Cinch.fm, a popular podcasting service with no business model, is shutting down. Lets break down what happened…
Solves a real problem - check!
Did it with simply elegant UI - check!
Building the tech to scale - check!
Enough marketing to acquire boatloads of free users - check!
Screw potential customers that bet on the service with their time and effort - check!
They forgot that they needed to generate a revenue stream if they wanted to really be a lasting business.
Now I don’t know the Cinch founders or the details about why they shut down, but it doesn’t take a long look at their home page to get a clear picture. Check out the live feed and then the right hand column.
Caption: When freeloaders attack!
1. The price (FREE) attracted bad customers that were generating crap content (at best) and frequently pirating audio streams more than they were adding value.
2. They had acquired a strong following of true podcasting influencers. But they failed to generate revenue from this content.
3. They probably spent a lot of time dealing with the piracy, scaling, and customer support to handle all the freeloaders instead of spending their time on what could have been a profitable business built around semi-pro and profesional podcasters that needed simpler solutions.
Why do startups do this?
I’ll step away from bashing on Cinch. They just happen to be the most recent example of “shocking” FREE failures. This problem is pervasive in the startup world.
1. They are playing “the lottery”. I’m not sure founders realizethat they have a better chance of winning powerball than they do of creating the next Facebook.
2. They are scared to build a sustainable business. Once you start charging someone (content producers, advertisers, subscribers, etc) your business can instantly be valued and it becomes MUCH harder to play the funding pyramid scheme. I think people are scared to lose that “lifeline”.
3. They believe they are changing the world. What egotistical crap. I can’t stand to listen to these people. The change the world contingent also lives under the false assumption here is that you have to bribe users with “FREE” to change the world. Does Apple give you an iPhone with 1,000 free songs and apps? No. Did they change the world? YES!
4. They try and serve everyone instead of a “niche” of a few million people. Then you end up not solving for accute problems that people are willing to pay for. Then you end up turning off the users that would have actually generated you revenue for solving their problems.
The tragedy of Cinch
With Cinch the group of people that want to profesionally podcast is smaller than everyone… but there is a real business there that could have been built. They had great UI, were starting to solve a real problem with unique solutions, and had gotten some critical early adopters to promote the service.
I’ll go back to Apple again because startups tend to idolize them. Apple doesn’t build for everyone. They don’t care if they don’t win the race to market share or features. They care that they win the race to profits. They care about this because they want to be around for the next 100 years. They care about profits and revenue because that’s their engine to change the world.
What you get with FREE: As the business.
You get bad customers that distract you from your core business. At best you get some entitled clowns that believe you owe them feature X or Y because they graced you with their presence. At worst you get silent pirates and you’ll run around like a chicken with your head cut off trying to prioritize for everyone.
What you get with FREE: As a customer.
At best you invest your time and effort into something that is going to get shut down. At worst you end up being the product and then getting pissed when you realize the business had to make a buck, sell out your privacy, and shove ads in your face.
Instapaper flies under the radar. In a landscape where many companies are talking about how many people they can hire or how much venture capital they can bring in, Instapaper doesn’t compete. Rather, Marco Arment, the company’s founder, still handles everything himself and has focused on creating a self-supporting service.
All you really need is good value proposition and persistence. Keep making updates. Keep telling your story. Take care of your customers better than anyone else. It might not get you a billion dollar validation, but it will likely provide you more than enough to live life on your own terms.
If you want to get into startups and you don’t already know programmers who enjoy working with you, then I seriously suggest you start learning to program immediately. It’s not as bad as it sounds.
I agree with 100% and would like to add a couple of additional key points:
You do not need to become a great (or even good) developer. Just dangerous enough to prove something works.
If you are not willing to invest a couple of months learning, I just don’t see how you could actually be successful long term.
One of the most common cringe worthy events of every tech meet up theses days is begging for a technical co-founder. Usually the same people month after month with the same ‘fundable’ idea. I can’t help but think if they would have just invested a couple of months in themselves they could have gotten the ball rolling…and of course with a workable demo likely make it easier to attract others.
Episode one covers the some of the smartest things we did over the last year. The quick hits include:
Focusing on support as a differentiator. It’s sad how low the bar is for customer support out there. It’s especially easy for you, as a startup, to beat ALL the big guys at it.
Contracting a designer to build out a template of UI components AND the style sheet along with 4-5 completed pages. It got us a direction and reusable UI components we could plug and play for the next year.
Developing the ability for ourselves to impersonate customer accounts from our admin panel. This ability has been invaluable for customer support since we can just see what they are trying to do and have set directly while talking with them.
Focusing on winning customer quotes and success stories. Your customers can explain what you do to other potential customers much better than you can.
Skipping a beta and just launching a paid service.
Making customers part of our mission by sharing our customer goals. I’ve had a lot of our customers congratulate us on hitting our first goal of getting to 5,000 customers.
Running to get a deal on AppSumo. Not that we made a lot of money on the deal… but the exposure helped us get the name out.
When we started marketing where our customers lived on quora, niche blogs, and other communities.
That’s it for episode one. Let us know what you think in the comments or dropping us a tweet.
The best way I can sum it up is, simple practical design tips all in a convenient beautiful little package.
Reading this book will not make you a great designer. It probably won’t even make you a good designer. However, it will help you avoid some big mistakes and keep you on the right path until you can hire proper design resources for your product/project.
RamenCamp teaches aspiring entrepreneurs the art of bootstrapping. Master the challenges of getting a startup off the ground with advice on finding customers, building teams, getting press and staying organized, all on the cheap.
This looks like a great event with a great list of speakers.
It is a bit of a hike, but if I am free this weekend I am hoping to make the trip.
Reading between the lines of this fantastic post by RunKeeper… “When you take 10 million in funding you get pushed away from users.” I’m glad they’ve recognized that.
We’re very proud of the large, passionate user community that has rallied around RunKeeper as we’ve grown. We recently crossed the 10m user mark, have assembled an incredible team of 23 employees strong (and growing), and recently raised $10M from a terrific group of investors so we can grow even faster. Thanks to our user community, because without you, there is no way we could have made it this far.
With all of this good stuff happening, we wanted to write this post because we feel like we owe you an apology. You see, we have always prided ourselves on being a user-driven company. A company that cares about your feedback. A company that makes decisions with you, our users, in mind. We feel like recently we started to stray from those values. We spread ourselves too thin. We had too many initiatives going on at once. And most importantly, we stopped listening to our users as much as we should be. As a result, improvement to our core product (i.e. the reason you are all here), began to suffer.
Q: What common misconception about entrepreneurship have you think is untrue?
Ross: I think it’s a misconception that you need a substantial amount of financial backing when initially launching a business. You definitely need to raise some sort of capital, but my experience creating JackThreads is proof that there are definitely ways to limit costs and do it on a bootstrapped budget.