Our Biggest Mistake So Far

When trying something new, you want to learn what works and what doesn’t as quickly and cheaply as possible. As Steve Blank says, a startup is a temporary organization in search of a scalable and repeatable business model. In other words, early-stage ventures exist simply for the purpose of running experiments to validate their hypotheses.

Public Innovation has reached a critical stage where we have come to realize that the business model we put forth last November is neither scalable nor repeatable. This is not to say we’re not generating revenue. But rather, the business model upon which our social impact model rests is flawed.

Custom Solutions vs. Product Focus

Because tech – and, specifically, civic tech – is experiencing such explosive growth, we set ourselves on a path to sell technology services as our core revenue base. We always knew that it would take at least a year to ramp up our operation, build up our sales pipeline, and prove our value proposition to potential customers. But what we didn’t anticipate was the fundamentally wrong approach we established to sell services that we provide.

In particular, we tacitly positioned Public Innovation as a custom web application development shop without realizing the consequences of that choice. The challenge with this approach is the voluminous amount of customer interaction and project management that must occur for projects to succeed. Even practicing agile development, we’ve found ourselves spending double the hours budgeted while charging half the hourly rate we should. This has left zero time (and resources) for us – as an organization – to focus on our social impact model.

How might we change our model? Well, it turns out that startups generally don’t do custom app development. Instead, startups focus on developing a single, minimally viable product. That’s the most practical path to achieving scalability and replicability. This epiphany seems, frankly, stupid for us to have not realized sooner. But hindsight is 20/20, right? And there’s an even larger issue that looms in the background.

Community Organization or Civic Startup?

Let’s assume that we can fix our business model by shifting to a software as a service product focus (yes, we can). A new tension will emerge that challenges our ability to drive regional impact. Specifically, pursuing a civic startup model means that our revenue growth will be driven by our ability to offer our services outside of the region. Again, this will drain our internal capacity.

Another hard lesson we’ve learned is that there are many existing organizations that are already doing good work across the Sacramento region. And these organizations ostensibly empower people with tools to help them create the change they want to see, as well as benefit from the current allocation of philanthropy in the region. However, we wouldn’t have a social impact model in the first place if we didn’t think there was an opportunity to accelerate measurable progress. Until we can better position Public Innovation as having unique and valuable core competencies, we fear the perception of competing over finite resources and duplicating efforts. Yet, a significant portion of our work will require grant funds or other sources of philanthropy to be sustainable.

This is Our Next

While we would have liked to learn these lessons sooner, a pivot is still feasible for us. In the coming weeks, we’ll be developing a prototype platform to add capacity to collective impact efforts. It’s something that we know is needed and that we know how to build. The question will be whether it’s something for which a sufficient number of customers will pay. Stay tuned.