Borrowed with permission from MapleButter. Are you an Ontario-based tech start-up who’d like to share a similar story? Contact Trevor at MaRS

This is the story of Flowtown – a startup I co-founded with Ethan 2 years ago. In it, I’ll go over; how we got started, raised a venture round, scaled to over 25,000 customers, hit a wall and built it all back up again. Entrepreneurship is about crazy highs and intense lows and the ability to get through those tough moments.

I’ve been doing startups for over 10+ years now. One thing I’ve noticed is entrepreneur’s ability to tell stories after the fact, as if they predicted the future. It’s as if their journey was all part of an elaborate plan that just fit together flawlessly. But the truth is – it’s a bunch of crap. Sure, we all have big hairy audacious goals and detailed plans to achieve them, but the paths we actually take rarely match up with what we tell ourselves after the fact. With that perspective, I want to lay out how we got to our latest product and detail the bumps and hardship along the way.

In the Beginning, We Had landingpag.es

Flowtown was conceived as a bootstrapped startup between Ethan and myself in mid 2009. We shipped our first product on July 3rd, 2009–it was a landing page application that we believed small businesses would use to capture leads. We talked to 30+ business owners and identified the need. What we missed was that no small business would self-service, and after launching and getting over 600 people to sign-up, we finally got to 1 monthly paying subscriber. On that day we went pro (cause we made $1 dollar) but we also realized this wasn’t going to work.

As a bootstrapped startup, we knew the microeconomics were not working out and we needed to solve the problem – essentially, profit or die. This is the point where we realized that we were doing customer development (CD) wrong and went back to the drawing board.

The next product idea came from a prototype we built called Hedwig. A simple app that let you enter in an email to see all the demographic and social data for that person. However, this time we were going to do it differently. We armed ourselves with 6 high fidelity mockups and hit the streets. Only after we pre-sold the app to 10 customers – at $20 bucks a piece – did we take things to the next level.

Traction and Raising $$$$

After spending 4 weeks validating and launching our minimum viable product (MVP) we launched to the public. On that first day of going live, we got our first upgrade! That was the beginning of a trend that brought us from $0 to ramen profitable in just under 2 months.

Starting the year in 2010 we knew we had a decision to make – either continue building the company organically or raise some capital and throw some gas on the fire. We decided to raise. 4 weeks later we closed a $750K round of financing by some amazing investors. We quickly increased our growth by building out an amazing team, starting a prolific blog, hosted weekly webinars and hiring customer coaches to help on-board new users. Month over month we grew users and revenue at 30+% until one day it all came to a stop.

Getting Shut Down

It all started when the Wall Street Journal published a front-page article attacking Facebook for leaking user data and how some companies – not us – were selling private data to 3rd parties that were using it for advertising solutions.

Although we weren’t directly mentioned, it did cause Facebook to take a hard stance against the data-brokering industry, and resulting in our sevice being shutdown.

It was at that point in time that we had to make a tough decision about the kind of company we wanted to create and the problems we wanted to solve. We never wanted to become a data provider, even though that’s what 70% of our customers were paying us for, but we did have a passion for our customers and the company we created. So we did what was right by our users.

We quickly turned off new registration and sent an announcement to current customers–giving them 2 months to continue using the service as is–and committed to maintaining the other features (mostly email and auto-responders) indefinitely. Deciding how to react was simple – do to our users what we would want done to us. Sounds easy, but it’s hard to do, especially when you’re a startup and you need to move quickly to finding the next thing.

Starting Over

The next steps were hard. We immediately cut our burn by 60% to extend our runway. That meant some tough decisions regarding salaries and overhead, but we knew we had to move quickly. We then went to the whiteboard and brainstormed ideas that would still be relevant to our customers–social media marketers–but that we would feel passionate about, too.

3 Prototypes Were Born

  • Spiderman
  • Timely
  • Ambassador

Spiderman was an idea to build a discovery engine to find content that marketers could easily share with their customers in a targeted way.

Timely was a Twitter app that automatically optimized when tweets got published based on historical engagement of your followers and their activity.

Ambassador was the idea that every company has “superfans” that might connect their social accounts for your business to leverage when promoting content (to help with distribution of content and news).

So, after building all 3 minimum valuable products (MVPs) in 4 weeks, we called a meeting with our investors to show them our solution to the problem with real data and present our decision. Spiderman wasn’t a good fit for our team’s DNA, and Timely was not a venture idea – so we decided to doubled down on Ambassador. The MVP showed promise, but we felt we needed to revise the core idea and open it up to be more than just an application for publishers to help promote their content.

As an aside, Timely still lives on today, being used by over 15,000 people.

1000 Accounts; Still No Traction

We spent the next two months validating the idea and adding new features to Ambassador. Some of these where:

  • A way to see who your most engaged users were on Twitter and Facebook
  • An invite system to allow Ambassador to connect to your company using Facebook connect.

We launched each feature separately and iterated on them as we learned, inviting over 1000 new business to sign-up and go through our invite flows. Towards the end, we discovered that everyone understood the concept of an “Ambassador” (aka Super Fan, Champion, Evangelist, etc), but they didn’t feel like they needed to formalize the relationship so much as it changed over time.

We continued to learn and present new ideas to customers–trying to understand their needs–until we added the following features:

  • Ask a question
  • Reshare request
  • Send swag

That’s when things clicked. No one cared about the “ask a question” (because it made the app feel like Facebook) or “Reshare Request” (cause it was very one-way for the Ambassadors) but they loved the “Send Swag” idea. However, they wanted the ability to give it to anyone – not only Ambassadors. And that was the a-ha moment; we decided to scrap everything again and focus on this simple core idea.

Gift Marketing

The solution came from our own need. As a company, we’ve always focused on engaging and building our online community. One habit we had from the beginning was giving out “swag.” We gave away free accounts, t-shirts, posters of our infographics, and even cool credit card covers (only for the ultimate “superfan,” however).

Our vision and belief is that giving free stuff, including product samples, will eventually be seen as a new way of marketing and to acquire customers. Much like freemium in online SaaS products has become a new way of marketing certain products, product-gifting will become a dominant channel for finding new customers. It’s still very early, but we’re committed to this vision and we’re super confident (and excited) in our early traction.

Revenue is starting to flow and we’ve got some amazing early customers helping us shape our product. The journey certainly hasn’t been without its ups and downs, but without that, what fun would it be?

I hope you’ll join me for the ride. Sign-up for early access.

Note: Over the next few weeks, Ethan’s going to be doing interviews around the product and our pivot, if you’re interested in talking to him, shoot him an email.

Dan Martell

Dan Martell is the co-founder of www.flowtown.com, an application that helps turn your best customers into your best marketers. An award-winning Canadian entrepreneur, at 25, Dan formed his first start-up, Spheric Technologies Inc., and watched it grow by an average of 152% per year before he sold the company 4 years later in mid-2008. As an informal angel investor, he is active in advising entrepreneurs using lean startup methodology and metrics based marketing to gain market adoption. See more…