I learned a lot of lessons during my time as CEO of Virtrue (identity management & background checks). I loved it. I hated it. I worked with zero pay. It messed up plenty of personal relationships. Despite all the work, it still failed. I’ve written about why a bunch but have yet to publish the reasons (coming in another post).
However, today was YCombinator Demo day and two companies in that batch clarified a key learning for me: FOLLOW THE MONEY [or users if you're consumer focused].
In Silicon Valley, it’s easy to get wrapped up in your own hype of how you are changing the world. You forget that first and foremost, you are building a business. At Virtrue, we pivoted three times but stuck with our core technology throughout. While iterating on our core product, we also built out a nice side business for some of our customers – running background checks. It’s not sexy. Our product looked pretty bad. A large part of the process we used for our customers was manual. They did not see this (classic MVP move on our part).
Background checks were the only part of Virtrue that ever made real money. We had early talks with Lyft and a variety of the early (and now successful) pioneers of the Sharing Economy. They wanted something really custom for background checks. We wanted to push our social identity verification. Background checks were just an added bonus to using [what we thought of as] our core product.
Whoops. One of the hottest companies at YC Demo Day was Checkr. I’m sure they will raise a massive round. They are a background check platform. They are crushing it. They do the same thing we did but built a nicer platform and actually made background checks the core of their business. They saw a need (at their previous jobs) and followed it.
At Virtrue, we saw a need. Heck, we even saw good revenue. We ignored it. The whole team was made up of first time founders. We should have followed the money.
Side note: We actually looked deeply at the background check market and spend days debating whether to build something like Checkr. In the end, as that would have meant giving up our core product and vision – i.e. a massive pivot (vs a mini market pivot) – we decided against the change. Whoops.
Side note 2: for those who are curious, the other company that made me think “follow the money” was Edyn. I was in an accelerator with Jason Aramburu and team way before they were called Edyn. They followed the money and made a major leap. Jason had the balls to follow the money. The story of early Edyn is Jason’s to tell so I’ll leave it at that.