How I screwed up my first business (model)
The story of my first business begins in 9. grade, year before high school. I found out that one of Estonian leading universities had a program for high schoolers to take real university courses online. Even though I didn’t exactly qualify by age I still decided to go for “Programming Basics” and “Programming in Java”.
If you are aware how WebCT platform works, feel free to skip the following paragraph. If not, the courses were organized by weeks (I think “week” in this case lasted for 2 or 3 real-world weeks). Every week we would get new materials, exercises and an assignment we had to submit by the end of it, plus the equivalent of final thesis.
The beginner course was complete disappointment, I clearly had a better grasp of C++ (and Estonian) than the lecturer, which was one of the reasons I decided not to go to university years later. Java course was rather interesting however. I hadn’t done any serious Java development before and it got me started. As I obviously had researched extra material by the first week, the entire course seemed way too easy since second, but I didn’t mind. The lecturer and other participants were awesome. That spark an idea..
..an idea that took about half a year from the end of the course to hatch. The level of the provided university courses was low, the entire process was way too long and the environment barely usable. I knew I could do better. Hence, at the age of 16 me, a law-student friend of mine and another guy from the Java Course incorporated what could be translated as “Online training group ltd”. The law student was an adult and had to take the only seat in board of directors as I couldn’t being underage. I still had the majority of the company though.
The third partner was also underage and couldn’t get his parents to sign the consent to become partner. So I held his share for the time being. Neither did we have the money for it, but we managed to get a loan – how we got there is worth an article of its own.
We started off with a simple goal – to teach programming to others like us. At time, it was nearly impossible to learn any development in our native language without attending university. To get into the “inner circle” you had to go through several layers of trolls in internet forums and IRC, we decided to provide the safe entry point. As we were targeting people our age we decided to keep the price low. Way too low.
We quickly built our training platform and started off with few courses. Things we’re going pretty well, we recruited other people (who we mostly knew from internet and were also our age) to teach platforms they knew. Our design wasn’t the best but a friend of mine had recently started a web development company. With the earnings from our first few courses we bought a whole new design from him and decided to build version 2 of the platform.
Trainings is a field where you need to be licenced. That was a bit problematic as we were just few teenagers. Luckily the law-student-co-founder discovered we don’t need a licence until we provide 120 hours of training a year. As all our courses were online, we could decide how long one lasts in real time” As you might guess we never crossed the 120 hour limit.
That’s when things started going wrong. First of all, we had a choice of either going on with the same model, or switching to information-product based approach. Instead of having training groups we would simply have packages of videos/text/tests and assignments. We decided to stay with the original idea. In long run, that sealed the doom of the company. From there one, most of the development was done by the other “technical cofounder” (we obviously didn’t use such terms nor considered us a startup. I’m sure I didn’t even know the term startup). More precisely whenever he got an idea he just added it to the system without consulting anyone else. In time the platform grew to be a horrible mess from backend point of view.
When a young ambitious designer joined us he completely remade the site. However the code-base was unreadable. We later on called it “hieroglyphic code” as random letters were used as variable names and the author failed to answer any questions I had. I’m pretty sure he couldn’t read the code himself.
At one point I just gave up and decided to write the entire system from scratch dumping all his code. I strictly forbid him to ever touch the source code again. From that point on we didn’t get along anymore and didn’t speak for long time. That wasn’t the only reason of cause. He wanted to keep on just giving almost-free courses in “hipster-like” environment, I wanted to build a business. He didn’t even ask for his share in the company when he got 18. In sake of honesty, he later asked for a share from the courses which used his materials.
By that time we had noticed that our initial target group was wrong. There were some young people taking our courses, but majority where companies and even universities training their IT departments. Almost all participants were way older than us. We didn’t draw any conclusions from that and moved on with our initial plan.
The problem was the initial approach had proven to be flawed. It required too much commitment and engagement for trainers point of view, for relatively low return (we paid our trainers 40% commission from net profits of the course). But we were sure the technology was to be blamed. The administration interface was rather uncomfortable, it took some time to grade all the works and set up the materials for new course). New system fixed all that.
So on the third year of operation we upgraded our platform again, instead of upgrading the flawed business model. As you can guess, the problems didn’t go anywhere. Trainers constantly forgot to update materials/answer questions/grade assignments. Even I grew tired of printing countless diplomas for graduates and sending them out almost every week. Some of the courses cost less than 20 euros, so we had loads of clients yet we hadn’t made any substantial profit.
Things got so bad that I couldn’t motivate myself nor the trainers to go on with the courses anymore (despite the contracts). Once I had to refund 2 courses because the trainers didn’t bother to add new material I knew enough is enough. We just stopped and in the end, took the platform offline. What we were doing was just not motivating for our trainers nor for me.
Our trainers got so little at the end of the courses it didn’t keep them coming back daily. If one had actually been teaching 40+ courses at time (which would have taken less than 8 hours a day) he could have made above industry average salary. The problem was, no one taught more than 3 courses at time.
Most importantly, what did I learn from my first 3 year business venture?
1) Just do it. Even though we failed I don’t regret the try. I got the taste of entrepreneurship at 16, at 19 I was already experienced in fields of contracts, accounting etc. We didn’t go bankrupt, we just stopped the operations while actually having some money in the bank account. After another quick failed venture I started my consulting/software development company Elkest Solutions which pays the bills ever since.
2) Hire an accountant even if you think you can’t afford one. I’m never ever planning to do any accounting myself. I’d rather be mauled by a bear than do another fiscal year report ever again.
3) Don’t be afraid to piviot. I could be polishing my Porsche right now instead of writing that post if we had dared to make the move.
4) If your product/service is worth it, don’t be afraid to charge for it accordingly. Had we raised our prices over time, we might have developed into something much bigger.
5) Be very careful with who you go into business with. That’s something you’ll hear repeated time after time, but won’t understand until you’ve experienced it.
6) Technology won’t solve all your problems.
7) You are never too young/old for anything. Our clients included several universities and public companies who were satisfied with the courses…mostly taught by 16-19 year olds.
8) I personally learned to deal with customers and complaints. I can now keep calm talking to any client (which was a challenge at 17), even if I have to explain him how to type URL into an address bar.