- Legal tech startup Atrium shut down in 2020 after raising $75 million in venture capital.
- Founder Justin Kan described the critical mistakes he made like hiring too many people too early.
- Kan also said founders need to love the specific product being built to fend off burnout.
- Visit Business Insider’s homepage for more stories.
Many startups begin with grand missions to disrupt industries; most fail to deliver and quietly shutter their doors with limited explanation. But after Atrium was shuttered, founder Justin Kan, best known for creating the live-streaming platform Twitch, delivered a public post-mortem on exactly what went wrong with his legal tech startup.
“I wanted to get the knowledge out there to hopefully help future founders,” Kan told Insider.
Kan founded Atrium in 2017 with the lofty goal of revolutionizing the legal services industry. Atrium would build software tools to service its in-house law firm and eventually sell the technology to other lawyers.
Kan is a cofounder of Twitch which sold to Amazon for $970 million in 2014, had launched other startups and was a partner at Y Combinator. So he knew firsthand how difficult it is for founders to navigate legal red tape.
“I started Atrium because it was a problem I had,” Kan said. “I felt I could build a big company around it.”
Investors bought into Kan’s vision: Atrium raised $75 million including a $65 million Series B funded led by Andreessen Horowitz in 2018.
There were signs of trouble in early 2020, when the company laid off its in-house lawyers and said it would be focusing primarily on its software. By March, 2020, Kan announced the company was shutting down and returning some of its $75 million raised to investors.
Although Atrium shut down during the economic crash caused by COVID-19 lockdowns, Kan attributes Atrium’s failure to a variety of things, none of them the pandemic.
“I think we hired way too fast in the beginning,” he said. “We should have just kept a small product team in the beginning and solved one slice of the problem.”
—Justin Kan (@justinkan) January 6, 2021
As he wrote on Twitter, “The more people you have, the harder it is to bubble up feedback or turn the ship.”
His thread also emphasized the importance of the research and development stage, where founders should be studying their market and designing a product to solve a specific problem.
“If you try to skip this you miss the part where you are forced to develop something differentiated. Very hard to solve this with money,” he tweeted
In Atrium’s case, he found difficulty in creating a new and comprehensive program for lawyers who already had long-established processes. As Atrium struggled to build a service for the market it was aimed at, Kan said the team lost focus on building the product.
“I don’t think we built enough of a product culture in the beginning,” he said. “It is core for any startup to really first build around a product.”
But the main lesson Kan learned was that, if you don’t have inner drive to provide this specific product to the world, you’ll burn out when the going gets tough.
“Ultimately it wasn’t really my passion to solve this problem,” he said.
Atrium’s failure hasn’t stopped Kan from wanting to try his hand at future startups. But he will now “only work on things where I have intrinsic motivation.”