Lessons from the start line. 3 years as a startup CTO

It’s midnight and I’m sitting in the bar at a local hotel while a group of Germans attempt to convince the manager that they should be allowed to continue playing their horrifically heavy industrial techno on the PA in the ballroom. the manager sighs, capitulates and I turn back to the code editor, open on my laptop.

I’m there as part of a conference, as are the recently mollified Europeans (really nice guys by the way, if you can get past their “unique” taste in music) and about a hundred others but right now I’m focusing on completing the finish line management for a 4 month old startup software platform, ahead of our first live event the following day. Our bootstrapped registration system has been working overtime since the end of February while myself and my co-founder have been working even harder on developing the software to cover the variety of requirements from our three initial customers.

So begins the story of Race Nation, a journey from concept, through prototype and the eventual divergence of me, the technical co-founder and the company I helped to build.

Jan 2014: A rocky start

Race Nation was originally meant to be an event management platform for “mass participation sporting events”. In short we were planning to build a system to manage marathons, fun runs, triathlons, etc. and would focus on the registration and general run up tasks that face any event organiser. I was the technical side of the business, while my co-founder would handle the business side of things. According to our analysis, the market was worth millions of pounds in the UK alone and the competitor landscape was pretty sparse so it looked to be the perfect opportunity for two hungry, driven, entrepreneurial types.
The company got off to a fairly bumpy start. Armed with a business plan, a good idea and not much else, my co-founder and I spent two days in London attempting to secure the initial round of funding. We were asking for a lot and offering next to nothing in terms of users, traction or features. Suffice to say these initial meetings didn’t result in us receiving any funding at all. We did get some good advice from some of the VC firms and arrived back in Jersey broke, bewildered but determined to make the idea work.

Lesson 1: the idea is not enough. Traction is everything.

With an empty bank account, we had little choice but to start building the platform in bootstrap mode. This was more than a small problem as the platform was never going to be close to profitable at small scale, needing to run at a national level to become viable. But armed with the wisdom from the UK visit we knew that to secure investment we would have to show demonstrable traction and growth. We secured a small number of local clients who were willing to take a chance on a new startup and, with the launch of our first very simple system, we were in business. Albeit without an office or any ability to pay for much including salaries.

About 4 months of full time work later things weren’t looking great, with no income worthy of the name and no external money we were both having to consider the ongoing viability of the enterprise while still being able to support our early clients. A quick side bar, one of the issues with events of the kind we were focusing on is that they have a long run time. Often registration can run for months, in some cases nearly a year can pass from the event being opened for registration and it actually taking place. This meant we were bound to honour these client’s needs even past the point of the company being potentially wound up.

Lesson 2: Be wary of small margin based businesses. That low profit level means there's no fallback in the early stages.

As I sat in the hotel bar at 2am, we had already started worst case scenario planning. Would we need to get other jobs and continue part time? What about the work load which was only set to increase over the rest of the year? How on earth could such a great idea become another data point on the failed startups curve? Suffice to say our first actual event was a real mix of emotions. Elation at successfully servicing a client from beginning to end mired with uncertainty about the company’s future.

April 2014: Angel

At the eleventh hour, my co-founder managed to find a local investor who was willing, despite the advice of his business management team, to provide us with an angel round. The terms weren’t exactly favourable but at the same time we were desperate and the investor was actually a really good sort so we took the cash and just like that, we were back in the game. We were also able to get some space in the office of one of our non-exec directors, a table in the corner to call our own.

The next couple of months were frantic. We hired an intern to help with the growing workload of managing one of our larger clients (we’d taken on a lot of responsibility above and beyond the on-line registration side of the event, mostly to keep the client happy but also to test a range of new features) and started adding new elements to our platform at incredible speed. Integrated fundraising was bolted on to allow entrants to take sponsorship on-line, reports were created on the fly. The finish line system was enhanced and improved to include SMS updates, real time tracking, race timing system integration and more.

One of our original business ideas had been the production of race packs (the race number, chip & letter) and, although we’d been warned off this by one of the VC’s we’d met in January, we’d attempted it anyway. This was a very manual process. producing hundreds of letters, packing them with the right numbers, t shirts and more turned out to be very tough to manage. For the two largest events (both in June) the company pretty much shut down for the week prior as we wrestled with jiffy bags and printouts.

Lesson 3: Physical logistics is really hard and should be avoided if at all possible!

For the remainder of the year we continued to grow. Introductions from our board members meant we had secured a range of UK based clients to act as the foundation for our UK growth. And each client was accompanied by a range of new requirements, feature requests which were dutifully added to the system as we implemented team support, ecommerce add ons and more and more reporting. With the new client load we also started to see the first client impacting issues appear. up until this point, all our clients had been local and any issues could be easily dealt with face to face. The new raft of UK business meant our customer service systems came under pressure as we dealt with remote queries from both clients and entrants.

With what appeared to be a successful launch behind us, we had been back to market to secure the next round of investment. Our turnover was increasing at a pace but the small margins meant we were a long way from break even and the angel money had started to run out. We’d also taken on some more staff members so our headcount increase needed to be sustained along with all of the other costs associated with our planned growth. Up until this point we had been running as lean as possible with next to no outlay on anything that wasn’t (at the time) considered to be business critical.

The next round was more complex, with multiple investors both on and off island mostly from within our non executive board members network, and brought with it the need to have a UK presence in order to qualify under the UK’s Seed Enterprise Investment Scheme (SEIS). After advice from legal, tax and other experts we eventually set up a UK branch office to maintain our offshore advantage while allowing us to legitimately accept investment under SEIS. The first seed round was agreed and promised to extend our runway by another 10-12 months.

Jan 2015: One year in

The team had continued to grow in all areas except technology and we’d outgrown our table. Armed with the next round of funding we moved into our own offices marking the first significant expense other than salaries since the beginning.

Now it may seem odd that we’d hired in all areas bar technology, Race Nation is, fundamentally a technology platform. The simple reason was we’d been trying to hire locally for months and had discovered that there simply wasn’t a pool of local, available affordable talent. And while the business processes, customer service and other aspects were able to grow along with demand, our technology resource started to stagnate. We managed to hire a junior developer bring our team up to two developers but still lacked strength at the core of the business. Our technical debt was starting to build, the core system was still the same code I’d written over a year previously and contained some poor assumptions making introduction of the seemingly never ending list of new features ever harder.

It’s interesting to look at the platform and where it had grown. 12 months of organic additions had left us with a functional but sprawling mass of reports, management screens and internal functions. Half baked alternate revenue streams had gone through basic implementation but where a long way from being generally available. Notably, while the original concept had called for a true SaaS platform, we hadn’t had the time to create it in the face of other requirements so every client coming on-board needed to be set up by hand.

Lesson 4: If you're going to do SaaS, bake it in from day one - you won't have time to add it later.

At this stage, my personal stress levels were through the roof. We’d suffered a pretty major technical issue earlier in the year which had highlighted our exposure to technical debt but still the requests for new features kept coming. Some were totally new functionality but we lacked the time to properly assess and design them. Some where fixes to previously rushed work and the most demoralizing of all, some where outright reversals of elements that had been launched barely weeks before. Despite constant warnings that we were approaching a critical state the push continued and I grew used to the common occurrence of, when offering two solutions to a problem being asked for both.

Lesson 5: Strength is needed to say no to client requests. Failure to "start at no" will result in massive problems with both deliverables & quality.
July 2015: a four legged stool

In July, the board members got together to agree the strategic direction for the company. Finally I had a chance to advise all of the stakeholders of our fragility and convince them to allow us time to regroup and perform some much needed quality assessment and maintenance. The two man development team were now spending most of our time patching issues with the system due to previously rushed implementations and new feature implementation had dropped to near zero. To further complicate matters, my plan for solving the resource shortage had been hamstrung by the delivery of the previous fund raise dragging on for months. I had intended to being searching for new developers in the UK but without guaranteed money to pay salaries I couldn’t move forward. We were now firmly reaping the rewards of our place on the iron triangle (fast, cheap, good – pick two) and desperately needed to focus our limited resources on our core solution.

The meeting was a turning point, but not in the positive direction I was hoping for. In place of doubling down on improving the quality of our core product I was presented with a grand plan to add a further two service lines to our existing offering. There was also a push to split out our fundraising element into an independent platform that could stand alone. At a stroke we had gone from barely being able to support one service, to having to deliver four!

Lesson 6: Focus is key. If you spread yourself too thin, the first thing that suffers is quality and in the startup world, quality if everything.

The timeline for implementation of the new features was also optimistic (to put it mildly). We were to deliver two of the three new features before the end of the year. The only positive? I did get agreement to aggressively pursue recruitment for the technical side of the business once the next round of fundraising was completed on the understanding that this would have to be in the UK. The new goals were just achievable assuming we could get more developers on board to help.

Oct 2015: Divergence

The months that followed the strategy meeting represented a pretty dark time for me. The business goals had grown but other than that, nothing had changed. The recruitment drive promised had never materialised, the raising of the next round seemed to have stalled and we’d narrowly averted a near disastrous issue with our internal systems. We were also out of cash again. My belief in what had once been a wonderful journey had been tarnished beyond repair and I was increasingly resentful of the other opportunities I was having to pass on due to the massive amount of time needed to keep the platform online. In short I was done.

Lesson 7: Almost everything behind a startup will take a lot longer than you think. Ensure this is built into timescales and beware promises of rapid resolution.

I advised the board that I would be stepping away from the business but, out of loyalty and not wishing to ham string the company further, I offered to make this a transition down to part time while they sourced a viable replacement. I had already been offered a position with another company so had to balance the two roles for a short time. My intention was to move away as quickly as possible. Of course this didn’t quite go to plan but, for me at least, there was now light at the end of the tunnel. I was also reducing the burden on the company’s burn rate which, given our cash crisis, seemed to be fair.

May 2016: The new team

Six months later and the business had finally managed to secure some more money, a new CEO and was able to look at growing the technical team. As outgoing CTO I was present for two days worth of interviews which resulted in two new hires, both UK based, both to operate out of our Brighton office.

Almost immediately, the difference of doubling our technical output began to show really positive returns. New features that had been held near indefinitely were started, quality assurance was formalised and a new sense of purpose seemed to imbue the company. Some of the old problems were still there, the lack of technical know how at the higher levels of the company meant feature planning remained erratic and was often driven by client need rather than aligned with longer term business requirements.”Drop everything and do X for client Y” remained a regular occurrence along with the associated knock on effects for both quality and delivery of other features. Cash flow was still an issue with our burn rate now lumbered with regular trips to the UK (in spite of a full suite of remote team management tools) but, for the first time in 12 months, it felt like the company had righted itself and was back on something approaching an even keel.

As the year wore on, I was able to hand over more and more to my replacement until, at the end of September I was able to finally step away completely, 12 months to the day after I had first expressed a need to distance myself from the

With hindsight.

What would I change if I could have the time over again? Well aside from the lessons highlighted above I would certainly have kept a much closer eye on the business side of the business. Early on, my co-founder and I had split responsibilities which, in hindsight was an error. He’d proven to be ineffective in controlling the board, unwilling to put the business’ needs first over those of our clients and there was a lack of clarity around the financial state of the business for much of my time there. In his defence, running a company was no more his specialty than it was mine but I can’t help but feel that had we both failed each other by not sharing the load and breaking the silos of responsibility that ultimately led to a fairly solid division.

Lesson 8: co-founders must have insight and control over all elements of the business. You don't split the workload, you share it and act as a check and balance for each other.

I would also have forced a degree of focus on the core proposed offering. I allowed the platform to be led by client needs rather than by our own requirements and in so doing, failed to maintain the needed foundation for a successful SaaS product. Rather we ended up building a fairly conventional company with all of the associated problems facing such an organisation.

The future?

So what does the future hold? For Race Nation I can’t really say. There’s a new plan, new investors and the right noises are being made about fixing some of the problems at the heart of the business. Whether enough has been learned from past failings to achieve these lofty goals is a different question. I hope so, there’s a good team and some great talent involved and the core concept remains solid. I’m not going to go so far as to say that success is guaranteed, but it certainly doesn’t deserve to fail. The company is growing like crazy and there was plenty of fun had along the way. I met some amazing people and got to solve some cool problems. Certainly, I would change some of the choices made but I wouldn’t trade the experience for the world.

And as for me? Well that’s a much longer story for another time.

Rob Dudley – October 2016

(Image credit: The Barefoot Runner by Jeromy Deleff )