For over 5 years, my life revolved around growing my previous company, Binpress. In the months since we found a buyer for it, I've had some time to think about why it failed. Now that we've sold the company, I wanted to reflect on the journey my co-founder and I had with the company, from struggling to get users, getting to $30k in monthly revenue, raising a seed round and eventually selling the company on a down note.
Binpress came into conception in late 2010. Myself and business partner, Adam, had been running a web development shop for around 4 years at the time, taking mostly projects from other entrepreneurs, building web services, platforms and marketplaces.
We were building a bankroll and experience to eventually get our own venture going, and we had the perfect opportunity when one of our previous projects, in which we had minor shares, made a minor exit and gave us some breathing room.
During those 4 years, I've developed a significant library of polished code that I reused often in client projects. Everything from authentication, to payments, database abstractions and so forth, that made development on new projects very rapid.
One time, I joked with Adam, that if only we could just sell those components we'd live much more comfortably, as we can forgo all the integration and project management work that always drained the life out of us.
That jest became the origin of Binpress once we gave it more serious thought. If you have any background in software development, you know a bunch of code libraries and SDKs that are available commercially and seem to be working out as viable businesses. However, each one of those seem to have a significant brand and marketing engine behind it. How do individual developers and small shops get started with releasing developer-oriented products and making it a business success?
That's what we set to find out with Binpress.
Conception, launch and initial struggle
The idea was to create a marketplace serving developers looking to launch their own code-based products. The initial focus was on code libraries specifically, since that was a market we knew intimately.
The marketplace was named Binpress (short for "Binary Press" - I came up with the name). We hired a design firm, paid an IP lawyer to help us create a custom software license generator and built the product over the course of roughly 3 months. We made a soft launch just before the end of 2010.
And then nothing. Over the course of 2 months, we had exactly 10 new users. Everyone who's launched enough products have experienced this state, but it's still depressing every time. To be completely honest in retrospect, our product looked bad, our marketing copy was bad, we had no idea how to explain what we offer to potential users, we had no inventory - in short, it was to be expected.
There is much more information on creating marketplaces now than there was then. We had the classic chicken-egg problem - how do you seed both sides of a marketplace. How do you get publishers to come when you don't have an audience yet to buy their products, and how do you get an audience when you don't have any inventory?
First uptick - seeding the marketplace inventory
At this point, we felt we needed some kind of event to kickstart things, and we decided to focus on the publishers initially which turned out to be a smart move.
The idea was to create a prize-bearing competition around code-libraries. Developers would submit their code-libraries to be evaluated, and the top picks would receive a significant prize.
In order to maximize the effectiveness of the event and exposure it got, we wanted to bring in people and companies with name recognition in the industry. We invited a bunch of high-profile developers to evaluate the submissions. We procured sponsorships from top software companies and services, each providing their products as a way of self marketing, but in some cases also providing actual cash money. Over 25 companies participated, including Google, Microsoft and Amazon (AWS). You can see the original contest page here. Overall we were able to offer over $40k(!) in cash and prizes.
Much of this was due to the dedication of my co-founder, Adam. Once he got going, he got on a roll and was talking to dozens of companies a day. We got a lot of rejections initially, but as we started hooking in some of the bigger fish and put up a professionally designed landing page, it became easier and easier until I had to slow him down, as we already had too many on board.
We now had our event set up, but like everything else it would be for nothing if people didn't know about it. Getting $40k in sponsorships from companies like Google and Microsoft was newsworthy enough that we got a bite from most of the tech media. We managed to get coverage on TheNextWeb, Mashable and a bunch of other tech news sites. In addition, we asked all of our sponsors to share the contest on their social media accounts and if possible send out an Email blast to their followers (which a few did).
The contest ran over 1 month, and was overall a huge success - we now had around 200 products on the marketplace. The publisher side had been seeded.
Second struggle - clients and sales
During the competition we had our first few sales which was very exciting for us. It's really hard to describe how it feels to make your first sale on a product you created. It's really a special feeling.
However, despite an initial strong showing, once the hype around the competition died down so did the traffic to the marketplace and our sales with it. For the first several months we were averaging around $500 in sales. $500 is more than 0, but it's not much in the grand scale of things. We had some high months where we would break $1k and then crash down to $300. When they say running a startup is like riding a roller-coaster, they were probably describing our revenue graphs.
Being product guys first, we tried to solve the problem by tinkering with product. We started a redesign and constantly added and changed features. None of it seemed to make much of an impact individually, but slowly traffic and sales were rising. Very slowly. But they were rising.
Thinking back, that upwards trend was likely thanks to the seeds planted when we ran the competition - we received a ton of backlinks from high ranking sites and a lot of mentions in general, as well as a bunch of new content, and over time Google's ranking of our site rose in search results for relevant keywords.
Second uptick - mobile components
The current timeline is late 2011. Around this time, the App Store is becoming a huge player and a draw for developers and founders, and many are looking to build mobile software fast and on the cheap.
Around this time we got a few requests to add mobile technologies to the categories on our website, and we were happy to oblige. A few components were published and some were doing very well. They were also priced significantly higher than the products we previously had.
You might be surprised to find out that sometimes people are more inclined to pay for products that cost more (I wrote a blog post about that specifically in the context of software product pricing).
We went out and recruited developers. We built relationships with them, and held their hands through the process of publishing their products. We built marketing and ad campaigns around each individual product.
The market conditions on the App Store, coupled with the additions to our inventory of high quality, well priced mobile components, resulted in a significant growth to our revenue. Our revenue stabilized around $3k / month. Then $5k / month. Then $10k / month. There were down months in between, but it seemed like we were hitting a new milestone every few months.
Joining 500 Startups and raising our seed round
We had previously tried to raise money and failed miserably, so we weren't actively looking to raise again. In retrospect, we weren't ready - product and traction wise.
I noticed 500 Startups were accepting applications for their accelerator program (this was around Feb. 2013). On a whim I filled out their application form. At this point we had reached a local maxima of $20k revenue in one month, so our traction was stronger, but after our previous experience with fundraising, we weren't hopeful.
To our surprise, we got invited to interview. If you keep up with those things, an invitation to interview puts you over the first and biggest round of cuts, which we didn't expect to make. We had a decent, 10 minute interview, which frankly didn't feel like it would be enough. But after several weeks we got the word - we were in.
I later learned much more on the criteria and review process from the other side, so I can safely guess our improved traction was probably the biggest deciding factor.
During the accelerator program (which is around 3.5 months), we raised our seed round of almost $1M.
I've blogged in detail about the 500 Startups program itself and my experience with the fund-raising process, so I won't add too much on that here. Instead, I want to talk about something else - hiring.
Hiring good help is hard
We knew exactly what we wanted to do with the money we were raising - invest in marketing and sales.
We didn't need more engineers. A common trap I see startups who raise their first outside money is to hire more engineers and go full-bore on product building. Even though I would be happy for someone to take over my dev duties so I could concentrate on other things, it was not a priority.
Similarly, we didn't need any help with operations. My co-founder had everything under control, even if it was a pain in the ass on a day-to-day basis. We did get a virtual assistant, which was excellent bang-for-the-buck, and we could finally pay all those lovely startups that make running a startup easier (zenefits, gusto, etc)
What we wanted was to bring onboard marketing and sales expertise. We felt that we did a decent job getting up to $30k / month in sales on our own, and we were definitely constantly learning and improving, but marketing and sales were not our strong suit. As a B2B product, where traction equals sales numbers, we had to ramp up our efforts there to take the company to the next level.
We started the hiring process during the accelerator program, once we secured some initial funding. We always felt that once we had the money for it, finding good people to join would be easy. Boy, were we in for a rude awakening.
The gist of the problem was that we ran a business aimed at very technical people (software developers), and thus we needed marketing and sales people who could understand that target audience. Turns out that combination is extremely rare.
We tried hiring from all background and for different roles:
- We hired a former enterprise marketing person from a fortune 500 company.
- We hired a sales person to make cold calls to software companies and sell them our products.
- We hired a developer / blogger who was heavily involved in the dev community to be our developer evangelist.
- We hired a former editor of one of the biggest sites for software development content.
- We hired a well known SEO and content marketing company.
None of those panned out, for various reasons. The most common thread is that most people are not well suited to work in startups, where you have to produce results quickly and work independently. They are too used to being in a stable, comfortable environment, where someone always tells them what to do, and results are measured in quarters and years.
Working at a startup is for people who are not satisfied with any of the above. They're not looking for work just as a means to get paid, but also as an enriching, fulfilling experience. (I previously summarized my thoughts on this in the aptly titled article "Should you be working at startup?").
After much trial-and-error, and learning from previous mistakes, we did manage to make a few good hires. However, those hires were not at the positions we needed to really make a difference. They did an excellent job with what we asked them to do, and showed growth throughout the process, but were several years of experience behind what we needed from someone that could own the marketing and sales angles for Binpress.
While we were trying to hire our marketing lead, we did not sit on our heels and waited for our savior to arrive. We were always learning and experimenting, trying to build up our acquisition channels and increase revenue.
While this was true even before we raised our seed round, we start feeling more pressure to grow once we raised. The pressure was completely internal - none of our investors was putting it on us directly. There's just a different sense of responsibility once you start dealing with other people's money, and we were determined to reward those people who put their faith in us and our business.
We tried a bunch of things -
- We added an affiliate program. It was tough to get traction as our payout was relatively small as a marketplace - we were paying a commission off the commission we were making of each sale. A percentage of a percentage, if you will.
- We added product discounts - time based, coupon code based, a percentage or a fixed price off, for a single product or many products, etc. It did help close some deals, especially on the larger licenses
- We added purchase orders, which were requested by people purchasing on behalf of companies. Again, this helped close a few deals, but was a real pain to deal with.
- We added a customization services to products, which later evolved into a full blown project management tool. Customers who purchased products from our publishers could request customization to that product or even the development of a new product from scratch. This actually generated quite a bit of additional revenue, and helped with customer loyalty, but required a lot of hand holding on our part..
- We started running retargeting campaigns on multiple platforms. I don't think we got even one sale through retargeting.
- We added an external checkout process for publishers who wanted to use our platform tools through their own site and brand.
- We created a bunch of landing pages for specific categories of products, and tried to market those separately.
- We added lifecycle emails for various aspects of the product - review requests a few days post-purchase, follow-ups on abandoned carts, reaching out to publishers who got stuck in the setup process, and so forth. Those were very beneficial in raising conversion, however they obviously did not generate new traffic.
- We added a live chat to the marketplace through Olark, and had someone always answering sales questions and doing customer service.
There's likely a bunch of other things we did that I can't recall at this point in time. Most of the stuff we did had a positive effect, but none had the breakout potential we had hoped. We were stuck in a rot.
The timeline now is Sept. 2014, a little over a year since we raised our seed round. With our hiring difficulties, and lackluster results from our marketing efforts, we made very little progress from when we finished the accelerator program. We were feeling the heat - We had spent a little over half the money we raised, which was a healthy rate, but only when you are growing.
At this point we had been running Binpress for almost 4 years, but it had not become the big company we had believed it could be. We decided we needed to make a big change to have a chance, and so a new product vision was born.
As we had moderate success with the external checkout feature I mentioned above. It seemed a strong selling point for developers with an established brand and products. We decided to expand on that feature and take it all the way - we would become the "Shopify for digital products".
The change was on two fronts -
- We would open our services to all digital products, and not just code based products as it originally was.
- We would provide publishers with their own store for digital products, with their own branding, but still using all of the tools we built for the marketplace.
You might think be thinking "But shopify already provides support for digital products". While this is true, we felt our differentiating features were strong enough - We handled licensing for many product types through license generators, and our store design was built around digital products (instead of a traditional eCommerce flow that you find on Shopify sites).
Once the decision was made, we immediately went into production mode. It took around 3 months to build the new product, during which I was programming for 10-12 hours a day. I really got into a roll - I was implementing features quicker than our designer could design it. I took this opportunity to clean up a lot of technical debt that built up during the years we kept adding and modifying Binpress, and added a ton of automated testing.
The product was shaping up very nicely. Our designer, who has been with us since the accelerator program was really coming into his own. His designs and concepts were some of his best work to date. There was a lot of excitement from our existing publisher community, especially the bigger publishers with an established brand and significant revenue stream.
We launched the new product Jan. 2015. We ran a PR and marketing campaign around it, getting significant coverage in the tech new scene. We already had significant organic traffic. But as time went by, nothing changed.
Yes, some new users were signing up and creating their own stores. Some of them published products and some were even making a few sales. However, the overall scale of it was very minor compared to the marketplace.
We tried to throw some more marketing efforts at it, but nothing stuck. As the months went by, it was becoming clear we had exhausted every option. We had no more ideas on how to grow the company. We had lost.
It took us a while to come to terms with this reality. We didn't bring it up when we talked - instead, it was always "what more can we do?". But eventually, we had that talk and faced the music. We had given 5 years of our lives to the company, we had some successes, but we had taken it as far as we could. It was time to move on.
Our immediate goals were to return as much as we could to our investors. We tried shopping the company for a while, and while there was significant interest at one point, no one was able to commit (my co-founder will likely expand on this in a separate post).
Eventually we settled for selling the assets only (site and code-base), while dissolving the company. Definitely not the outcome we were looking for. At the same time, I want to thank our investors for putting their faith in us, even though we couldn't reciprocate.
Special thanks goes out to 500 Startups - Parker Thompson and Dave McClure in particular, we love you guys. Warren Adelman who gave us our first check outside of 500 Startups. Tak Miyata and Steven Cheng from Scrum Ventures, who invited and hosted us in Japan. And lastly Patrick McKenzie, who gave a ton of his free time to help us out in person.
After thoughts - Why we failed
It's hard for me to pinpoint exactly why we failed to take Binpress to where we believed it can go. If I'd known exactly why, I could've addressed it previously and made the company a success.
However, after detaching for a few months and giving it some thought, I can come up with some theories:
The marketplace format was not a good fit for the products we had on it
We keyed in very early on the fact that higher-quality, higher-priced products generated much more revenue. There was just not enough demand for most products to compensate for a lower price with purchase volume.
Hence, we optimized for and actively sought out high quality products that could justify a higher price sticker. While some of those products found individual success, they didn't benefit the marketplace as a whole.
Compare this with one of our competitors, CodeCanyon. Their tagline right there on the front page is "15,466 Scripts and Snippets From $1". They optimized in the opposite direction, by going for a lower price and sales volume, while putting no emphasis on quality. This benefits the marketplace, as at that price range people are much more inclined to shop around and pick up stuff they don't actually need at the moment (just like at a dollar store). Compare this to products that cost $300 and upwards of $8k, and you can clearly see the same shopping pattern will not happen.
While we did have some recurring customers (more than you'd think, actually, following the reasoning outlined above), most of our clients were one-and-done. They would arrive based on need, and not to shop around. The products we had acted mostly standalone, and did not benefit the marketplace as much as we'd hoped.
Selling code to developers is like selling ics to Eskimos
This might be obvious in retrospect, but it didn't occur to us when we started how difficult it would be to sell developer tools to developers, especially if it's just code products.
When developers see a commercial code-library, 2 thoughts run through their heads -
- I can probably find an open-source alternative
- I can probably build it myself
Developers are more likely to spend 20 hours building something themselves then spend $50 on an off-the-shelf solution, even if they make $200 / hour (or cost their company that much). As a software developer myself, I can totally relate, as I've done this myself many times before. Sometimes, it's the challenge of solving a problem yourself, sometimes it's on general principle, but the time/cost equation rarely enters the picture.
Only if no open-source solution exists, and developing from scratch appears to be too difficult or out of the developer's depth, then they would consider paying for commercial solution.
This is one of the reasons we later tried to open up our platform to other product types, however we never got any significant traction in anything other than developer tools. Which leads me to my next point -
Changing an established brand is hard
One of the things that we did really well was build Binpress as a name brand for a code marketplace. I would run into random people at events or day-to-day life, and would be surprised time and time again how many people have heard about us or visited our site.
Binpress came to be synonymous with the code marketplace it started as. All the organic traffic it was receiving was arriving from search terms relating to code and programming.
Adding new product categories was not enough. We would need to go through the process of creating an audience for each category from scratch, and we just ran out of time to do so.
We really needed that 3rd person who could lead marketing and sales
Honestly, I think we did an amazing job with the marketing on Binpress, all things considered. We built it up from averaging around 2k visitors and 0 sales per month for the first few months, to averaging 140k visitors and $25k in sales per month. And most of it was organic search traffic (over 80%), which is the best kind.
However, as much as we did well considering our backgrounds, our responsibilities and inclinations were in other aspects of the company. After every successful marketing effort, I would naturally gravitate back to product development, and Adam would gravitate back to operations and administration.
We didn't have that third person that could always keep the momentum going and build on it, and hence our growth was too back and forth - we would make progress in spurts and then let it decline while we went back to do our main activities.
Sales in particular, were a missed channel in my opinion. We did do some inside sales, mostly follow ups on abandoned carts and by answering inbound sales questions, but we did very little cold outreach or relationship building with companies for which our products were relevant. While we tried to hire to fill that need, we never did find the right fit.
Social and community building was another missed opportunity. I'll admit that initially I did not believe in social as a channel that could support the kind of products we had. Knowing what I know now and seeing how other companies approached it, we could have made a much better effort building a community for our publishers that could become a draw for other potential publishers.
Unfortunately, this is a channel that is not "fire-and-forget" like some of the marketing campaigns we did, and a person who could be hands on it was sorely missing.
And in the end, it just didn't have the scale
All the points I made above make sense and likely contributed to the overall results. However, at the end I still believe we were limited by the concept of the company, which just didn't have the scale we originally envisioned. A marketplace for developer tools could only grow so much - and our attempt to pivot into new markets was brought on too late to have a chance to really succeed.
I still believe the developer tools market is very big. However, the type of products that would benefit from being listed on our marketplace as it were, put a ceiling on how far we could grow. Once a product gets to a certain point in sales and brand recognition, there was just no reason for it to be listed on Binpress. It would be better off having a completely separate online presence, focused completely around its own brand and sales funnel.
Compare this to a marketplace like Steam, where the convenience of their desktop client and of having your entire collection in one place is the main reason people prefer to buy all their games from there, despite most of those having separate online brands. There was no such incentive with Binpress, and thus the products that could take us to the next level, were never going to be listed on our site in the first place.
What's next for us
Me and my co-founder, Adam, have moved our separate ways. Adam is now a venture partner at 500 Startups, while I've been building a new venture on my own, an online platform for managing martial arts gyms (launched earlier this month).
I've also been working with startups helping with fund-raising, customer acquisition, user-experience and product management (feel free to contact me if you need help with any of those topics). I want my experience to benefit others, so that their companies might reach its full potential.
If you made it all the way down here, I hope you enjoyed my story. If you have any questions or comments, I'd love to discuss it in the comments below.
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