34% of startups fail due to lack of product-market fit. Learn how to avoid it for only $15!
Matt created Tali, a timekeeping solution for lawyers powered by voice technology like Amazon Alexa, and Google Assistant. Like many first start-ups, they encountered many mistakes while trying to build. He created Tali in the effort to help lawyers more effectively keep track of their time instead of using pen and paper. Ultimately, due to a lack of traction and a misfit product market they had to wind things down.
October 10, 2019
Sponsor Failory and get your business & product in front of +20,000 CEOs, startup founders, entrepreneurs, developers and marketers every month.
Do you want to grow your business? With GenM you can get free marketing from an apprentice as part of their training. The student will work 40 hours per month creating content, increasing SEO rankings, carrying out advertisement campaigns...
Want to take ownership over the growth of your business, but don't know where to start? Get 1-on-1 advice from vetted growth experts about your business.
Feeling stuck with your startup and not sure what to do next? Join to get free personalized advice every week from the CEO at Headway. Sign Up for the Live Stream
A 5-minute read that's informative, witty and free? That's Morning Brew — the daily email that delivers the latest news from Wall Street to Silicon Valley.
Hey there - My name I Matt Volm. I’m currently 33 years old, a dad to two young boys, and the former CEO and Co-Founder of a now-defunct VC-backed technology startup called Tali.
Tali was a timekeeping solution for lawyers powered by voice technology like Amazon Alexa and Google Assistant. With Tali, you could record your time via voice (“hey Alexa, tell Tali to log 12 minutes to the Hanson divorce matter”), and Tali would take what you said and turn it into a time entry form that you could sync to your existing billing system. Tali was a SaaS product, so users could purchase a monthly subscription ($12/user per month) or an annual subscription ($120/user per year). We raised nearly $1.0M of venture capital to fund the business and ran the company for nearly 2.5 years, but ultimately wound things down due to lack of product-market fit.
I grew up in a small town in Wisconsin and was the first person in my family to go to college. I focused on accounting and finance, and my first job out of school was as a CPA. I only lasted a few years as a CPA, and then moved into corporate finance, which I did for a few years as well before going to graduate school, attending Berkeley Haas School of Business and getting my MBA. After my MBA, I did management consulting for a few years, but ultimately went back into corporate finance, which is what I was doing before starting Tali.
As you can see, my career path has been rather meandering and includes a variety of experiences. I always thought that starting a company would be fun, but had no clue how it was actually done. Tali was my first startup, so before starting the company I had no idea how entrepreneurs came up with ideas for their startups. I thought you had to be an engineer, ultimately solving some very difficult problems with a complicated piece of technology. Turns out, I was wrong.
The idea for Tali all started one night in my dining room. My wife is an attorney, so needs to track every six-minute increments of her day in order to appropriately bill her time. She tracks all of her time using pen and paper, and will then spend a few hours each week at our dining room table manually entering this data into her electronic time and billing system. I saw her doing this one evening as I was setting a timer with our newly purchased Amazon Echo, so I randomly threw out the idea “hey, wouldn’t it be great if you could just tell Alexa to track your time for you, and she would turn it into a time entry form?”
My wife thought it was a decent idea, so I went out and spoke to as many other attorneys as I could. I learned that they had the same problem around timekeeping, and thought a voice application through Amazon Alexa would be a novel way to solve their problems. After this initial customer discovery, I thought the idea had some weight, so went to form a team around it.
While the idea for Tali may have been sparked in my dining room, it didn’t get it's true start until one random afternoon a few weeks later. At the time, I was working in Strategic Finance at HealthSparq, a healthcare technology company in Portland, Oregon. It was here that I met two other guys named Matt — Matt Anthes-Washburn, or “AW”, was a product manager and Matt Hoiland, or “Hoi”, was a full-stack dev.
During a hackathon at HealthSparq, Hoi and AW had created a chatbot named Charli that would answer all of your health insurance questions based on your specific member benefits (I know, pretty awesome, right?). The ease of the conversational user interface attracted me to this project, and it was our joint passion for conversational UI that initially brought us together.
As a non-technical person, I had no idea how any of this stuff worked. To be honest, I was pretty ignorant when it came to technology and just took for granted that stuff like my iPhone did what I needed it to do. But I wanted to learn more about how Charli worked, and also how something like this Alexa time tracking solution would work. So I asked them to meet up after work one day, and I quote, “teach me how AI works” — such a simple request, right?
After we got together, Hoi and AW ran through some basics associated with AI in a way that a non-technical person like me could grasp. Then I told them about the problem my wife was having, and the proposed solution I had recommended. Before I even finished my sentence, Hoi was penciling stuff out on paper on how that could work, meanwhile AW was doing what AW ultimately does best — teaching me what Hoi was penciling out, how it would all work, and what it would mean for a potential user like my wife.
Within 30 minutes we had a proof of concept sketched out, and I was convinced that we had something special — not necessarily in the form of a product (although I certainly hoped that would be the case), but in the form of a team.
You had me, the business Matt.
You had AW, the product Matt.
And you had Hoi, the technical Matt.
So the next weekend, over donuts and blueberry pancakes at AW’s house, we decided to make it official — we were going to start a company together.
Idea? ✔️ Team? ✔️ Product concept? ✔️ Funding? Nope.
One of the benefits (and pitfalls) I had as a first-time founder was naivety. Once you have an idea and a team, all you need is a pitch deck and you can go out and raise some money, right? That’s what I thought, and so that’s what I did.
Hoi (the technical Matt) is not only an all-around coding ninja, but he’s also a top-notch designer and creator. He shot a high level product demo and some other footage, which he edited into a professional-looking 60 second video that I could share with investors (click here to see this original video). In addition, I prepared a 15 slide pitch deck outlining what we were trying to build at Tali. With these two things, I started sending every early-stage VC a cold email asking for a meeting. The response rate was, in one word… *sigh* underwhelming.
This isn’t surprising — I was a first-time founder, we were pre-revenue and had nothing more than a product idea and a team that I *thought* could build it.
But then we experienced our first bit of good luck…I got a response from an early-stage VC out of Los Angeles and we scheduled a phone call. I spoke to one partner for an hour, and he then referred me to his other partner, who I spoke with a few days later. Two phone calls with two people a few days apart.
I got a term sheet the next week.
They wired me $150k the following week.
All of this without ever meeting in person, just two phone calls…this fundraising thing isn’t so bad, eh?
Wrong. Wrong wrong wrong wrong. Turns out fundraising was a giant pain in the a$$, and I heard “no” more often than I heard “yes”. I’m not going to get into fundraising here, but we ultimately went on to raise ~$750k in total to fund the business (round was rolling, so we collected one check at a time from a variety of investors over the ~2.5yrs we were in business), but this first check and investor is what made all of that possible.
We started the company in February 2017, received our first investment in June 2017, and launched our paid beta product in September 2017, six months after we initially got started.
In terms of actually building the product, my two co-founders (e.g. Product Matt and Technical Matt) did nearly all of the work (we did use some contractors as well, who were close friends, so we knew their work was quality). We considered outsourcing some development work but ultimately determined that managing an offshore development team would be more time consuming and actually give us less control over the product and codebase then we wanted.
Our strategy at Tali was to get a paid product into market as quickly as we possibly could. We wanted to do this for two reasons:
On the front-end or input side, we started with a focus solely on Amazon Alexa (we later added Google Assistant). In addition, we built a simple web application that a user could access online to see all of the time entries they captured with Tali (we called this the Tali dashboard). Last but not least, on the invoicing side we started with an integration approach — rather than build our own invoicing and billing system (which would require a lot of engineering effort and take time), we chose to integrate with Clio, a legal practice management solutions (we later added PracticePantherand Rocket Matteras integration partners as well).
We went to the market at a price point of $90 for a three month subscription (or $30 per month). This price point was higher than our competitors, but we didn’t focus on this — instead, we looked at the value we were delivering to our user. If a lawyer bills out at $300/hr then each six-minute increment of their day is worth $30…surely Tali could save you more than six minutes over the course of a month! We included a free Echo Dot to sweeten the deal for our customers, but also to avoid the objection of “I don’t have a smart speaker for my office so I can’t use this software.”
This product — the Amazon Alexa skill, the Tali dashboard, and the Clio integration — priced at $90 for a three-month subscription (with a free Echo Dot) is what we launched in September 2017 at the Clio Cloud Conference in New Orleans…and people loved it! 💜
By December 2017, our paid user base had risen to 101 people from all across the globe. At $30/month, that’s $3,030 of monthly recurring revenue (MRR)…not bad for a product built mostly on nights and weekends by a team of three!
We launched, and then we realized we had a problem.
When a user created an account and submitted their credit card information for a $90 purchase, which got them three months of Tali, they were making a unique, one-time purchase.
We never built in the functionality for the subscription to automatically renew. 🤦♂️
This meant that everyone who had signed up would need to submit their credit card information AGAIN, or a second time to keep their Tali subscription going.
You’re probably cringing right now, which is the appropriate response. This meant I had to reach out to every person, all 101 people, to ask them to submit their credit card information again.
I e-mailed 📧
I called ☎️
I e-mailed again 📧
I called again ☎️
After all was said and done, I managed to get 22 people to submit their credit card information again. Let me do the math for you — that’s a 78% churn rate…ouch. 😟
When was the last time you talked to a customer about your product or startup idea? A strong strategy is key to startup success. Get a free product strategy assessment and get access to actionable advice from the startup experts at Headway.
We tried everything - inside sales, Google AdWords, Facebook Ads, reseller arrangements, etc. etc. - but nothing ended up working. Near the end of Tali, sales were slow and only growing about 10%-15% per month. We reached about $3,000 of monthly recurring revenue (MRR) but nothing we did on the sales and marketing side seemed to move the needle.
This was mostly driven by our target customer, which was a solo or small firm attorney. Because of this, account sizes were typically small (less than 10 users) and our price was also low ($10 - 12 per user per month), meaning our average revenue per account was $100 or less. This meant we couldn’t afford to spend a lot of money to land these smaller accounts in a profitable way, and we never ended up figuring out an efficient way to spend our sales and marketing dollars in a way that generated favorable unit economics (e.g. customer acquisition cost when compared to customer lifetime value).
We had some hiccups early on, every startup does, but we continued to grind away throughout 2018, and what a grind it was.
During 2018, we focused heavily on improving the product. Everything we did had a positive impact on user experience and engagement, but nothing really moved the needle. Our average daily active users (DAU) crept up, but was never greater than 10% of our total paid user base. We were able to get a lot more people activated because of the onboarding improvements AW and Hoi made, but our free trial to paid conversion rate (those users that started with a free 30-day trial and then converted to a paid subscriber) never rose above 3.0%.
We were growing our paid user base each month, but growth was slow (only 10% — 15%) and driven mostly by direct sales efforts (which meant unsustainable unit economics). We even reduced the price from $30/user/month to $12/user/month to see if this would help drive sales, but it didn’t. We ended 2018 with around 250 paid users, more than we had at the end of 2017, but because of our price reduction, our MRR remained flat at roughly $3k.
By December 2018 I knew we were in trouble. At this point, I had raised nearly $1.0M and we had 2.5 months of runway left.
I went to our current investors to ask for another follow on, and they all said no.
I tried to find angel investors that would write some smaller checks, and they all said no.
I even tried to find some later-stage investors that would write a larger check, but they all said no too.
We weren’t going to grow our way out of this problem, and we weren’t going get additional capital either, which left us with two options — put things in cruise control or zombie mode, or shut things down.
I think the most difficult part in this process was simply admitting the fact that shutting things down was an option. As an entrepreneur, you need to solve your way out of a lot of problems and the odds are always stacked against you. So how do you know if this is just another one of those things you need to plow through, or if it’s different? Here’s what I did.
Talk to your mentors
My initial thought was we would just put things on hold at Tali for a while until we figured out what was next. We’d keep the technology up and running, do support requests and demos as needed, but would otherwise do as little as needed to keep the lights on. Me and my team would go and get day jobs to pay our bills, and once we “turned the corner” with Tali we would jump back in full time. Sounds like a great plan, right?
Turns out, not so much.
I wasn’t able to admit that shutting things down was an option until I spoke to two of my mentors. Both had founded multiple companies in their lifetimes, some succeeded but most failed. They gave me the same advice — putting things in zombie mode is a dumb idea. “Give this thing everything you have over the next few weeks, and you’ll either go out in a blaze of glory or you’ll turn things around. Anything in between is not a viable option.”
With these conversations, zombie mode was off the table, and we were either going to turn things around or shut things down. Because of these conversations, I was finally able to admit shutting down was an option, and actually say the words out loud. Doing this was incredibly freeing, and took a huge weight off my chest.
Consider and reflect on everything you’ve done
After I spoke to my mentors, I went to the drawing board to reflect on everything we did up to that point and asked myself “is there anything I’m missing or anything I haven’t tried?” I looked at this mostly through the lens of our go-to-market and growth strategy, but also considered our product approach.
I tried outbound sales, but unit economics were not sustainable.
I tried digital marketing, but the results were poor.
I tried Google Adwords and SEM, but this was expensive and conversion rates were low.
I put reseller agreements in place with technology partners, but these weren’t driving any volume.
Blogging, webinars, etc. all produced the same results — nothing seemed to be working.
I even went to other startup founders, asking them if they had any recommendations or tactics I could try. All of their ideas were things I had already experimented with, which didn’t yield positive results.
Then I looked at the numbers and realized that, at our average growth rate, it would take us 26 months to reach cash flow positive at our current burn rate. How on earth would we even make that happen if we got day jobs and were focusing LESS on the business?
Is a “one-step” pivot viable?
By “one-step pivot”, I mean keeping one foot planted on the ground while lifting the other and moving it in a different direction (versus a two-step pivot of lifting both feet off the ground and completely jumping in a different direction).
Up to this point, our strategy was to be a horizontal SaaS company, one that was building a time and billing solution that could enter other industries outside of legal, rather than building a vertical SaaS solution just for attorneys. However, since we launched our product we had a long list of feature requests from our attorney users that were not focused on time and billing — things like taking notes, adding calendar entries, and assigning tasks, to name a few.
We hadn’t prioritized these legal-specific things before, but could we build and launch any of them within the timeframe we had left? It sounded like a one-step pivot — we were still focused on voice technology for our existing core user but would expand our use case to go beyond time and deep within legal (something we hadn’t previously planned).
Turns out this wasn’t a viable option, at least not with the time (or money) we had left. Are there any options left?
Can you sell?
We had spent nearly $1.0M and the last two years of our time building Tali. We had built a voice technology application for a business that worked, something we believed (and still believe) will be core to future enterprise software products. So we asked ourselves — “would anyone want to buy what we’ve built?”
We had a few conversations, but nothing that ended up working out.
No more options
After I went through all of the options above, there was only one thing left — winding down. So that’s what we did — our attorneys started the legal process, and I notified all of our investors, partners, and users to tell them that we’d be shutting down, and then closed the bank accounts.
We were first-time founders, so everything was brand new to us. We had never raised venture capital before, built a product from scratch, or tested sales and marketing techniques, along with a whole lot more. While this was a significant challenge we had to overcome, it also helped us throughout our journey - we had no preconceived notion of how things were supposed to be done, no bias from our past experiences.
We ran Tali for nearly 2.5 years and spent about $750k during that time (most of our spend was spent on salaries/labor, marketing, and travel) We did have a revenue generating product, but were only generating ~$3.0k of MRR at the time we wound things down.
People. Hands down, the best resources an entrepreneur can have are the people they surround themselves with. I do my best to constantly expand my network, leveraging tools like Twitter, LinkedIn and e-mail to reach out to people (typically cold outreach) I want to meet.
Invite us into your inbox and get immense learning and 80+ deals on tools to help you scale your startup (worth up to $50,000)!