"As we approached the end of our runway, it became clear to us that DrawQuest didn’t represent a venture-backed opportunity, and even with more time that was unlikely to change."
I believe this is the heart of the message. It looks like there was no revenue generation model that could give back the money invested ($3.6 million) and provide a real return.
The application is successful and there is a large user base. Let's assume DrawQuest is able to make a profit of $200,000 a year on revenue of $400,000 based on some simple changes to allow users to pay for premium features. For a very small company with 2-3 people, this may be enough to keep going. Now, I don't know what these numbers can really be but I would imagine for a bootstrapped company it would be viable.
It's unfortunate that this business "failed" because the profit it can generate just isn't enough for the investors and the founders.
It would be nice if instead of shutting it down, it's handed out to others that will be happy with its lower profit potential.
This is mostly right. DrawQuest would make a fine lifestyle business for a few partners, but is unlikely to become a business that represents a venture-backed opportunity. However because we built it as a venture-backed business, that's the bar we're held to.
Per my post, I'm exploring options for keeping the service alive for the next few months (and hopefully longer), and am cautiously optimistic we'll be able to figure something out.
It may seem surprising that a seemingly successful product could fail, but it happens all the time. Although we arguably found product/market fit, we couldn’t quite crack the business side of things.
Hopefully people will read into this and learn that building a product without figuring out how to make money and just hoping it becomes obvious -- or that someone will acquire you -- is NOT a business model.
I would say that many people would disagree. Launching without a profitability model is what a lot of startups do, and some of them are successful. I'd like to see numbers on how many of those types are successful versus the startups looking for profit to begin with.
I would argue that it is A business model. The debate would be around whether or not it's a good business model. I guess as long as you're honest with yourself and your employees, aiming to be acquired as a profitability plan is perfectly valid.
400,000 uniques/month in a consumer play is peanuts. They didn't shut down because they couldn't monetize. They shut down because they didn't get the traction needed for consumer ventures.
I have a thesis that the success of startups that operate in a market with strong network effects is often more about luck than skill and that, therefore, repeat success on the part of the founder(s) is by no means guaranteed.
It's like when a first-time golf player scores a hole-in-one. If you try to get them to repeat the feat, they can't because they don't actually know what they did to get the ball in the hole - they just whacked the ball in the general direction of the tee.
Now, take a thousand ball-whackers (startups) all targetting the same tee (market). If the network effects are strong enough, one of them is going to win simply by getting their ball closest to the pin. They don't have to actually get it in the hole - as long as it's the closest, the network effects will take over and push the ball into the hole.
Result: The ball-whacker is perceived as a genius and VCs line up to invest in his next startup.
However, if the first success was, indeed, down to luck, there's no guarantee that the second attempt will be equally (or, indeed, anywhere near as) successful.
This isn't to say that all first-time hole-in-one ball-whackers are just lucky. Some are clearly naturals. The trick is distinguishing between the naturals and those who were simply lucky.
Putting who he is aside, I think the very tough realizations they made apply to a lot more than just DrawQuest's situation:
> As we approached the end of our runway, it became clear to us that DrawQuest didn’t represent a venture-backed opportunity, and even with more time that was unlikely to change.
It takes a lot to decide that you should kill something rather than try to funnel more money into it without having an end-game set up.
"It takes a lot to decide that you should kill something rather than try to funnel more money into it without having an end-game set up."
Correct. But you may miss out one point: not every innovation or successful apps is able to meet this criteria. I believe as an online app, they've already stretch to its most, even received VC funding in the first place.
Apart from the planning for exit earlier, they are quite successful. Apps have very little room to be profitable due to the high competition. I was in a seminar when the presenter did a survey to count how many people have 5 apps installed: majority. How many people have 20 apps installed? 1. The funniest thing is the "1" said, I barely use my smart phone. Everybody was staring at him, why? He said I like to use computer. :(
I think it's important to distinguish between having an audience and having a market. As is fairly well understood, it's possible to have very small audiences that monetise effectively, and very large ones with next to no spending.
One more subtle problem is that products aimed at highly internet savvy westerners seem less likely to stand a chance of making money, as those people are precisely the least likely to spend anything. Reddit has a similar disparity between audience size and ability to get money from them, but aiming at the 4chan crowd strikes me as a recipe for pain. Hopefully eventually he'll find an actual market.
Canvas was fun. While I don't know the details, imo it failed (at least community-wise) because they made some strange changes for strange reasons (removing so called sticker-rain, removing audio-remixes, etc).
The weeks after these changes the user base dropped largely and once that started there was obviously no coming back due to massive decrease in activity on the site that would scare away new users. Myself included: Previously I was spending at least 1 full hour a day on Canvas for about 5 months straight and just some days later it went down to like 5 minutes a day before leaving completely.
To this day I fail to see how they ever wanted to monetize Canvas. I think that was the real issue here. It looks like the site had a few hundred uniques a day for the last couple of months and the servers are still running...
I think what you said is very typical. Apps are like mini toys or online games. People lose their curiosity very soon since there are so many free choices out there. We cannot expect or take it too seriously for the long run. Being adopted to a certain extent as Canvas DrawQuest is good enough.
I help run a site called Doodle Or Die (http://doodleordie.com), which is very similar to DrawQuest. Much like them; we barely cover our costs. But we've largely automated away most human effort so that we can keep the site going for our community while we figure out a brighter future for it.
While our game is similar; I think the way we have approached it from the business standpoint is more realistic. We fully bootstrapped it ourselves and never put ourselves in a position where it had to make money. All of the people working on it still have day jobs. We see Doodle or Die as a great side project that we will continue to work on and maybe we will get it enough traction to attract a buyer. As much as we want it to be the next DrawSomething we knew that it would be a hard road towards that and therefore we were never holding our breath.
There is something to be said for going out and taking the bigger risk like DrawQuest did. But I think we have all agreed to save our bigger risks for bigger opportunities (i.e. we are all working at successful startups outside of Doodle Or Die that have a much better future). We never took the risk; and that's why you don't see us writing a blog about our failure. With all that being said we welcome DrawQuest users to try out Doodle Or Die.
I wonder if moot would've been able to turn DrawQuest into a revenue generating product if he'd had more runway?
I guess my question is this: what is the difference between DrawSomething today and Google and Twitter before they started making cash? All three seem to have great usage and engagement? Is it just market size that prevented more capital being deployed?
edit: I meant DrawQuest but wrote DrawSomething, thanks for the bug report tricolon :)
I suspect that most general interest applications could generate revenue eventually with enough cash put in (the exception being fundamentally flawed business models - "let's sell bags of rocks over the internet to children!").
But the curse is that the longer your runway, the more cash you've raised/invested, the longer payoff time, and the longer you/your investors have to wait to get there.
That's why shutting down and cutting your losses is worth it in a lot of cases. If you don't see a clear path to the hockey stick or to breakeven, you're better off closing the doors, even if you can raise a little more money.
And I would say that the difference between DrawSomething and Google and Twitter is that the upside potential is correspondingly larger. Search is ubiquitous, twitter is a communications mechanism (albeit one I never "got" or cared for). DrawSomething is more of a game, and while games can definitely make money, it's a highly competitive space with lots of churn. It's just less appealing from an upside potential.
So, when you solve really big problems, you might be able to raise more capital for a longer runway, because the risk/reward is greater. I suspect that DrawSomething was cool, users liked it, but that it didn't have the upside potential that something else might have.
I give Chris credit for recognizing this and walking away - and for all we know, there might have been more money to raise, but at terms he didn't care for. Which is totally reasonable.
I feel like one of the problems moot will always face, simply because of his legacy, is that his core userbase with any venture will end up being those who frequent 4chan...possibly be the hardest to monetize group in the world.
While the app was successful in the sense of popularity, it was not successful in the sense of profitability. That line is far too blurred for far too many startup founders nowadays.
I commented in another thread about the "4chan users don't buy anything/aren't monetizable" problem[1], but while I used neither service, I don't think that 4chan users were a signficiant userbase of either Canvas or DrawQuest. Those services didn't really appeal to the average 4chan user at all. I think this was a deliberate decision to keep 4chan users from scaring the rest of the internet away, but I'm not sure it was the right one to make, because it's essentially throwing away the power of moot's name amongst a large and influential audience.
The real challenge would be coming up with a startup that could benefit from an early infusion of curious 4chan users without being "poisoned" by it. Probably one with less of a community focus, which is unfortunate for moot, since that seems to be what he likes working on the most.
The ability to easily seed any community-driven site is a godsend. Whether they can monetize them or not, it helps jumpstart the activity so they can then focus on bringing new, outside users that can then (hopefully) be monetized.
That's a trivial problem to solve. Simply don't even mention you're the founder. Or demote yourself to a tech lead, or someone. It's only a problem if you glamorize yourself and jump and shout to everyone that you're the founder of so and so.
With 25K DAU und 400K MAU you have 6% DAU/MAU which is the worst engagement rate i have ever seen (25% might be acceptable). Yet he says "Retention and engagement are great"
Using 3.6 Million $ to build a simple drawing app probably worth about 3.600 $. "Our most recent product, DrawQuest, is by all accounts a success".
Still kind of shady (or is it just me??..): When they launched DrawQuest, Canvas was already dead. However they did not acknowledge this in any way. Today Canvas is still online while not having any proper audience or any changes to the site for like 2 years. All in all they got like $3.6 million for Canvas in funding without any income.
He writes it himself:
> we created DrawQuest after the failure of our first product, Canvas
Why keep it online for another 2 years if it failed? I don't get it.
This has been said elsewhere, but outside of /b/, 4chan is quite a normal board. I don't read the whole thing, but in my experience, /fit and /diy are fairly civil and often work-safe. /v seems about as good as any video game nerd discussion can get, especially since Quentin and his Diamond Dogs have been rescuing everyone.
I have been very surprised to not see very many people taking up 4chan's self-serve advertising. The audience on 4chan is pretty clear: video gamers, lovers of Japanese culture, artists, trustafarians and paranoids. They spend money on games, computer equipment, plastic figurines, art supplies, costumes, body pillows, music, camping equipment, tools and knives.
I actually run a startup (in someways similar to draw quest) and was constantly told it is a lifestyle business; but I've only recently realized it doesn't have to be. That model is difficult to find, and will seem all too obvious once it's discovered (look at Facebook or Twitter).
I believe if moot had cracked it (that model) and had sustainable week over week growth, draw quest could have survived.
I was once told by the CEO of Kik, it's a lot harder to get to 100 million users than it is to get to a 100 million dollars. I couldn't agree more.
I have no idea how things work with moot's company, but depending upon how your backend is built, moving it can be rather a lot of effort, effort which will be in short supply as people involved with the company are now suddenly very busy looking for new employment.
We went through something similar as chumby industries was dying where a lot of effort near the end (and even past it) went into network traffic optimization aimed at "keeping the lights on" as long as possible past the retail death of the product. Significant dependencies on Amazon's AWS/S3 infrastructure were built into our backend at that time, which limited our effective ability to host on something cheaper without making changes much larger than were warranted to make on a volunteer effort for maintaining a dead service.
TL;DR/Lesson learned -- It is a good idea to implement your backend services in such a way that they could, in the future, be deployed on vanilla Linux hosting if need be, even if you currently rely on some "cloud" provider with its own APIs.
Damn, I have a draft of an idea that is similar to this that I want to dedicate my time to later this year. I haven't even heard of DrawQuest, and it's not essentially like it, but is rather similar. However, I can see at least 10+ ways to monetize it. I wish there are/will be more details why this failed.
I am an android dude so couldn't download the app but am curious as to how the app is currently monetized and what the daily installs look like.
With high CPMs on mobile decent ad strategy should be able to monetize that app quite well. Or even a virtual currency of some kind of drawing tools, bigger uploads etc. Should be more than enough revenue there to keep the lights on and build out a new app...
Mobile gaming is about risk management. There are a lot of failures but the successes can be huge and pay for everything else. You try and try again until you strike the rich vein of players who are actually willing to sink money into virtual crap. Even with incredibly coercive game design and analytics - finding and engaging these users is hard.
Expectation must be adjusted. A lot of apps and even real world products should shoot for a short term profit and gain in before the majority of people lose the curiosity and become tired of it.
[+] [-] avenger123|12 years ago|reply
I believe this is the heart of the message. It looks like there was no revenue generation model that could give back the money invested ($3.6 million) and provide a real return.
The application is successful and there is a large user base. Let's assume DrawQuest is able to make a profit of $200,000 a year on revenue of $400,000 based on some simple changes to allow users to pay for premium features. For a very small company with 2-3 people, this may be enough to keep going. Now, I don't know what these numbers can really be but I would imagine for a bootstrapped company it would be viable.
It's unfortunate that this business "failed" because the profit it can generate just isn't enough for the investors and the founders.
It would be nice if instead of shutting it down, it's handed out to others that will be happy with its lower profit potential.
[+] [-] moot|12 years ago|reply
Per my post, I'm exploring options for keeping the service alive for the next few months (and hopefully longer), and am cautiously optimistic we'll be able to figure something out.
[+] [-] benjaminwootton|12 years ago|reply
[+] [-] callmeed|12 years ago|reply
It would be nice if some other mobile/gaming company bought the assets and kept it alive.
[+] [-] mildtrepidation|12 years ago|reply
Hopefully people will read into this and learn that building a product without figuring out how to make money and just hoping it becomes obvious -- or that someone will acquire you -- is NOT a business model.
[+] [-] freehunter|12 years ago|reply
I would argue that it is A business model. The debate would be around whether or not it's a good business model. I guess as long as you're honest with yourself and your employees, aiming to be acquired as a profitability plan is perfectly valid.
[+] [-] zaidf|12 years ago|reply
[+] [-] elwell|12 years ago|reply
[+] [-] logicallee|12 years ago|reply
[+] [-] jackgavigan|12 years ago|reply
It's like when a first-time golf player scores a hole-in-one. If you try to get them to repeat the feat, they can't because they don't actually know what they did to get the ball in the hole - they just whacked the ball in the general direction of the tee.
Now, take a thousand ball-whackers (startups) all targetting the same tee (market). If the network effects are strong enough, one of them is going to win simply by getting their ball closest to the pin. They don't have to actually get it in the hole - as long as it's the closest, the network effects will take over and push the ball into the hole.
Result: The ball-whacker is perceived as a genius and VCs line up to invest in his next startup.
However, if the first success was, indeed, down to luck, there's no guarantee that the second attempt will be equally (or, indeed, anywhere near as) successful.
This isn't to say that all first-time hole-in-one ball-whackers are just lucky. Some are clearly naturals. The trick is distinguishing between the naturals and those who were simply lucky.
[+] [-] jc4p|12 years ago|reply
> As we approached the end of our runway, it became clear to us that DrawQuest didn’t represent a venture-backed opportunity, and even with more time that was unlikely to change.
It takes a lot to decide that you should kill something rather than try to funnel more money into it without having an end-game set up.
[+] [-] dclara|12 years ago|reply
Correct. But you may miss out one point: not every innovation or successful apps is able to meet this criteria. I believe as an online app, they've already stretch to its most, even received VC funding in the first place.
Apart from the planning for exit earlier, they are quite successful. Apps have very little room to be profitable due to the high competition. I was in a seminar when the presenter did a survey to count how many people have 5 apps installed: majority. How many people have 20 apps installed? 1. The funniest thing is the "1" said, I barely use my smart phone. Everybody was staring at him, why? He said I like to use computer. :(
[+] [-] fidotron|12 years ago|reply
One more subtle problem is that products aimed at highly internet savvy westerners seem less likely to stand a chance of making money, as those people are precisely the least likely to spend anything. Reddit has a similar disparity between audience size and ability to get money from them, but aiming at the 4chan crowd strikes me as a recipe for pain. Hopefully eventually he'll find an actual market.
[+] [-] Phil_Latio|12 years ago|reply
To this day I fail to see how they ever wanted to monetize Canvas. I think that was the real issue here. It looks like the site had a few hundred uniques a day for the last couple of months and the servers are still running...
http://www.alexa.com/siteinfo/canv.as
[+] [-] dclara|12 years ago|reply
[+] [-] dodadmin|12 years ago|reply
While our game is similar; I think the way we have approached it from the business standpoint is more realistic. We fully bootstrapped it ourselves and never put ourselves in a position where it had to make money. All of the people working on it still have day jobs. We see Doodle or Die as a great side project that we will continue to work on and maybe we will get it enough traction to attract a buyer. As much as we want it to be the next DrawSomething we knew that it would be a hard road towards that and therefore we were never holding our breath.
There is something to be said for going out and taking the bigger risk like DrawQuest did. But I think we have all agreed to save our bigger risks for bigger opportunities (i.e. we are all working at successful startups outside of Doodle Or Die that have a much better future). We never took the risk; and that's why you don't see us writing a blog about our failure. With all that being said we welcome DrawQuest users to try out Doodle Or Die.
[+] [-] aditya|12 years ago|reply
I guess my question is this: what is the difference between DrawSomething today and Google and Twitter before they started making cash? All three seem to have great usage and engagement? Is it just market size that prevented more capital being deployed?
edit: I meant DrawQuest but wrote DrawSomething, thanks for the bug report tricolon :)
[+] [-] mattzito|12 years ago|reply
But the curse is that the longer your runway, the more cash you've raised/invested, the longer payoff time, and the longer you/your investors have to wait to get there.
That's why shutting down and cutting your losses is worth it in a lot of cases. If you don't see a clear path to the hockey stick or to breakeven, you're better off closing the doors, even if you can raise a little more money.
And I would say that the difference between DrawSomething and Google and Twitter is that the upside potential is correspondingly larger. Search is ubiquitous, twitter is a communications mechanism (albeit one I never "got" or cared for). DrawSomething is more of a game, and while games can definitely make money, it's a highly competitive space with lots of churn. It's just less appealing from an upside potential.
So, when you solve really big problems, you might be able to raise more capital for a longer runway, because the risk/reward is greater. I suspect that DrawSomething was cool, users liked it, but that it didn't have the upside potential that something else might have.
I give Chris credit for recognizing this and walking away - and for all we know, there might have been more money to raise, but at terms he didn't care for. Which is totally reasonable.
[+] [-] tricolon|12 years ago|reply
[+] [-] unknown|12 years ago|reply
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[+] [-] dchuk|12 years ago|reply
While the app was successful in the sense of popularity, it was not successful in the sense of profitability. That line is far too blurred for far too many startup founders nowadays.
[+] [-] ANTSANTS|12 years ago|reply
The real challenge would be coming up with a startup that could benefit from an early infusion of curious 4chan users without being "poisoned" by it. Probably one with less of a community focus, which is unfortunate for moot, since that seems to be what he likes working on the most.
[1] https://news.ycombinator.com/item?id=7099531
[+] [-] anthony_franco|12 years ago|reply
The ability to easily seed any community-driven site is a godsend. Whether they can monetize them or not, it helps jumpstart the activity so they can then focus on bringing new, outside users that can then (hopefully) be monetized.
It solves one half of the chicken-egg problem.
[+] [-] AznHisoka|12 years ago|reply
[+] [-] Lionga|12 years ago|reply
Using 3.6 Million $ to build a simple drawing app probably worth about 3.600 $. "Our most recent product, DrawQuest, is by all accounts a success".
[+] [-] udev|12 years ago|reply
[+] [-] Phil_Latio|12 years ago|reply
He writes it himself:
> we created DrawQuest after the failure of our first product, Canvas
Why keep it online for another 2 years if it failed? I don't get it.
[+] [-] pearjuice|12 years ago|reply
[+] [-] diydsp|12 years ago|reply
I have been very surprised to not see very many people taking up 4chan's self-serve advertising. The audience on 4chan is pretty clear: video gamers, lovers of Japanese culture, artists, trustafarians and paranoids. They spend money on games, computer equipment, plastic figurines, art supplies, costumes, body pillows, music, camping equipment, tools and knives.
[+] [-] eli|12 years ago|reply
http://www.dailydot.com/business/4chan-10-years-christopher-...
[+] [-] brokenparser|12 years ago|reply
[+] [-] baldajan|12 years ago|reply
I believe if moot had cracked it (that model) and had sustainable week over week growth, draw quest could have survived.
I was once told by the CEO of Kik, it's a lot harder to get to 100 million users than it is to get to a 100 million dollars. I couldn't agree more.
[+] [-] AznHisoka|12 years ago|reply
[+] [-] georgemcbay|12 years ago|reply
We went through something similar as chumby industries was dying where a lot of effort near the end (and even past it) went into network traffic optimization aimed at "keeping the lights on" as long as possible past the retail death of the product. Significant dependencies on Amazon's AWS/S3 infrastructure were built into our backend at that time, which limited our effective ability to host on something cheaper without making changes much larger than were warranted to make on a volunteer effort for maintaining a dead service.
TL;DR/Lesson learned -- It is a good idea to implement your backend services in such a way that they could, in the future, be deployed on vanilla Linux hosting if need be, even if you currently rely on some "cloud" provider with its own APIs.
[+] [-] gaadd33|12 years ago|reply
[+] [-] latj|12 years ago|reply
[+] [-] Keyframe|12 years ago|reply
[+] [-] ojbyrne|12 years ago|reply
[+] [-] erichate|12 years ago|reply
With high CPMs on mobile decent ad strategy should be able to monetize that app quite well. Or even a virtual currency of some kind of drawing tools, bigger uploads etc. Should be more than enough revenue there to keep the lights on and build out a new app...
[+] [-] mentos|12 years ago|reply
[+] [-] siliconc0w|12 years ago|reply
[+] [-] dclara|12 years ago|reply
[+] [-] unknown|12 years ago|reply
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[+] [-] unknown|12 years ago|reply
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