The Entrepreneur Diary
A story about the ups and downs in our start-up
In the middle of 2014, I decided to found a startup together with friends. Six years later, in June 2020, the servers were officially shut down.
After about 500k EUR turnover, invested 75k EUR, six freelancers, three external software development companies, numerous attended startup events, and a not exactly quantified number of nightly working hours, it is over.
This is supposed to be a story about a journey whose end is not as glorious as some other startups but whose experience will help me and my co-founders for life.
In 2014, in our previous jobs as engineers, we always had a lot to do with checklists — whether it was checking machines, buildings, or simple quality management tasks. Because of the printed out Excel tables, there was always a large amount of paper and at the end of the year, we always had a poor trainee who had to evaluate all the paper checklists and make analyses. At some point, our customer at that time said to us: “Surely we are not the only ones who do this? If someone could digitize it, I’m sure he’d make money. The idea for our start-up was born. To test how a possible app could work, we built an MVP in Excel with the help of different macros and tested it with the customer. He was so enthusiastic about it that we decided to build a native app with a suitable web application from it.
A few days and many evening discussions later, we had put our idea on paper and asked our former boss whether we could start our start-up for the digitalization of checklists on a part-time basis. Surprisingly but fortunately he agreed and gave us 10k Euros if his company could use our app for free. We had no experience whatsoever in founding our own company and so we decided to start as a sideline. The fear of failure was too big, as we ourselves had only been out of university for three years and had only just started our own business.
Since we in person had no in-depth knowledge of app programming, we started looking for suitable companies. Our main focus was to make sure that the company makes a youthful and fresh impression just like we had of ourselves. After numerous Google searches, we first found a company in Hamburg — so we booked two flight tickets and took off. The team and the office of the young software company made a great impression on us. After presenting our plans, however, they turned us down. With the honest reason that our idea was a bit too complex for the small team.
So the search went on and we found what we were looking for in a town not far from where we lived: The first visit was exactly what we had in mind: About five young men sat around their computers in a rented apartment. Shortly before our visit, they had had breakfast together. The picture corresponded exactly to our ideas and so we quickly came to an agreement. What united us was the fact that we both had the idea of our own product and wanted to see it realized. All the formalities were taken care of because of the formality but the trust was there from the beginning.
The development of our app gave them additional financial resources to generate their own software for digital accounting and that was perfectly ok for us. Afterward, we would be faced with further challenges that we didn’t consider at that time, but more about that later.
Since we had no idea how to draw mockups or wireframes of a software, formulate and categorize user stories, we did everything with Word and especially PowerPoint.
The first versions of our app were simple presentations in PowerPoint, which were further detailed in a specification sheet (whose template we had found on the Internet). In order to raise the necessary starting capital of 50k Euros, our fathers stepped in as additional investors and so in September 2014 the J. Scheidt & J. Wokittel KG was officially founded in Basel-Stadt (Switzerland).
The development of our app for iOS and Android including the linked web app took one year. Due to the deep cooperation with the young external software company, we quickly got to know the typical and standardized tools like Slack and Atlassian (Jira). My co-founder started to work on the topic of finances and since I liked to build websites during my studies and we had to pay attention to finances, I started to set up our website. And already here I got the first contact to completely new areas: Search engine optimization, scalable hosting, server administration, etc. In my studies, I had the basics of computer science but I never had to deal with this subject before. Suddenly I was confronted with the basics of color theory, measuring user interactions, and various A/B tests. If there is one thing the engineer is taught in his studies, it is not to be afraid of new techniques and the ability to learn a lot of new things by himself. That worked out quite well, too. We bought our logo from 99designs — whose service I would still recommend to young startups with limited budgets.
At the end of 2015, our app went live and we reduced our workload in our main job to 80%. So we could both work at least 20% in the start-up on a part-time basis.
We had of course already done research on potential customer groups and especially LinkedIn and Xing turned out to be an excellent medium to address new customer groups but one important factor was crucial for us to grow: Vitamin B! We were fortunate that my father had good contacts with various companies, which made it very easy for us to get product introductions and orders. Had we not had these contacts, we would have had financial problems much earlier. But one thing we noticed very quickly after the go-live:
Our app was geared to the needs of one customer — but all the others worked differently with checklists and sometimes completely differently.
So we had to start developing further updates immediately. At that time I liked to say that selling a software product was very different from selling apples. You can buy an apple or not — there is not much you can change about it. With software, however, you suddenly get requests from people that don’t fit into your roadmap. We quickly learned that hardly anyone was interested in the features (which we thought everyone wanted). Instead, other things were relevant, such as customizing colors so that the app would fit the corporate design of the respective company.
Confronted with the various update requests, another problem arose: Our customer growth was not sufficient to develop all updates. So we had to prioritize very strongly. Nevertheless, we were able to implement a lot, as some customers were willing to pay for the respective software update. So, financed by one customer, we were able to extend the software for all others “free of charge”. Nevertheless, we were much too slow, which we noticed by the fact that suddenly more and more competitors appeared on the market for digital checklists, some with much more (financial) possibilities. In addition, customers became restless and did not want to accept development times of one or more months (understandable from my today’s point of view).
How startup scene celebrates itself
In search of more customers and reach, we have started to go to startup events. In retrospect, I would rather question whether it really makes sense to spend your time at such events, because we were not looking for investors but for customers. But which customer who is interested in digital checklists goes to startup events? Probably only a few! It was (I would say) mainly because I wanted to win: be it money in a pitch competition or attention. I would describe myself as extroverted, so I liked going to such events and wasted time creating pitch decks and preparing speeches. Many events were quite interesting but we didn’t make one cent more profit.
We wanted to grow organically, without outside capital. But that worked much too slowly than the market required. We talked to a few investors and nobody rejected us per se — on the contrary. We even got offers but we didn’t want to take them up in order not to lose control over our product (our baby).
My eyes were opened at a startup event in Zurich, Switzerland where I met a well-known investor who now lives in San Francisco. He told me that he knew us because of our online presence and that he found our product very interesting. But he wondered why we would spend our time here instead of working on the product? At this event, there are no customers to win over for us. With that, he had held up the mirror to me. From then on we never went to a startup event again. Instead, we visited trade fairs. There we were not “celebrated” as a startup but we went home with dozens of business cards of potential customers in our pockets.
I understand that many young entrepreneurs, investors, etc. need such events, but you have to ask yourself critically when you as a start-up really start to get an added value out of it. Especially if, like me, you work on your pitch deck, sometimes for days on end. You always have to ask yourself what you want to achieve with a visit.
Please do not misunderstand: It also helps a lot personally if you exchange ideas with other founders and make contacts, but this must always be in a healthy relationship with your own product and customers.
In 2017 we realized that our product had reached its limits after only two years. The technological backend was no longer able to be expanded without a lot of effort. We also experienced serious scaling problems as the amount of data increased, causing the app to slow down. The development in three areas simply cost too much money: maintaining iOS, Android, and web apps in parallel was quite time-consuming. However, specializing in one device did not make sense, as each customer worked with completely different devices. Another complicating factor was that our development partner was now very successful with its own product and was raising investor money for the first time. As a result, their focus was (understandably) on their own product and no longer on project business with us. We had to take care of our software ourselves in the short to medium term.
We wanted to seize this opportunity to give both our product and our entire start-up a new lease of life. In the meantime, we had met some good freelancers and planned a deeper cooperation. We couldn’t hire anybody permanently but we could book fixed resources. So we planned to completely overhaul our product and at the same time become independent from external companies.
We planned a 2-day workshop at my home and invited our freelancers to make sure everyone had the same understanding of our new product. Here another big mistake in thinking crept in, which we should only notice later:
We had received countless customer feedbacks but still didn’t scale.
Instead of building from scratch with customer feedback, we were compulsively trying to combine our old product with the new customer input. Since our old app did not scale with the existing customers and prospects, we should have thought more about why it did not scale. We should have become more independent from old process constraints. The biggest mistake in developing the first software version was that we mapped the checklist process of one large customer and used it as a reference for all the others.
Our procedure for a complete product relaunch
After we had planned the relaunch and planned all the necessary features, it was time to raise the necessary capital of about 50k Euros. So we converted the partnership into a public limited company, added another friend and partner, and invested money again. We also did the same as our first software development partner and wrote our own web application for a customer. Since we were also certified experts for ventilation hygiene, we started to sell our engineering know-how. This way we had the necessary capital together and could get started — without having to raise external funds, which made us very proud.
We started to create various mockups and wireframes. This time we didn’t use the name PowerPoint anymore, of course, but used several other specialized tools.
In addition to the graphical visuals, we created numerous user stories, each describing the individual actions in detail.
At the same time, I developed our new design language and corporate identity with a designer. This time everything was to look like a unified whole and since then I have been a fan of good and well-thought-out design. The collaboration with the designer was almost like a revelation — his deep understanding of it regularly amazed me in various conversations. I still benefit from this today, for example when it comes to creating sophisticated presentations or simply presenting complex issues.
We also had the website completely redesigned and paid attention to things like uniform and standardized templates, version control, security, access times, and much more. This (inbound) strategy also turned out to be the most successful: Nearly all new interested parties found us via Google without us putting a cent into advertising. Since we were active in a “boring” B2B sector, we had the advantage over our competitors of focusing relatively solely on content marketing and new web trends. Both our appearance, design, and image were much more modern and fresh than those of our competitors.
I can recommend Pinterest at this point: If you are busy (especially in a team) collecting graphic ideas, templates, and/or inspiration, Pinterest is an excellent choice. It’s fast, easy and you have a virtual pinboard right at your fingertips and you can compare together — you get a feeling for what you like and what you don’t like much faster.
We used inVision to create a style guide and visualized the first app areas — these visualizations were then sent to our front-end developer.
To avoid having to develop for different devices, we decided to use the PWA technology (Progressive Web App), which was rather new at that time. We set up our own servers on DigitalOcean, used GitLab to control our version controls, and coordinated all tickets via Asana. With Slack, we were available around the clock. Everything seemed to be well-coordinated and ran like clockwork at the beginning — it was too good to be true at first.
But very soon we realized that the relaunch would take everything from us — time, morale, and physical. At this point, I started to keep a kind of diary to record the ups and downs, from which I will report in parts below. Time passed by and the money was used up more and more without us getting noticeably closer to our goal.
Analyze requirements to become better
We had planned nine months for the realization of the relaunch. In January 2018 we took the first step and parted with our previous service provider. The latter had received investor money to develop its own software solution and now (understandably) wanted to concentrate fully on its own product. So we seized the opportunity and built up our own team and infrastructure: We set up our own servers and mirrored all customer data to us in one weekend. Our team initially consisted of three freelancers: 1x frontend, 1x backend, and 1x design.
Until we finished the relaunch, our old software version should remain active. Our schedule was to be finished with the relaunch in September 2018.
While our developers were working on the new version, good SEO enabled us to register an average of 5–10 new registrations per day on our old app — but NOT a single prospect became a customer afterwards! In my diary, I wrote down that this fact is a mystery to me and that I will write to everyone. After I had done that I was even more perplexed. The reasons why they didn’t want to use our app were all completely different:
- The product is not free.
- The product has too few functions or special function xy is still missing
There’s no budget.
- Unfortunately, other things have come up.
- And so on…
I didn’t want to leave it like that and asked again what exactly was missing but I rarely got an answer. So we continued to create user stories to make sure that no request was forgotten.
Since we wanted to renew our website and optimize it with regard to SEO, we started tracking the exact user behavior. Surprised by the technical possibilities for data analysis, we were nevertheless able to gain valuable insights and for cost reasons, we planned to continue to focus on inbound marketing in particular.
In February 2018, I wrote in my diary that with all the new features, I’m afraid that we’ll run out of money before we finish and all my hopes are for the product relaunch. Mails from disappointed customers who still used our “old” version made me sleep less and less. I was disappointed to keep losing customers while we were working on a completely new version. I was angry about the fact that some customers were technically so incapable of using software (you really have to be so honest) that I wondered why they even had a smartphone.
I doubted myself why we just didn’t succeed and one problem chased the next.
I was angry about every bug and that I was not able to fix it myself.
The feeling of powerlessness
Summer was passing, September 2018 was approaching but in August it was finally clear that we would never be ready on time. Just the forecast of the expenses showed us clearly that the budget would not be enough if it continued like this.
So we all got together and talked openly about the problems. One of the main problems was that each of our freelancers was a separate company: The front-end developer would refer to the back-end in case of errors and vice versa. As a customer, I was in between but could not technically help in all details. In addition, the characters in the team were very different and so stress and interpersonal problems became increasingly noticeable. During this time I looked for tips in various guides, how to react in such situations but only found them moderately. Instead, I made many phone calls and listened to the problems of each individual. I asked the developers to talk to each other instead of seeing me as an ambassador but this strategy was not successful. Basically it was company against company — even if they were individual companies.
The biggest problems started when our main developer suddenly reacted to questions only apathetically. Our project had become irrelevant to him. When we asked him when he was going to finish feature xy, he once said on a conference call “I don’t know, it’s finished when it’s finished”. That was the first time I raised my voice in my professional career.
So here I was confronted with a situation that completely threw me off balance: My and my partners’ money was in this company, I had been working part-time for several years and didn’t pay me a single cent to develop the product further. We worked many nights only to be told that we just didn’t care. It was too much.
I started not sleeping through the night so I sometimes went to bed at half-past eight in the evening. I lost my appetite and my digestion did what it wanted. During this time I talked a lot with my fianceé and my father. And that was good.
I maintain that in such situations it is enormously important to be able to talk to someone outside of the business.
Together with my friends and business partners we decided to look for an emergency plan B. Managing a team of freelancers, each of them representing a separate company, turned out to be unprofitable. And even though we wanted to have more independence, we longed for a central contact person, because we were not able to develop front- and backend code ourselves — we were finally much more busy with sales, marketing and support. After some research, we found a German company that works with Indian developers. The combination of a German project and quality manager with Indian developers seemed to be worthwhile.
Our primary goal was to achieve a software level with which we could finally go to the market to acquire new customers. Unfortunately, we had lost not only some capital but also know-how due to the trouble with the main developer. It turned out that the source code was not documented and the developer had absolutely no interest in making a clean project handover. Furthermore, we had to realize that his plans were unrealistic regarding feasibility. So we were forced to delete one feature after the other — our planned relaunch could not provide the number of features we had expected at the beginning. This hurt — we had to explain this fact to our existing customers who were looking forward to the new features (the feedback came from them).
The cooperation with the new development office got off to a very good start and a to-do after the next disappearance — a glimmer of hope came our way. So after some time, we were finally able to launch our new product:
Our new website went online at the same time. We had also started to collect email addresses of potential customers who were interested in the new software solution via a special landing page. Our SEO work paid off and we were able to store contact details of more than 140 new corporate clients — we were proud because there was seemingly demonstrable interest and that we had come this far without a marketing budget.
We wrote to all interested parties and booked the first test accounts.
After a few weeks then the disillusionment: Our new main developer has left the company from one day to the next. Apparently there is no such thing as notice periods in India and certainly no documentation or handover. Of course, we withheld payments but that didn’t help us in the situation. Due to the increasing number of users, the first bugs became noticeable and the customers complained (rightly so). Again we were powerless! We would have loved to spend the night and fix the bugs ourselves but we couldn’t. I tried to find the Indian developer somewhere in the net so that he would continue privately but in vain. The development company hired a new developer. We thought we could go on immediately but no: We mainly used Vue.js in the frontend and they had hired a developer who had to get used to it first. For us, it is simply not understandable how some market participants act with regard to customer needs — that many of these companies even exist is a mystery to me. Until now I always thought that basics like clean documentation or protection against failures were standard in project management. Here we were always on our own and even if “our concerns could always be understood”, we were left out in the rain when it came to finding solutions.
Dissatisfied with the situation, the service provider, and also not willing to pay for the renewed training, we looked for a new partner — this time deliberately in Europe.
With the new partner, we finally reached a decent product level. Standardized processes were in place from the start and ensured quality and documentation. We didn’t want to be left empty-handed again if people were absent.
But unfortunately, we did not scale fast enough. The customers’ requirements for new features far exceeded our financial possibilities. Moreover, many of them had such individual wishes that it would not have been worthwhile to make them available to all customers. Many customers thought that we would offer a completely customizable software. With a subscription price of 12€/user, many customers were surprised to receive a standardized software for the digitalization of checklists, which cannot be integrated “out-of-the-box” into every SAP e.g.. Here we also noticed the problems of our pricing model: We took a very low subscription price of 10€/month/user on average. This was too low for a B2B product, as the requirements from the B2B are completely different, e.g. in terms of support. The customers preferred to send us their paper scans, excel sheets, or photographed checklists and we set up their complete system. In the beginning, we did this free of charge to avoid losing any customers, but in the end, we charged for this service — which worked very well. We realized that we didn’t have to be ashamed of taking money for services rendered.
Unfortunately, many customers (especially SMEs) did not realize this: They did give away one account to many employees to save money and for them, it was then a matter of course that every desired update would be realized free of charge. In some cases, it was taken for granted that we would have to conduct product training on-site — without any financial consideration or that the license fee accepted would have been correspondingly high. For us, it was sometimes incredibly brazen what customers allowed themselves and demanded from us as a small start-up. Billing targets of 90 days are a matter of course for large corporations, but often painful for small start-ups.
When we had solved one problem, the next one came and so on. It was a constant up and down. One day we made great progress until the next day the next bad news reached us. Most of the bad news came because of bugs or because they were not fixed fast enough. We felt powerless: we just couldn’t fix the code ourselves, we were dependent on our subcontractors. We ordered a feature, made the mockups, created process diagrams, made explanatory videos, and much more. After some time we got the update…..completely bypassed. All the tests stuck to us and we asked ourselves “are the developers actually testing themselves”? The answer is yes and no: Sometimes an API call is made and if it is successful, everything seems to be fine. Rarely have the developers actually tested in the software itself — as the customers would do. And that was the case with all our partners. What I miss about this is the customer’s view of the developers: How does the customer come into contact with the software? Certainly not via API calls but via the simple frontend and by pressing a button. So the software should be tested before delivery because that is the way of the customer.
Despite the errors that occurred or the too slow development of new features: we always found a solution. This was our strength: we were good at solving problems, no matter how devastating they were. However, we had to realize that we were not scaling fast enough. On the one hand, we were proud that we could always pay our bills and didn’t handle money lightly — after all, it was the money invested by friends and family. On the other hand, the organic growth hindered us in achieving the necessary time-to-market timeline that is so imperative for software products.
We once stood out at a start-up presentation and were invited to an investor meeting. After several meetings, we were invited to join the Accelerator Program. However, when we received the contract, we were almost left speechless: we were to receive training and contacts. In return, we had to guarantee a certain amount of turnover by the deadline x. If we didn’t meet this, we would have to financially compensate and pay back the time spent on training and consulting — that would have been a mid-five-figure sum. How is a start-up that is usually in unfamiliar waters supposed to guarantee sales if it is still working on getting better?
At the beginning of 2019, we met with all those involved in the AG at the annual general meeting. Together we talked about the experiences and that we will give ourselves a few more months to observe the development. If no positive trend would show up, we wanted to look for a potential buyer of the product. As an entrepreneur, you are still a human being and every human being has limited resources: time, nerves, stress levels, and motivation are not unlimited. It was important for us to give ourselves a defined period of time at the end of which a decision was made. One step after the next and even if the way is unknown, the goal should be clear.
In mid-2019, after more than 6 months with the new product on the market, we finally sat down together and looked at the figures and developments. We quickly realized that the invested effort was out of proportion to the outcome. The decision was made: we would look for a buyer and if no one could be found, the servers would be shut down. The end of the product as we knew it was sealed. And if the sober figures and developments spoke for it, it hurt incredibly after all these years.
A funny and interesting detail was also revealed when looking at the numbers: To finance the product relaunch, we sold our engineering know-how and advised companies that were formerly customers of the software. This line of business was actually only meant to finance the app, but in the meantime brought in many times more profit, with comparatively low investment. We decided to continue on this path. We also agreed that if someone performs a service, he will be paid a part of the profit directly. The invested time of every partner in the company was no longer in vain but paid off directly. That was only fair and motivated.
At this point, I personally decided to reorganize my life’s purpose. In the last few years, I had many projects at the same time: my own start-up, a part-time job, and an additional distance learning master’s degree — all of which I was now able to complete more or less successfully.
The work should not have been in vain
Even if our product idea and the startup did not work as we had imagined it, we did not want to throw away the invested time, the know-how, and the product. So we started to search for potentially interested parties. We got to know a startup that was currently expanding internationally and as luck would have it, the boss contacted me and invited me to dinner. We met and I found out that his customers were interested in a function for the digital capture and processing of checklists. So we decided to explore possible cooperation.
After a few weeks full of discussions and the exchange of documentation and insights, we had an offer ready. Unfortunately, the feedback was not as hoped for: our terms of sale were realistic but only acceptable if we were willing to switch to the buyer’s company. Absolutely understandable from the buyer’s perspective. After all, the product itself was only half as good if you don’t have the know-how for the market and the customers at the same time. Unfortunately, this was not possible for us because we would have had to change our place of residence, which was simply impossible for family reasons.
Besides this interested party, an international construction technology group was also interested in us. Here, too, various meetings followed, but in the end, due to internal processes at the prospective buyer’s premises, we were unable to proceed. So we wrote to our former competitors and lo and behold: they knew us and the interest was there. For us it was also a good opportunity from the point of view of our customers: We had to tell them that we would no longer be their solution provider in the future, but we could offer them a solution that would enable them to continue to pursue their digital process. So we made sure that our former customers were not alone. We remembered the saying that the true face of a person always shows at the end of a relationship. Here it was a business relationship but it was important to us that we end it properly.
If the interest in our contacts and customers was very high, the pure source code was not. But we didn’t want to throw it away either. So we decided to make this open-source and make it available to everyone. So our final act in development was to create a clean repo on GitHub and publish everything there, including documentation, help section, etc. Maybe our work can help others as well.
As usual, you summarize your experiences at the end. Since this article has become longer than initially thought, this is also very important. First I would like to list the biggest mistakes we made:
- Wanting to grow purely organically when the product doesn’t allow it
- No in-house developers and little control over freelancers
- Know-how outside the company and know-how loss
- Time spent on relatively unimportant activities
- Freemium in the B2B area
- Technical KnowHob overestimated by customers
- Support effort underestimated
- Pricing model B2B: License costs too low
- A plan never works the way it was conceived
Of course, it would be wrong to describe the past years as a pure misstep. After all, I have learned an infinite amount, from which I am now profiting in many ways. Therefore it is important for me to list the most important (positive) experiences at this point:
- The team must be right. You have to support each other and listen to the other
- The focus on your own work must always be questioned: What is the actually added value behind the work I am doing?
- Contacts are important — but the right ones. Who will help me build up new customer groups? Who has contacts with important people and where do I meet them?
- As an entrepreneur, you have to be open to new areas. Finance, marketing, technology, etc. It is helpful to spend many hours dealing with these topics and to become deeply familiar with them.
- Sell, sell, sell: As a startup entrepreneur you always have to sell. Whether it is yourself, your ideas, your product, or your vision. If you are rather shy you should work on it. No matter how good the product may be, if you cannot sell it simply and convincingly, you have lost. We, engineers and technicians, tend to promote technology too often, but I haven’t solved any of the customers’ problems yet.
- Pitch the problem, not the solution: It’s about solving a customer’s problem with your product, so don’t talk about how great you are. If the customer finds his problem in your solution, then he himself draws the conclusion that he wants to work with you. I often did that wrong in the beginning.
- And in the end: Have fun and reward yourself. Even though we didn’t pay out any money, we went out for dinner at irregular intervals and deliberately didn’t talk about work. We did something together as a team and had fun together.
I hope I could show another side of the startup life with this article. When you are an entrepreneur, so much happens and it is important to me to say that failure is an option at a certain point. Usually, nothing ever works out as planned but I hope I gave you some courage to tackle one problem after the other. Even if it feels that way, you are not alone and many have been confronted with the same or similar problems before. It is worthwhile to talk to these people and to discuss solutions together. But pay attention to what qualifications these people have. Unfortunately, these people (who were never in the same situation) think they know your problems and solutions — don’t fall for dazzlers.
The time as an entrepreneur is extremely exciting and instructive. Even if you don’t end up where you wanted to be in the beginning, time is never lost — on the contrary. It shapes you forever and is part of your very personal USP!