Failing to Build a Startup Gambling Marketplace [Story]

Behind the Music

Twitter is full of armchair critics, from sports to politics to startups.

reading Skin in the Game taught me to call FRAUD whenever someone is unwilling to bear risk for their opinion. since i know how to code, i thought it would be fun to put armchair critics to the test: with friendly, cash wagers about startup outcomes.

do you really think Uber will IPO by 2020? cool, make a $20 wager. do you really believe Slack will be acquired by Google? right on, challenge the $50 wager that says otherwise. just stop Tweeting your opinion -- be rewarded for it instead.

like many of my side projects, this one began with a Tweet:

a month later, i failed to grow Startup Wagers into a viable side hustle and shut it down.

How it Worked

before getting into possible reasons for its failure, lets review how Startup Wagers worked.

first, you provide a startup’s name and select a potential outcome, along with a date.

this creates a pending wager. provide your name and amount to go live.

the 3rd and final step is a notice. your wager gets posted to the network and if someone funds it as your opposition, you’ll be asked via email to send in your stake.

you can also view your ledger at any time, which is governed by a UUID mapped to your email.

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UUID is a universally unique identifier, e.g. “asdf-qwer-cxzv-3431.” at Startup Wagers these were provisioned for each unique email that made a bet, and players could access their bets via /players/UUID-HERE.

nobody knows your profile UUID except you, so it worked sort of like a crypto key. sort of.

Launch

launch plans are overrated.

i ship so often (2+ projects /month) that i typically send a couple of tweets and that’s it. for this project i didn’t try Product Hunt, where i’m a top 500 maker. i didn’t even hit my email list. i figured 50 people will give me the same “truth” as 500.

by the way, the “truth” in startups and side projects is that the market wants what you built, or they don’t. the goal is not to guarantee a market wants your product, it’s simply to get to the truth as quickly as possible.

so i did what i always do: Tweet.

in the first 30 days, over 200 wagers were placed through the platform with a 23.17% conversion rate from home page → confirmation.

this is great, but only 7 of those wagers were funded with real cash, or about $150 total revenue.

let’s explore a few reasons i might have failed to make this viable.

Why I Failed: Network Effects

social networks from and many mobile apps rely on network effects to grow. this is where more players mean more utility for other players. if 100 wagers were live on the marketplace instead of 10-20 (my average for 3 weeks), more wagers might have been challenged with funds.

my startup experience has been almost exclusively B2B, non-social network, and i simply didn’t have the interest or skillset to create “virality.” i could have done the bare minimum, e.g. “click to Tweet” following a new wager, but didn’t. i’m that stupid.

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Why I Failed: Validations

a live feed of any information is only as good as its form inputs. within a few hours of launching, trolls came on board and began posting stuff like “Facebook will shut down tomorrow.”

it was until a week after launch that i finally added basic filters and max data ranges. sigh.

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Why I Failed: Long Term Gratification

humans prefer instant gratification. if we bet $20 today, we want $21 tomorrow.

but startups are the antithesis of short term gratification, with most taking 3-5 years to mature, or go bust, or maybe even longer before anyone has a clue if they’ll stick around.

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Why I Failed: Centralized Operation

some serious players asked via email or Twitter DM: how will i know i won? who decides?

the answer, of course, was that I personally made Google Calendar reminders for every funded wager, with a task to verify whatever happened and pay out the appropriate players.

we won’t even get into the scalability issues here, because Startup Wagers was not only manual, it was free. to be clear, i decided against taking a cut because i don’t know how the legalities work, not because i’m a nice person. although i maybe am.

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Why I Failed: Legal

suppose i got 10x the traction and made > $1,000 in the first 30 days.

this is a great milestone for a side project and in my opinion, makes it worth going “official” from a legal entity perspective.

but how much money does one need to make with an online gambling project for the legal regulation and permits to be worth it? i didn’t feel like figuring that out. another strike on my motivation to proceed.

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Why I Failed: Trust

this is the most obvious assessment of why Startup Wagers didn’t “take off,” beyond the lack of exposure. which is more easily fixable with promotion effort.

let’s be honest: i built the site in 2 days using Bootstrap 3. i made a logo in Photoshop. i launched with zero testimonials.

that said, i got first revenue in < 1 hour after launch. this is the benefit of launching to people who already know and trust you (aka Twitter followers)... you get to skip a few steps otherwise required for cold traffic to convert.

Why I Failed: Usability

even startup dudes like me who think about tech all day long, would be hard-pressed to name 20 companies on the spot and make a prediction about each.

this means landing on the home page with a blinking cursor next to “I wager…” might be a little daunting, and cause dropoff.

to mitigate i found an Angellist API key from a 4-year-old abandoned project and added live search.

this got serious action until Angellist cut me off. thanks Naval.

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Why I Failed: The Premise Itself

some readers might think the simple stuff -- design, trust, marketing -- were why this project failed. but sometimes you have to take a step back and re-examine the idea itself.

for example, i don’t believe the mantra “ideas are useless, execution is everything.” i believe ideas have tremendous value. and i believe the better your idea, the easier the execution.

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with this in mind, i believe Startup Wagers primarily failed for the same reason i launched it: people don’t have any skin in the game.

it’s more fun to tawk online than act on your opinions, because being wrong is cheap if you’re only tweeting, and expensive if you’re making wagers with hard-earned cash.

there’s a reason VC are celebrities -- there are relatively few of them because few have what it takes to make bets. and VC funding for a startup has similar “wager made → wager funded” conversion as Startup Wagers. it’s < 1%.

next, i’ll discuss how this could have been more successful, but the best hint i can give you is to change industries altogether.

launch Startup Wagers for TV shows, for example. this passes tests for short term gratification, community-verifiable (decentralized) outcomes, and is more mainstream than tech startups with 100s of millions of television lovers.

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Mic Drop

if i did this all over again, my #1 change would be how i launched.

i would have pushed for at least 5,000 unique eyeballs, vs ~1,500. i would have implemented better form validations to target short-term outcomes vs 3-5 year “will get acquired” type speculation.

i also would have added a few viral mechanisms, e.g a Twitter bot that pinged companies “someone just bet $150 you’ll shut down in 3 months!” kind of message. imagine how sweet that would be.

but i didn’t do any of this, and i failed.

i’ve since reimbursed everyone who funded bets, and will be shutting down the website this week. if you want to give it a go, i’m open to passing along the domain and source code to a serious developer. i’ll even make the first bet.

just promise me you’ll make new mistakes.