The first 1,000 user problem, i.e. why consortium apps don‘t work
July 29, 2011 § 1 Comment
Almost every day you hear about a new hot app. Gets lots of buzz, raises some money and is featured on TechCrunch. Most of these apps are built around a consortium model. Meaning, they are great if everyone is doing it. But they suck when they first launch. The shining example of this is the Color app.
The Color Case Study of failure:
Color launched to a lot of buzz and hype a while back…i.e. in March. It passed the “three ass test” that VCs like to apply to investments – i.e. kick ass team, cool ass product, big ass market. It was founded by 3 star entrepreneurs all with amazing credentials. They had a vision to disrupt Facebook (hmmm…where have I heard that before). And their technology was cool. They even coined a new market, the virtual network (i.e. the people who are near you whom you don’t know nor care to meet). This puppy was hot, hot, hot. They used the three checks on the “ass test” to raise $41 million from well-known and respected investors. Pause for a second and realize they raised $41 million before they launched their product. Without knowing the valuation, I would have to guess their post money value was at least $100 million. [I couldn’t imagine 3 top entrepreneurs selling more than 50% of their company on a series A round.] So they got a valuation greater than $100 million before they had any customers.
After they raised their monster round, they launched their product and…thud.
that Color’s app has is that they had a product that would be really cool ONLY if everyone used it religiously. But they had a terrible experience for new users. Do I really need to type all of the reasons that is a fatally flawed assumption? Within a few days after launch, the rock star CEO admitted this problem. No offense, but that is a really big whiff guys. [Off point, but an interesting post script is that 2 of the 3 rock star founders have already left the company. That’s right, 2 of the 3 stars left after a few months.]
you can’t get to 5 million users if the first thousand users have a terrible experience. Entrepreneurs should spend more time focusing on use cases that are fun/engaging/problem solving for the first thousand users, rather then dreaming about how cool the product is going to be once everyone in the world is a user.