I wanted to take a few minutes and write a post sharing some insight into how we have chosen to build the team here at FitnessKeeper. The more startups I talk to, the more I am finding that we have taken a somewhat non-traditional approach.
When I left my job in 5/08 to start FitnessKeeper, it was just me and an idea. Today, FitnessKeeper looks very different than that, and we are proud of what we have accomplished in a short time:
- 235K+ downloads of our initial iPhone application
- featured in TechCrunch (twice), Lifehacker (twice), Mashable, NY Times, TUAW, AppleInsider, and many others
- featured by Apple (at no charge, they picked us) in full page iPhone ads in WSJ, USA Today, NY Times, and on the walls of Apple Stores
- team of 9 of us involved, great team, complementary skillsets
- revenues that are fully covering our burn
- several big initiatives underway, and lots of exciting updates to come
One interesting stat in all of this is the total amount of outside capital we have raised: zero. How have we done that? The secret (shhhhh) is in our non-traditional team structure. 10 months in, and I am still the only one in it full-time. Everyone else is either moonlighting (nights/weekends with a day job) or freelancing (we are one of several clients). Because people have kept their day jobs or other paying clients, it has enabled a large portion of their compensation to be paid in equity, rather than cash.
But make no mistake, these are not “contractors”. We meet at least once, and usually several times a week as a team. We push aggressive goals and release cycles. Every team member is personally vested in and passionate about what we are building. This feels and acts like a founding startup team, it just happens to take a different shape than how most startup teams choose to go after it.
As a first-time entrepreneur, I have spent a good deal of time meeting with more seasoned entrepreneurs/executives/investors for mentorship and advice. As our traction has been increasing, I have heard two consistent rallying cries beginning to emerge: Time to raise funding, and time to really invest in marketing.
As much as I appreciate the advice and can understand this position, I can’t see it making sense for us at this stage of our growth. For better or for worse, the economy is in the dumps. The capital markets have dried up, and even if we were able to raise money, the valuation would suffer. Not to mention the time suck that goes into the fundraising process. And most importantly, I am just not convinced that we need outside capital to get over the hump and really scale this thing.
Now, if times were rosy, we would have tons of competitors out there. And some competitor that shared our ambition would go raise a boatload of capital and blow right past us if we kept this approach. In this economy, I believe that scenario is much less likely to occur. The startups that raised money before us and are out trying to raise their follow-on round—I hate to say it, but they are going to go away. And our potential competitors that are trying for the boatload of capital—they are going to stay on the sidelines because they aren’t going to be able to raise that round. Without funding, which is not the way they have launched companies in the past, they aren’t going to know how to build the business with non-traditional approaches like what I am describing (until reading this post, of course).
So, to all those who say, “time to raise funding”, I counter with, “focus on operating the business and don’t waste your time.” And to all those who say “invest in marketing”, I counter with “leverage free tools like SEO and social media, and give yourselves maximum flexibility and optionality by keeping your burn as low as possible.”
For entrepreneurs, it’s a new world out there. But in my experience, new is not bad, and in it’s own weird way, this new climate makes for a powerful barrier to entry that puts FitnessKeeper in a great position to ride this one through. When the capital markets do open up, we’ll have been plowing forward slowly and steadily all along, and we will be much further along than the companies who stayed on the sidelines and the ones who ran out of cash along the way.
We’ll see where this goes, but that’s my story, and I’m sticking to it! If you are an entrepreneur who is thinking about starting a company and unsure whether you could get the funding, the question is, do you need it?
Jason
Very inspirational as an MBA student, mobile consultant, and entrepreneur.
I’m more and more convinced that “lite startups”, particularly software ones, can exist well into the stealth and beta modes and gain traction and revenue without getting the golden hand-cuffs slapped on by the VC’s. I think your company and team dynamic will be a much imitated model in the current market conditions.
Great post man. Keep it up and stay on your own as long as possible.
Thanks Rob! I appreciate the words of encouragement. We’ll keep you posted!
Jason
Jason, sounds like great progress . . . and I like (and agree with) your approach . . . keep it up!
Brian
One requirement unstated in Jason’s post, is the ability for the founder to work without pay for a while. Anyone wanting to try the Jason model should sock away at least a year’s worth of expenses before embarking on pursuing their dream. After that, have passion, commitment and a great idea!
Thanks Brian! I owe you a call, will call tomorrow
Doug,
(Doug is our CFO)
Good point, I mostly agree. That is what I have done (no salary for the last 10 months and counting), and the business would not be in nearly the place it is today without someone driving it full-time. It also helped to have a CFO in place early on to bring some seasoning to the team
I do know of one company locally that is very similar in structure (and model) to FitnessKeeper, but with 100% moonlighters, including the CEO. He does consulting during the day to cover his expenses, and is left with plenty of time to devote to his venture.
So, there are different ways to do it, but it is much easier if there is at least one founder really going after it, which does take some savings.
Jason
Agreed.
Of course, the more people you can get to work full-time without pay the better.
We ran with four people on a flexible pay scheme. That’s one where we only paid out what we could afford from income. This meant a little money some months and none the rest.
keep up the great work!!! love the back story.
Jason, thanks for sharing. I find it particularly interesting that Apple is featuring you, since nike+ which was developed with Apple is a competitor. Any thoughts on that?
thanks
sab
Congratulations on all of the great success.
I just wanted to propose a counter argument to the marketing thoughts. Marketing does not always produce a negative return. My guess is that you could find some paid search advertising and display advertising that would actually earn you more revenue than you pay for it. Especially if it is being supported by free marketing from Apple. I wouldn’t write those channels off and I would think about experimenting with small dollar amounts. If you could spend $1 and get $1.50 plus increase your market share wouldn’t that be a great investment?
I agree in this economy with your…”strategy” . As a recent startup my self, marketing has been a focus. BUT free advertising by word of mouth alone has paid me back 10 fold compared to throwing money into ads. I know my mouth can’t say enough good about runkeeper.
For sure keep it going!
Canada Mike
Thanks for keeping us all connected with the update posts.
Bravo – we just hosted a panel of entrepreneurs at BU on this very topic.
I think the biggest theme that emerged was that for any entrepreneur, you have to adapt to the climate you’re in. Like you alluded to, if this was 1999, you’d probably have to take capital to stay in the game. In today’s market, you’re positioning yourself well to ride it out – and if you can ride this out, you can ride out almost anything.
So while you should never say never when it comes to raising capital, the extraordinary effort it takes right now to get the extraordinarily poor valuations just doesn’t add up.
One might say this attitude of keeping the company lean and mean, or fit, makes you the “Chief Fitness Keeper”
Eric – well said!
Canada Mike – yes, big fan of social media, word of mouth. press, etc.—all the free stuff that in my experience, works better anyways.
Aaron – sure, if we could crack that code, it would be a no-brainer. Difficult to track though, plus I am skeptical that the numbers could work with such a small one-time non-recurring price point. A bootstrapped company also does not have much wiggle room for mis-steps. But hey, if you figure it out, I am all ears!
Sebastian – we think it is a lot more than this, but for starters, those are iPhone ads and Nike+ doesn’t work on the iPhone
(only iPod and Touch)
Manish – thanks for the support!
Martin – very interesting, thanks for sharing!
I just discovered RunKeeper, thanks to the NYT ad, and I am totally blown away. What a fabulous app! And as the mother of two independent entrepreneurs, I enjoy hearing the story of how you have gotten this off the ground. For what it’s worth, I’m going to put a plug for the program onto my Facebook page. Keep up the good work, and best of luck to you and your team.
I just wanted to say thanks for a great product. used it for the first time today and gave it a positive review on my blog http://craigboydfitness.wordpress.com
As an entrepreneur myself, I really enjoyed the back story on building your start up. Thanks again, look forward to using it even more on my future runs and rides. Craig Boyd.
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Just downloaded the app and am trying it out. My buddy from work turned me on to this, and I’m excited to get started. Also interested in seeing what the future holds for fitness keeper. Best, –Mark