12 Months of Flow: What Went Wrong?
This chart says it all: you can't fake product market fit and we don't got it.
So what do you do when you've spent a year and a quarter million dollars building something that isn't gaining traction? Do you persist, pivot, or perish? Before we decide, let's take a look at what went wrong.
The Problem(s)
As a founder, you tend to have an internal meter that indicates whether things in the company are going well or not. Like a pendulum, it swings constantly and sometimes it sends the wrong signal, but it's usually pretty spot on and cuts through the artificial noise that can distort perception. After all, as founders, we tend to default to optimism.
I got pretty good at suppressing that internal meter. There's all sorts of ways to ignore logic and reason - our brains can be pretty fickle. But when you hear the same thing over and over again, reality becomes more and more difficult to ignore. Here's what I started to hear often, specifically when speaking to investors:
This is going to be really tough, Mark. The main problem is that you're operating a consumer marketplace with low average order values, low margins, and a high potential for disintermediation.
You're going to need crazy scale.
It's shocking how many conversations I had to have to triangulate that this is what people were saying to me (no one said it flat out like this). It's worse that I didn't recognize these hurdles myself - I remember telling myself things like, "I know that these are concerns, but others have overcome them and so will we."
I had no idea how difficult (and expensive) it would be to overcome them. Let's break down how those concerns manifested into real business challenges:
This is just the tip of the iceberg and there are a lot of macro factors impacting us as well, but this article is going to get painfully long if I dive further, so let's change gears and talk about what comes next.
The Solution(s)
On the one hand, we can fix the chart pretty easily by starting to spend on marketing again, but the chart isn't really the core problem, so while that may be one possible solution, it's likely not the right one. We can take the perspective that we'll be able to fix our unit economics, CAC/LTV, AOV, churn, retention, etc. over time and that we should prioritize top-line growth in the short-term, but that's a big bet to make and feels like throwing good money after bad. If the past is showing us that the economics don't work, it's hard for me to trust that the future will be different.
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What it comes down to is that we have a leaky bucket. Very leaky. Users come into our ecosystem and they exit our ecosystem and we don't extract enough value in the interim to justify the cost of getting them in the first place. That's a tough place to be as an early stage business when you have limited resources and need to raise capital to grow. Back to the original question, do we persist, pivot, or perish? Here are our options:
In the startup game, giving up isn't an option and we just said that carrying on is the definition of insanity, so that leaves us with #2, #3, or #4. But which and how?
#2 is a last resort and #3 will take time and resources that we don't have. #4 it is.
But in order to fix the problems, we still need time and resources. When a company needs money and investors won't give it to you, there's only one thing to do...
Get it from customers.
And that's what we'll do while pivoting aspects of the business in order to plug the holes we've already identified. Here are two things we're doing to turn the company around:
These are just two of the many things we're doing - next time I'll tell you how.
I hope you enjoyed this candid inside look at the inner workings at Flow. My hope is that sharing this story helps someone else avoid the same challenges as well as recognize that this stuff is hard, sometimes it hurts, and you're not alone.
We might be down, but we're not out, so stay tuned for the next episode.
With love, hope, and humility,
Mark
Part Qualified ACCA | Certified Enterprise Architect | Global Business Transformation
2 年Great read, and very well said. Such a thoughtful and perceptive article Mark.
Marketing Manager at Blocks | Smart lockers & Product Marketing Manager at Emorfiq | No-limits solution for your online store
2 年Thank you for a candid behind-the-scenes view. Have you considered broadening the type of spaces/providers available: wellness, sports, craftsmen, so going beyond real estate? Almost as an appointment scheduling, rather than space reservation.
Founder at Skóra
2 年Appreciate your candour Mark. Onwards and upwards. If you build it they (won’t necessarily) come? ?? cc Rados?aw Bu?at
Vine Ventures
2 年So thoughtful and insightful, as always.
Pivoting
2 年This is the type of mindset and transparency that sets you apart. Bravo for being open enough to share in this format. You receive valuable input as people respond, while at the same time provide a roadmap to teach others. Top post from a top man. Well played geezer.