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Yaron, thanks for joining me.


Hometalk is not your first venture, in fact you launched Alfy, a company that did, in fact, raise tens of millions of dollars in VC money. What about that experience made you decide to bootstrap Hometalk rather than raise a round from an institutional investor?

It's a pleasure Zach, thanks for having me.


As an inexperienced entrepreneur running Alfy, I equated the company's headcount and amount of capital raised with unequivocal success. The problem, however, was that we did not fully crack the product or business model before raising money and we scaled prematurely. Had we built a more solid infrastructure, I am confident that we would've had a more successful trajectory.


As such, in my subsequent startups, I deployed the lean startup model to test, iterate, and solve the product/market fit before I ever considered external capital.

Okay, but recognizing product/market fit is a challenge for any start-up, and many start-ups scale too soon because they wrongly believe they have achieved product/market fit.


Did you think you had achieved product/market fit with Alfy, or were you not even thinking in those terms? And, in order to avoid scaling too soon, do you think there is a more precise definition or metric/s start-ups can use to quantify product market fit?

Great question. At Alfy, I believe we achieved “product/market fit,” but not “business/market fit.”


Customers used and liked our product, but they were not consuming it in a way that could sustain the organization (revenue-wise). We had a burn rate of $1M per month and we couldn’t monetize in a way that would’ve enabled Alfy to grow organically into a sustainable organization.

Do you think the failure rate of start-ups would be lower if entrepreneurs aimed to hit business/market fit prior to scaling?

Absolutely. Business/market fit means optimizing for the customer experience and for the business model that supports it at the same time.


I’m not aware of any studies on the matter, but I believe that companies that follow this model definitely increase their probability for success. Of course, a company will need to iterate, but, ultimately, if they can’t find a sustainable revenue-generating model, it’s a bubble. They’ll keep optimizing for the customer experience, but never for the business, and that's unsustainable. The results are often downturns and layoffs in hot pursuit of finding a last-minute model that works, which is really a shame. If you instead optimize for the business/market fit right away, with customer value at the center of it all, you increase the likelihood of a company’s viability for long-term success.


Venture capitalists often say otherwise. With Hometalk, investors have told me to forget the business model (in the early stages) and focus only on the customer, but, because of my experience, I did not heed their advice.


I have seen many entrepreneurs wasting years of their life focusing on only half of the target, only the consumer-level value, hoping to one day achieve business/market success, too. But they fail to recognize that an optimal business model, in many cases, is not just an incremental iteration to the existing product, but rather requires a significant change. And those changes so late in the game can cost the entire company.

So, many entrepreneurs are chasing the wrong metrics?

Many B2C entrepreneurs validate their pursuits by focusing on outliers, such as WhatsApp or Snapchat, companies that had decacorn exits without a strong business/market fit. Then they feel validated chasing elusive valuations, while solely obsessing over consumer value. But statistically speaking, those examples are insignificant; I want entrepreneurs to have a higher chance of success, not just to be one in a million. Focus first on becoming a real million-dollar business, before getting caught up becoming a billion dollar enterprise.


Here’s the way I see it: The longer path to business/market fit is really the shorter path to long-term success.

Is there any difference between bootstrapping a B2B company versus B2C?

Hometalk was originally launched as part of Networx -- when did you realize that Hometalk represented its own opportunity?

We originally built Hometalk as an engagement platform for Networx. The original idea was that contractors would contribute home & garden projects and tips for the site.

What actually happened was that the contractors were not sharing content in any meaningful way, but there was genuine interest in DIY content created by community members. When we saw that, we quickly spun off Hometalk into its own entity, a user-generated platform where users can share their projects and experiences with each other.

Did you consider raising capital then?

I didn’t want to raise external capital for the following reasons:

1. The most valuable asset right now is our autonomy and agility. Had we raised money, especially at the early stages, we would have lost that asset. If you wait until after you have proven the business/market fit, the capital is mainly used to scale, not to figure out who you are.

2. Personally, I always prefer to risk my own money until I am 100% convinced that we have a business with a justified valuation. It’s a huge responsibility to take other people’s money. I’d prefer to risk mine, not theirs, especially at the early stages of a company where there is so much risk.

3. Taking money early would have likely caused short-term thinking because VCs like to see results immediately. But my experience is that long-term thinking is critical in order to build a lasting brand.

What methods can other companies use to bootstrap their own efforts?

Here are some of my recommendations for bootstrapping:


· At the earliest stages, find a business/market fit that generates value and revenue before scaling (scaling prematurely will be a distraction that can make it harder for you to get the formula right) and stay focused on nothing but the customer and the business model.

· Keep costs painfully low. When we moved from Los Angeles to Casper, Wyoming, I rented a U-Haul and did it myself - because we didn’t have money for the move. On many other occasions, I took long road-trips and slept in $30 motels to avoid flight expenses. People now see our beautiful offices and look at our numbers...but they have no idea how much sweat I invested into these companies for the last 10 years.

· Be patient and don’t get caught up in vanity metrics. When I started Networx, for instance, I had only one employee for the first three years.


Having less resources forces you to focus on the core business and ensures that you’re dealing directly with the customer and the business model. Instead of worrying about the long-term prospects for the organization (i.e. investor relations and employee headcount), the bootstrapping model requires your involvement in the heart of the business.


And then finally -- and this is the probably the most important piece -- it really boils down to finding amazing people.

How were you able attract top talent with a limited budget?

I didn’t search for typical resumes for high-tech employees -- I couldn’t afford them. Instead, I had to base my hiring decisions primarily on character. Many of our top employees, both in Networx and Hometalk, didn’t arrive with what you would call stellar resumes, but sometimes people without the resume feel less entitled and will go to greater extremes to succeed.


When we were based in West Hollywood, I used to pick up our first employee at 4:15 am, so that he would turn on his computer at 5 am to begin contacting East Coast contractors at 8:00 am EST. He didn’t have the resume, but he had crazy drive.

What was the biggest downside to bootstrapping?

You have no life for a few good years. You must work around the clock; you must do it all yourself.


But the highs are unparalleled. To this date, I remember when I got my first credit card processed, for $75 (done by fax!). Someone had actually paid for our service. I was more excited by that transaction than I was closing any of the financing rounds for my first startup!

Will you ever raise capital for Hometalk, VC or otherwise?

We are now considering it -- not just from VCs but from PE funds -- because we feel like we finally cracked the business/market fit and we are now exploring avenues to scale.

Moving to Hometalk, how does a DIY social network differ from other niche-networks that have launched in the past?

What makes DIY different is the market need. The DIY market need is extremely fragmented; there are so many different use-cases. One person needs a small cleaning project, while someone else wants help remodeling the entire house; one person is in New York, another person is in Atlanta, each with different materials, climate, and geography.


So the only way to create a platform that would give ideas, tools, and knowledge to everybody is by crowd-sourcing that information, by everyone sharing their own experience and insight for the benefit of the community. In essence, the need to build the community was always there.


Moreover, people are really quickly losing their material competence, their ability to use their hands. Our goal with Hometalk is to enable community members to empower each other to become more skillful.


My experience is that once we stop using an area of our brain, even for just a few months, we can lose that capability altogether. For instance, since I started using Waze I have totally lost my sense of direction. People are quickly losing the capabilities to work with their hands. We are passionate about empowering people to embrace DIY because we’ve seen them regain confidence and know-how, not to mention how it impacts their financial stability. And these benefits extend far beyond DIY.
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