Some months ago I announced that I had started Likvido, a debt collection company. Starting out, the plan seemed super obvious: smaller companies seem to have a lot of pain, let’s fix that by providing a modern and awesome solution starting in Denmark.
At launch, we made a lot of noise. We posted two different videos on LinkedIn, posted on Facebook, tried Adwords and some additional outreach to potential customers in our network:
This was a great start!
Not only does everyone now seem to know we’re working with debt collection, my co-founder Max, got A LOT of meetings in his calendar.
Overwhelmed by opportunity
The “value proposition” we launched with was the easiest one to communicate: “Hey! Debt collection is quite expensive today. We’re doing smart magic technology things, so we are cheaper. Buy from us!“.
If you’ve been in the startup world for more than two weeks, you probably know that this is a … bad approach.
Being the cheapest can be a smart move, but surprisingly less common than many newbies think. Challenge is: not only do you need to earn money to grow (and make investors happy), but competitors can just sink their prices and you’re doomed. However, if you’re in a position where your competitors CAN’T sink their prices for whatever reason, then it’s another story and you might have found the right approach.
Before product-market fit:
We’ve been in the startup world for a while, and respect that startups have phases. I believe very much in looking at product-market fit.
Everyone seems to have their own definition of it, but the idea is basically if you’ve found the right product for the market. IF YES, then you should narrow in on that product/market, and scale like crazy. IF NOT, then you should expand your horizon, try a lot of stuff and see what works.
The obvious problem is then when the founders believe they have product-market fit, but in fact, they don’t. I tried this in my last startup Monera, which went bankrupt with a very hard crash (personally ~100k USD lost), very bad Trustpilot reviews, and a very difficult period.
Currently, we are very obviously at the “before product-market fit”.
Of course, we could just launch and compete on a classic debt collection product, but that’s just stupid. Not only do our competitors have brands, technology staff, and integrations to all the very profitable companies already, it’s a very tough market to compete in if you have the same product.
Expanding our horizon:
The output from the many meetings we had after our LinkedIn stunt was very interesting. Not only did we get a very nice amount of debt collection cases to run, we learned a lot.
Before launching, we had two overall ideas: either we should go for the smaller segment with a “mostly online and self-service solution“, or make “solutions for industries“. However, the underlying assumption we didn’t challenge was the product itself. We wanted to make a debt collection product – a product used AFTER the companies had sent a lot of reminders and tried themselves.
During our first month, we learned a couple of very interesting things:
- People are not very happy with their current debt collection provider(s) (turns out some companies have more than one), but also not very dissatisfied. It’s a “meh” relationship
- People don’t care much about debt collection and talking about it… is not so interesting
In addition, we also learned some other things:
- A LOT of time is spent on the whole process before going to debt collection: sending the invoice, sending reminders, bookkeeping and moving consumers to automatic payment solutions
- Companies selling things as a subscription (electricity companies, fitness chains, SaaS tools with contracts) have a big problem with debt collection.
A typical scenario is that one invoice was sent to “legal collection”, but you keep sending new invoices because the original contract was 12 months. Do you run multiple cases? Do you combine them? How do you automate it?
- Popular SaaS tools want an integrated solution for debt collection (accounting systems, SaaS tools for niches…)
By expanding our horizon, we’ve found out that building a smart debt-collection tool for entrepreneurs is probably not the most interesting space.
But… Building a fully automated invoice-to-reminders-to-debt-collection software for medium-sized and enterprise? Or delivering this fully-automated product to other SaaS tools?
Very, very interesting. So we changed out home-page to communicate this:
(For the non-Danish reader when taking the headline into Google Translate: “Put your recovery on autopilot and get faster payment”.. Trust me, it sounds better in Danish)
Soooo many opportunities
To make things worse, we also had some chats with a couple of big companies.
Not US “fortune 500”-big, but definitely top 250 in Denmark. Big enough to have a serious impact.
Turns out, when we talk about the “invoice-to-reminders-to-debt-collection”? This is a bigger problem when you look at big companies. Not only do they spend so much manual time, the invoices and reminders they send have so much potential for improvement.
(An example: say you have 100.000 customers you invoice two times a year. Today you send a physical letter to everyone because you don’t have e-mails on everyone. The postage alone is ~2-300.000 USD a year. Our system looks at the customer: if they have an e-mail and the e-mail doesn’t bounce, we skip sending the letter… That means in postage savings alone, on a yearly basis, we’re worth at least 100.000 USD..- And that’s before we talk about time saved, higher collection rate and a better end-user experience).
That things us to the main challenge: opportunities.
We’ve been doing this since the middle of February.
We’re building a pretty complex product with: company login, admin login, debtor login, accounting system integrations, installment-, fee- and interest calculations, sending email/SMS/letters at a very high volume and much more (don’t get me started on compliance and following the rules).
This is hard.
This is a crazy period.
And we’re not even done with opportunities. Last week we met (a huge) electricity company that wants to use us. One tiny exception: they wanted to do the debt collection system themselves so we only provided the software.
And this is why I call this the crazy period.
We have so many opportunities and a highly complex product… And now we have to solve exactly what product we’re building. To solve exactly: what is our product market fit? Exactly what product do we plan to scale?
But for now, time to be crazy.