Startups Aren’t Dead, Says ClayValet Founder in Wake of Shutdown

10/29/08Follow @gthuang

You usually only hear about startups when they’re successful, but Seattle-based ClayValet is an exception. Two weeks ago, founder Mikhail Seregine announced that he was shutting down his four-person company, an online shopping service that allowed customers to ask questions about products and get personal recommendations. He followed up this week with a really informative post on his blog (and on Seattle 2.0) where he explained what happened with ClayValet, and what he’s learned from the experience.

It’s an example of the willingness of Seattle startups to help one another through difficult times. And, as Tony Wright of RescueTime recently pointed out, it’s sometimes easy to forget that most startups close down. (Usually, the founders just keep it quiet and find other jobs.) You should read Seregine’s original post, but what happened was that ClayValet, which was built on top of Amazon’s Mechanical Turk, simply didn’t get enough traffic and users. Towards the end, Seregine talked with three potential acquirers who were actively interested, but no deal could be structured.

I called Seregine yesterday to chat about lessons learned. The Stanford University and Amazon.com alum sounded fairly upbeat as he plans the next stage of his career. I learned that he was the first engineer on the Mechanical Turk project (he was at Amazon from 2002 to 2006). He started building a private alpha site for ClayValet in early 2007, and got funding from an angel investor. But he ran into several major obstacles. The company lacked expertise in a number of critical areas, such as consumer websites, enterprise sales, and promotion. So it struggled to create an interactive site for a new audience, and to engage customers, who often found generic Google searches to be good enough.

The most important lesson for next time (he plans to stay in the same general space), Seregine says, is to find a co-founder—and the right co-founder. “That’s important. There’s a lot of important decisions that need to be made. You can make better decisions if you have time to research them and have people who have the right experience.” It may sound obvious, but to start a company, you really need someone to bounce ideas off, someone to own parts of the business, and someone just as motivated and invested in its success, he says.

Next up would be to find the right company advisors, and meet with them every month. At least for Seregine, one advisor would be a serial entrepreneur—one who has seen successful exits. Another would be a business advisor with lots of sales contacts in the industry. And another would be a technical person to provide feedback on software and design.

Rounding out his list of lessons learned are things like working out a more targeted revenue model with specific customers in mind and a specific distribution channel for reaching them, and getting the planning balance right—not so much as to impair flexibility, but enough not to magnify inherent risks in the technology and the market.

I couldn’t help but ask Seregine about his experience with Amazon, and cloud computing technology. “I learned a lot,” he says. “They give you a lot of responsibility, even when you’re starting out.” ClayValet used cloud computing facilities, he says. “The less you worry about the hardware, the more time you have to worry about other aspects of the business.”

Lastly, I got his thoughts on the Seattle startup scene in the wake of ClayValet’s closing. “The community is really good in that it’s supportive,” Seregine says. “It’s not as big or diverse as down in the Bay Area. You can know a lot of the people here, there are fewer cliques, and not as much competition. On the other hand, the disadvantage is if you’re doing something specific, there’s fewer people to collaborate with or evolve ideas together and team up. The feedback I’ve gotten is useful, and I’m very grateful for it…I don’t think startups are dead.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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