistically significant.
But the politicians just ignore that for "growth" and keep granting 100,000+s of visas and then blame asylum seekers.
And then complain that there's mysteriously low productivity in the UK.
That's why you either get in via very small business (where the owner is the buyer and user) or guerrilla (like Slack et al).
The software my school uses to communicate with parents is fucking awful. Based on digging around their website & linkedin, I suspect they have a team of offshore developers - which is fine - but my money is that they don't actually have a team, they're paying a company that gives them supposedly-fungible engineer-hours instead of an actual cohesive team that works on the product and is proud of what they've made. They just eat requirements and shit something approximating software.
But what am I going to do? Say I build a competitor, solo, for cheap. (It can be done. The software doesn't do much. The hardest thing would be ensuring the emails actually get delivered.)
Now I get to play salesman. I have to sell it to my school. Now I have to maintain it. Our school isn't rich; a local school paid $130k for an unrelated hardware+software solution, so I'm at most going to get that, and now I'm on call 24/7, now I'm training the teachers & administrators to use it, now I'm fielding support emails, etc., etc.
Fuck it. I'll keep moaning.
Why? I don't see any reason this should be true.
It's a bit brain-melting, but once you realise it, the talk of NIMBY-ism etc. is just irrelevant.
If you add more assets with a good yield, assuming that yield is better than bonds etc., then those assets will get bought.
The only other brake on that is diversity of portfolios, but it doesn't strike me as particularly important, especially if many landlords only own a few properties.
For example right now there's more demand than supply for a 2 bed house for £2000pcm, but if we doubled the supply then there'd be competition and we'd end up at a much lower price?
Obviously the property market would be looking very differently if population was decreasing. The whole economy would.
Isn't this exactly what's happening in Japan? Govt practically giving away mostly rural homes, as owners died without heirs.
I think it would've been much earlier than that. Cumulative net migration since 2000 is around 8.5 million people. So the UK's current population would be radically lower today without immigration.
https://www.statista.com/statistics/283287/net-migration-fig... (annoyingly the per year figures need to be summed up manually on both this and ONS reports)
ONS data states that the average house price outside of London and the South East rose from £134k in 2005 to £192k in 2019 [0].
The Bank of England's inflation calculator states that £192k in 2019 costs £139k in 2005 [1].
Looking at London specifically, house prices more than doubled from £303k to £684k over the same period [2]. That's a 63% increase in real terms. Immigration would have some effect on this, but so would UK citizens moving to London or foreign nationals buying up property as an investment.
[0] https://www.ons.gov.uk/economy/inflationandpriceindices/adho...
[1] https://www.bankofengland.co.uk/monetary-policy/inflation/in...
[2] https://www.home.co.uk/guides/house_prices_report.htm?locati...
Of course not all UK citizens are white British, and the negative fertility rate would've applied downward pressure, and it's conceivable that white Londoners emigrated to Australia etc at a higher rate than other parts of the UK. But none of these factors can really explain a 50% decline in population in the same way that internal migration can. It certainly becomes very difficult to reconcile the numbers if any signifiant number of people from predominantly white areas had been moving into London.
I agree with you that most of the change in average UK house prices is driven by London. In a zero immigration scenario it seems likely that London prices would be radically lower with the rest of the country having much less, if any, change.
That's one reason that made people at the lower end of the payscale vote for Brexit: Immigration keeps wages low.
We're also seeing it since Covid: immigration keeps the GDP (barely) growing while the GDP per capita is decreasing.
The cost is wholesale destruction of local culture, too. London is a city in England but no longer really an English city, for example.
Still, I think it's valuable to understand the economics at play. Especially in a business context.
> Post-Brexit, EU immigration was only replaced by non-EU immigration
Yes, in fact this was how Brexit was sold to many south Asian voters: your family will have an easier time moving to the UK.
And that's a good thing?
> Yes, in fact this was how Brexit was sold to many south Asian voters: your family will have an easier time moving to the UK.
Yes, and now the very fabric of most English cities has broken down in many parts.
Honestly don't see the UK (or the EU) pull itself out of this mess for a long time. Both embraced too much free immigration instead of embracing more automation and digitization.
> the very fabric of most English cities has broken down
How do you mean? That doesn't match my experience in London.