How to bake a CAKE. When to enter a start up competition.

by Funa Maduka

The protagonist of the CAKE financial case, Steve Carpenter, was presented with what many entrepreneurs would deem as a spectacular opportunity: to be selected for the first TechCrunch 40 competition. A major selection by a nationally recognized entity would undoubtedly bring media attention, expertise and future funders to CAKE’s doorstep. The “stamp of approval” would possibly also facilitate the fundraising process; after an uphill battle to secure Series A funding, Carpenter the competition proved a difficult temptation to resist.

What was most interesting about this opportunity was that the competition prohibited startups from releasing a public beta before entering the competition. Prior to considering the competition, Steve had already planned a series of phased releases of the CAKE product, specifically – “a private alpha site in in March 2007, a public beta in June 2007, and version 1.0 in November 2007.” Therefore Carpenter would ultimately have to scrap this plan and work on private iterations until TechCrunch judges could consider the product in September 2007.

So Carpenter scrapped the plan and entered the TechCrunch 40. CAKE ultimately did pretty well and received the media attention it had desired. Tens of thousands flooded its website as articles were written up about the technology in ZDnet tech blog and others. The problem was that none of these visitors stayed and as time went on, Carpenter began to realize more problems with his business model as the public beta began its “road test,” now after almost a year of intensive work. Because of the amount of time spent on building up the back end, it was not incredibly easy to go back and change the technology with the new features – in fact iterations could only be released on a monthly basis as opposed to every week. In the end CAKE crumbled. Albeit a valiant effort, but one that could have surely benefited from sticking to the original plan.

You can’t bake a cake in the microwave…

It’s common knowledge (well save anthropological evidence in a few college dormitories) that you can’t bake a cake in the microwave. By entering the TechCrunch competition, which hamstrung his ability to iterate, Carpenter essentially did just this.

The lesson we take from this case is that entrepreneurs should look at competitions as critically as they look at their other business decisions. Just because it has a big name, it does not mean that it is the right fit for your organization. In many ways the TechCrunch40 was not right for CAKE at all. Carpenter needed to go through the various phases to understand certain components about customer behavior, network effects and the opportunity to explore front-end development sooner. By releasing it into the market place after so much work had been done, he faced the unenviable challenge of turning a chocolate cake into a vanilla one.

In doing research for this piece, I came across a post by Linda, who writes for the blog Plano and Simple, she had awesome advice about the questions entrepreneurs should ask themselves to ensure that the competition and the business are the right match (at the right time).

Link here!


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