Podcast Summary
Understanding the economic realities of childcare business: Building a childcare business comes with unique economic challenges. Founder of Poppy shared her experience of exploring pricing models and revenue streams but eventually had to shut down due to unsustainable economics.
Starting and growing a business, especially in a challenging category like childcare, comes with economic realities that must be carefully considered. Avni Patel Thompson, the founder of Poppy, shared her experience of building and eventually shutting down her company on the Y Combinator podcast. She acknowledged that from the beginning, she knew the economics of childcare would be a challenge due to the inherently margin-challenged nature of the category. Despite this, she approached her business as a series of experiments and continued to explore pricing models and revenue streams. However, she realized that what the business looked like at a certain scale was vastly different from what it could become at the next level. Ultimately, despite her best efforts, the economics of Poppy didn't add up to a viable, scalable proposition, and she made the difficult decision to shut it down. This conversation underscores the importance of understanding the economic realities of a business and being prepared for the challenges that come with scaling.
Discovering hidden talent and adapting to new realities in caregiving businesses: Scaling a caregiving business involves uncovering untapped talent in local communities and adapting to new realities to effectively connect caregivers and families
Scaling a business in the caregiving industry involves significant changes and adaptations. Starting small, a caregiving business may feel like a "mom and pop shop," but as it grows and works with more caregivers and families, it transforms into something larger and more complex. This shift can impact the value proposition for caregivers and the economics of the business. One encouraging discovery was the existence of untapped talent in local communities, such as teachers, students, and stay-at-home parents, who could be qualified, vetted, and connected with families. This not only provided access to a new pool of caregivers but also unearthed hidden supply in the caregiving market. Another experiment, "Bring Back Brunch," aimed to create a modern village where parents could connect while kids were supervised. While some of these initiatives were successful, the core focus remained on connecting a large number of caregivers with a large number of families against various dimensions. In summary, scaling a caregiving business requires adapting to new realities, discovering hidden talent, and experimenting with new ideas to connect caregivers and families effectively.
Navigating marketplace business challenges: Poppy's journey: Poppy addressed initial concerns by standardizing and diversifying tutors, but faced complications due to transient tutors and parent demand for consistency. The CEO remained persistent, experimenting with new solutions until more drastic changes were necessary.
Running a marketplace business, even one as seemingly simple as connecting parents with local tutors, comes with unique challenges that can evolve over time. At the beginning of Poppy, there were concerns about safety and parents wanting consistent tutors. However, with standardization and a diverse range of tutors, these concerns were addressed, and kids benefited from interacting with various individuals. However, as the population of tutors was transient, and parents wanted a consistent number of tutors, the business model became complicated. Despite solid growth, Poppy wasn't taking off as expected, and the CEO remained mindful of this, conducting monthly investor updates to understand the dynamics. Revenue was always a priority, allowing the business to last for several years and provide time for experiments. However, as the scale grew, it became apparent that the initial vehicle might not work, and new experiments were necessary. The CEO wasn't ready to give up and continued to explore potential solutions, such as Poppy Pool and utilizing stay-at-home parents, until more drastic changes were needed in the last six to eight months.
Considering tough decisions when funds run low: Founders may need to pivot, get acquired, or shut down when funds dwindle. Clear communication and eliminating uncertain options can aid the decision-making process.
Running out of funds can serve as a crucial turning point for a startup, forcing tough decisions. The founder in this discussion had been considering the future of his company for some time, but it wasn't until they were down to six or eight months of runway that the situation became dire. He evaluated three options: pivoting, getting acquired, or shutting down. The first would require drastic changes, including cutting the team and stopping the service. The second, acquirement, was optimistic but uncertain. The third, shutting down, was the hardest option to accept but ultimately necessary. The founder pursued all three options, finding that potential acquirers were understanding and straightforward about their lack of interest. This experience highlighted the importance of clear communication and the value of eliminating uncertain options in the decision-making process.
Making the tough call to shut down a business: Founders must evaluate all options carefully when considering shutting down a business, including continuing to operate, pivoting, or shutting down. Being realistic and communicating effectively with the team and investors is crucial.
Making the decision to shut down a business is a difficult process that requires careful consideration and evaluation of all options. The founder in this discussion weighed the possibilities of continuing to operate, pivoting, or shutting down, taking into account the team, resources, and mission. Ultimately, the decision was made to call it quits when it became clear that the original hypothesis was not panning out and it was no longer viable to continue. The founder emphasized the importance of being realistic and not running the company into the ground with unrealistic optimism. The decision was not made lightly and involved communicating with the team and investors. Fred Wilson's post on "pivot or die" further emphasized the challenges of pivots and the potential for messiness and pain. In the end, the founder believed that a clean shutdown was the best option for the team and the mission.
Communicating effectively during difficult business situations: Founders should involve trusted team members and investors, gather info, make informed decisions, and communicate effectively to maintain trust and shape outcomes.
Transparency and communication are crucial during difficult business situations, but it's important to consider the audience and their ability to take action. Founders should involve trusted team members and investors in conversations, gather information, and ultimately make decisions based on their goals. By controlling the narrative and communicating effectively, founders can wield significant power during challenging times. It's essential to remember that these situations are not imposed upon us, and we have the ability to shape their outcomes. When making tough decisions, it's important to collect information, understand the possibilities, and make a clear, informed choice. Communication with key stakeholders, such as investors and team members, is essential for maintaining trust and moving forward.
Communicating openly with investors: Transparent monthly updates build trust and demonstrate commitment, leading to continued investor support during tough times
Maintaining open and transparent communication with investors throughout the entire process is crucial for handling difficult conversations and maintaining their support during challenging times. The speaker shared their personal experience of providing monthly updates and being transparent about the company's financial situation, which helped make the eventual hard conversation less surprising for investors and ultimately resulted in their continued backing. This approach not only builds trust but also demonstrates the founder's commitment and stewardship towards their investors' capital. This open communication strategy is less common among founders, but it can significantly impact the outcome of a company's journey.
Setting a standard for regular updates to investors: Transparency and communication are essential for founders, even during challenging times. Honesty and accountability to investors can lead to future opportunities, while maintaining a passion for the space can lead to future success.
Transparency and communication are crucial for founders, especially during challenging times for their startups. The speaker shared his personal experience of setting a standard for regular updates to investors, which not only held him accountable but also provided transparency and honesty that investors value. He emphasized that even if a startup doesn't meet the desired success, the learning gained can be put towards future endeavors. Founders have multiple constituents, including investors, employees, users, and themselves and their families, and making decisions that do right by all of them is essential. The speaker also acknowledged that shutting down a startup can be emotionally challenging for founders, as their identity can be closely tied to their company. However, maintaining a passion for the space and learning from the experience can lead to future success.
Making tough decisions as a founder: Prioritize team, users, and legal responsibilities during shutdown. Seek support from fellow founders. Take a break during holidays to grieve and recharge.
Leading a startup involves making difficult decisions, and the process can be emotionally taxing. The founder in this discussion had to shut down her company, and during that time, she prioritized taking care of her team, users, and legal responsibilities over her own emotional needs. She chose to make the announcement at the end of the year to give everyone time to process and move on. The founder also emphasized the importance of seeking support from other founders who understand the complex emotions involved in building and shutting down a company. The holidays provided a necessary break for the founder to grieve and recharge before considering the next steps.
Setting boundaries for personal growth: Taking time to heal and reflect after setbacks is essential for personal growth and professional success. Allow yourself to grieve, define your identity beyond accomplishments, and stay true to yourself to continue pursuing opportunities.
Setting boundaries and giving oneself time and space to heal and reflect is crucial for personal growth and professional success. The speaker shares her experience of taking a break after a business failure and the importance of allowing oneself to grieve and heal before moving forward. She also discusses the challenges of defining one's identity beyond professional accomplishments and the support of loved ones during times of transition. Ultimately, the speaker emphasizes the importance of staying true to oneself and continuing to pursue new opportunities despite setbacks. Additionally, the speaker highlights the common experience of entrepreneurship involving pivots and challenges, and the importance of being open and transparent about one's journey.
Learning from Entrepreneurial Failure: Accept failure as part of the journey, have open conversations, consider implications for team, investors, and self, learn and move on, and challenge the myth of trying only once. Money raised impacts the journey, consider implications of returning capital to investors.
It's important to acknowledge and accept that failure is a part of the entrepreneurial journey, and it's essential to approach it with a responsible and thoughtful mindset. The speaker shares his personal experience of facing the end of his startup, and although it wasn't the desired outcome, he emphasizes the importance of having open conversations about it. He encourages founders to consider the implications for their team, investors, and themselves when a pivot or shutdown is necessary. The speaker also emphasizes the importance of learning from the experience and moving on to the next chapter, rather than quitting forever. He encourages a more fluid transition between projects and challenges the pervasive myth that success comes from trying only once. Additionally, he highlights the impact of the amount of money raised on the entrepreneurial journey and the importance of considering the implications of returning capital to investors. Overall, the conversation underscores the importance of resilience, responsibility, and learning from failure.
Managing setbacks and fueling the next venture: Entrepreneurship involves learning, experimentation, and setbacks. Passionately solve problems, manage resources, and keep promises to investors. Continue learning and collecting knowledge for future ventures.
The entrepreneurial journey is a process of learning and experimentation, and setbacks are an inevitable part of the path to success. The entrepreneur's role is to carefully manage the resources they have, keep their promises to investors, and remain deeply passionate about the problems they aim to solve. Even after a failed venture, the entrepreneur can continue to learn and collect knowledge, which may ultimately lead to unlocking the "big thing." Startups are creative endeavors that require space and time for inspiration, and entrepreneurs can engage in various activities and experiences to broaden their horizons and fuel their next venture. The entrepreneur's life's work may not look the same in specifics, but the commitment to addressing the problems of parents and working mothers remains a driving force.
Starting a new venture and personal growth: Explore with curiosity, kindness, and productivity. Embrace uncertainty and view setbacks as valuable learning experiences.
Curiosity, exploration, and kindness are essential elements for personal growth and starting a new venture. The speaker shares her experience of starting a company named Poppy, which didn't turn out as planned but taught her valuable lessons. She emphasizes the importance of being kind to oneself and allowing space to figure out what's next. The speaker also reflects on her past structured life and expresses her discomfort with unstructured time. However, she recognizes that she needs a sense of productivity and purpose to continue exploring. Despite the challenges faced with Poppy, she doesn't view it as a failure but rather an experiment that achieved its intended goal for thousands of parents and caregivers. Overall, the speaker encourages embracing uncertainty and approaching new challenges with kindness.
Staying true to your mission and values: Authenticity allows flexibility to make tough decisions, prioritizing the greater good, and maintaining transparency about intentions
Staying true to your mission and values can provide you with the flexibility to make tough decisions, even when faced with difficult choices. Anthony Pompliano emphasized this during the conversation, sharing his experience of prioritizing solutions for the greater good over personal gain, despite some users' misunderstanding. He acknowledged that there isn't always a clear-cut answer, but being transparent about your intentions can help navigate these situations. This authenticity can give you the room to maneuver and make decisions that align with your mission, ultimately benefiting yourself and those you serve.
