Why we discontinued products that generated $6m in revenue per year
Every startup has a finite amount of resources in terms of both people and cash, so choosing the right thing to focus on is critical. I believe that every company has a few defining decisions that ultimately end up leading them to market domination or bankruptcy.
The thing about these decisions though, is that you can only identify them in hindsight — otherwise building a startup would be easy.
Over the 6 year history of Bigcommerce I could name a few big decisions we made that led us to become the business we are today, but in this post I want to talk about the business we had before Bigcommerce and how we gave up $20M in future revenue to create Bigcommerce from nothing.
Between 2003 and 2009, we built our previous business, Interspire, from no revenue and 2 people to around $6M in revenue and two dozen people. Being first-time entrepreneurs, we were learning everything along the way and both wore many hats, as you do when you’re hustling.
We started the business by building a basic content management system that web designers could rebrand and offer to their small business clients. Think WordPress before WordPress was what it is today. This product, WebEdit, did so well that we were able to reinvest profits into the business and over the next few years we built a suite of 7 products.
Between these 7 products we had about 50,000 customers. And we were profitable. With a team of 10 or so engineers, we were releasing updates to each of our 7 products every few weeks. We were similar to what Basecamp is today. Momentum was growing, our revenue was on the up and we were having a great time working crazy hours being young and single.
Our products were all perpetually licensed, which means you’d pay us a one-time fee of anywhere from $295 to $2,995 and would then install them on your own web server as PHP scripts. This worked well for the first few years. Really well, in fact.
Around 2006–2007 though, SaaS really started taking off. WordPress, ConstantContact, Mailchimp, Google Analytics, SurveyMonkey, Salesforce and a bunch of other fast-growing companies had gained massive traction and scale and SaaS was now the accepted way to deliver software.
The problem was, our products were all installed on your web server. We also had 7 separate products and only 10 engineers. Compare this to ConstantContact for example (who were a competitor for our email marketing product) who had dozens of engineers focused purely on one product and you can see the problem.
Clearly we had to make a decision. Do we keep hiring engineers and spreading them across our 7 products, or do we double down on one or a few of our products and make them great? To figure this out, we initially launched two SaaS products from the 7 that we’d built.
We took our email marketing product and “Saasified” it, calling it BigResponse. We took our shopping cart product and Saasified it, calling it Bigcommerce. We put the same marketing effort behind each of our new SaaS products and gave it 3 months.
Whichever gained the most paying customers in that time was the one we’d focus all of our attention on moving forward.
During this time we continued to sell and support all 7 of our products as they were extremely profitable and were used by 50,000 businesses including a lot of huge brands, such as GE, Monster, Shell, Ticketmaster, Kraft and Virgin.
After 3 months though, it was clear we had a hit on our hands with Bigcommerce. It had attracted 3,000 paying customers in just 3 months with a tiny marketing budget.
We leveraged our Interspire email list of 250,000 subscribers to promote BigResponse and Bigcommerce. Most people on our list were web designers with dozens of clients and they loved Bigcommerce because we took care of everything technical and let them simply customize a design and on-sell it to their client as a fully-hosted e-commerce offering.
So we were now at a crossroads. Do we keep our good portfolio of 7 products, 50,000 customers and $6M in revenue, or do we accelerate our focus on Bigcommerce — our great new product, with 3,000 customers and much less revenue?
We knew we didn’t want to do both, because that would dilute our focus even more and we’d ultimately end up failing.
To make the decision easier, we leaned into building and promoting Bigcommerce more aggressively. We decided that if we could build it to 10,000 paying customers in the first 12 months, we’d go all in and give up the good for the great.
We started to hire more engineers and designers and were releasing new features at an astonishing rate.
Twelve months in, things weren’t just humming, they were on fire. We ended up with 9,850 customers and made the tough decision to discontinue all of the Interspire products within 18 months. This gave us time to honor our support contracts and notify our customers and design partners of our decision.
In the process, we essentially got the clock ticking. We were 18 months away from not just losing $6M a year in revenue, but also the future revenue over the next few years, so about $20M all up — a huge chunk of which would’ve gone to the bottom line.
Over that 18 month period (from 2010 to mid 2012) we worked furiously to improve Bigcommerce and expand our team. We also built sales and support teams in Austin and started to think seriously about raising our first round of financing.
In the end, of course, the revenue we generated from Bigcommerce more than compensated for the Interspire revenue we chose to give up. But most importantly, we now had a single focus and a single vision that everyone was excited about.
Instead of spreading our focus across 7 products, we focused on making just one product the best in the world.
Today Bigcommerce has well over 100,000 paying customers, 500 employees across 3 offices and is growing rapidly every year, so giving up the good for the great was the best decision we ever made.
When I talk to first-time founders as an advisor, the first thing I ask for is a high level overview of their strategy and I’d say that 80% are planning to launch multiple products all within quick succession.
While it sounds good to have a portfolio of products and the revenue forecasts all (of course) go up and to the right, in reality the dilution of focus that comes from having more than one product can easily kill a startup before it gets any real traction.
Build a great one-product company instead of a good multi-product company and you’ll have a much better chance of winning a market.
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