Its with some sadness that start up, Tab is not going to see it to the New Year but the CEO Shawn Zvinis has learned a great deal and he shares the highs and lows of running Tab and some of the pitfall that other entrepreneurs should be aware of:
Tab: Startup To Shutdown
The mistakes an angel and accelerator-backed startup made and what we learned along the way.
Tab (previously Subscrib) was a web-based prepaid loyalty app that started in the basement of Campus London in late September 2012 by Shawn Zvinis, Christoph Sassenberg and Gary Luce.
The idea was simple: customers would open prepaid accounts at local shops and earn bonus credit by doing so. We would eliminate payment fragmentation and use the transactional data to automate retention and marketing for these shops. Best of all, customers did not need a smartphone, as we used their mobile number to create their account.
We raised seed money from a local angel investor early on, joined an accelerator and started to grow the team. We encountered a lot of issues that on their own we could have tackled, but together set us on a path to failure that we struggled with.
Our final metrics (at the time of writing this article)
Shops = 25
Customers = 832
Average Purchase = £4.13 ($6.61)
Average Cash Topup = £16.21 ($26.06)
Average Credit Card Topup = £29.06 ($46.64)
Total Topups = £53,811 ($86,571)
Total Transactions = 14,600
1. Building a Random Team
My previous startup did not see the light of day, even though I spent almost six months working on it, because I did not build a team. I thought I was a master of my trade and that I could do everything myself. It turned out that I was wrong about that.
This time around, I was adamant that I would build a team from day one — and that is exactly what I did. I found someone that I could work with, that had similar experience as me and most importantly was able to commit all of their time right away. Not long after that, I persuaded a German developer I knew to stay in London and not return home (after working at another failed startup), but to join us on our journey, as we felt we were executing quickly.
It was not until we started talking to institutional investors several months later, that we realised they viewed us as having no credibility in the space we were attacking and that no early traction, innovative approach or growing metrics would save us.
Investors wanted to see former payments, daily deal and retail executives as the team behind Tab—not three random guys trying their hand at “disrupting a crowded space”. It was not that this was a deal breaker for investors, but because of some of the other mistakes we made, it played a major part in the slow demise of Tab.
Key learning: be from the space or build a team of experts in the space you are attacking; if you can not find anyone to join you, your vision and plan may need rethinking or you need metrics that just can not be ignored.
2. Raising Too Little Too Early
As co-founders, we all had different (short) personal runways, which made money a real concern. Early on, we were lucky enough to meet an angel investor from the finance space that wanted to put the first money in to Tab. We thought this initial seed money would not only solve our cash-flow issues, but would also be a great signal for other investors and would allow us to build our first product.
It was clear that if we did not take this money, Tab would have never been more than a paper prototype — so we took the money. This started a proverbial time bomb that we would never be able to stop: we started taking small salaries that we relied on each month and exhausted our personal savings for anything else we needed. It also made fundraising and cash-flow a priority from day one.
Looking back, we should have continued working part-time until we had a simple digital prototype and early revenue before we raised any external funds. Further, the funds should have only been used for running experiments, marketing expenses and outsourcing the development of things we could not do ourselves.
While our first angel investor helped us get started, it was not a good enough signal for institutional investors, as they were looking for industry experts putting money in. It was also evident that we either needed to be a killer team that has done it before and raise a lot early and quickly, or have crazy traction and growth to get their attention.
Key learning: try to avoid raising a single penny until you have built a working prototype and have some (any) early revenue — and in a best case, revenue that can at least pay your overheads, so you can have the upper hand when negotiating with early investors. Also, raise more money than you think you’ll need and pinch pennies the whole way.
3. Building a Not So Minimum Viable Product
In September of last year, we had lunch with a friend. He suggested that we should find a way to test our idea without writing any code. We were always talking “lean” and this was the opportunity for us to walk the walk. We took their advice and instead of building an app, we printed numbered business cards that we used to identify customers in shop and we printed a simple ledger that our first pilot locations used to keep track of balances and transactions—our paper prototype.
It went very well and in a few weeks we had more than 30 consumers using Tab to prepay for their coffees and pastries, and they used their identification card to pay for future purchases. It became apparent that it was very hard for shops to handle transactions this way and they almost begged us to build a digital version to make it quicker at the point of sale and reduce human error (which was appallingly high).
The problem was that we wanted all the bells and whistles from day one: payment processing, account profiles, multiple locations, transaction histories, email receipts and more. The result was that we ended up building something completely different than what we tested and we built too many features without validating they were needed. We had to quickly start customer development again and ended up rebuilding Tab from the ground-up, which took us another 8 weeks.
We should have quickly turned our paper prototype into a simple digital prototype — nothing more, nothing less. We could have then quickly iterated, skipping features that were not needed and building features that shops actually wanted (and would pay for).
Key learning: build early and as little as possible initially; talk to your customers and iterate your product. Each iteration should be the minimum input needed to generate the minimum output needed.
4. Focusing On an Accelerator Too Early
One of the General Partners at Seedcamp happened to be the first consumer to use Tab at our very first pilot location, the cafe at Google Campus in Shoreditch, East London. We got excited about the idea of being a part of Seedcamp and what it could do for us as a company: open doors, keep our ticking time bomb going and provide us with a stamp of approval for future fundraising.
We tried to join to Seedcamp twice (once traveling all the way to Portugal and once on home turf in London) and we were accepted the second time around. Each event needed our attention for around three weeks: one week to get prepared, one week of mentoring and investor demos, and another week following-up with everyone we met. In total, we spent at least 6 weeks of time devoted to getting in to Seedcamp that could have been used to talk to our customers and iterate our product (or lack of product in the first case).
We launched our first product the day we finally got accepted into Seedcamp, so we had no product validation at this point; we were not ready to start scaling in any shape or form. In hindsight, we should have spent those weeks solely on product development and iteration and applied to an accelerator only when we felt we were close to product-market fit and were ready to start scaling.
Seedcamp has changed me as an individual, and for that I am ever grateful for participating, but as a company we were not ready to reap the full benefits the programme had to offer.
Key learning: being in an accelerator is a full-time job. You should apply when you think you have product-market fit, you have early revenue and you are ready to put fuel on your startup’s fire.
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