How I Built An Online Community Using Lean Startup Principles

This is a guest post by James Spittal, who is an Entrepreneur and Web Marketing Consultant in Melbourne, Australia. He is the founder of Merspi for VCE Students and the Lean Startup Melbourne group. He is also the Managing Director of Fast Fast Websites which provide lean web marketing solutions to small businesses. You can follow him on Twitter at @jamesspittal or on Facebook.

It was 2009 and I was undertaking some electives in Entrepreneurship at Swinburne. As many businesses start, I started with a simple question: “What is the product that I wish I had (as a user or customer) several years ago?”

Taking yourself as the target market for your business venture puts you in a position of power and true understanding — knowing their real pain points and being able to relate to the customer is a real competitive advantage and often a good starting point for the solo, bootstrapping Entrepreneur.

I eventually came up with an idea for an online learning platform for VCE students. It was a kind of Blackboard competitor – online tutoring that schools would buy mashed up with an intranet based collaboration and Web 2.0 philosophies.

merspi screen shot.

It came from several pain points I had as a few VCE student:

  • Severe lack of content related to how to succeed in VCE (I remember googling VCE back in 2006 and finding literally nothing that was context specific to VCE.)
  • Tutoring is expensive (Often as high as $80/hour)
  • Textbooks suck!

Lesson #1: Customer Complaints = Opportunities

One of the first things that our Entrepreneurship lecturer wrote on the board was “Customer Complaints = Opportunities.”

In other words, the “problems” that people may see in the industry or the market as it currently stands often lend themselves to exceptional business ideas if re-framed as business ideas.

We took the problems we had identified with the VCE schooling system and asked the question: “How could we fix this?”

This lead to the idea of the online learning platform for VCE students.

Over the next twelve weeks, we wrote the business plan and work-shopped the idea with the help of lecturer.

Lesson #2: Don’t Be Afraid To “Pivot” & Listen To Customer Feedback For Hints

We started with a basic idea – online video tutoring for VCE students that schools would buy. Our first test involved talking to some lecturers (experienced mentors) and potential customers of the product.

After several months of schmoozing, hard work and rejection on the phone, we managed to get a meeting with a few schools and managed to convince them to give us an hour of their time. After only one or two meetings, we soon realised that our idea was unlikely to ever be something that schools would pay for.

“This isn’t going to work,” we thought. This raised the question: “How could we make it work?”

We went back to the drawing board and started again. This time, we took on board all the feedback from our customers (schools): “Schools don’t have money to pay for this kind of thing. Neither do students.”

OK – what if we could find a way to do it so they didn’t have to pay?

This is where the idea to run Merspi as a free Question/Answer site came from. “But what about the other sites out there where VCE students may be spending their time?”

We soon realised there were some major problems with each of these sites that we identified. We surveyed some VCE students to find what they thought about the whole thing. The feedback was overwhelming. There was a big demand for information but there was an extreme lack of supply that could be found via Google and similar search engines. However, it was an interesting market because although the demand was high – the students typically didn’t have money to invest in their own education so the large corporations in the market were also struggling.

Lesson #3: Stay Lean: Keep Costs Low & Start Small

Our first attack at this market according to our business plan was going to be to raise a large amount of money and get the website built for around $100,000. This was far from lean.

After a lot of failure at trying to raise six figures worth of capital with no experience and no track-record of success, we gave up. But I was not disheartened. I knew that I could put something together myself… leveraging my own skills. I knew that it would take a lot of time but time was the one resource I had in plentiful supply at that point.

A slab of red bull later – we had a working product. Our total costs from idea to implementation ended up being less than a few hundred dollars. The majority of our start-up costs for the three months were spent on SEO, marketing and essentially ‘buying’ the attention of as many VCE students/schools as we could in the hope that the community would grow and catch on in the early bootstrapping days.

Early Merspi
Above:An example of an early version of Merspi

In the end, our total start-up costs were less than $1,000 and about half of that went towards attending the largest VCE conference that was out there (marketing).

Lesson #4: Watch Your Analytics For Hints To See How You’re Going

We noticed an interesting thing with the Merspi.com launch. We had an impressive amount of traffic practically from Day One. We didn’t start with a list of VCE students or have any great networks in the field. The traffic that hit the site in the early days – the majority spent a very long time on site (over 10 minutes per visitor) and there was a high level of user engagement.

You could say this was our first serious test. This was the first time we validated our hypothesis that this was what students were looking for. The validation increased over coming weeks as the traffic grew steadily.

Lesson #5: Understand The Numbers and Metrics

We knew that a key metric for the success of our online business was going to be traffic, number of users and the number of questions asked per day. Hence, we set about creating a plan to track these numbers on a daily basis and created short “feedback” loops to improve them.

One example: we invested in Search Engine Optimization (SEO) and link-building over a trial period of a week and measured exactly how much extra traffic this caused on the site in order to test our return on investment (ROI) of Marketing Spend vs Increased Traffic.

Lesson #6: The faster you can learn in business (Information, Metrics, Customer Information)… The better your chance of success.

We used tools such as KISSmetrics, KISSinsights, User Testing and Google Analytics to survey our customers and constantly try to better understand them. We also did the old fashion method of going out and talking to VCE students.

The most important principle of the Lean Startup Philosophy that made all the difference in Merspi making it from idea to implementation and becoming an eventual success (albeit, a slow and sometimes painful one) is the principle that Dan Kennedy calls: “Seek the swift blade” and Eric Ries calls “Fail fast, fail often.”

In other words – “failure” unto itself in business is not a bad thing. We could have taken the initial meeting with schools all saying no as a sign that we should give up.

Instead, we took it as feedback that we should keep the core concept but modify the target market slightly. We integrated the learnings and key complaints from the school target market which was ‘we don’t have any money’ and found a way to deliver the same quality content without having to charge for it to be a sustainable model.

A common saying amongst Neurolinguistic Programming (NLP) practicitioners is “There’s no such thing as failure, there’s only feedback.”