An honest introspection of a tech startup founder after shutting down his company
Today I announced that the Seattle based startup (Yoga Panda) which I launched and ran over the last year and half is shutting down. In this detailed post, I am going to tell you what it has been like to ride the startup roller-coaster and take a look back at the ups and downs along the way, the mistakes, the wins and the lessons I am taking away as I start a new chapter. Enjoy the ride!
First, let’s talk about Why I am writing this post:
I am writing this for all of you out there who are thinking about launching your own startup and wondering what it is like — I hope some of you will find it useful and that you will learn a thing or two from our mistakes. I tried as much as I could to provide you with the reasoning behind the decisions we made along the way. I hope you will find it insightful.
I am also writing this for my friends, family, acquaintances, customers and partners who have heard and who have been part of this journey and who may be curious about the details of why we are shutting down Yoga Panda and what it has been like to go through that experience.
I am writing this for myself as well as going through the exercise of reflecting back on our startup journey over this last year and hearing your feedback will help me better understand my mistakes and ensure that I am learning and taking some lessons from this. It is also a copping mechanism of sort for me as shutting down a company is never easy especially when one has worked so hard and put in so many long nights week after week to try to make it work. Regardless, one has to accept failure when the desired objectives are not met. It has taken me many weeks even months now to really accept the reality of our startup and finally decide to move on and make the announcement that the Yoga Panda service is going away.
I would normally write this kind of post as a list (ex: top 10 lessons) and focus on the key takeaways and end up with a an essay that is concise with about 1,000 words. Instead, I decided to do this in a different format, I structured it as a case study of sort around what we have done, why we have done it detailing the reasoning behind some of the key decisions we made along the way. This essay ended up being over 10,000 words and it took quite a bit longer to write. I have broken it down into clear sections so that you can skip some if you’d like and focus on the ones you may care the most about.
I welcome your comments, thoughts and feedback.
Before jumping into it, let me give you some context on my background and how I ended up quitting my job to launch a technology startup:
Right after college, as soon as I joined the corporate world as a software engineer I knew that I wanted to become an entrepreneur and that I really enjoyed building businesses and working on technology products. It took me almost 9 years before I was able to quit my job and do that full time (you can blame the lengthy employment-based US immigration system for that — let’s leave that for another post). I had a successful career and gained experience across a variety of roles including software development, product planning and eventually product management at a large Redmond-based technology company. But most importantly, in parallel, I launched 2 companies on the side which I managed during evenings and weekends which provided me a taste of the startup world (they both failed by the way). I read all the recommended books, subscribed to the right email lists and blogs, attended tons of local startup meetups, listened and met tons of startup founders. Eventually I launched a startup on the side which I managed evenings and weekends and when that failed I launched another one the following year which had some traction but it ended up failing as well.
Eventually, I quit my corporate job to focus full time on my own projects and on that goal of building a technology startup. My initial plan was to focus on digital advertising measurement which was my area of expertise those last few years in my corporate job. I knew the industry, the trends, the challenges faced by customers, the key players, I had in-depth knowledge of all the various technologies available in that marketplace, I even served in one of the industry organization board setting the standards for the advertising measurement in the years to come.
After a 6 months sabbatical, I ended up launching a digital magazine for yoga in the Seattle area (Seattle Yoga News) as a side project (for fun) which gave me an inside look at the yoga industry and a good understanding of the pain points faced by the yoga community and yoga studios (& small service-based small businesses in general) which ultimately led me to launch Yoga Panda: a yoga class finder app that made it easy and convenient for yoga practitioners to search and book yoga classes near them on a pay-as-you-go model directly on their phone and save up to 50% standard drop-in rates.
Let’s talk about the vision of Yoga Panda:
I started thinking about the whole concept of the Yoga Panda App back in the summer of 2014. I had met multiple small business owners who were in the fitness and yoga space who had either recently shut down their studios or were struggling to get people through the door. At the time, with the goal of helping them out, I decided to put together an in-class 4 hour training during which I taught these studio owners and managers all the best practices on branding and digital marketing. I also consulted with multiple studios advising them on what they needed to do to grow their business. While I enjoyed working 1:1 with small business owners and I could potentially have built a consulting business and a digital marketing agency focused on this vertical, what I really wanted to do was to leverage technology to solve problems for people at scale. I therefore started exploring ideas and researching the industry to understand the various players and the existing tools at the hands of these businesses to grow and attract customers. While there were some options out there in the marketplace such as Groupon, Classpass, Adwords, Facebook Ads… they all had major limitations in my view. I wanted to create an effective technology based marketing platform that these small business owners loved.
For that to happen, such a tool needed to have the following attributes:
- It needed to be performance based (it should not cost anything or cost very little unless it actually worked and got people to actually show up for class) and it should be commission-based (unlike Facebook and Google Ads through which you have to pay up front for clicks and impressions regardless of whether the conversion happened offline)
- It needed to be profitable and it needed to ensure that every time someone visited the studio that person was being serviced at a profit. Unlike Groupon and other group buying platforms, every time someone showed up to take a class, they should pay a fair price.
- It needed to not negatively impact the business: most importantly It should not cannibalize existing demand (meaning that existing customers should not be tempted to give up their existing direct relationship with the business to adopt a model that provides them more value through a 3rd party)
- It should require no expertise and be low overhead: It should integrate seamlessly with the existing tools and processes used at the studio, it should not consume any additional/unnecessary time from the studio owner’s time or staff (think manually entering a bunch of new Groupon users into the computer system upon their first visit) and it should not require any technical expertise (studio owners may be an expert in the service they provide but they may not be an expert in technology, digital marketing or whatever new tool you may offer them)
- It should help them attract potential long term customers at scale and help them grow their business
Next thing I started doing was to engage potential target consumers to understand their pain points regarding discovering and finding yoga and fitness classes near them. It quickly became clear that the experience was fragmented and non-optimal. While one may start their search on Google, it becomes a time-consuming process to navigate from one studio website to another to gather the desired information to make a decision about where to go, with a potential stop by google maps to visualize where all the different locations are then another potential stop by Yelp to look at reviews then a bunch of different pages on the website of each studio to figure out the description of each class, pricing, schedule (note that half of these websites were non-mobile friendly at the time). One may also take a look at different group buying sites such as Groupon to compare special offers. My conclusion was “there must be a better way” and this end to end experience could be consolidated in a simple and convenient app.
As a consumer, when it comes to searching and booking flights, travel aggregators such as Kayak or Expedia make the process of searching across multiple airlines simple and convenient. I can search based on the factors that I care about for my decision process (departing city, destination city, price, dates, layover duration….). As a consumer that is what I would love to have when it comes to searching for local services. But why stop there? From a consumer perspective, I should be able book and pay for a class directly on my phone and be treated like a regular customer of that location when I show up, scan a bar code on my phone and just walk in to class.
All the pieces of the puzzle started falling in place in terms of product vision:
- For this to work and become a viable business, the platform needed to be scalable and the Mindbody platform which is the Point of Sale and backend software system used by a very large portion of studios and boutique fitness centers made it all possible. They have APIs which would allow us to pull the real time schedule and information about all the classes from each one of the studio partners we may work with and we could register each one of our users directly in class and provide them with that experience they would love (be able to just walk in to class just like a regular member).
- We could analyze historical attendance for each studio and dynamically price time slots on the schedule based on supply and demand just like airlines do with empty seats in their planes. This way we could enable consumers to pay for classes on demand and potentially save money by getting a discount but only for the inventory that is less in demand (classes that are less busy). We could even take this a step further by incorporating other signals into the pricing algorithm such as holidays, seasonality, weather… (prices should be lower if the weather is predicted to be very sunny outside as people are less likely to want to take a heated indoor yoga class for example)
The model felt robust: it addressed all the key attributes that were important for the studios owners, it just needed to drive a lot of new customers through the door. It was in theory “the perfect experience” for consumers.
But what got me really excited was the fact that this was not about yoga, not about fitness, this was about a platform for connecting consumers with local service providers that optimized pricing based on supply and demand. If we could build it and get it to work for one vertical (in this case yoga) then we could easily expand to other verticals. If we could make it work in one city (Seattle) then in theory we would build the right marketing playbooks and leverage everything we learned to easily replicate what we have done and learned to expand to other cities. Amazon redefined commerce, Monster was the brand for job searches, what if the Panda platform became the go to place to find and book local services. We could expand our platform to other wellness services, massages, spas, barber shops…. Or any other local service-based business that was not at full capacity and had “idle times”.
The vision was simple: aggregate supply from local businesses, define a better search experience with the right search pivots consumers care about when booking a service for that specific vertical, build some great backend pricing algorithms, drive adoption, dominate a vertical and move to the next one. The plan was great, I was very excited about it, I just needed the right team to execute on this vision.
Let’s talk about forming the startup team
It is common wisdom that by far the most critical factor that will make or break a startup is the team. I also faced challenges early on with my cofounder in the first startup I launched back in 2010 and so I knew that it was important to ensure that the right team was on board rather than focusing on taking on the first person that is ready to jump on board.
The other critical factor was to recruit into the founding team the right person or the right people with complimentary skills for us to be able to execute on all the key priorities for the company in the first 12 months — most critically be able to build the right technology and take our platform to market.
While I have a solid technical background and I could have rolled up my sleeves to implement some of the technical aspects of our platform, I knew that I would greatly benefit from having a great technical cofounder. While I had done a fair amount of web development and backend development as a software engineer, it had been a few years since I had done any serious work on that front. Most importantly, I had not built any mobile apps myself and that was going to be a key piece of the platform.
I therefore embarked in my search for a technical cofounder and started exploring my network and connections to identify who may be a good fit to bring on board for this new venture. I started connecting back with many folks who could be good candidates but the key hurdle was the fact that many of them were not in a stage in their life to be able to jump on board and put in the level of commitment and time required to build this startup from the ground up.
Right around that time, I decided that it would be fun to participate in a startup weekend in the Seattle area, it had been many years since I attended one as a participant and a startup weekend could be a good opportunity to connect with new people, hack through the idea, get feedback on it and validate the assumptions that I had about the business. I signed up and ended up attending the EuroSeattle Startup Weeekend in early 2015 and it ended up being a fun 48h, I connected with a lot of interesting folks and we built a prototype of the App (we got 2nd place by the way). One of the people I worked with that weekend was Anatoli Macarov, a Seattle -based mobile developer who ended being one of the cofounders of Yoga Panda. I also met that weekend a couple of other people who played a key role in Yoga Panda over time: Rajesh Mukherjee & Li-Tien Ou (I will get back to them later in this post).
Right after that weekend, I also ended up having a skype call with Ahmed Jamal who I had met the previous year when I traveled to Baghdad to be a speaker and coach at the first startup weekend hosted in Iraq (you can read more about it in this Geekwire article I wrote and watch this Ignite talk I gave about my trip). Ahmed is a full stack developer with a strong interest in startups — he was in Germany at the time in a work exchange program but he was ready for his next challenge.
I talked with both Ahmed & Anatoli about having us be cofounders in this new venture — we started regular Skype calls and started thinking through the technical architecture of the platform, what the MVP should be… and ultimately put together a high level execution plan to take Yoga Panda to market. We slowly got in the rhythm, we rolled up our sleeves and started getting things done. I focused full time on Yoga Panda, Anatoli was working evenings and weekend while having a day job at a local company. Ahmed was still in Germany at the time working late nights and weekends too. Ahmed eventually moved to Seattle at the end of the spring and started working full time on Yoga Panda as well. We set up a launch date for July 2015, formed a Delaware C-Corp, took care of all the legal paperwork and we were ready to take over the yoga world in the Seattle area.
Let’s talk about quitting your job to become an entrepreneur and build a tech startup
Many people end up quitting their job because “they hate it”, I actually really enjoyed my job. I was climbing the corporate ladder, I had tons of responsibilities in a senior role, I was the go to person in one of the most strategic priorities for our division working directly with executives and senior leadership. I had a great salary and compensation package, I was enjoying a month of paid vacation each year. I was wearing “the golden handcuffs”! By quitting my job I would be leaving this comfort for uncertainty, I would be leaving behind a steady paycheck and a decent amount of money as unvested stock.
But… for that 31 year old sitting down in a high rise in Downtown Bellevue, it was the right decision to make.
Looking at the statistics objectively, it just did not make sense for me to quit what I had, to try to pursue that dream of launching and building a technology-based company. The odds are stacked against you, you typically have less than a 10% chance of succeeding. The opportunity cost of quitting the job to pursue an entrepreneurial venture full time with no clarity on what the opportunity I’d be pursuing is and with no funding is high. It just does not make sense by looking at it from a financial perspective.
Now it is easy to get your perception skewed when it comes to startup success, browse through your favorite startup media outlet and you will come across tons of success stories or successful exits by young startup founders. You could read about some twenty-something tech founder who built an app in his garage with a friend, sold it a few months later and ended up making more money in a year that you will end up making if you worked in your corporate job for the next 30 years. I trusted that the experience that I had and the mistakes I had made in my previous startups would greatly improve my chances of success and I still knew that I was still likely to fail.
The question that I often get is “why did you do it then?”. The answer was simple: “I couldn’t not do it”. I had to give it a try. One of my favorite quotes is “you miss 100% of the shots you do not take” and attempting to launch and grow a successful technology startup was something I wanted to do since my early 20s. While I launched a couple of startups in the past, I was not “all-in”, it was something I put a tremendous amount of effort in but it was still something I only did on evenings and weekends. I believe that if you truly believe in something then you give it a 100% and while you are working on something on evenings and weekends, your competition may be working on it all day everyday including evenings and weekends and that someone who wants it and works on it twice as hard is that much more likely to succeed.
I also remember sitting down with a bunch of coworkers at the time for lunch who were 5–10 years older than me, some of whom always wanted to jump ship and launch their own startup but they never did. They got too comfortable with their lifestyle, they got restricted with a mortgage and other family financial responsibilities that made it that much harder for them to take such financial risks. I just did not want to be in that position. I did not want to look back 10, 20 or 30 years from now and wonder what my life or my career would have been like had I pursued my dream and taken that path down the entrepreneurial road when I had the chance. I believe in living my life without regrets and so it became a no-brainer.
Additionally, I was lucky enough to pursue an education in Computer Science and to have a solid career in the technology industry. This meant that even if what I tried failed, I could always go back into the corporate world. I would surely have less money in my savings, my 401k would not have grown, but I trusted that my profile and experience would allow me to fairly easily land a job and continue where I left off.
Another key factor for me was that as I transitioned from my 20s to 30s, money became less and less of a motivator and I was not interested in living a materialistic-driven lifestyle — I started valuing experiences much more than physicals belongings and enjoying the simple things in life much more than luxurious things. While I do enjoy having a comfortable lifestyle and I aim to become financially independent (not actually needing to earn income for the rest of my life) — I enjoy other things much more such as pursuing and working on things that I am passionate about. I was passionate about entrepreneurship and so being able to focus on something that I am passionate about was a very logical thing to do.
Finally, a turning point for me was that trip to Iraq I mentioned earlier in this post, I saw and met technology entrepreneurs who were in a much more challenging environment that I was, yet they were all-in and pursuing their passion. If they were doing it, I had no excuse not to do it.
Let’s talk about raising money and about our business model
I had done a lot to educate myself regarding the fundraising process (read blogs/books, attended educational events on the topic, talked to a bunch of investors/founders about it…) and I recognized that when we formed the team to build Yoga Panda — raising money was going to be a challenge.
The business model for Yoga Panda was simple. Classes on our platform are typically priced between $10 and $20 and every time someone booked a yoga class we made a 30% commission which meant that we made a $3-$6 commission on each transaction. It is not much per say but those few dollars add up quickly when thousands of people start using the app regularly. The beauty of the model is that the full end to end transaction can be all automated: if we could service one transaction, we could as easily service hundreds or thousands. Additionally, being able to scale the platform to manage millions of transactions would only require more servers and of course the right technical architectural decisions. Once a marketplace is established with enough supply and the target consumers are actively making bookings - besides minimal support - the marketplace could yield some profit as the only fixed costs are the standard payment processing fees ($.30 + 2.5%) and the fees that Mindbody charges for the use of their APIs.
If we could acquire customers at a low cost per acquisition and the lifetime value of that customer over the following 30 days was significantly higher then we had a great business in our hands. We just needed a high enough volume of transactions each day for it to actually be sustainable. As an example, if we could spend $5 on average to get a new user and over the next 30 days they booked 2 to 3 transactions resulting in $10 in commission then we basically had created a “great machine that could print $5 bills”, all you had to do is feed it $5 in the beginning of the month and you could collect $10 at the end of the month.
The goal we wanted to reach with the yoga marketplace in the Seattle area was 700 transactions per day, at that scale assuming an average commission of about $4 per transaction, we could be making almost $3,000 in revenue per day which would translate into about 1 Million dollars in revenue per year. Assuming users would be using the platform about 3 times per month, we basically needed to get to about 7,000 active users per month. This meant that we would be operating the biggest yoga studio in town capturing about 2% of the local market without operating a physical space, paying electricity or having yoga teachers on the payroll. We would be leveraging all those unused spaces in yoga classes all over town and created value out of something that would have gone to waste otherwise. This could be accomplished with our founding team and technology, so after covering our salaries, overhead, payment processing and API fees, we could be operating at a 30–40% margin.
So, from an investor perspective, we had to demonstrate that we could accomplish that, if we could, then we had the opportunity to grow this $1M marketplace into potentially $100M company by scaling it to fitness and other cities while maintaining a healthy margin.
Raising money meant that we needed to convince investors that we had the ability as a team to execute on this vision, that we could not only build the platform but that we could acquire customers and scale our marketplace to this defined threshold in terms of volume of transactions.
From an investor perspective, we were a risky bet in many ways, we were a young team with solid experience and technical chops but we had not known each other for very long and we had never built a commercial product together. Additionally, none of us had raised investor money in the past and we were missing that track record of having a positive exit in a previous startup and past experience making money for investors.
During the Spring of 2015, I had the chance to talk to many investors, we took part in the First Look Forum organized by the WTIA during which I got the chance to pitch in front of dozens of investors. We also applied to the local Seattle Angel Conference that spring. That experience highlighted to me that a lot more investors were interested in B2B SaaS companies (less risky) and many did not understand our value proposition or even knew anything about yoga.
My conclusion was that focusing on fundraising was going to “suck away a lot of time” and it may or may not be fruitful. So, instead of trying to convince a bunch of people that we could succeed at building a successful marketplace — we decided rather to build it and try to hustle to try to scale it and then hopefully be at the point where we could demonstrate that we had a viable business model and company and be at the point where we needed money to scale and expand to other verticals and other cities.
Additionally, projecting in the future, if we raised a seed round — that money would most likely go towards two things: basic salaries for the founding team and some marketing budget. We decided to skip the salaries and in order to acquire customers, we would leverage our connections in the yoga marketplace and put in time rather than money by doing a lot of guerilla style marketing, focus on partnerships and collaboration with others, search engine optimizations…. It was risky but if this strategy proved successful it could mean that we did not have to give away about a third of the company to raise that first round of funding and we would have made the pie bigger early on while being able to keep a bigger slice of it over time.
This meant that we had to be super lean with our capital (I put in a bit of cash into the company to cover our basic expenses to get started) and we had to manage our cash flow very tightly. We would have to drive transactions and whatever revenue we yielded would go right back into marketing to scale the marketplace.
Let’s talk about what we have done well
We launched an MVP and went to market quickly: as soon as we started executing on our plan and building the platform, we were getting things done fast. As part of our MVP (Minimal Viable Product) which took us about 2–3 months, we decided to launch an iphone App which enabled users to login, search and filter classes and pay for them with Paypal. Additionally we built backend capabilities which connected with the MindBody account of yoga studios enabling us to pull all the information about the schedule of classes at that studio including the teacher name, the class description, the type of class it is… We created a basic pricing algorithm that categorized classes into 3 tiers based on historical attendance and priced classes dynamically based on attendance for that location/day/time over the previous 30 days. We also implemented the ability to register users directly for classes in the MindBody system of studios so that they would be registered for that class when they show up on site. There were many features that were missing, the User Interface design could be better overall for the MVP, but we shipped a solid v1 and the end to end experience worked. The only challenge we had was that on our launch date, we started with 4 initial studios and so the first users of the App did not have a lot of classes to choose from initially which brings me to the 2nd thing I thought we did well.
We were able to sign up a lot of studios into the platform: The process of on-boarding new yoga studios was simple on our side given the technology we built. We needed some basic information from the studio owners such as class capacity, input on the desired price range for classes on our marketplace,… and we needed them to make a small configuration on their MindBody account which took 2mn and that granted our server permission to their data so that we could continuously sync our platform with their account. When I initially started reaching out to yoga studios all over the Seattle area, I was very optimistic in terms of how quickly we could get studios signed up. It actually took longer than expected. Most yoga studios are small business owners who tend to be overworked, they are continuously bombarded with sales emails and cold phone calls for pitching them on all kinds of services and their time is typically consumed with random firefighting as part of the day to day operations of the business. After engaging them, explaining our value proposition and even at times getting a positive response from them, it sometimes took weeks before I was able to get a signed contract back and for us to get access to their account to be able to get them on board. After a lot of dedicated work, we ended on-boarding almost 50 locations around the Seattle area resulting in over 1000 yoga classes for our Yoga Panda users to choose from each week which constitutes over a third of the local yoga studio supply.
We iterated fast and ended up with a solid cross-platform product: Things did not always work as expected and we encountered a bunch of technical hurdles and bugs along the way. From the get-go for example, the day we launched the app, we could not process payment with credit cards because of a Paypal unexpected issue:
We had integrated our app to process payments through Paypal (this was the fastest way for us to get the MVP live given that Anatoly was familiar with the Paypal APIs from a previous projects he worked on), we tested everything and our code worked as expected for both credit card payments and payments with a Paypal account. As we were preparing for launch and set up the new Yoga Panda company, we also created a new Paypal account under the name of the company and requested permission to be able to process credit card payments through this new account. What had taken 24h to get approved in the past was now taking days with no response. After multiple attempts to contact support via email and phone, I ended up having to reach out to a former coworker who works at Paypal to be able to get someone in the approval team at Paypal to respond to my request. The whole process ended up taking over 2 weeks only to get “denied” with no clear explanation — all the code we had written to leverage the Paypal APIs to process credit card payments was now “throw away code”. While we were trying to figure this out, we were able to strip out from the App the integration with Paypal for credit card processing, replaced it with an integration with Stripe, launched a new version of the App into the App store, started processing payments… all the while we were still waiting for Paypal to respond to us.
Over the course of the following few months, we were lucky enough to get access to an amazing office space close to Fremont with a beautiful view of downtown Seattle and Gasworks park. A friend of mine who ran a local company gave us unlimited access to his company’s office space for free (Thanks Mehdi for your generosity). This, I think, gave us a huge boost in confidence and accelerated our execution speed significantly, it started to feel more and more like were we becoming a legitimate startup — we had a product in market, we had a great space and we were going full speed ahead. The team was spending more and more time there, it made us more productive as compared to working from the kitchen table at my house or syncing through Skype as we previously did. Those days I often worked until 4am to 6am most days and then biked back home in the empty streets of Seattle (fun memories). There were days when I remember working for 18 hours each day (continuously communicating with studios to grow our supply, figuring out our next growth hack to drive more installs of our app but most importantly working closely with the team on the product vision and iterating through features so we could release a solid v2). During this time we were also very lucky to work with Li-tien (who I mentioned earlier as someone I met during Startup weekend too) — she had recently graduated from the University of Washington and contributed tremendously to the new design of the App during this period — before heading out to the Bay area to take a designer job down there. (Huge Thanks to you Li-Tien once gain for being a rockstar). I was spending a lot of time with the local yoga community and I used every opportunity to get feedback on the App as we continued to iterate on the App. Multiple minor releases and updates later, about 3 months after our initial MVP, we launched what I considered was a solid second version of the App with a whole new user interface. The feedback from users was very positive. We ended up with a product I was proud of.
Once the new version of iOS was live, our top priority on the product side was to become cross platform by launching an Android version Yoga Panda followed by a web version and within weeks and after a lot of hard work from Ahmed & Anatoly. Yoga Panda reached that milestone: you could book yoga classes at yoga studios all over the Seattle area on your iphone, on Android or on the web.
We did a lot with very little: Whether it was on the product side or on the marketing side, we managed to scrape through with what we had and we got things done. There are many funded startups out there that spent more time and hundreds of thousands of dollars and even millions and ended up with half of the platform capabilities that we built. We put in time, effort and dedication and very little money and created a platform that worked that people used to book and attend yoga classes near them. More importantly, we have driven thousands of installs of our App through sheer hustle. There are times when we were making and printing flyers after midnight only to wake up early to be part of a 6am yoga event that attracted our target audience. We hustled every step of the way when it came to marketing and customer acquisition and while it is so much easier to set up a referral program for users (refer a friend and get your next yoga class for free) or subsidize the first transaction (try the app and get your first class free) as a strategy to grow the user base really fast, we did not have the luxury to do that because that would not be sustainable for our cash flow, we would still have to pay the studio for their 70% share of the price that the user would have paid (typically $7 to $14 per transaction). One of the best strategy we came up with to acquire customers was to host our own yoga events that we could run profitably or break-even on while making tickets for the event exclusively available through the App. We leveraged our margin for the event to market the event which ultimately led to our real objective which is to drive installs and grow our user base.
we built something that people loved: not everybody loved it of course, there were some use cases we could have improved (Ex: Adding other login options besides Facebook, storing credit card payment information to facilitate repeat transactions…) but when we connected with users that were squarely in our target audience, you started hearing things such as “I love the Yoga Panda App”. The App in many ways was a great tool for someone who was into yoga and recently moved to town and wanted to explore different studios. Another great use case was someone who really liked specific teachers and wanted to find classes taught by that teacher regardless of location or someone who wanted to find a specific type of class (Ex: Prenatal yoga classes) in a certain neighborhood. Our app could provide exactly the information people were looking for in 2 clicks when otherwise there may need to browse online for 10mn to try to figure it out.
We were generating revenue from the beginning (just not enough of it): in my previous startup, I had made the mistake of growing a user based for my web application with the goal of monetizing that audience down the road once the audience became large enough. Even though I had a decent amount of daily traffic to the site, I was not generating any revenue. Generating revenue from day 1 was an important lesson I had taken away from that experience and so as soon as the app was live, we were making a few dollars per transaction. Our challenge was that we never ended up with a big enough volume of users and transactions for the marketplace to become sustainable.
Let’s talk about the mistakes we have made and what I wish I would have done differently
We launched a Yoga App rather than a Wellness & Fitness App: Our strategy from day 1 was to start small, focus on one vertical, prove the market and the business opportunity within that vertical, showcase solid growth, get baseline numbers when it comes to cost per acquisition, understand user behaviors and patterns and build out solid marketing playbooks that could be leveraged later for scale and expansion. The Yoga Panda phase was going to be an opportunity for us to showcase what we can build as a team and an opportunity to showcase with concrete numbers that we have a great business here worth investing in as we scale to wellness & fitness and to new cities. It made sense for us, however, focusing on yoga-only proved to be a big limiting factor for us in many ways because yoga ended up being too small of a niche to capture enough value for users and get a positive ROI from the transactions we were generating given the effort we were putting in.
The challenge we faced ended up being that our metrics did not look great: our conversion rate from Install to transaction was too low and active users were not using the app as often as we projected. This ultimately made the relation between cost per acquisition and the lifetime value for those customers unsustainable for our marketplace.
Overall, people were getting the value we were providing: “at your fingertip, our app gave you convenient access to yoga classes at local studios on a pay-as-you-model with rates that are up to 50% off”. The challenge however was that the focus of the app on yoga-only set limitations on our potential whether we targeted yoga practitioners or people interested in potentially taking a yoga class :
- About 13% of Seattleites are into yoga: Through our marketing, we did a pretty good job reaching this audience especially given that we were able to tap into the SeattleYogaNews.com audience and get the word out about yoga Panda through various local yoga events. The challenge however is that the majority of this audience already does yoga regularly which means they likely already have a membership at an existing studio or they have built a habit of going to a favorite studio. These people however are often enthusiastic about our App even if they are not active transacting users. I attribute the big delta between the numbers of installs and the number of actual transacting users to this audience. I have met tons of people in this audience who have approached me saying how much they love the app yet they had never actually used it to book a transaction. As I mentioned earlier, we hosted yoga events as a strategy to drive installs of the app and so we ended getting a lot of people to install the App to book the desired event with the hope that a good portion of them would end up discovering the app and eventually using it to book classes. That hypothesis proved to be wrong. The very large majority of event attendees did not convert into “class bookers” and ended up being one-time “event-bookers”. We did have hundreds of active users who belonged to this category — however — they were not using the app as often as we were hoping for. They may use it once in a while because they wanted to try a different studio or because they wanted to take a class with a specific teacher and we helped them find that class…. But that translated to irregular use of the app. Some may use it one time. Others may use it a few times but overall the lifetime value of users who are already into yoga was not very high. We saw some people use it on a one off basis if they happened to discover the app while visiting Seattle as a traveler (this meant a one time transaction). The perfect sub-category of this audience was when someone who is into yoga recently moved to town — Yoga Panda proves to be a great tool to explore and discover yoga classes and studios around town.
- About 87% of Seattleites don’t practice yoga — however 1 in 2 of these people are interested in yoga — that is a lot of people if you think about it, we are talking potentially millions of people in the greater Seattle area. The challenge however is that even when you get someone to install and use the App to book a yoga class in this audience. By default, they will only use it sporadically. They may use it once, they may use it once a month or once every few months but the lifetime value of customers ended up not being as high as desired. The bigger challenge however with this audience is the fact that they are not that into yoga to want a dedicated app on their phone just for that. The consistent feedback we have received from this audience is that “the model sounds great but I would install and use the app if it offered other types of fitness classes or wellness services such as massages”. This was further validation that our long term vision was correct but rather than react to it right away, we needed to figure out a way to grow our marketplace and drive transactions as this was the only way for us to prove our model and be able to raise money to scale.
The strategy we chose — to start small with just yoga, prove the model in one market and then scale — in retrospect was our biggest mistake. It would have been a similar technical effort to implement and launch the platform as a broad fitness and wellness platform than just a dedicated yoga platform. We were hoping that the advantage we had with access to the Seattle Yoga News audience and the strong connections we had with studio owners would greatly accelerate our user acquisition strategy and our supply on-boarding phase. However, given that this audience we were reaching was not transacting regularly enough on our platform and given the slow on-boarding of new studios, we would have gotten a much better ROI on our time by being a broader marketplace. Existing users would theoretically use the platform more often, the lifetime value of users would have been higher as we may have captured a commission not just from one yoga class they may decide to take a certain month but also from other fitness classes they may take that month as well as a massage they may decide to book. Our Install to conversion rate would have been much higher. We would have driven a lot more installs and would have had a much stronger value proposition every time we reached a new potential customer with our marketing. We were more likely to have someone install the app because they would have had many more reasons to do so: access to local gyms, a desire to book a local boxing class or a cross-fit class specifically — we would not have been limited to just people who may have been interested in trying a yoga class.
In retrospect, I should have come to these conclusions faster and shifted direction sooner but we kept hustling blindly and trying to drive transactions to prove that our model worked.
We spent a lot of time on marketing activities that did not drive the desired results: With my cofounders focused on the technical aspects of the product development, when I am not working closely with them from a product management perspective, every single other responsibility and task falls in my lap. Whether it is doing product support, onboarding a new studio, creating and updating our wordpress site, responding to emails, designing a flyer, writing a blog post, conducting interviews with the local media, …. And most importantly acquiring customers and driving transactions. I have to say that Rajesh (who I mentioned earlier I had met at Startup Weekend as well) contributed significantly on this front and he put in a ton of effort especially at events to help promote Yoga Panda and drive adoption of the platform. We tried tons of different strategies and tactics. Some were more fruitful than others, we wasted a lot of time on some initiatives that had close to no impact. We were willing to test everything: as an example, we considered working with hotels to reach travelers and potentially get hotels to subsidize some classes for their best guests. After wasting a bunch of time exploring this idea, it did not prove fruitful. We spent hours planning a yoga event with a potential sponsor which ended up falling through. When you are working with a very limited marketing budget, you pay for marketing with time which ultimately led to me working tons of long hours with a limited return on investment of time given that not all the strategies had a positive pay off.
We did not focus enough on social media & on the potential for social: on my previous startup (Govpinion), I had spent a lot of time on social media and on building an engaged community. I ended up with a decent audience especially on Facebook (~20k+ Facebook followers from my target audience) however that did not translate to the behavior I desired on my web application. As we executed on a lot of different marketing strategies for Yoga Panda, we just did not allocate enough time building our social media following and creating engagement that was likely to translate to installs and transacting users. I think we could have done more on this front.
Additionally, we envisioned our App being social by design. That was the reason we made Facebook the default login option when wanting to use the app. We wanted to make it easy for friends to easily coordinate attending classes together. We wanted for people to easily see which classes their friends were going to. We wanted people to self-organize into social tribes with tribe leaders who encouraged their tribes to go to class together which would lead to more regular class bookings. We just never got to prioritizing these features high enough for us to execute on them.
We did not tap into the teachers as Ambassadors for the App: We had plans to launch an ambassador program and a whole set of tactics to tap into the yoga teachers community to help advocate for the App. One of our strategies was to provide them with a widget that they can embed on their website to showcase their schedule in real time based on their teaching schedule across multiple locations, create rich landing pages that they can claim which would be SEO optimized…. We never got around to seriously executing on this plan either.
I should have gotten mentors and the right board of advisors: Throughout my career, I have often identified mentors who I have turned to for advice and feedback on what I am working on. It is a great way to get perspective from someone who may have gone through what you are going through and can help provide guidance and sway you away you from mistakes they may have made in the past. Over the last couple of years, as I started spending more and more time on execution for yoga Panda. I have neglected investing time on this front and identifying and working closely with a couple of mentors. I think I would have greatly benefited from it.
Also, similarly, I think we would have benefited as a company from a strong board of advisor who could have guided us and held us accountable. I intended to form one when we started but my time got quickly sucked into execution mode that I never stopped to explore that again.
We lost momentum and execution velocity when things did not go as planned and our growth was slow: After months and months of product development and iteration and months of hustling to scale the supply on our marketplace and months of hustle to drive transactions on the marketplace we created. We failed to get the kind of growth we were hoping for. We were reaching a lot of people but not enough of them were installing the app. We were getting people to install the app but not enough of them were actually using it to book transactions. We were getting people to book transactions but there were not booking them regularly enough. As the CEO of the company, I had built projections that were showcasing a viable marketplace in which people were expected to behave differently. The reality was different. That greatly impacted the morale of the team. The team put in tons of time and effort with the hope that we could prove the marketplace and raise money. The numbers did not look good enough for us to get in front of investors and we kept trying to figure out what feature we needed to add to move the needle. Having to re-purpose our code and launch a new marketplace that was broader felt daunting especially given the effort needed to onboard enough supply to provide the level of choice we had on our platform for yoga. In retrospect, as the days and weeks started passing by and our growth was very slow. Our execution velocity took a significant hit. We were mostly fixing bugs, addressing different issues as they came up. We discussed a lot of different features that could move the needle and drive transaction but we often ended up in “an analysis paralysis” state as we kept going back and forth within the team on whether that is the best use of our time and whether we can come up with concrete data proving that such a feature would indeed move the needle. In the meantime, other startups raised money and launched similar platforms (Zenrez, Lymber…). We would have to now compete with other companies with a similar value proposition but more $$ in their bank account.
The value proposition we delivered for consumers just did not matter enough: People only use a few apps regularly — if you don’t solve a problem that people really care about — something they think about regularly — people just forget about you. You just don’t matter enough to them. To prove the case, I invite you to open your phone and go through the different apps you have installed, you will likely notice a bunch of apps that you installed a while back and it has likely been weeks if not months since you have opened some of these apps. You will likely end up uninstalling them one day when you decide to clean up you phone or you are trying to make room on your phone because you ran out of memory space.
That is in fact what likely ended up happening to our App with a lot of users who ended up installing it. We became this “nice to have app” that helped you find a book yoga classes near you but the reality of things is that we were perceived as a “vitamin” not a “painkiller” and you want your product to be a painkiller, something that solves a problem for people now, they can’t live without it, they really want it and when they need it, they open their wallet right away and pay you to get it. Unlike a vitamin, which is optional and if you don’t get it — you’d still be fine. The opportunity with a broad fitness and wellness app shifts the user value proposition to weight loss, getting healthy, looking and feeling better…. Which are things that are more likely to fall in the “pain killer” category — being in the yoga-only vertical has kept us in the “vitamin” category.
We stuck with the more challenging on demand model: it is common wisdom that subscription-based models are much better for business than on-demand ones. The whole fitness industry is based on the premise that people will get gym memberships that they won’t use. One of our major competitors “Classpass” initially pivoted from an on-demand model to a subscription based model and went on to raise over $84 Million in funding and scaled globally to over 50 cities in just a couple of years. We could have pivoted and launched a subscription based formula focused on yoga specifically that allowed our users to get a membership from us for a flat fee (let’s say $79) which enabled them to go to as many classes as they wanted at different studios in town limiting the number of times they could visit each studio. I think the model could work financially for us and we would have had scaled further — I don’t however believe that the Classpass model is good for the studios in the long term and like groupon it will negatively impact the industry in the long term. I decided not to pursue this option but in retrospect if our only objective was to get something to stick, this could have been a good route.
Let’s talk about what it is like to be the “CEO” of a bootstrapped technology company
Building a technology company is exciting especially during the initial “honey moon phase”. There is typically a lot of enthusiasm, confidence, energy and passion and you need a full dose of each of these to get started and keep going. It takes a lot of dedication and hard work. Things don’t always go as planned and no matter what happens you have to “take the punch” and keep fighting. There are many highs along the way (you close a deal, you get some media coverage, you get a spike of transactions…) but there are tons of lows (your app starts crashing unexpectedly, you get a bad app review, you lose clients….) and over time when things don’t go as planned, these lows take a toll on you. Even if you are a confident person, over time you start doubting yourself and it can be emotionally challenging.
Being the CEO of a bootstrapped startup means that you have a very limited operating budget, you therefore lack the ability to delegate and outsource many tasks and projects ( some of which are not always the most exciting) but if they need to be done, you just roll up your sleeves and get them done. By default you become a generalist, one hour you may be performing maintenance on the database, the next you are working on social media posts or a promotional flyer for an event the following day, you may then be doing an interview with the local radio before having lunch with a studio owner selling them on your service. When it is all done, you still have to triage bugs, discuss and prioritize features with your team, respond to support emails and then execute on the next tactic on your marketing plan. If you don’t know how to do something, you just research it and figure it out. By default, there is more on your plate than you can handle and the only way to get the ball rolling is to put in the hours. Working 12 hours a day, 7 days a week quickly becomes a norm. Forget about work life balance, social gathering, hobbies, your favorite TV shows,…. Every hour of the day is an opportunity to make progress on one more task. The business will suck every hour of the day you are willing to give it and you truly need to be passionate about what you are doing and be dedicated. Over a period of months and months, I was a workaholic and I was obsessed with building and growing Yoga Panda. I managed to get enough sleep, to eat healthy, to get enough exercise, to spend a bit of time with my partner but besides that every single hour of my day was going towards building the business.
Eventually, I was burnt out. As a team, we had put in a tremendous amount of effort to try to make it all work, we failed to get enough traction and we had little to show for all that effort we put in. I started struggling emotionally, I felt that I had failed my team, they trusted me and believed in me as they embarked in this journey with me but I failed to get the traction that I promised them, I started doubting myself, my productivity dropped significantly. I was not ready to throw in the towel but I was failing to take actions that will result in a different outcome. I was in denial. I had a hard time admitting failure and I needed a break. I took that opportunity to visit and spend time with family. It is not until I took this break that I realized how burned out I was from the previous 12 months. As much as I wanted to focus on Yoga Panda and tackle the next big priority, I felt incapable of doing so and we started stalling. Being the CEO of a company can be lonely, you aim to showcase confidence with people outside the company and with your team but many of the struggles you face you end up having to go through on your own.
It took quite a bit of time to reach the point of acceptance and finally decide that the right thing to do is to shut down this venture and move on. Looking back now, I may have failed in building a successful startup and I have succeeded in having the guts to pursue my dream. I have succeeded in giving it 100% and for that reason I am proud and happy with this journey and this experience regardless of the financial outcome.
I do believe that there is a business opportunity around on-demand local services based on a similar model that Yoga Panda tried to create. We will eventually see a winner in that space. A go to brand that the modern consumer will go to book local services. ClassPass may end up launching a new service in that direction. Mindbody may decide to strategically start focusing on that side of the business. New startups such as Zenrez or Lymber are pursuing that opportunity and may see success with that. I will be following the industry and watching what may happen.
Let’s talk about what is next:
I will continue managing Seattle Yoga News and scaling its presence and reach in the Seattle area. I have been spending less and less time on operational work for Seattle Yoga News this year and intend to continue doing so as we continue to grow the team. I expect and hope that over time it continues to scale as a side business.
I love being an entrepreneur and running a technology startup and I expect to launch other startups in the future. But at the moment, I will most likely be pursuing new career opportunities in the technology sector in the Seattle area and potentially in the Bay area. I am not sure yet what exactly I may focus on but I am definitely open to your suggestions and recommendations.
I hope you enjoyed reading this post. Make sure to leave me a note below with your comments and questions.