Guest post: Lessons from the startup that passed on the chance to be the ‘Uber of China’
Wodache team outing at the Great Wall of China.
Wodache team outing at the Great Wall of China.

I’ve always had the entrepreneurial bug in me. In high school, I sold CDs to friends, discounted telescopes from Costco, bought and resold TVs — none of which continued very long. At age 25, I had a break in my career, and a close friend and one of the smartest guys I know Skyped me about the traffic and pollution problem in China.

“Why don’t we do something about it?”

I thought to myself, “Perhaps it’s finally time to start a real business.” Two months later, I packed my 13-year Seattle life into two suitcases and moved to the wild wild east. I only knew a handful of people China, had little money, had never started a business, and had never lived there. This was going to be nuts.

We started working on a peer-to-peer ride-sharing idea, where you could rent a stranger’s car while not in use. Three months later, we came up with a short film for our initial application and worked our network to get a meeting with InnovationWorks, the YCombinator of China, and was flat out rejected with, “You expats are too idealistic. This is China. No one is going to let strangers borrow their cars!” We then had a $ 2 meal at a food court nearby. Depressed.

The following week, my partner and I each came up with ten ideas and shortlisted to three. We surveyed the few friends we had, and most liked the carpooling idea, an alternative to taxis. We thought “Perfect! It’s still within the vision of reducing traffic and pollution!”

Two months later, we competed at Beijing Startup Weekend and won second place. We caught the attention of several angel investors, DCM (a top-tier VC), and an angel investor of Twitter and FourSquare.

Pitching at the first Beijing Startup Weekend at Opposite House, Beijing.
Pitching at the first Beijing Startup Weekend at Opposite House, Beijing.

Robin Chan, the angel investor to Twitter and FourSquare said to us, “If you build the Uber for China, I may consider investing.”

We responded, “No thanks. We have the vision of reducing traffic and pollution. And we believe carpooling is the best way to achieve that vision.”

Judges from DCM, IDG Capital Partners, and Robin Chan.
Judges from DCM, IDG Capital Partners, and Robin Chan.

Over the next few months, an awesome technical co-founder joined us, attracted several non-paid interns from top schools, won second place at the MIT Chief competition, built a prototype, and launched a pilot at Groupon China.

We demonstrated market, team, and product, and investors were now seriously interested. A well-known entrepreneur agreed to lead the investment round. We ended up with 25 local and foreign investors. We were fortunate enough to have negotiation power with the term sheet, and turned down a verbal investment offer from Zhenfund/Sequoia China. We raised $ 250,000 to get things started.

This already seemed like a dream come true.

At one point, I was tired of the service of taxi drivers. So we tested a taxi-hailing app where you could rate the drivers by service. We manually collected  about 70 taxi drivers’ numbers and built it into an HTML5 web app.

Unfortunately, the prototype was overly simplistic and was not location-based. When a user calls the taxi driver, he’d be busy with another passenger or be too far away. This is a case where an MVP (Minimum Viable Product) would require more effort. So we decided to focus back on carpooling.

Over the next 12 months, traction proved to be difficult. But we continued to get great press from local news and foreign sites like The Atlantic and Yahoo! News. I worked through connections to do pilot programs at Google, Zynga, IBM, Alibaba, Alcatel-Lucent, etc. We closed a paid deal with World Bank to launch carpooling programs with three companies, including Lenovo.

We were in talks with major online travel sites and a top car maker for a potential strategic Series A investment. They wanted to do a marketing campaign with us first and hired an agency to shoot a commercial about our story.

Car-maker’s marketing campaign about Wodache.
Carmaker’s marketing campaign about Wodache.

Despite these developments on the business side, product adoption was slow, and retention was low. The problems were one, users couldn’t find rides due to lack of users on the platform and two, rides couldn’t be guaranteed.

We thought it was the product’s problem, so we spent another three months building a new version. That didn’t work. Then we thought perhaps we needed local talent, so we brought in a team of five from AutoNavi, the mapping data company that powered Google Maps China. Traction still didn’t pick up.

Eventually, the investors got seriously concerned and decided to re-structure the company. We tried to compromise for a few months but couldn’t reach an agreement. We eventually closed the company in March 2013 and returned the remaining funds to investors, three months before Didi Kuaiche launched.

Didi Kuaiche, now the biggest competitor to Uber China, just raised $ 1 billion dollars from Apple. They have cumulatively raised $ 5.4 billion in funding and currently valued north of $ 25 billion USD.

Here are the lessons I learned from the Wodache experience.

Focus on the hard need

I was too idealistic. I pitched the environmental and the social aspects hard. In retrospect, users couldn’t care less about the environment or making friends. They need to get from A to B easily, that’s it. Everything else is secondary.

You might be thinking, “Uber, Lyft, and Didi all now have carpooling features.” Yes, it makes sense to do carpooling after critical mass is established. But the opposite direction is more difficult. We were essentially solving the same problem as Uber, indirectly. Carpooling works when the supply density for a given geographic area increases.

Therefore, there are multiple ways to solve a problem, pick the way that’s most direct and solves users’ immediate needs.

How much financial security do you really need?

When I left for China in 2011, I had bought a home in Seattle three years prior. Yes, just the beginning of the eventful global financial crisis. I rented my house out, but it wasn’t enough to cover my mortgage. While we were building our startup, not only was my money draining every month, my home was depreciating at $ 5,000 to $ 10,000 a month. But I somehow managed to ignore those depreciating factors and kept going.

My partner and I would meet at hotel lobbies instead of coffee shops because we didn’t want to pay for coffee. We ordered street food and ended up taking turns with stomach aches. We’d host bi-weekly gatherings to expand our network but order water instead of drinks.

I think one of the biggest hurdles of making the entrepreneurial leap is the feeling of financial security. Some need $ 100,000 to feel secure. Some need $ 50,000 $ 30,000 or $ 10,000. At the time, I was at the lower end. I envisioned the worst-case scenario. “Will I go bankrupt in a year? If not, it’s worth a try.”

My room in an older two bedroom apartment in Beijing.
My room in an older two bedroom apartment in Beijing.

Watch out for success illusions

I attended way too many competitions and conferences. I’d sometimes meet people that said, “I’ve heard of you guys!” As if I was somebody. We kept winning competitions, so we kept competing, and it made me feel successful. Getting funded made me feel successful. Press releases made me feel successful. These small wins do help to a degree — meet investors, gather feedback, attract potential talent and partners. But there’s a balance.

I somewhat lost myself in this success illusion.

Success is not when you’re funded, featured in TechCrunch, nor asked to be a guest speaker at conferences. It’s when users love your product enough to pay or tell their friends about it.

Fundraising as a last resort

I was gaga over investors. I fully embraced them as angels who were going to propel me to startup heaven. I was naive. Some angels turned out to be the opposite. Plus, the time to fundraise is typically three to six months in, which makes some founders lose focus from the customer and the company. As much as investors could provide advice and introductions, they could also be a distraction. This is especially dangerous when the company’s survival depends heavily on fundraising.

Many founders see landing investments as a goal, as if fundraising is a necessary step in starting a tech business. I’d challenge that premise.

I’d highly recommend watching this video from David Heinemeier, the creator of Ruby on Rails.

There are tons of other lessons learned in areas of product, recruiting, leadership, fundraising, localization, Chinese market, transportation industry, and business development. But this might turn into a book if I continue.

In the end, if you ask me if I’d do it again, I’d say, “Yes!” without hesitation. The experience has led to the recent traction of my second venture, Jobscan, a self-funded and profitable business.

We had the foresight. We saw the opportunity brewing. We’re proud to have been involved in the early days of the transportation space in the biggest and one of the most complex environments in the world. But what mattered most was how the rest of the team continued their own ventures. Out of our 13-person team, one is working on her own healthcare startup focused on cancer treatment. Another intern started an outsourcing company with two other developers from our team, failed, and is now a product manager at Baidu. One is a co-founder of a big data analytics startup. Our former marketing manager started her own organic food delivery company. One moved to the States to attend the University of Pennsylvania. One engineer now works for Uber.

Those who shared our journey experienced what it was like to bring a crazy idea to fruition. What it’s like to build a company is no longer an unknown to them. They learned the mistakes we made and embraced our passion. The team is like family, and always will be. Sometimes I joke we ran a Wodache incubator. Although we missed the $ 25 billion opportunity, we’re more than proud of values we instilled into our team, and that’s the legacy we left.

Like they say, “It’s better to have tried and failed than to have never tried at all.”

wodache2

From our former marketing manager Zhou Han: “Five years has gone by, the people are still the same, but much has changed. Other companies have satisfied our carpooling vision. Sometimes it feels like school life, you won’t understand it unless you were part of it. Everyone’s experience is irreplaceable and unique. No matter what, I thank everyone who joined our journey. Best wishes to all.

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