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❌ Failed startup
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Burning $125k building a gaming content site

Kyril is the founder of DotaHaven, a gaming content site that’s currently passing away. The website had early success, raising $90k, growing from 0 to 500k page views/mo in 6 months and making $3.5/mo at its peak. However, in the last months, the business has struggled to make enough money to keep running; over-investment in a non-validated concept is one of the reasons for their failure.

Bulgaria
Blog
No MVP Validation

Kyril Kotashev

June 10, 2020

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Hi Kyril! What's your background, and what are you currently working on?

Hello there and thanks for the invite to do this interview! I’m Kyril Kotashev, I’m 29 years old, from Bulgaria, and I’m the founder of DotaHaven. It is a gaming/esports content website with a SaaS in it that aimed to provide content creators and influencers in its niche an additional way to monetize.

Our startup is in the process of joining the ranks of the failed projects. Even though the website is still online (people are still reading some of the content), we’re leaving it on auto-pilot for the foreseeable future and moving onto other projects. Our concept didn’t deliver good-enough results and we’ve just decided to stop active work on it.

So, I’m currently in a period of introspection, not working on anything actively. I’m organizing my head, the ideas I have, and the many lessons from my experience so far as well as looking forward to new challenges and projects in the near future.

What motivated you to start DotaHaven?

Stubbornness, mostly.

In my last year at university, I got invited to work as the main content guy of a gaming/esports startup. We partnered up with one of the biggest esports teams in the world at that time (Na’Vi) and created the first premium educational platform for the Dota 2 video game.

Long story short, the startup showed promise but was ultimately unsuccessful due to lack of funding and most importantly – mismanagement caused by our total lack of experience.

The founder of said startup eventually quit, but I wasn’t ready to give up because I saw a lot of potential. I wanted to make something useful out of all the knowledge I had accumulated from the project.

And on a deeper, personal level – fear.

I was terrified by the thought that I might have to find a traditional job. I had an MSc in Finance, so the local big banks were my most likely employer. Yet, every time I went into a bank branch, the atmosphere of soul-crushing bureaucracy haunted me. Accepting a job there seemed like death to me.

I was clinging to the idea of working on this startup as a drowning man clings to a piece of floating wood. Not because I wanted to be rich or famous or anything, but because I wanted to make a living out of something interesting and stimulating to me on a day-to-day basis to keep my soul alive.

So – stubbornness and fear. The most inspirational of motivations.

 (P.S. I’ve grown a bit wiser now and am aware that first, not all 9-to-5 jobs are soul-crushing, and second - there are many ways one can keep their soul alive even in a not-that-stimulating 9-to-5 job. Third, the idea of working on something you’re passionate about is a bit romantic and divorced from reality, but that’s a different topic and I’m struggling to avoid writing a 5k word essay on each one of your questions.)

How did you build it?

Wrote a business plan, built a detailed wireframe, and started fundraising. Eventually, I managed to raise $90k from a few local business angels that were interested in the niche. I was successful in fundraising mostly because I used my experience from the 1st startup and the new developments in the market niche (new competitors making money) as proof that we have a good chance to be successful in the niche ourselves.

I am not a developer and didn’t have a technical cofounder, so we decided to outsource the dev. process. We partnered up with a small local software company that we trusted and started work on the platform.

Meanwhile, I started gathering a team of freelancers to work on the content with me. The site went live after 6-7 months of work behind curtains.

At first glance, all of the above seems in order, but people with a bit more experience would have noticed that in the last sentence hides our most fatal mistake. More on that below.

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Which were your marketing strategies to grow your business?

We started with an email marketing campaign. Then, we experimented with small ad campaigns on Facebook, Google, Twitter, and Reddit. 

We got visitors on the website, but 1st, they weren’t converting, and 2nd, they weren’t coming back.

It became obvious that the problem wasn’t in the marketing campaigns, sadly, but in the service we were selling. We weren’t the only providers of premium educational content in our niche anymore, and our strategy for differentiation (eCommerce model instead of SaaS, different partners/influencers) wasn’t successful.

Very few people were interested in what we were offering. There was no product-market-fit.

(The lesson here is that investing any money in paid promotion is generally speaking a waste before you’ve established a product-market fit. Paid promotion is a growth expense, and we were still in the validation phase, not in the growth phase.)

We realized that we had to pivot. Even though we had invested very little resources in the promotional campaigns above, we had invested a lot in the development of the platform and the premium content in it, which meant the startup was in a bad place.

We changed the business model to a traditional subscription model and at the same time changed our strategy: rather than focusing on the value to the end-consumer of the educational content, we were trying to find a model in which we create value for our content-creator/influencer partners as an additional source of income.

DotaHaven's site

At the same time we started an organic content marketing strategy (I talk about it in detail in this content marketing case study for those of you interested). The pivot was ultimately unsuccessful (sadly, we didn’t have the resources to test the new concept properly), but the new strategy brought new visitors and the website was growing:

DotaHaven Pageviews

We used this positive trend to secure an advertising contract to keep the business alive and we were positioning ourselves for a third pivot. Sadly, the trend we were riding to grow (a new video game genre) died out and with it - our traffic started falling. This made the business unsustainable and landed us where we are at right now.

Which were the causes of DotaHaven’s failure?

A biology professor (Bret Weinstein) used to bag all the dead animals his cat brought home and put them in his freezer. At some point he made his graduate students autopsy the animals, and what they found was that the majority of the cat victims (I believe he said two-thirds) had additional health problems. In other words, most of these animals were more susceptible to death by a house-cat than their peers because of their additional health issues. 

As we know, the same is true for coronavirus victims. A young, healthy person usually manages to deal with the virus. However, a person with comorbidities and a compromised immune system is at a much greater risk.

I strongly believe the same principle applies to businesses. Few businesses fail due to a single factor. Usually, some kind of stress coming from the environment puts the final nail in the coffin, but it only manages to do so because the business already had serious underlying problems.

In our case what killed the business was that the trend we were riding (the new Auto Battler game genre and the Dota Underlords video game) died out.

The important underlying issue, however, was that we had exhausted most of our resources developing a service before we had validated the need for its existence. This left the business with not enough room to breathe to properly pivot and test new concepts & strategies, business models, etc. 

Which were your biggest mistakes and challenges you had to overcome?

Again, the biggest mistake by far was that we spend >80% of our resources developing something very few people needed.

I was aware of the concept of the lean startup, but I didn’t know how to put it into practice and how you can take it to an extreme in order to improve the chances of finding the elusive product-market-fit.

IMO the most important thing for a startup by far is to be lean and agile.

It seems to me that if you fail at any of the two you’re very likely to waste your time and money, as we did.

You need to be able to challenge, test, and if required change your assumptions as cheaply as possible in order to give yourself the best chance to find the right approach.

It’s wise to start serious investments in development and marketing only after you have tangible evidence you’re on the right path.

Besides that, there were many other problems, mistakes, and learning experiences along the way. For example, I’d avoid doing another startup as a solo founder. I think a co-founder is extremely beneficial. I’d also avoid doing another startup without a mentor. That said, I don’t think those are true for everyone – they are negotiable, case-specific, and they have pros and cons.

Being lean and agile, however, is simply non-negotiable. There are no downsides besides the fact that it requires more effort on the side of the founder(s), but this is well worth the increase in the chances of success.

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Which were your expenses? Did you achieve some revenue? In the end, how much money did you lose?

Our expenses were:

  • Salaries (initially a team of 3, then only mine).
  • Platform development expenses (outsourced to a software dev firm).
  • The fees of the freelancers who helped with the content.
  • A whole bunch of other minor stuff (servers, a few PCs, etc.)

All in all, we managed to spend about $125k over two and a half years, with the majority being spent in the first 6-7 months while we were developing the platform and content behind closed doors.

Our revenue:

  • About $35k advertising income. Most coming from the one-on-one advertising partnership we entered, a smaller part from the automatic ads from a display ads network.
  • And an insignificant amount from the actual SaaS we were trying to get going.

If I draw the line right now we lost about $90k (the initial funding), but it’s worth mentioning that the website is still online, has traffic, and we haven’t made an attempt to liquidate the assets of the business yet (this decision remains to be taken) to mitigate some of the losses.

If you had to start over, what would you do differently?

  1. I’d put the initial investment in a bank account.
  2. I’d find a co-founder if possible, and we’ll spend a good amount of time experimenting with no-code solutions and different kinds of content while the only major expense is our salaries.
  3. We’d start investing in proper development and marketing only after we’ve had a successful validation experiment and our no-code MVP is gaining some traction.

Which are your favorite entrepreneurial resources?

Before giving you a list, I must mention that I avoid motivational, life-coach-style, this-is-the-way-to-become-rich resources like the plague. Moreover, I strongly believe that domain knowledge is way more important than knowledge about entrepreneurship.

I try to consume (professional) content on two levels:

First, I get high-level, broader startup and entrepreneurship lessons mostly from the stories of other entrepreneurs. I treat Paul Graham’s blog like the Startup bible, and I have been deeply influenced by the thoughts of people like Sahil Lavingia, Jason Fried, and many others. That said, I prefer long-form blog posts/articles, podcasts, and the occasional book. I don’t believe reading Tweets will make you a better entrepreneur in any way (Twitter is just useful to keep track of what these people are up to). I must mention that I’ll definitely add failory.com to my list of resources I visit – it’s a great way to find the stories of the not-so-famous members of the startup community.

Second, I try to develop useful practical skills that I can apply in the projects I’m a part of. In my case, this is content marketing, especially SEO. I’ve learned plenty from the Ahrefs’ Blog and the writings of Nat Eliason. This is useful only if you want to get into content marketing and SEO, however.

Where can we go to learn more?

Before wrapping this up, I’ll allow myself to tell yet another somewhat unrelated but hopefully interesting story:

When you invited me to do the interview I, naturally, checked out the Failory website. I started listening to your latest podcast (at the time) with Bernard Huang from Clearscope. The name sounded very familiar, and then a friend of mine reminded me that years ago we used to write some Dota 2 content for his Game Runners website/startup as freelancers.

Now, we live half the world apart from each other (I’m in Eastern Europe, Bernard is in the US, and my friend is currently in Japan), and yet our paths have intersected again randomly. This gave me a profound realization that even though the world is huge, the startup community - less so, and in a way, we are all walking on this path together.

The best we can do is try to learn from each other and whenever possible – help each other.

Startups are not a zero-sum game. The more we support each other, the more value we’ll create for ourselves and the rest of the world.

If you want to follow my story and learn from my mistakes, the best place to do so would be my blog on Medium where I occasionally post stories like my 5 Lessons from 2 Failed Startups. If you’re into social media, the blog has my other links.

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