Listening To Customers Almost Killed One Startup

“Fail Fast, Fail Often” and “Fail Better” are phrases that startups always hear from their mentors, and many live by (especially after reading The Lean Startup). Even though we’ve fully embraced the “fail fast” mantra to help our business succeed, the fear of complete failure is still there. Any startup has fears of failure. Failing fast and quickly learning from our failures helped the team at Digsy to get closer to product-market-fit before they went down in flames.

This is going to sound crazy, but one of their biggest failures was listening to their customers.

This startup operates in the commercial real estate industry so the product is based on many, many conversations with potential customers: commercial real estate brokers. In every conversation, they asked about pain points, business processes and how technology could help them accomplish their goals more easily. They would hear the same things over and over, so they decided to build a product that solved common pain points and addressed their wants and needs. They did this twice, and they crashed and burned. Twice.

Experimenting constantly and failing fast is a constant cycle for any entrepreneur. Every week, they try something new; if it fails (which it usually does), try something else. It is good to optimize, both on a micro- and a macro-scale. From minor messaging changes to entirely new concepts of how you can do business, everything is an experiment. It was through the series of small failures that kept their minds in the game, allowing them to see the big failure. The keys to successfully living the “Fail Fast” mantra are perseverance, urgency and validated learning . Failure is a depressing waste of time and money — if you don’t quickly learn something you can leverage toward success.

Their goal from the beginning has been to improve the commercial real estate industry and change it for the better. The first product, BrokerRoster, was a tool intended to help commercial real estate (CRE) listing brokers find tenant rep brokers looking for space so they could pitch them their listings. While researching how to improve the product to generate revenue through innumerable conversations with brokers and other CRE professionals, they kept hearing essentially the same thing: “keeping track of leads and deal opportunities is too hard”. So it was decided to expand BrokerRoster to solve that pain point.

Big mistake.

They spent months building a suite of CRM-like tools giving potential customers what they asked for: a way to get more leads and a better way to manage deal opportunities. After all the hard work and late nights, the product enhancements failed. Very few used it and even fewer wanted to buy it. 

The second big failure came with the next iteration of BrokerRoster.  They did more research and customer interviews and found that listing broker users kept telling them: “if you could find us more small tenants and buyers looking for space, that would be great.” Tenants and buyers that are in the market for commercial space are the lifeblood of listing brokers. Since their SaaS CRM product was failing, they again listened to customers and decided to start focusing on tenant lead generation.

This time, they re-branded and built Digsy. There were two goals: help smaller, unrepresented tenants quickly find space AND help listing brokers to find tenants looking for properties like theirs.  It was a win for the tenants — they could find space faster and easier — and it was a win for the brokers (at least, so we thought). Since the tenants were unrepresented, the listing broker would make more money, by not having to split the commission with another agent.

They built a new service that customers asked for — a way to find more prospects for their listings — and in the process we figured out a way for them to even make MORE money. In exchange, Digsy would take a small referral fee when they closed a deal. In the first few weeks, they had many tenants using the service, going on tours and everything seemed to be going great.

But as time went by, hardly any of the listing brokers who initially adopted the service were sending their listings to the tenants on our platform. This was of great concern, because it meant tenants were not getting serviced and, worse, that Digsy was failing.

What the hell happened?

Eventually, they wised up and realized they had failed big time. Crashed and burned. Kablooie. This product they spent five months on failed. The product all their customers asked for failed; they never used something they were so enthusiastic about.

This time, they shut down for three days and sat in front of a whiteboard to discuss the state of business and explored the successes of every marketplace from Uber to 99designs. They dissected why tenants and buyers were using our product, while listing brokers could not care less. Three full days is a lot of time for a startup to put everything on hold, yet it was the defining moment. Taking a step back helped to see the big picture.

It was discovered that the brokers using the system the most were not listing brokers. They were tenant rep brokers trying to find new tenants to represent. With this newfound knowledge, the service offering was reworked and they started connecting tenants with a personal market expert (broker) to help them save time & money finding commercial space. They created an on-demand network of the best market experts to help tenants & buyers find space, where the first expert to respond to a tenant or buyer request would get the business. Through these trials and tribulations, they stumbled on a product that was like Uber for commercial real estate. In the first week of modifying service they closed two deals. In the previous five months they had closed zero. 

Docstoc founder Jason Nazar recently shared his philosophy on failure:

“Failing, as other people may see it, for me and for many other entrepreneurs, is simply part of the process of iterating until you find that thing that is meaningful and worthwhile.”JASON NAZAR, CEO – DOCSTOC

A big lesson: Your customers are everything, but failing fast is only great if it is for the sake of your real customers . 
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This is an edited version of a post originally posted at http://www.getdigsy.com/, by Kyle Pinzon, the Director of Customer Success at Digsy .You are free to re-edit and repost this in your own blog or other use under Creative Commons Attribution 3.0 License terms, by giving credit with a link to www.startupcommons.org and the original post.