How an indie business beat a VC startup

How do you raise millions of dollars, delight millions of customers only to be sold to a bootstrapped competitor for $35K?

This is the real story of two sites: Pinboard and Delicious. It first caught my attention because I love underdog stories. As I went down the rabbit hole, I realized it represents so much more, including:

• What customers want vs. what people are incentivized to build
• First big decision founders need to make — and employees should ask about
• How a flea can devour an elephant with the help of time and profitability‍
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Winning formula: simple & reliable

Customers want simple and reliable solutions. 

Over the years, Delicious became bloated and buggy. It lost its identity in the shuffle of owners: it was first sold to Yahoo, then sold 4 more times in a matter of years.

Meanwhile, Pinboard focused on serving customers eager to pay a small fee for a no-nonsense product that just worked. Pinboard is the classic MVP that does a narrow job extremely well: 

Simple is deceptively hard. Simple requires an opinion of what matters most, and the focus to stay that way. Simple spreads faster because it’s easier to explain. Yet most of us do the complete opposite. 

The mantra of most product teams is to add more features in the pursuit of growth. But every new feature adds a little more complexity — and enough complexity over time kills two crucial things: 1) customer engagement and 2) pace of execution. It’s death by a thousand silent cuts.  

We are also easily kidnapped by FOMO. Look at all the teams chasing the hot new feature. Last season, it was Stories. This season, it’s social audio. 

Part of the problem is that we see ourselves as “builders”. But to build great things, we often need to destroy and ignore anything that doesn’t meet the bar. It’s short-term pain for long-term gain. 

The skill of simplifying, aka “razor mode” separates great from merely good.

• Do we really need that UI / copy? 
• Can we just use a spreadsheet?
• What are customers really trying to do?
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Who is this “redesign” for?

Every time Delicious was sold, there was a new “redesign” to mark a new beginning. Tragically, each redesign alienated customers more— they had to relearn the product and suffer the loss of culturally significant features. 

The answer is obvious: the redesign was never for the customers, it was for the egos of the new owners.  

Redesigns almost always happen when there’s new leadership. Asking: who is this redesign for? is the best way to check that you’re not falling for the ego trap.
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Where did it all go wrong?

How did Delicious turn from hot new startup to abandoned orphan?  

In the beginning, there is one decision that changes everything: are you a Ben & Jerry’s or an Amazon? Ben & Jerry’s: grow organically and profitably. Amazon: go big or go home.  

Pinboard vs. Delicious is a natural experiment of taking the same idea and pursuing two different strategies. 

Delicious died a slow death because it tried to become Amazon even though the product was never designed to be like Amazon. The founder raised $1M and then couldn’t raise again at attractive terms, so he sold to Yahoo.

It’s glamorous to raise millions, or join a company “worth” millions. Yet the harsh reality is that most businesses are not designed to grow like weeds. 

Telling questions: 

• Is this a winner-takes-most/all market? Why would most customers want to use the same product?
• Are there network effects? What makes this exponentially more useful as more customers use it?
• Are there juicy economies of scale (aka more profitable to serve more customers)? Why does it get better with scale?

Most of the time you’re in a space that does not lead to these insane dynamics. That’s ok! Pinboard’s founder makes a cool $200K+ every year without a boss: no investors looking for an exit, no board member checking if he’s still fit for the role.

But the numbers speak for themselves: this was not a venture-scale market. Pinboard thrived precisely because it stayed small, independent and laser-focused on the needs of its best customers. It also gets to eat the opposite of humble pie:  

Recap

To stay away from extinction:

1. If you’re a challenger: what’s the simplest thing you can build? 
2. If you’re established: how do you keep it simple? 
3. Who is this “redesign” for? 
4. Finally, before all else: are you Ben & Jerry’s or Amazon?