from Hacker News

How to proceed when you run out of cash, but you still believe?

by aldamiz on 12/4/19, 4:02 PM with 202 comments

• by AndrewKemendo on 12/4/19, 8:05 PM

  I empathize completely with this team because my company was in a very similar situation in 2018. We had two very technical computer vision products, had found traction and a growing enterprise user base but revenues didn't grow fast enough and all of the major companies were entering the market.

  We were lucky enough to find an acquisition off ramp last year but all of the feels are the same.

  The big takeaway I learned is, if your differentiating product/service could be classified as a feature (which most ML or CV products are) inside a platform or application, you'll be run over by the major platforms who rebuild your product/services inside their platform.

  Your only hope is that your team/data/IP is so far ahead and the acquiring company can't build what you're doing in-house more cheaply than what you're willing to sell for. Unfortunately it seems like there are fewer and fewer cases where major players can't rebuild your work more cheaply.

  Second, it's excruciatingly difficult to prove the value of your product/service to a potential acquirer because you don't know their metrics, and if you do, you don't know their acquisition strategy. We did an intensive integration of our product with a Fortune 50 retailer, and based on their own numbers showed (using their own A/B tests) that our service provided a statistically significant lift in a core metric that they cared about, in this case paid conversions. Their CEO even talked about it at a public summit. However their acquisitions strategy didn't include small companies that aren't major strategic partners (Only >$200M+ acquisitions).

  The worst part here is that, the founders (like I was) are absolutely in love with the technology and how amazing it is. The problem is, from a business perspective, that basically doesn't matter. You could be doing the most amazing work in NLP token inference, but if the product doesn't fit perfectly as an acquisition and it's not so compelling as to build a huge platform around, it's probably going to fail.

  I wish it weren't the case, but it leaves me questioning what the value of doing really hard technology is as a startup. It seems clear that the most financially successful startups aren't solving fundamentally hard technology problems until they get to scaling something with broad product market fit.

• by bumblebee4 on 12/4/19, 7:19 PM

  Looking at your own brand homepage, my impression is that it is too technical. I had expected to see many instagram-like pictures of people who demonstrate that they have managed to dress better by using your product. Isn't your value proposition that people can dress better?

  Maybe I have overlooked it but I think you have the perfect software to run an online shop. Pay influencers to use your product and viewers who like the results will want to buy clothes from you. The profit margins of the sold products should be higher than anything that can be made from selling an app.

• by jakobmi on 12/5/19, 3:43 AM

  FIRST build a successful business, THEN try to sell it. You try so sell something that's essentially worthless, and even worse: you have zero negotiating power. So at best, you would accept an offer of ~10'000 USD. This is the cold hard truth in this case, and I don't mean it in any bad way.

• by sofiaqt on 12/4/19, 4:47 PM

  This is a brave post. It takes a lot to share this with the world. I truly hope the right partner comes along and makes the best use of all the hard work you put into this. Respect

• by Etheryte on 12/4/19, 6:45 PM

  Looking at the technical bits, I can't help but feel that you've failed to communicate it well. Case in point, the caption for the edge detection image of the girl:

  > “…providing interactive access over a worldwide computer network to the plural fashion images, together with access to the fashion data for the fashion items in each of the plural fashion images and the information linking to the vendors of the fashion items…”

  This sentence (with ellipsis!) does not appear anywhere else in the article, so right off the bat it's hard to understand what you're trying to convey. Secondly, it's insanely verbose, the whole sentence can be boiled down to "hosting fashion images with relevant metadata". If it's an excerpt from one of your patents, then without context it only muddles the situation — it makes it seem like you either don't know how to communicate your tech or you're trying to mislead.

• by TekMol on 12/4/19, 7:21 PM

  What strikes me as odd is how unstylish everything in that post and on the fashion taste api website is.

  Is that intentional? Because I would think with $3.5M in funding, you can hire professional photographers, models and stylists to make the photos and the videos. And a webdesigner to make the site.

  The appstore pages look better. And you have good ratings from thousands of users. So why do you want to close it down? How many users do you have and what are your running costs?

• by 1_over_n on 12/5/19, 3:47 AM

  There are other ways to proceed when your running low - in my experience it depends heavily on how hungry a bulldog you have built (i think paul graham said this) which is often a function of when you raised cash. If you have to make payroll and can't proceed without all those people sat in their we-work seats with computers you need to buy them thats a difficult spot. We have tried to stay lean for as long as possible and avoided taking cash because we work in medtech and don't want investors that do not understand our roadmap and milestones. We have found partnerships with academia, government, and research institutions have helped drive our project forward without needing to play the VC game. We advance our product and havent given equity away.

• by weiming on 12/4/19, 7:39 PM

  Cool idea but, from watching the demo videos:

  (a) That's a messy, unappealing closet.

  (b) The Alexa interaction felt awkward. Probably a touch interface would've worked better.

  (c) Ugh, (used?) boots on the TV stand.

  (d) Many of the clothing items we own are Asian items without barcodes. Wonder how the import would work on those.

  (e) The website (chicisimo) could use a lot, and I mean a lot of copywriting love. So many walls of text. Some fashion photos should be front and center. It is hard to understand what is going on in the animated iOS screen.

• by TallGuyShort on 12/4/19, 7:36 PM

  >> We are a team of 8. We are 2 full-stack, 1 iOS, 1 Android and 4 product people

  What were the 4 product people doing day to day?

• by klinskyc on 12/4/19, 4:21 PM

  It seems like telling the world you are dead in the water gives the upper hand to an acquirer here right?

• by HenriNext on 12/4/19, 10:21 PM

  > "We are a team of 8. We are 2 full-stack, 1 iOS, 1 Android and 4 product people."

  And that leaves 0 for business + marketing + sales.

  Maybe you didn't find the right business model during 5.5 years because you had nobody working on finding the right business model?

• by dwrodri on 12/4/19, 7:17 PM

  As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision.

  That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?

  I'm torn, because I believe that people should absolutely pursue passion projects, and that a passion project should absolutely be monetized... if you have developed a respectable business model and a potential product-market fit.

  My first thought is that you could get some funding and use this as a platform for fashion retailers to exchange consumer profiles at the B2B level, or as part of the internals of the recommendation system.

• by proxybop on 12/4/19, 4:17 PM

  That’s an interesting article. To me, that company should have been really valuable and done really well especially in the retail clothing industry. I wonder if it’s more luck and connections than anything that has to do with product when forming a company

• by excalibur on 12/4/19, 8:19 PM

  > One of our processes.

  This process needs some work. It replaced the girl with an entirely different girl, and swapped her Metallica tee for H&M, effectively removing her taste.

• by Animats on 12/4/19, 11:26 PM

  "An In-Bedroom Fashion Stylist that understands the user and her taste and knows what clothes she has in her closet." That's from Clueless.[1]

  Is there anybody who really wants that? People with too much money and no fashion sense? Is that a market?

  [1] https://www.youtube.com/watch?v=XNDubWJU0aU

• by devit on 12/4/19, 8:45 PM

  Assuming this can recommend clothes that someone is going to immediately love based on previous purchases, this seems incredibly valuable for all the fashion e-commerce sites starting from Amazon, and could in fact turn any large site with this technology into a monopoly at least until someone replicates it.

  Of course it needs to actually work though, which is not clear from the article (categories like "comfy" aren't going to cut it, you probably need a sophisticated deep learning approach on product images plus brand identity data and maybe Instagram posts with a lot of training data).

  Obviously you can also run a store or an affiliate-based site yourself with it, but the problem is that you are going to be missing data on customer's taste; maybe you could exclusively cater to people who love posting their photos on Instagram, connect to their Instagram account and understand their fashion taste from their posted photos - or you could even support imitating someone else fashion's taste by looking at their Instagram profile.

• by zuhayeer on 12/4/19, 11:29 PM

  We need an inverse of this too "How to proceed when you're flush with cash, but don't believe"

• by dazhbog on 12/4/19, 9:06 PM

  Haha, that is exactly what is going on with us now. We just launched our first Kickstarter[1] and its not going well.

  We will go ahead, eat ramen, and pursuit this, and its a HW product. Wish us luck.

  [1]: https://www.kickstarter.com/projects/pycno/pulse-building-sm...

• by krn on 12/5/19, 2:55 PM

  > We finally found the right path 36 months ago, but we haven’t found a relevant business model.

  The best use case for such technology is a B2C fashion app targeting 16-36 women with an extremely well-designed UX, that doesn't force to signup or enter any payment details.

  Look at the Fashion Finder[1] by Daily Mail, and how it was successfully monetized via affiliate networks[2].

  I could easily see such an app being acquired by one of the latest unicorn fashion startups, such as TheRealReal[3], Poshmark[4], thredUP[5], or Vinted[6].

  [1] https://www.dailymail.co.uk/femail/fashionfinder/index.html

  [2] https://skimlinks.com/resources/case-studies/case-study-the-...

  [3] https://techcrunch.com/2019/04/23/luxury-consignment-e-taile...

  [4] https://www.forbes.com/sites/bizcarson/2018/12/14/next-billi...

  [5] https://www.forbes.com/sites/glendatoma/2019/08/21/thredup-r...

  [6] https://techcrunch.com/2019/11/27/vinted-the-second-hand-clo...

• by j45 on 12/4/19, 8:20 PM

  If there is a smaller part of your business that can generate $, it can be a good way to help you stick around/simmer until the timing is right for the demand to increase.

  Products are about as much as deciding what part of your solution you're building that lines up with what the market is ready to actually do and growing from there incrementally.

  A neat example of this I read about was how the iPad was designed for many years before the iPhone came out, but the iPhone in a way was a starter/training device for a larger touch computing experience.

• by paulie_a on 12/4/19, 10:57 PM

  Move on. It's a bitter pill to swallow but that's the reality. It's game over. You might be able to scrape some cash together and you will be in the same place 6 months later.

• by thepratt on 12/4/19, 10:21 PM

  For the patent section, I don't understand how any of the 3 are worthy of a patent or were able to be patented. I'm not sure of timelines, but for the 3rd[1], isn't that what Instagram integrated ages ago with circles linked directly to a checkout - prior art?

  [1] system to automatically match an item in an image, against its equivalent in a database with ecommerce links to purchase that same product.

• by z3t4 on 12/5/19, 7:45 AM

  The most important factor of product success is probably timing. If you have had a problem for years, you are not likely to adapt a solution. But if you've only had the problem for a short time, like from one day up to a month, then you are much more likely to adapt the solution. So you basically have to be lucky, or go to market fast (within one month).

• by theicfire on 12/5/19, 3:37 AM

  Wow, thank you for this. I admire your team's dedication and bravery. I found the details of all the assets of your company fascinating, since I myself know very little about classification or fashion. This is a bit of a business review type article, and I hope you write more about this and things go well for you all.

• by jbduler on 12/5/19, 1:21 PM

  We were in the same situation 4 years ago for our computer vision company, same team size. We targeted the wrong industry (beauty) and that was a mistake. Lessons to be learned and plenty of contacts for you as we went through the process of an acquisition. PM me, I am easy to find.

• by alexis_fr on 12/4/19, 10:25 PM

  “Blogger” started like this, according to the interview in “Founders at Work”, an interesting book.

  The guy of blogger had to fire pretty much everyone, and it was on bay still running, and everyone angry at the former employer. A few months pass and Blogger took off.

• by zarriak on 12/4/19, 7:28 PM

  The product seems good but I can't help but think it would have been a much better strategy to try and look for an acquisition as soon as the patents were filed.

  Also would have preferred a browser extension and website for the reverse image searching.

• by nikanj on 12/4/19, 7:17 PM

  Society tends to tell stories about survivors. Just believe, believe even harder, sacrifice all, and you'll succeed.

  We don't share stories of people who believed so hard, and then ended homeless and broke.

  xkcd touches on the subject too ( https://xkcd.com/1827/ ), as they tend to do regardless of the topic.

• by luckydata on 12/4/19, 7:22 PM

  reading the blog post I learned everything I needed to know to understand why they haven't been successful commercially. I wish them good luck but their business skills seem to be awfully lacking.

• by shamino on 12/4/19, 6:54 PM

  I have some criticism of the idea, actually. As someone who doesn't think they have good taste in clothes, I would not use this. I would want to upgrade my wardrobe and improve my style.

• by Aeolun on 12/5/19, 10:20 AM

  If you run out of cash, maybe you shouldn’t still believe.

  I don’t mean to tear it down, but the idea as it stands apparently isn’t a business.

  You must change the product if you still want to achieve market fit somehow.

• by ydnaclementine on 12/4/19, 7:30 PM

  seems like tech that boutiques would say they’re interested in, but don’t bother because ‘what we’re doing now seems to work, so why change’. the one shop/brand who does understand and utilize the tech will take off

• by gerdesj on 12/5/19, 1:27 AM

  "If you read all the way until the end, I appreciate it. In return, I want you to discover a song in a language you’ve probably never heard before: Basque."

  I've heard of Basque, off of Northern Spain. Also isn't there a bit of France involved?

  Good luck for the future.

• by thysultan on 12/4/19, 10:52 PM

  Start minting believe coins.

• by goatherders on 12/5/19, 4:19 AM

  So they built some tech with no business model? Ooph

• by sergesalager on 12/4/19, 6:01 PM

  Eskerrik asko! ;-)

• by grogenaut on 12/4/19, 6:49 PM

  Dangit I was hoping medium had decided to call it quits. Wish hn would highlight the blog name not the domain.

• by czxtm on 12/4/19, 7:01 PM

  Good luck!

• by look_lookatme on 12/5/19, 12:38 AM

  According to Genius you sue google.

• by idorube on 12/5/19, 7:33 AM

  I'm reading about your product and can only think one thing: "But, why?...."

• by choward on 12/4/19, 7:44 PM

  Those arguments for acquiring patents are as weak as the patents themselves. I'll admit that I only skimmed and read parts of them but nothing seems patentable or particularly innovative to me. It just looks like standard software engineering.

  > as a startup we need to create value and this method has proven successful in the past

  This means nothing to me. You did something I'm not a fan of in the past (patenting software) so that makes it okay to do now?

  > we’ve never thought of using patents against others

  It doesn't matter that you've never "thought of using patents against others". Things change. And the way that business is going it seems inevitable that these patents are going to end up in the hands of patent trolls. Patent trolls don't usually come up with their own patents. They buy companies that aren't doing well just for the patents.

  > And now, our number one driver for building IP: companies sometimes need leverage to negotiate or deal with the big tech players

  I don't understand this one at all. What negotiations are you having where patents help?