Why I turned down $500K, pissed off my investors, and shut down my startup

I just did what no startup founder is ever supposed to do.

I gave up.

It wasn’t even one of those glorious “fail fast and fail forward” learning experiences. After seven months of hard work and two weeks before we were to start fundraising, we had a good team, glowing praise from beta users, and over $250k in handshake commitments. But I pulled the plug.

My team and most of my investors are pissed, but I’m sure I did the right thing. At least I think I’m sure.

The business had what I considered to be an unfixable flaw. My investors and my team wanted us to take the funding and figure out how to fix the problem before the money ran out. I’ve started four companies in the past with a mixture of exits and bankruptcies, so I understand that this is what startups are supposed to do, but I just couldn’t do it this time.

This article is in part my explanation to the various stakeholders, in part self-therapy, and in part a call to other founders and investors to let me know what they would have done in my situation.

I began work on ContractBeast, a SaaS-based contract lifecycle management offering, last October. Unless you’ve worked in big IT, you’ve probably never heard of Contract Lifecycle Management or CLM. In brief, CLM covers the authoring, negotiation, execution and storage of both physical and digital contracts with strict access control. It also does things like let you know what contracts are about to expire or automatically renew, and who is responsible for those deals.

CLM is a highly fractured, $7.6 billion global market with over 80 established companies fighting for market share— and that’s not counting the dozens of e-signature startups that have popped up in recent years. Almost all of these companies are clustered in the enterprise space, where sales-cycles are long and top-down, and where revenues are driven by consulting and customization.

It’s a big market begging for disruption. The mid-market of SMBs is grossly underserved and the enterprise market is grossly overpriced. ContractBeast was going to deliver a low-cost SaaS product with no consulting required. We would focus on the mid-market first, and then work our way up to the enterprise.

Building the beast

Our target users responded positively to the mock-ups, and many excitedly asked when they could start using it. I was on the right track. I spent the next few months working evenings and weekends developing an MVP and getting feedback on features as they were implemented.

My users told me they loved the product, and that they planned to use it extensively. But weren’t really using it much, and I had no idea why.

I left my job in January so I could work on ContractBeast 70+ hours a week. The rest of the team kept their day jobs. That was fine. It made my final decision easier.

We started private beta in early March, and things looked solid. About 35% of our users continued to use the system at least three times per week after completing registration. The UI needed work, but our users raved about how ContractBeast would save them time and worry in the future.

Saving the beast

Killing the beast

Eulogy for the beast