Iterating in a Startup – Part One

I’ve been hearing a good bit of chatter lately about how important it is to iterate in a startup. This generally refers to figuring out a product, market, and business model that will result in success. Of course, success means different things to different startups. For some, it is a large, market-disrupting company. For others, it is a profitable, growing business large enough to sustain a nice lifestyle for those involved. Let’s drill into iterating in a startup.

Lance Weatherby values velocity and versatility in team members and has coined the term velocitile to label such a person. I believe that you need both a good market and flexible people to be successful in a startup. With both of those in place, iterating is a natural and healthy part of building a company.

My Inc. 500 software company, Hannon Hill, makes mid-market web content management solutions for higher education and other industry verticals. It wasn’t always this way. When I first started the company in December of 2000, the vision was to provide a software-as-a-service (SaaS) application that would make it easy to update a generic, small business website, for $30 per month.

The service worked with existing websites over FTP and provided a visual interface, similar to Windows Explorer, so that people could click on a file and edit it in a browser-based word processor. Upon saving the changes, the file would then be sent over FTP back to the web server, along with a backup version. The benefits of this model included:

• No software to install on the web server or web browser
• No up-front fee and a low monthly cost
• Familiar file manager interface with word processor

The software was as easy to use as web-based email. The only problem is that it was a complete failure. I started out working on the company part-time and eventually went full-time within six months. I learned several lessons shortly after going full-time:

• The market wasn’t accepting of SaaS
• $30 per month per site was much too cheap to build a business
• Customers needed significant hand holding to get up and running

At that point, I knew something had to change. By August 2001 we had retooled the product to be an installed server application (it was always a PHP/MySQL app) at the price point of $1,000 for a 10-user license.

Stay tuned for part two to learn if our iterating paid off.