SM: What did you do after There.com?
WH: After I left There.com I started IMVU. I was determined to not make the same mistakes again.
SM: How did the failure of There.com impact the fundraising of IMVU?
WH: In a very interesting way. The first thing I realized was that raising a lot of money can cause you to develop bad habits. While I could have raised money, I came up with a plan with my cofounders. The plan was to get to profitability using a small amount of capital that I was willing to invest myself. The consequence was that we put ourselves in a situation where necessity is the mother of all invention.
If you only have $300,000 to get to profitability, it causes you to think about getting money from customers at a very early stage. That focuses your mind on what the value proposition of the company is. That helps you focus your vision. With There.com, it took us four years to get our first customer invalidation. With IMVU, we came up with a development plan of two years and then condensed it down to six months. We then asked ourselves what we could do to three months. We got it down to something so small that it seemed that nobody would pay for it. It was hard to imagine that any customers would buy it.
If you build a product that appeals to a large number of consumers, then there will be a certain amount of consumers who will be willing to look past an extraordinary amount of deficiencies so they can have the product. They give you the benefit of the doubt in a way that is hard to imagine. If you can’t find any customers to validate your product, then that should be a reality check. Even if the answer is no, that is not necessarily bad because you only spent three or six months getting there. You are now in a great position to make a course correction and try something else. If you are going to fail, fail fast so you can learn and try again.
That is the development process we put IMVU on. We failed very, very fast. We learned from that and we tried something different. We failed again and we learned from that again. We tried something smarter and eventually we had something that had value. We incrementally reached a viable product for a large product.
I set up an annual operating plan for the company for the first twelve months that included sales targets starting at month six. Our first sales target was $300. Our initial guess was that we would sell the product for $25 apiece, so that would have been twelve customers.
SM: What was the product?
WH: We were trying to sell a instant messenger add-on that would piggyback on your existing IM client and would pop up an additional window that showed a 3-D character representing you and a 3-D character representing the person you were chatting with.
SM: What was your assumption that the 3-D characters would be compelling for them?
WH: The assumption was that it would give a level of personal interaction to the chat experience. This was a lesson that I knew from my previous experience at There.com. Social norms are different when you are face to face with someone versus when you are interacting via text. When you are interacting with an avatar, face to face social norms apply. In the real world, if you are playing a game with someone, even if they are a stranger you will follow social norms. As it turns out, if you have an avatar and you are interacting in a social environment, it is very hard to just close the window on that other avatar.