Rent Collection: Anatomy of a Failure
In my last post, I explained that our original plan for Castle—software tools for independent landlords, beginning with rent collection—had failed. Actually, I didn’t say “failed”; I said that we’d realized we needed to go beyond software alone to fully achieve our vision of automating landlording. And that’s true—but it’s also true that pursuing our rent collection tool hadn’t worked out as well as we’d hoped. This post is an attempt to explain why.
First, let’s look at where we ended up. When we made the decision to shift our focus, we’d been building and selling our rent collection tool for a little under three months. We had eleven landlords signed up for the beta, with another ~100 at various stages in the sales pipeline. (Of course, we knew this approach wouldn’t scale, but the approaches successful startups take to get their first customers rarely scale.)
Our Streak pipeline as of October 2014
Our sales process (inasmuch as it was a “process”) was simple: we’d have an initial conversation with the landlord that was all about them, to learn about their needs and build the relationship. Then, we’d walk through a demo of Castle with them, primarily to get their feedback. We never did any kind of hard sell—instead, some percentage of people would express interest in using Castle when we showed them the demo, and we’d sign them up.
A slide from our demo deck
Rent collection as MVP was failing lightly, which is the most dangerous kind of failure. We were making some progress, and we could’ve probably kept going like that for a while, signing up new customers at a steady (but rarely increasing) clip, maybe even raising a little money. Having just enough “success” that we never felt like we were falling flat on our faces. But it was never going to take off.
Ultimately, with rent collection, we failed to make something people want. It was a tricky kind of failure, because landlords “want” rent collection, they just don’t want it. When we talked to them about it, they often said they were interested in it, but it was more of a “sure, I guess I could see myself using that,” not a, “Yes! I want that!”
Paul Graham says you need to make something a small number of people want a large amount. Peter Thiel says the same thing in a different way: that you should gain a monopoly in a small market and then expand with the market. Rent collection is the opposite: a large amount of people want it a little bit.
We knew this going in, or at least we should’ve: there are tons of other rent collection services. If landlords really wanted online rent collection that badly, they could find it with a quick Google search.
We believed that none of these other rent collection services have really stuck because they mostly did a bad job with the execution, and because rent collection on its own isn’t enough—it’s necessary, but not sufficient. We still believe that to be the case. But the writing on the wall is clear. And that’s why we’re moving in a new direction.
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