We’ve covered a lot of companies who have started up amidst change, and this week’s story is about what happens when that change is too much for a company, as it was originally formed, isn’t enough to be sustainable.

I recently spoke with Mike Townsend, previously of Flowtab (more on their story here) about what happens when your company pivots, and then you decide to call it a day.

Karen: On your post mortem page for Flowtab, you talk about a prototypical company launch. (You posted a 1-page splash to let people know you were pre-launch, you talked to bar owners, and you pitched a presentation of your app to bar owners before building anything.) Is there anything now when you look back that you might have done differently in your earliest stages?

Mike: In the early stages you want to learn as much about the customer as you can.  Forget for a second that you’re building a technology company, and just think about what people are thinking.  When do they feel the most annoyance with their environment?

Everyone we talked to inside the bars said Flowtab would be a great application, and they would “love to use it”.  We might have fixated too much on the bar patrons and bar owners, but skipped over the bartenders.  Going back I wish we had really studied the bartenders and understood what they needed. We also learned that clients saying they would use the product is vastly different than them actually paying to use the product.

Karen: When you hit #1 on the iTunes store, that seems like a pretty solid buy-in from the public. Were you thrilled, or were you nervous because you hadn’t launched any bars yet?

Mike: We were excited, because at that point it was real.  However, we understood that it didn’t mean much to the growth of the business.  Probably a bit nervous to gain a bunch of publicity when we had 0 bars to use it!

Karen: Can you go a bit deeper into your experiences on the money trail. Do you have any advice or lessons to share with others who are at that point in their own business now?

Mike: It’s so important to put yourself in front of people as often as possible. Raising money is more an attention drain than a time drain, each of which are quite costly.  Use AngelList (angel.co) to find potential investors that are interested in your industry or have invested in similar, non-competing companies. Look at their twitter handles and LinkedIn pages and see who they hang out with, then go to the events where those people are. We also found success going through our high school and college networks.

Investors are everywhere, but most are in Silicon Valley. It is totally possible to raise money anywhere, but for a first time entrepreneur, I suggest you play the numbers game and play in the big pool for a few months, i.e. move to the Bay. We found it hard to find investors in LA, but successfully raised our first $50k within a month of moving to the Bay.

Karen: Let’s talk about scale. Because of the nature of your business, you had a tougher road to hoe than the average SaaS start-up. What lessons did you learn about that experience?

Karen: There has been lots of talk over the years about adopting advertising-based models as a surefire way to turn off investors. When you explored the liquor ad space, what lessons did you learn?

Mike: Actually, the advertising based model was an idea from one of our investors. Our advertising strategy took advantage of a certain legal loophole which does not allow bars to accept paid advertising inside their venue. We could get around this by showing you ads on your phone, which made perfect sense conceptually. We talked to Diageo and Pernod Ricard and both said we would need to hit about 2,000 orders per week in SF alone before they would be interested. We still there is an opportunity there, but it relies on massive traction, something we didn’t  have at the time.

The lesson here is don’t think about how you are going to make money at scale, think in the present and ask for money when customers are getting real value from your service.

Karen: What advice do you have to first time entrepreneurs considering making their idea work?

Mike: Choose attainable meaningful weekly milestones and fight as hard you can to get to them, telling as many important people as you can along the way.

Be extremely persistent with investors, and don’t stop until you get a “yes” or “no” out of them. And if they choose not to invest, ask them for feedback on your pitch and for an introduction to someone else. Make them work for you.

At early stages, do things that don’t scale. The essence of being scrappy is leveraging every resource you have. For small startups, one of these resources is usually time. Call or visit your customers, listen to them carefully and try to understand their needs.

Mike and part of his team from Flowtab have moved to a new venture, HomeHero