To Pivot or Not to Pivot
This article is part of a case-study like series discussing a business pivot from an entrepreneur and investor’s perspective.
One of the toughest realizations as an entrepreneur comes when you recognize that your company is not providing the results you need. This isn’t a question of meeting short-term goals, but rather when you recognize that the results you are obtaining are not leading where you expect. Identifying at what point things need to change is often difficult, and staying accountable to your stakeholders can be extremely stressful.
Sometimes the hard questions need to be asked, and you need to sit down with your co-founders, your team, and your investors to assess the situation, and determine the best course of action. When, despite many obvious successes, the entrepreneurs behind YUPIQ realized they were heading down a less than favourable path, they knew there were some very difficult decisions to make.
YUPIQ was started by four Master of Engineering students. In 2009 and 2010, during their last years at UVic, they were recruited as the very first team to enter the Alacrity Foundation’s Entrepreneurship@UVic program.
While still attending University, the co-founders were engaging in meetings and completing projects that drove them deeper and deeper into the business world. With the support of Alacrity’s Owen Matthews, and the experience in tech that he and other Alacrity advisors and mentors shared, the young graduates settled on a business concept and market that seemed to show promise.
On March 1st, 2011, YUPIQ was officially incorporated as a social media promotion platform. By incorporation date, the team had grown to fill the necessary development, marketing, and sales/admin positions.
The concept behind YUPIQ was simple. It was designed as a platform that provided customers a voice to amplify communications with their fans. The premise was simple: Enabling people to refer friends to the products and services that they loved through promotional campaigns amplified a brand’s reach.
With the rise of Facebook, Twitter, Instagram, and myriad of other platforms, social media had revolutionized the way consumers were communicating. YUPIQ planned to capitalize on this revolution, building their platform through Facebook and allowing users to instantly share and promote things they liked with their friends and family. People using the system were rewarded for participating in each promotion, encouraging them to continue to spread the love. By partnering with brands and promoting events, YUPIQ aimed to monetize the act of making and completing a referral through a variety of products.
By the end of its first year, the company had grown to have a strong user base and had well known brands as clients. Things were looking good for the small team! But later in the year, critical adjustments to the Facebook platform changed the marketplace, and underlying issues with the concept became apparent.
The founders of YUPIQ were meeting on a regular basis with Alacrity advisors, and with their investors at Wesley Clover International. Through countless conversations and developing answers to some pointed questions, they realized that monetizing the promotions made through the YUPIQ platform was proving to be more difficult than anyone had anticipated.
“In that market, every customer had an expiry date as soon as they launched their promotion. It essentially negated all of the economic advantages of selling SaaS.“ -Will Fraser, YUPIQ co-founder/CEO of Referral SaaSquatch
While new promotions were being added, the user base was strong and growing, and big brands were interested in making use of the platform, the inability to track the impact of campaigns was proving to be an achilles heel. This was not an uncommon problem in the industry, as attribution across campaigns was a sore point for most every online marketer. However, for YUPIQ, the difficulties to quantify ROI that stemmed from the reporting challenges caused customers to hesitate to commit to a price for a campaign. The challenge was exacerbated by the fact that the types of campaigns that YUPIQ supported tended to be fleeting, based heavily on events with limited life cycles. The recurrence cycle and long-term strategy of partnerships wasn’t matching the level required, and the actualization of revenue wasn’t reflected in YUPIQ’s current model, even though the potential customers were on-boarding consistently.
“Customers thought of our product like a poster board. You buy it, you use it, and then you throw it away versus the poster board factory which we wanted it to be.” -Logan Volkers, YUPIQ co-founder/COO of Referral SaaSquatch
The period of self-assessment came to a peak during the holiday season at the end of 2012. YUPIQ’s co-founder, Will Fraser, called a meeting with the other founders. The question to be answered was this: was there a future for YUPIQ in its current form? After some reflection, the founders met again in the New Year, and made the difficult thumbs up/thumbs down decision on whether or not to continue. The vote was a unanimous thumbs up, with the caveat that some things needed to change.
“When we came back from vacation, it was pretty clear that everyone thought the same thing. Whether it was the employees of the company, the founding team, or the investors, we all felt the same way – something had to give.” -Logan Volkers
Then came the next challenge; involving the entire team in the next phase. Although it’s part of the base culture at YUPIQ that everyone constantly shares information in an open way, not everyone had been involved, or up-to-date on all these discussions. But as young graduates and friends in a flat organization, it was important to the founders that the whole team to be involved in the decision. After sharing all their perspectives on the situation, the entire team set to work on what they call the Blue Sky Week.
“We’ve always been a flat-structured team, pretty democratic. That led to us realizing that things weren’t really working, but as a team, we really liked working together. We thought we had something there, but we needed to do something different so we just had an open-ended brainstorming week.” -Torben Werner, YUPIQ co-founder/CTO of Referral SaaSquatch
Continued in “One Week to Pivot“