‘It was all quite quick in the end’

Dynamic Res, a business that NDRC invested in in 2015, ceased operations at the beginning of 2018. Having successfully raised a seed round, and armed with a growing base of paying customers, founders Daragh O’Shea and Darren Cantwell were forced to shut up shop. Daragh sat down to discuss what went wrong, and what he learned from it.

Dynamic Res designed a technology platform to shift how travel agents sell. From 2015 to 2018 it grew from idea to product, trial to paying customers, Seed towards Series A – falling just short of the latter.

In a largely digital age, where travel agents appear to represent a bygone era, it was a business that faced an uphill task but, with Daragh’s programming background, and more than a decade’s worth of experience in the travel industry through Darren, the duo thought they were on to something, right up until January 2018.

“The reason we shut down was we ran out of cash,” says Daragh. “The investment that was due to come in the previous October was dragging on and on…”

In the end the business, with seven full-time staff (which at one stage hit 11), saw the investment fall through and, despite back-up plans being negotiated in January, a month O’Shea admits is “a nightmare” for funding, Dynamic Res was no more.

The company was successful, until it wasn’t.

Strong Beginnings

The founders met while Daragh, who was employed at a software development company, started working on projects for American Holidays, a travel agency where Darren worked. Building up a rapport, Darren approached Daragh with an idea: Dynamic Res.

‘The system is designed with a focus on the agents’ needs allowing Dynamic Packages to be built with blistering speed from a single screen.’ So read one of the company’s taglines.

Daragh was, at first, sceptical, but the lure of the startup world is strong. Getting into NDRC’s then-called LaunchPad programme in 2015, and the €20,000 investment that came with it, was enough of a safety net to try it and see how it goes.

“I wanted to build products, have my own company. It was more of an ‘opportunity knocks’ situation. Being in web development, there’s a relatively decent safety net. If it went pear-shaped, I could always fall back into what I was doing,” says Daragh.

The duo came through LaunchPad and secured subsequent follow-on investment from NDRC as it sought outside, seed investment.

“We did the rounds, trying to raise money in the next six months after we left NDRC. Ireland is small, we probably spoke to everybody. Investors ask questions on areas you maybe glossed over. If they are interested, if they are in any way serious, they ask good questions around market validation, customer knowledge etc. And when you don’t have a product and aren’t selling, you need to have those answers. We were pre-product, pre-revenue, the hardest position to be in.”

‘A good moment. A big moment. A brilliant moment.’

Timing

Daragh notes timing as key, a learning he made after several incidents throughout his company’s existence.

For example, one of the funds Dynamic Res talked to had just put money into another travel company, so that was their ‘travel thing’ done. In Daragh’s eyes, they weren’t going to invest in another travel company, “no matter if we were competing, which we weren’t”.

Securing the Seed round around September 2016 took six months, far longer than anticipated. However, with €500,000 to put into the business, Dynamic Res was on the up.

Soon a Series A Round was nearing, the team was growing, and customers were taking notice. In 2017, as funding was coming to what the founders felt was a fruitful conclusion, their first paying customer, followed by customers, emerged.

“A good moment. A big moment. A brilliant moment.” Daragh, even now, after the ceasing of operations, is excited by that achievement.

“They were highly engaged customers. It was USIT. We had a lot of other ones, others then signed up as paying customers, three more smaller customers in Ireland then signed up, part of consortiums of agencies. We were starting to put groundwork into getting the consortiums over the line.

“We were working on a very large contract in Italy for a group that owned 1,000 agencies. We had a huge amount in the pipeline, all who wanted a product that we finally figured out what to build.”

Behind the scenes

Yet, with hindsight, problems were underpinning certain aspects of the business. By the time those paying customers came along, time and money had been squandered elsewhere and the pursuit of the next, much-needed funding, which was starting to drag on, was becoming an issue.

“I use the crawl, walk, run analogy,” says Daragh. “We had the end-goal in mind: The ‘run’. Everyone has the ‘run’ vision, particularly if you’re a startup. You can’t build ‘run’ straight out of the box, though. You have to work out what the ‘walk’ product is, then the ‘crawl’ product. Then you have to find out if someone will buy the ‘crawl’.

“Early on we worked on an unnecessary project that took a lot of time and effort, we burned up cash when we were figuring out if it was the right thing to do. It wasn’t. In hindsight I would do it different.”

Daragh maintains that experience is the most valuable aide of all and, were he to do it again, something he wants to, and is, doing right now, he’s infinitely better prepared following Dynamic Res.

“We probably had too big a team size. We got up to 11 at the height of it. That included the project we took on that we shouldn’t have. In reality we didn’t need to solve that problem up front, we could have solved it later, after we had more product built of what we were going to sell.

‘Pre-optimising for a problem that didn’t exist’ is how Daragh put it. An issue he and Darren became aware of quite easily: by talking to customers.

“Nobody talks to customers enough,” he says of the startup ecosystem. “You’re building on sand all the time. You have made an assumption, haven’t tested it enough, you build an assumption on top of that … it’s a house of cards. Or you veer off track early on and it’s hard to get back.”

‘We weren’t confident enough to sell what wasn’t good enough’

Get out there

Daragh thinks that, in general, the product entrepreneurs build in order to sell is probably too advanced. Build it to an earlier spec, sell it quicker, and evolve from that.

“We weren’t confident enough to sell what wasn’t good enough. But we probably could have sold it because it would have brought value to customers. They wouldn’t have paid much but it would have been enough. The real validation is paying customers. Because, using the product, their whole environment changes. Their day-to-day processes change from theoretical to real. They need different elements to what they expected, and you build with that.

“They might give good feedback. Paying customers might even tell you they will pay more if it can do this, or that. Now you know that that is true based on them, their data usage, their team etc.

“There’s the ignorance with not having done it before. Wanting to do it right, but you can’t make the right decisions if you haven’t done it before. You don’t put enough focus on an area because you’re focused on all these other things. You’re trying to build a product, trying to hire, trying to manage people, trying to sell, trying to market it, trying to know if you are building the right thing, trying to talk to customers – there are only so many hours in the day. And you hit these hurdles – staff, customers etc, all these dynamics at play. It makes it all the more difficult. Experience would help you here.

“Timing and luck and help can come into it. You can get lucky, you might stumble on the right product to build at the start, or find the right customer to help you grow earlier, or the right investor early on. There are an awful lot of things that need to line up and that’s why the failure rate is so high. There are so many things you need to predict, so many assumptions you make.

“The reason I think most of them fail is because they’ll get some sort of positive sign that their assumption is right and just go with it. What experience will help with is trying to understand whether the experiments you perform at the start, to validate your ideas, are good experiments or not, whether the feedback is from somebody who’s going to pay you, or somebody is not, whether the product/market fit is there or not – this is probably the hardest bit.

‘People let you down with time, not money’

Money problems

“We spent most of our time and funding building the right product, trying to build a sellable product and then building a team to sell the product. We should have done more with less. The problem is, with funding you feel you need to spend the money to get the money back. Or to get to the next stage. You don’t have the pressures of budget constraints as much, so you don’t focus on trying to do more with less, you just focus on trying to get it done.”

The impending Series A raise was with a view to getting the company to another point midway through 2018, and backup funding had been verbally agreed in the UK if projected business deals didn’t come through. With several months of a buffer, Dynamic Res – on the cusp of a major investment round – seemed in fine shape. However, time was not a friend.

“We were very transparent with employees, customers and clients. There was disappointment as the customers hadn’t been customers for too long. That was kind of a good thing perhaps, as we were yet to become critical to their business. But, from my point of view, it was particularly disappointing as they all liked the product. It was a solid product, a good base to get from the ‘crawl’ to the ‘walk’, and then the ‘run’.”

Now, without Dynamic Res, but with experience, Daragh feels “infinitely” better equipped.

“I would be quite a big believer in trying to learn from other people’s mistakes, trying to predict what you should be doing based on what people are telling you. I would have gotten a lot of advice, that’s why it’s disappointing to make mistakes that others told you to watch out for.”

Upon shutting the doors on Dynamic Res, O’Shea took to LinkedIn to discuss his learnings. One comment stood out.

“A wise man told me recently, ‘People let you down with time, not money’. We knew things would take longer than we'd planned, and then they took longer again.”

Would Daragh do it all again? “Absolutely.”