I'm not sure why you posted this. Are the pageviews from the controversy really enough to offset a long-term loss of reputation? Maybe you don't understand the line you crossed.
You advertised video courses taught by talented entrepreneurs. Later, you launched what is effectively a forum. These two things are hardly similar, but you charged users for the latter when they signed up to pay for the former.
Couch it in as many euphemisms as you want, but you tricked people for your own gain. I don't want someone to do that to me, and I won't do such a thing to someone else. Unfortunately, you didn't treat others as you like to be treated. I think that's unethical.
In the future, please treat your customers with more honesty and respect.
Adii isn't forcing anyone to pay and as he stated in his essay, he personally reached out to customers to inform them the video content was ready YET. Adii isn't doing a bait-and-switch without intention of delivering a quality product. He left his successful startup, WooThemes, to build a platform to help entrepreneurs. Before criticizing his approach coming from the outside (with less context), I'd prefer to hear directly from his customers.
He's doing exactly a bit and switch, and he's proud of it judging by his writing.
Let's consider a meat space analogy. Say I'm establishing a maid service. I don't have any maids or cleaning equipment, but I want to gauge interest in the neighborhood by signing people up for appointments and take their billing info. I don't tell them that this is what I'm doing. If I "reach out" to my customers and then say "J/K, I don't have an actual business yet, but I will soon!" that doesn't make it all okay. If I took any money on top of that, that's fraud. Indeed, even if I didn't take any money, taking billing info for a product that doesn't exist without telling customers as much is sketchy as fuck at best.
I believe they call that "deception", the definition of which is telling people something exists which does not in order to get their buy-in. Had he taken so much as a single dollar in revenue from someone, it will be fraud. It ruins the reputations of legit startups everywhere.
Everyone who did not opt-out was billed (eg. if anyone missed, misread, or otherwised ignored the email explaining the pivot).
I'm more discouraged this guy was given a platform to promote this approach at MicroConf Europe. How sad to 'hear directly from his customer' that he only discovered how he was being scammed when he attended the presentation! https://news.ycombinator.com/item?id=6515095
As I understand it customers were informed about the change in plans before they had to hand over their money, so it's definitely not as bad as you put it.
The roadmap was actually changed because of those customers, so presumably the end result should align better with what they really were looking for.
(disclaimer: I'm a initial customer who asked for a refund!).
Opt-in would have been the minimum to my taste. Here is how I lived the experiment from here:
- the billing info was captured by making me believe the content was completely available (it's actually still advertised here http://publicbeta.co/library/)
- I wrote to Adii who asked back for my trust etc, I said: ok let's wait until this guy is able to bootstrap his stuff, let's give him a chance
- later, I received a mail which I didn't fully read ("Announcing our new launch", I just assumed that everything was going on as planned - I didn't receive "We change everything, are you ok with that?" as the subject or similar)
- then I got charged for something different from what my billing info was captured for
EDIT: I then realized what was happening by actually attending the MicroConf Europe where Adii made a presentation.
- I tried to cancel but could not find a link to cancel from inside the app
- I asked for a refund + cancellation by email and got it
Note that I'm in no way angry (personally) against Adii!
I'm just analyzing this from a customer perspective.
The problem is that trust is basically broken at step one, and then later one can only wonder if the long email then the charge without clear notice then the lack of link to cancel etc aren't just other tactics to keep the game going on.
I wouldn't recommend using these techniques to friends!
I'm pretty sure this is illegal and risky to do (at least in some countries) and could actually break the TOS of Recurly or payment gateways.
Again, nothing personal, I'm just sharing my experience in case someone wants to mimic the technique here.
Personally I wouldn't mind about leaving my CC details if I was told the entire truth afterwards and then had the opportunity to opt-in again. Any reason why you didn't take the "second opt-in" approach, Adii?
Getting the customer to say "Yes" repeatedly [1], and relying on their own internal consistency to make them less likely to change their mind [2], is a well known sales technique.
So this would still be a dark pattern even with an opt-in, since people will mentally start rationalising ("It's a good service for smart entrepreneurs like me to learn from each other") instead of assessing it from scratch ("It's an online startup community I pay to belong to. Is that worth $30 a month? Hacker News is free...").
It's a shame, because if the thing people had paid for had been delivered this would have probably been okay, but as it is, it seems pretty unethical.
You lied to customers to get something valuable from them (in this case, the information that they were prepared to pay you, and their engagement with your site). You used this, by your own account, to gain $4000. I wouldn't want to make a large bet that that isn't fraud and outright illegal.
It probably isn't, unfortunately. But I hope your company fails. You should not get away with such behaviour.
A decent person would learn from all the people here saying "This is not an acceptable way to behave", and issue an apology for boasting about how they made a profit from deceiving their customers. I wonder: are you a decent person?
I don't think I would have done this either, but before beating up on Adii too much, have you ever spent a lot of time and/or money building something that no one wanted? It really, really sucks, and I can understand the strong drive to avoid it.
To keep the discussion productive, I think we ought to look at similar ways to validate a product that more of us would be comfortable with.
Edit actually, patio11's take on how to validate struck me as a pretty good approach:
You realize that the title is obviously exaggerated and that I didn't gain $4000 on day one. I did however gain the kind of validation that eventually allowed me to gain $4000 in cash when we launched a month later.
For every person that has criticized this, I have had another one saying this is great. I also know for a fact that I'm not the first startup entrepreneur to do this.
I have already apologized to each and every one of our customers. I have also mended the relationships (AFAIK) to the extent that the "angry" customers would consider being customers in future.
Ultimately, I think that this was ballsy publishing this and being open about the pro's & cons of this. I'm not saying that this is the best technique ever and neither am I saying that everyone should follow this approach. I am however saying that it worked for us and I am keen to engage others on this topic.
This is deception which and walks a fine line between legit and fraud. It doesn't matter what you think about who should do this or not - someone will attempt to emulate it, and they will end up in prison for taking money and not producing anything. It degrades the reputation of entrepreneurs everywhere who are diligently trying to build their businesses the RIGHT way.
The fact that you brag about it so boastfully is atrocious to be honest.
>The fact that you brag about it so boastfully is atrocious to be honest.
I didn't find his post to be bragging 'boastfully' at all. It reads chiefly informative and at times positively surprised. He found a technique that seems to work pretty well and he informs us about it.
I think your opinion is too harsh. Imagine yourself to be the customer of this website. You come across something you like so much you're willing to pay for it and you make the commitment to actually do so. Sure the revelation that the product does not exist yet is disappointing, but he also didn't take your money yet, and his website already convinced you that the product is going to be what you're looking for.
Since no-one reads newletters properly, I bet at least one of your "customers" thinks they are paying for access to some videos which they will intend to watch at some point in the future, and will be pretty pissed in the future when they discover they've been paying for months and those videos are still not available.
The shady part is doing the pivot without doing another opt-in. It's a classic bait ("Subscribe to get access to videos") and switch ("Continue paying to get access to a community and the promise of plans to make said videos in the future").
If that's the case, I'm happy to issue a full refund, no questions asked.
There's a major difference between trying to scam someone and pushing the boundaries to validate (and de-risk) an idea. If our ideas are shit, I will never take someone's money for that (hence the no questions asked, full refund).
No one does, this is the internet. They found something wrong with your project and they're going to jump on it like flesh hounds. No one's going to mention a small detail like that you never took anyone's money or even that you never had malicious intent.
These are Hacker News commenters, prototypal white knights eager to show off their perfect moral compasses, disregarding any opportunity for reflection or relativism.
I wonder how many of these people have actually built something and made a living from it? Or tried? Or spent months building something only to find out no one wanted it?
No, it is not something I would have done, but I really understand the need to have some idea of what's going to work, and could see how one might go too far in pursuit of that.
I have done all of those things and I maintain the view that there is no reasonable justification for deliberate deception in commerce. A fortiori amongst startup entrepreneurs, who should be doing their best to foster collegial relationships with one another based on mutual trust and confidence - ironically, one of PublicBeta's own goals.
You realize that the title is obviously exaggerated
For someone who is hearing of you for the first time, combining the subject matter under discussion and your admission of obviously exaggerating your post title makes you come across to me like a habitually deceptive person IMHO
Launching early is certainly a good thing. Launching a product that is only a proof of concept so people can really see what you're trying to do is also a good idea. But taking people's money under the banner "WE'RE A COMMUNITY OF ENTREPRENEURS THAT HELP EACH OTHER." when no such community exists seems borderline dishonest.
When 5.5% of your initial customers feel scammed and are are upset about being deceived it may be an "acceptable loss" from a business perspective, but I certainly don't think that's a "great result". 5.5% is a lot. For comparison, an eBay vendor with that many unhappy customers wouldn't last long.
Bootstrapping communities is notoriously difficult, and I'm well aware that the use of "community building hacks" are more the norm rather than exception, but I'm still not going to applaud this behavior.
He didn't actually charge people before the product was finished and they were able to opt-out after they knew what happened. Would have been a whole different story if the cards had actually been charged.
While the author did not charge the credit cards, he did not communicate to his site visitors about the situation either. It was only after the fact once they essentially gave out their information did he reveal the truth. Sure, you can argue that he did not charge for those that wanted to opt out. But from the get go, his visitors were not provided with the correct information to make an informed decision.
Communicating about it would defeat the entire purpose of the idea.
The way he did it allowed him to validate the idea in the exact same situation he would end up after building it, so it's a great way to take the (huge!) risk out of building a product.
Personally I wouldn't mind as a customer as you did know all the facts before you were actually spending the money.
I don't care. It's not my role as a customer to make it easy for you to experiment. You either tell me the truth, front up, or you don't try to make the sale.
"He didn't actually charge people before the product was finished and they were able to opt-out after they knew what happened. Would have been a whole different story if the cards had actually been charged."
He does note that he had to "authorize a $0 transaction" in order to store the details for each credit card.
But leaving that aside, not only was his conduct misleading, query whether legally enforceable contracts were entered into as soon as mutual promises were exchanged (promise to pay made by proffering means of payment in exchange for promise to deliver product).
If that is the proper analysis, a distinction based on whether the credit cards were ultimately charged does no more than draw the line between civil and criminal liability.
He should be glad that no one actually relied on what he said. Those who deal with him in the future might now do so with a degree of caution. He has probably copped enough flak in these comments to bring the message home to him - or at least I hope he has. I like the premise for PublicBeta, and it would be a shame if that service were tarred with the same brush.
This type of thing has the potential to ruin the reputation of startups everywhere. If it isn't outright fraud (selling people something that doesn't exist) I'm not sure what is.
I'm amazed someone has the gall to boast about this type of thing publicly while blatantly ignoring the long-reaching repercussions their actions could have throughout the entire startup community.
People routinely go to prison for similar types of deception in other industries. It is a slippery slope that is surely testing the bounds of fraud while ruining the reputation of legitimate startups everywhere.
Interesting - he gave a talk on this at Microconf Europe which was this last weekend, and a very good conference with lots of cool and interesting people. There was (I thought) something of a feeling in the room of "hrm, maybe this is a bit over the line?" although everyone was appreciative of the fact that it was a much stronger validation of the idea than just handing over an email address. Watching Adii talk, I certainly got the impression he was not 100% happy with the approach himself, and wrestled with it some.
OTOH, I can understand the risk avversion: if they've given you a CC number (they were not, however, charged), they're a Real Customer and your product is far more likely to have legs than just getting an email address, which is in turn better than not even having a pre-launch page and just hoping people want whatever it is you've slaved away building for months. Spending a lot of money to build something only to find no one wants it, or wants a fairly different version sucks big time!
Do I think that this technique can be refined? For sure. :)
One of the reasons for publishing this and being open about how this worked is to be a catalyst for a conversation around this, which would hopefully see a refinement of the technique.
I applaud you for being so open and transparent. Although I personally feel that the line was crossed, your openness to see a refinement in technique is refreshing. There are just too many "entrepreneurs" these days justifying their practices by saying that it works and it's completely legal. For me there are 3 responsibilities (in the same order) to any entrepreneur/business:
1. ethical responsibility
2. economical responsibility
3. legal responsibility
To say that something is completely legal does not make it unethical. So I do hope we can find a better way. The false advertising that companies put out makes me sad but it's also an opportunity for businesses to be honest with their customers.
Question for you though: You mentioned you received numerous signups signalling their interest. Could you have conducted your interviews with them instead? From the story, it seemed to me like the key point was identifying the needs of the customers. Of course, the ones who placed their credit card information are the ones most interested which filters them out from the rest.
Sure, I could have just done customer interviews without requiring CC details. I truly believe that this feedback is however still hit-or-miss and we might've optimized for the wrong thing thereafter. Paying customers' feedback is always better than the feedback from any kind of "free user".
If you use deception to found a company, you'll find reasons to continue using it while running the company, and you'll eventually lose the company because of it.
There are ways to measure buying signals. Please research them. Here, I'll do you a solid, and Google "how to measure buying signals"
While it's not my intention to hold this up as the authority on buying signals, what you will pick up on is that nothing on this page talks about the number of subscribers on an email list. Subscriber counts are, at best a weak buying signal. It measures interest, not willingness to purchase.
It already goes right up to my ethical "pain threshold" to have a "buy" button that links to a page that says "sorry! we're not quite ready yet. enter your email here" just to gauge interest. It's questionable.
This goes way beyond that. This is no longer a grey area. This is lying to potential customers. Justify it however you want, it's wrong.
This is specifically what services like Kickstarter were designed to address. And there is plenty of evidence to suggest that crowd-funding services are viable funding models, especially for low budget projects like this.
This feels like deception for the sake of deception and I would have been among those who were pissed had I signed up.
You'll see in the article that Kickstarter or crowdfunding would not have validated this idea, as the difference between backing / pre-ordering / investing in a product versus purchasing a product is significant. To validate an idea, you need to know that you can actually sell it in a repeatable fashion. Kickstarter or crowdfunding is generally a once-off process, so doesn't give you that validation.
(I know that many Kickstarter projects that were successful have turned into longer-term, sustainable businesses.)
We don't have any data, but "would not have validated the idea" is ... perhaps not 100% accurate?
People do manage to "kinda/sorta" validate their ideas by getting email signups. Granted, it's less accurate than actually collecting CC details, but it does provide some indication. And kickstarter involves actual money, so perhaps it gives you a better idea than email, even if it's not quite as good as getting their CC. Maybe that tradeoff is worth it in terms of openness with your future customers?
The comments here have covered all the shady/illegal aspects of the post, but the most dangerous part (and you may not experience it in person outside of major tech areas): people get really excited about manipulating and abusing others for their own gain (especially small numbers of technically competent people abusing large numbers of "normals").
People are just anonymous hits online, right? Drive up the hits. How? Just manipulate people. Oh, we got money? Chest bumps and high fives all around. We did it!
When you start thinking about "right" or "wrong" when doing work like this, your world falls apart, so you don't think that way. You run the hustle. You run the borderline-illegal practices all in the name of growth. When you're successful it'll all be forgiven by rich people who want to leech of your success anyway.
If we keep telling ourselves it's bad/wrong/illegal, all the people willing to do this shady work will end up ruling the world while we still sit on our poor sanctimonious asses.
TL;DR - Putting up a marketing site and asking for money up front sets customers expectations for what is to be delivered. But startups change significantly in the early stages, so it's very difficult to meet customer expectations.
I'd like to hear more about what people said in the customer interviews. Here's my experience as a consumer...
After flipping through the library, I signed up immediately. The cost/value was very high.
After putting in my credit card details, I was put in a queue, which was a little frustrating as I was expecting instant access, but I got over it quickly and didn't mind waiting. I think this was fine.
The big problem came when the library disappeared from the site and the business went in a very different direction. I had pledged $30/month for something specific (the videos from high-profile entrepreneurs), so it was disappointing to see that it wasn't going to happen. It even entered my mind that it was only ever a carrot to get my credit card details and that there was never an intent to make the videos. So, some confidence lost there. Also, still having my credit card on the hook for something else that I hadn't yet learned about was a bit disconcerting.
Adii is a friend and I was still curious about what it would be, so I stuck with it. It's highly likely if I didn't know the founder, I would have cancelled immediately.
I struggle to consistently participate in communities, so I will be cancelling my membership. The video library was more my thing, consumption without engagement. And that's what I pledged my $30/month for.
1) The intention was always to produce the videos / content. And it still is too (we have just deprioritized this and tweaked the roadmap from our initial plan).
2) The customer interviews we had (along with the survey we did thereafter) gave us insight into what our founding customers really paid for and for the majority that wasn't the content.
I am currently doing a startup too. It seems that I can handle all the design, coding and technical side of things but I cannot market and do sales.
Although I agree with some of the points such as launching early and the communication aspect of it. I'm against deceptive tactics to get sales. Even though he said that it didn't feel good, then why continue with the same tactic? Does getting the sales and numbers justify the actions?
I'm in the same boat as the author at the moment and if anyone out there has any advice I would greatly appreciate it.
Whether getting the sales and numbers justify a person's actions depends on the ethical values that the founder has. For many, this seems like a legitimate way of validating one's idea. For others, this is completely morally wrong. As you said, if it didn't feel good, why would one continue the same tactic? I believe business is an art as much as a science. There's much more balance work needed than the narrow focus on sales and numbers. The balance of employees, shareholders, customers, society, your own moral values, etc. Good luck! You can market and do sales. Just do it already :)
Best advice is to not do this, or anything like it. If you're a one-man show, then be sure to blog, tweet, or otherwise communicate with your customers often. Treat them like people, and build a following. When your startup fails (and 99% do), hopefully a good portion of those will follow you to your next venture. Building customers through respect is what builds a lasting brand (you). Don't take money until you have a product to give them, unless you're upfront about it.
That's what I'm doing at the moment. One of the biggest pivot in my Internet habits is that I've changed from being a lurker (just looking and not doing things) to being more active in the community, discussion or post. Even on HN. I've been here for ages but never contributed anything of value.
That will change now as I have to be able to harness the comments and engagements of people who are more knowledgable than me in this respect.
Just to be 100% clear: we never took any money for anything we didn't have. When we eventually opened the doors to our V1, there was actually something there and only at that point did we charge anyone's credit card.
On the subject of deception, Adii hasn't yet replied to my comment about this section from his previous article:
"So I took the testimonials that they had left on my Clarity profile, reworked them (for the purpose of my book) and sent it to the individuals (along with a sample chapter of the book) for approval."
I'm pretty sure this tactic would cross a line for me personally. Different story if you actually started out with even just 1 video, but to base a sale on a lie of content not yet created is a bit dubious.
I wonder if you looked in to your legal obligations at all? I know in the UK a company has a duty to trade fairly and not mislead consumers....I'm not sure to what extent you fall foul of the law if you do something like this?
Why in the world would anyone title a blog post this way? It sounds like he purposefully went out of his way to phrase his tactics in the worst possible way. Call it "market testing", call it "product validation", anything but "selling shit I didn't have".
A good read. However, the first rule of using white lies is you don't talk about it (in public - this would be a great thing to use PublicBeta for! ;-)) otherwise you get the sanctimonious types in the peanut gallery excited, as some of the comments here demonstrate.
Well, that's like reactive transparency. For some people this means that I / we have broken their trust and any future relationship is thus dependent on earning back that trust. Being open, honest and apologetic after that fact, helps with mending those relationships.
"If other people knew we didn't have the content, they probably wouldn't sign up any more."
Damn straight I wouldn't. And I sure as hell wouldn't be giving you my credit card details to store on file. I don't care what your PCI compliant third party provider is like, if I give you my credit card details, unless its a refer payment, then you debit it and throw away the card details.
This is totally unethical business practice. It's a bait and switch as far as I'm concerned!
I wonder what Braintree and Recurly think about it? (I'm pretty sure that "5% angry customers" would have been enough for Paypal to trigger its "hang on to all the money for 180'days" thing. Probably righty so…
Honest question:
taking customers' billing information with the promise of a product at a later date without they actually knowing that you don't even having the product. (more importantly when customers' are made to think the product exists: http://publicbeta.co/library/)
The angry customers you get can ruin your reputation very very quickly. Angry customers are the ones that usually go out of their way to write bad reviews.
The reality is: Yes, angry customers are never good for business or brand building. Neither are bad reviews. Trust me when I say that I hate the fact that I had angered even one individual.
That said, I interacted with every one of the angry customers and explained the rationale behind the decision. I managed to resolve the emotion to the extent that they were appreciative of my explanation / reasoning and would even consider becoming a customer in future.
This isn't excusing bad behaviour at all. In fact, I've been very up-front about the fact that this technique relies on deception and that I didn't like that bit.
I stick to what I've said though, which is that putting up a landing page with an e-mail signup and a "Request Early Access"-kinda thing is similarly deceptive. The only difference is that I actually asked for CC details. To that extent, I'm willing to do whatever I need to do to see my startup succeed.
This is obviously not for everyone and that's why I posted the quote from Lincoln.
Oh, well since you didn't like it, that's ok then. Wait, no it's not; it's horrible, indecent advice. Good business is being honest with your customers. Count me among the ones who would never turn over money with scumball tactics like this. Do your domain research, spend a few months making an MVP, and sell it in a working state. Give your early adopters premium pricing so they stick with you through the early churn. I wish your customers the best, as they're in for a rocky ride turning money away to such a scammy businessman.
You advertised video courses taught by talented entrepreneurs. Later, you launched what is effectively a forum. These two things are hardly similar, but you charged users for the latter when they signed up to pay for the former.
Couch it in as many euphemisms as you want, but you tricked people for your own gain. I don't want someone to do that to me, and I won't do such a thing to someone else. Unfortunately, you didn't treat others as you like to be treated. I think that's unethical.
In the future, please treat your customers with more honesty and respect.