Goodbyes are never easy.
And this is no exception.
TL;DR. We recently announced that Groopify will soon be discontinuing its operations, its mobile apps will be shut down and that the company will cease to exist as a standalone entity. Moving forward, part of the team that created Groopify will be joining Paktor, the leading independent player in social networking and mobile dating in Asia and Latam. As a result, our investors will see no money back on their investment. You can find more info about it here. While it may not have been the outcome we dreamed of when we started out Groopify, we have been unable to fully-materialise our vision and didn’t manage to deliver an attractive return to our shareholders, it still makes this chapter end on a positive note. We’re very proud of the journey and of what we have accomplished and we are very excited about the challenges ahead and to help Paktor accelerate its global growth.
No one ever wants to write the final chapters of a startup one has created, nurtured and grown, especially if it’s not the outcome one was hoping for. But I felt like I had to provide some colour around the recent announcement that Groopify (the startup I’ve been leading and growing for just under 3 years) will be shutting down and part of its team will be joining Paktor (the leading player in social networking and mobile dating in Asia and Latam). You can find more info about it here. Too often do we see big or cryptic headlines raising questions about the terms of a particular deal or with limited context as to what happened and what lead to this outcome. That’s the thing with private markets, information is limited, information is value, information is money. Yet, when you’re in a very particular private market — tech startups/entrepreneurship — (lack of) information is time and opportunity cost and one can actually pay it forward by being transparent and openly sharing with the world. I would even argue that substantial leaps can be made, especially at the startup operational level, from greater transparency and democratisation of information. Otherwise, folks in the ecosystem can’t leverage others’ experiences and knowledge to make progress, to start up, to grow or to get from 0 to 1 much faster and are at the mercy of what others (for the most part, media outlets, third-parties lacking a full and comprehensive perspective or general industry commentators) have to say — thus leading to incomplete accounts and resulting in all sorts of biases (one of which is survivorship bias).
Hence, thought of shining some light into the specifics of our particular outcome in the hope that it’s helpful for some folks out there who, like us, push, struggle, persevere, feel lost, and fight an uphill battle day in and day out. Because, well, you know… this entrepreneurship thing is hard as hell.
Just under 3 years ago, my co-founders and I created Groopify as an idea to connect compatible groups of friends offline and out of the need to simplify the last mile in social interactions and relations (or what happens between the moment we connect online or on mobile and when we actually meet in person) thanks to technology. In particular, we thought this was particularly applicable in the online dating space, an industry generating c. $3bn in annual revenue and dominated by large incumbents (IAC/Match, eHarmony and Badoo), where corporate goals and user expectations (finding love, meeting people, having fun, etc.) are not always aligned. In addition, we had always been avid users of dating services and loved to socialise and meet new people. So this was a cause not only large enough to tackle but dear to our hearts. Connecting online or on mobile has never been easier but while all apps out there are meant to bring us closer together, we end up spending most of our time chatting, browsing and stuck to our smartphones. We browse, we swipe and we chat. But we hardly meet and we hardly live. In our day and age, it’s more about ego and the pleasure of being liked or having conversation requests from dozens of potential suitors and not so much about experiences or actual interactions.
Within that context, we have always been firm believers that our friends are not only our best wingmen or wingwomen when it comes to going out and having fun but also help us provide context about who we are and how we interact with others. Also in the real world we tend to meet people in social contexts. Hence why an experience that had a group component at its core was essential and could act as a catalyst to generating more and faster (and, in general, more fun) offline experiences.
So we had a plan. We had a vision of what we wanted to do and, more importantly, what we wanted to change.
Fast forward to today and we have accomplished amazing things which, from a purely probabilistic standpoint, could have seemed almost impossible and that one should be proud of:
- We have created a community of over 250,000 users spread across 8 countries in Europe and Latin America
- We signed and onboarded over 1,500 venues and partners in over 40 cities to act as meetup locations
- We have developed and lead a team of 15 best-in-class and extremely talented professionals and created a kick-ass client and team driven culture based on fast-paced execution, hard work, transparency and honesty that everyone will carry with them going forward
- We were one of the pioneers in social and group dating in Europe and Latin America at a time when most players were driven by 1-on-1 mobile solutions
- We have run TV advertising campaigns on the leading broadcasting stations in Spain and seen by millions of people
- We were fortunate enough to get well-funded by amazing investors (c. $2m across all rounds) to execute on our vision
- And a lot of other stuff under the hood — the small victories and wins one makes along the way that are hardly perceivable to the outside world but that contribute greatly to making it such an exponential ride (among them, all the hard and soft skills unknown before — e.g. I barely knew anything about PR or programming before, learning to make difficult decisions under uncertainty, crafting a company vision and ensuring all stakeholders point and row in the same direction, as well as, generally, having a lot of fun all along)
In spite of all this, crucially, though, we still lacked a self-sustaining business model (as is the case of many Seed and pre Series A startups) and required external capital to operate and grow. In addition, in recent months the biggest player in the mobile dating space (Tinder) had begun to roll-out competing offerings in social dating — albeit latched onto flagship services with tens of millions of users globally, a recognised brand name and the benefits of being a part of IAC/Match, the leading global platform in dating. This made it much more difficult, yet not impossible, to compete.
For the last 9 months we had been immersed in our Series A round (where we were aiming to raise close to €2m) that could have helped us cross the chasm and compete head to head in social dating. While we were close to pulling it off (we had about 60% in soft commitments but no lead backer), and after speaking with close to 70 VCs (from Spain, France, the UK, Germany, the US, UAE and South East Asia) and getting just as many rejections (many of which were related to the lack of appetite in and interest for the sector and its growth potential. Andrew Chen alludes to some of the underlying feedback we got along the way here), reality struck and our delicate cashflow situation became apparent. That’s when we started looking for alternatives and being pragmatic about the situation. We thus had two streams going in parallel, one related to fundraising and the other related to M&A. Obviously, as the days and weeks went by and as our cash balance progressively decreased, the latter gained more momentum.
While we engaged in conversations with a numerous players in the industry (some of which didn’t even get beyond the first couple of emails), Paktor always provided the greatest fit. We kicked-off our relationship when we first started back in 2013 and had always been very open in sharing our views on the sector and keeping up with our respective growth trajectories. In addition, I have known Joseph, the CEO and Founder, and some of the early team at Paktor for even longer as we went to business school (at The University of Chicago Booth School of Business) together. In many respects, we started out our respective companies (albeit in different regions and with different spins and approaches) to disrupt the status quo in the social networking and dating space and to make it easier for people to meet in real life. So we felt there was a strong alignment in vision and incentives. In the end and after a few conversations on the phone, a long email thread and a due diligence process over the last couple of months involving interviews with the team, we came to a mutual understanding.
What exactly does this entail?
- Part of the Groopify team will be joining Paktor in Singapore and lead the growth efforts of strategic assets
- Groopify as a standalone entity will be shut down and the service will be discontinued in the coming weeks
- Our investors will see no money from this deal. It’s an acqui-hire without the “acqui”.
That being said, why in the world would we ever think about selling off our company? Why settle for an acqui-hire or talent acquisition? Why not just shut it down completely and move on?
It’s all about value preservation. There comes a point when you realise you will not be able to fulfill your vision (when you are running out of cash) and reset your expectations (when the M&A market tells you how much your company is worth) to minimising how much of what you have accomplished you are willing to lose. We were running out of money, had substantial debt on our balance sheet and our assets (i.e. our apps) were not compelling strategically given the potential acquirer’s growth roadmap. Yet, the team was highly valued and regarded as having created a kick-ass product used by hundreds of thousands of users globally. In the end, the fact that a company in the sector is interested in having part of the team join them is an indication that what we did and what we were building made sense and that we were on the right path and that this team is viewed as a valuable asset to deliver growth in the sector. Sure, we didn’t reach a billion users, but we still built something (a product, a team, a vision, etc.) valuable even if the economics sucked (or we couldn’t make them work). And, in all honesty, one could argue, when shit hits the fan and it becomes clear that one’s money has been written off, it becomes more than just about money. There’s a relevant emotional side as well. There is value in the journey and the longer term and a minor nominal success like an acqui-hire or talent acquisition can be a great stepping stone for future successes and home runs. Take it from a guy that has put in most of his life savings into this venture.
It also makes the chapter end on a positive note. Oftentimes when startups fail and don’t manage to live up to their promise or vision, either it just dies in silence, it spends months or years in a zombie state where value progressively leaks out and opportunity cost keeps growing (in spite of knowing the situation is irreversible), or it is all swept under the rug as if nothing had ever happened. Sure not every company can get to a multi-billion dollar exit but founders and startups should consider other options as well (such as an acqui-hire or talent acquisition) as a way to salvage value and to provide a soft landing once you hit dire straits. Also, strategic buyers should view it as an opportunity to invest in human capital with great expertise in a particular domain and with proven track record of working well together, to acquire top talent and to infuse the organisation with best-in-class technical and growth capabilities. This happens all the time in Silicon Valley, why not in Europe or elsewhere in the world?
All in all, and while this may not have been the exit we had all hope for (especially from a financial investment standpoint), we feel it was the best outcome given the circumstances. As it became clearer that closing our Series A and remaining independent was not going to be possible, we had to cut our losses and saw there could be a way to retain at least some of the value we had created and the experience we had acquired and capitalise on all of it going forward.
We are very excited with the challenges ahead and are extremely motivated to contribute to Paktor’s continued success and drive its next wave of growth and consolidation.
I couldn’t end this post without thanking everyone who has been a part of this journey. There are way too many people out there who have contributed to making Groopify what it is and that have helped us grow, so please forgive any omissions.
- Biggest of thank yous to our users for downloading our apps, for using our service, for meeting in real life, for living incredible experiences with news groups of friends, for sharing your feedback and ideas and for making us see that our vision was not so crazy after all.
- I’d also like to thank every single member of the team, past and present who has helped in any shape or form turn Groopify into a reality. Anyone who has ever shipped code, handled user requests, designed a wireframe or contributed to a growth campaign, from the last intern who joined us 4 months ago to the very first hire we made 1 month into this adventure. It’s been an honour to lead you and learn from you day in and day out. You should all be very proud of what you have accomplished. Never forget that.
- Thanks to all our investors. We are sorry for not being able to deliver the outcome you all expected but feel very fortunate to have shared this ride with you. Shout out to Juan Luis and Rubén (from Plug & Play) for believing in us when we were pre-product; Carlos Domingo for being our first business angel; Grupo Zriser (especially Rafa and Pablo) for being our first institutional investor and for providing guidance all along; José María Torroja for always being available to chat and provide feedback; Media Digital Ventures (especially Dani) for allowing us to put Groopify in front of millions of people; and all our other investors (Pinama, Lanzadera, Civeta as well as other business angels) for having been there and for supporting us all along. We clearly failed in delivering the return you hoped for but are tremendously thankful for having had you by our side and can only wish other startups have the privilege of having you as shareholders and backers.
- Thank you to my family, my friends and my girlfriend for always being supportive and for providing a sounding board all along.
- And obviously, a massive round of applause to my co-founders Miguel and Alex, without whom this would have been impossible to pull off. Thanks for always being there, through the highs and the lows, for captaining the ship with dignity, honesty and pride until the end and for joining me on this crazy ride.
I’ll be following up this post with a couple of additional ones over the next few days to comment more specifically on learnings we made along this journey hoping it can be of interest and helpful to others who are building and growing their startups. So stay tuned.
Onwards and upwards.