Is It Worth It?
I recently made a decision I on a startup project I’ve been working on for the past two years. I’d like to share my thinking on this decision in the hope it may be helpful to other entrepreneurs in similar situations.
ComeWith is a cure for loneliness. Loneliness is a massive problem. 60% of Americans report regular feelings of disconnectedness, isolation and loneliness. The problem gets worse over time.
The chart below tells the story.
ComeWith Adventure Club is a cure for loneliness. Adventure Club is a paid membership that creates fun, active, social experiences for people to meet, make new friends and cultivate meaningful relationships. We had success creating, marketing, selling and running this club in S. Florida.
As with almost every startup, we faced challenges in building this business. I’ve created enough startups to know this is normal. I’ve seen this movie many times before.
Here’s the pattern. You have an inspiration for a new business idea. You get excited. You follow this excitement, assemble a team and create the business while validating your assumptions with Customers. This is the fun and exciting part.
Then you start to evaluate and judge the thing that you created. You start to see problems. Is this a good business? Will the business make money? Can we attract employees, partners, investors? How does this business compare to other businesses? Are we good enough?
This is when you hit the wall. You start to become aware of all the problems that you have in going from good idea to great business. This is normal. It happens every time. I call it the Valley of Death. Every entrepreneur needs to get through the Valley of Death. Most don’t make it and they quit.
At this stage, you are no longer naive. You see the problems, and they are non-trivial.
With ComeWith, our primary challenges were as follows:
Optimizing CAC and LTV to maintain a LTV/CAC ratio of 3 or more. Our CAC was too high assuming 24 months of paid Customer life. The LTV assumptions were sketchy and unproven since we only had four months of operating history.
The business is hyper-local and difficult to scale. Our primary competitor provides service to all of S. Florida. In reality, that’s not the market unit that is relevant to Customers. People are not going to drive two hours through traffic on a Friday night from Fort Lauderdale to Miami. If you’re in Fort Lauderdale, you are staying in Fort Lauderdale. Considering income filters and relevant demographics, we are really talking about three zip codes in downtown Fort Lauderdale. That’s hyperlocal. Each market is actually a neighborhood. Each neighborhood needs a leader and Experience Creator. While there are 60 metro areas in the US with a million people or more, there are over 200,000 neighborhoods! I thought I was building ComeWith into a business that was comparable to Bumble BFF. In reality, ComeWith Adventure Club is actually more comparable to Nextdoor. And Nextdoor spent a shit ton of money to build out all 200,000+ neighborhoods.
Engagement trails off over time. The more experience we had in helping people cure their feelings of loneliness the more it started to feel like this is a health and wellness business. In health, everyone knows what to do to be healthy. Just eat healthy, natural foods that are not highly processed and exercise regularly. It’s not rocket science. It’s common knowledge. But people don’t do it. Why not? The answer is a host of psychological reasons. Similarly, everyone knows if you don’t want to be lonely you need to get out there, meet people and make new friends. But people don’t do it. Why not? The answer is another set of psychological reasons. When you join a new gym in January as part of your new year’s resolution, you stop showing up around February or March. Old habits die hard. We saw the same pattern in Adventure Club and it called into question our 24 months of assumed Customer tenure. Our competitor addresses this problem with high-pressure sales tactics and 12-month subscription contracts. Yuck. I don’t want to build a business that requires used car salespeople.
Now we see the problems. Can we fix them? Yes, we can fix #1 with organic channels. We can fix #2 with a franchise model. I don’t know if we can fix #3. My guess is that we can’t fix it 100% of the time but we can find a group of loyal Customers that stick with it. If we have enough volume in each club chapter, the club will work. But scaling this business is going to require a ton of people management.
Here’s where my biases come in. I like high-margin, scalable business. I like data businesses. I like software businesses in a SaaS (Software-as-a-Service) model. Adventure Club is too service and people heavy. Yes, we could provide software to other Experience Creators, but our experiments in this area shows that’s a tough road relative to many other options.
In summary, it doesn’t seem worth it relative to other things we could be doing.
Right or wrong, I decided to shut down the B2C SaaS part of ComeWith. We aren’t going to expand Adventure Club. It’s a painful decision.
During the process of running over 500 parties in bars and restaurants around the country, I see a different opportunity to help venues increase event revenue and improve the Customer experience. This is a pure B2B SaaS business that is more suited to my liking.
When one door closes, another door opens. I’m not 100% sure this is the right thing to do, but it seems to be for me and the team right now.