Taking Stock of Life as a Founder
Learning to appreciate the journey, celebrate the successes and embracing the inevitable.
This article was originally published on LinkedIn on May 19th, 2020.
About 2 weeks ago we finally hit the 500,000€ mark in sales with our primary product and brand: ThreadBasket.
A lot of people — especially my circle of friends and former colleagues — still think we sell t-shirts. We don’t. We research, create and sell the artwork that ends up on countless printed products around the world. And yes, those include t-shirts as well.
Our customers market their products on marketplaces such as Amazon, Etsy, Spreadshirt, Redbubble and countless smaller online shops.
Since launch…
- We’ve created and sold more than 34.000 unique designs (that’s right, 34.000!)
- We’ve processed over 19.000 payments
- The average lifetime value from subscriptions is about 70€ per user before they churn
- However, the average lifetime spend on designs that we can expect from those who buy is actually in excess of 500€
- Our top 10 customers have spent more than 10.000€ on average
Let’s get one thing out of the way first. I’m well aware that after almost 3 years of starting up, the number pales in comparison to the type of numbers I was used to dealing with in the oil industry. And clearly it’s not anywhere close to the top line figures that many of the more prolific startups are boasting, even locally.
If you work in the corporate world of multinationals, you might even ask yourself…
“How on earth can you run a business on that revenue?”
Chances are, some of you earn a salary + bonus that’s close to that.
But if there’s something I’ve learned in the past few years, it’s that our expectations (and probably yours too) are primarily driven by the well-funded startups with massive PR budgets, high-profile “Unicorns” and a romantic idea of what startups should look like (thanks Hollywood).
And I know many of you think you understand this, but trust me, unless you’ve been there and felt it first hand, you probably don’t.
Building a Startup is Hard
The painful truth is: Building a startup is hard. Like, really really really hard.
It’s not just a financial rollercoaster, it’s also an emotional rollercoaster where one day you feel like the master of the universe and the next day reality punches you in the face and it all turns into a depressing version of utter self-doubt.
By now I’ve taken so many punches, I’ve stopped counting:
- “XYZ is doing this. Should we do that as well?”
- “Why isn’t this strategy working?”
- “Why did sales drop by 50% in 1 month?!”
- “I’m going to stop those Facebook ads right now. Sorry Zuck.”
- “Our price is too high!”
- “Our price is too low!!”
- “Discounts are the downfall of humanity.”
- “At this rate, we’ve got about 4 months of runway left.”
- “Maybe we just suck?”
We made our life particularly challenging when we decided to fully bootstrap our startup (for those not familiar with the lingo, that means we are 100% self-funded). No external funding, no network of investors pushing our profile. Just us and the internet.
Our initial platform only cost 5,000€. But we somehow managed. Ruthless outsourcing, standardisation and automation of processes saved the day.
To this day many people don’t understand why we never sought any funding.
Well, let’s face it. Our product isn’t revolutionary. It’s difficult to blow people’s socks off with what we do. We don’t tick any of the buzzwords on the Gartner hype cycle (I’m looking at all of the AI/ML people in the room).
We also chose a niche with a fairly limited total achievable market and our product didn’t really scale. Our bank would have given us a credit line…they offered it. But what for? We didn’t have a scalable product at the time and didn’t really know where we were headed.
And to be honest, we probably wouldn’t have found an investor anyway. I was even having trouble explaining our business to my friends. From my experience, most investors aren’t necessarily looking for a profitable business to begin with. They want businesses that have the potential to scale BIG TIME.
You know, the stuff that you can potentially sell to a big established incumbent like Google or maybe even IPO one day (Note: It’s 2021. I guess a SPAC would seem more trendy now).
Say Hi to Captain Hindsight
It all seems so obvious in hindsight. But believe me, that sounds a lot simpler than it is. “Captain Hindsight” is a fool.
Anyway…today, I know better. Much much better.
But guess what? Despite all these challenges…
- We had paying customers from day 1
- We were profitable from month 2
- We hit 30k€ in sales in a single month in December 2018
- We broke 100k€ in sales after 8 months and 200k€ after 13 months
- We generated corporate profits before tax of almost 40k€ in 2018 (the tax on that really hurt us)
That’s not too shabby.
Even our tax advisor said it was unusual for a small startup to hit these numbers so early without any external funding or support.
I spent almost a full year in the labs area of a WeWork office. Of the 20-something startups in there, only 4 had actual revenue (us included), 10 barely had a working product and some were still at the idea stage. Yet all of them were spending 250€/seat/month for the something I could only describe as “the vibe”.
Two of those with revenue got to pitch at Y Combinator. One even got tapped by them. Those who know what Y Combinator is, will understand what that means.
That’s super rare. That’s big. I was really happy for them.
Along Comes Catharsis
But when our sales started dropping for no apparent reason, I felt like we were failing. Even more so, I felt like l was failing, personally. I had to lay off my 4 super motivated and always cheerful student staff.
We had to move out of the office space and back into home office. And despite all of the improvement in the past 10 years, German society has conditioned us to believe that failing in business is a failure of skill, a lack of vision or whatever.
“Shame. But, maybe you just ain’t got what it takes.”
…said the little imaginary devil on my right shoulder. The little angel on the left decided to take a day off. Not helpful. ;-)
But here’s an interesting nugget for you. A couple of years back the founders of relatively established SaaS businesses such as Gumroad and ConvertKit shared their origin stories. Even if you don’t know what these businesses do, trust me when I say they are staples in the online marketing space. I literally use both of them.
So apparently ConvertKit and Gumroad both barely hit $2,000 of monthly recurring revenue (MRR) in their first 2 years. Today, 7 years later, ConvertKit is well above $1mln and Gumroad at nearly $800k in MRR (Note: These numbers are much higher now in 2021).
Long story short…the majority of the startup world does not look like Uber, Airbnb, Revolut or N26. And when they do become high-growth businesses, they don’t necessarily gain notoriety outside their industry or niche. Startup life is usually a lot less sexy than people like to think.
Starting up can be scary. Like, “existential crisis” kind of scary. It’s a massive learning process unlike anything else. Not only about running a business but also about yourself as well.
Your needs, your wants, you fears, your strengths and your weaknesses. It exposes all of these things with the ruthless clarity of a 500W flood light…whether you like it or not.
Enter ThreadBasket 2.0
Anyway, so let me finally come full circle.
ThreadBasket’s current business model has reached it’s half-life.
It’s not scalable. Full stop. So we are at a crossroads.
Covid-19 hasn’t hit us as hard as others, but it has hit us as well. We are still profitable, but cuts will be necessary in order to extend our runway as much as possible.
Within the next 2 months we will be initiating the first pivot of our business model. We’ve been working on this for half a year. We will lose some customers, but we will hopefully gain new ones.
It will expand our total achievable market and finally provide us with more scalability. Our revenues will drop in the short to medium term, but they should be more reliable.
We will gradually morph into a licensing service for high-end stock illustrations, still focused on but not limited to the print-on-demand industry.
We will be competing with smaller niche players such as Vexels, but also partially with large cross-industry players such as Freepik, Storyblocks, Envato or Shutterstock.
That’s incredibly tough competition, but our strength is in our network, our followership, our specialization, consistent quality and unambiguous licensing terms.
Please wish us luck as we attempt to reach the next level.
My godmother’s husband is a former Captain. I’d like to share what he told me 2 years ago:
“Life is like a journey at sea. No matter where you’re heading, deviations are inevitable. So embrace them.”
If you got this far, thanks a lot for listening!
Your attention span is commendable.
You’re a dying breed ;-)
Thank you for reading, and I hope you found this useful and maybe even a little motivating. If you have any questions, find me on Twitter and ask me anything. 🙏
