Dash Hudson’s original business plan seemed simple enough when the company started in 2013.
Customers would download an app to their mobile device, and then any time they took a liking to fashion or beauty items while scrolling through pictures on Instagram, they could purchase them with a couple of taps.
But while the concept worked, the Halifax-based company found it very difficult to gain any traction.
For one thing, growing a consumer app proved more daunting than the founders had originally thought. Not only did it have to be discovered on a mobile device’s app store, but users had to be convinced it was worth downloading. Even if those two hurdles were overcome, it still proved difficult to drive significant revenue.
“The business model was crappy,” says Thomas Rankin, the company’s chief executive officer and one of its co-founders.
“We were doing essentially a referral model or an affiliate model, which meant that we were getting a small percentage of each sale, so it just became really difficult to make money.”
With about six to eight months’ worth of investor money remaining, Mr. Rankin and the rest of the founding team had to make a decision. In the process of trying to make a success of their e-commerce app, Dash Hudson was paying influencers to try and promote it to a larger audience.
But trying to verify if that tactic was working on a photo-by-photo basis was proving difficult.
“So I looked out at the market for a software solution that would allow me to track the analytics around that and I couldn’t find anything,” he says.
To fill the void, Dash Hudson co-founder and chief technical officer, Tomek Niewiarowski, built an internal dashboard to track marketing metrics.
Realizing this might be a product that had value for other digitally oriented companies, Dash Hudson reached out to digital and social teams at a few of the business contacts it had built up in the summer of 2015. The reaction was positive.
“We knew we had to move quickly to try and generate some sales so that we could just survive as a company,” Mr. Rankin says.
Doubling down on the technology worked.
From a team of just six people and five customers at the end of 2015, Dash Hudson is now a team of 80 people serving 300 global brands, and has moved offices five times in downtown Halifax to keep pace with the growth.
“Essentially what we’ve become is what we call a visual marketing platform,” he says, which is able to draw metrics from wherever brands are sharing digital photos and videos, whether it’s Instagram, Twitter, Facebook, or a number of other social media sites. Clients pay a monthly subscription fee to use the technology.
As a former venture capitalist – Mr. Rankin worked at Nova-Scotia’s Innovacorp until he quit at 32 – Dash Hudson’s CEO was well aware how investors would regard the kind of pivot he and his fellow founders underwent.
While he was always mindful of keeping the company’s investors abreast of what was going on, he knew that he was being trusted to give everything he had to make a success of his venture.
“Those early, personal investors, angel investors, they’re really investing in the team and the people,” Mr. Rankin says. “For sure the idea is really important, but at the end of the day, they’re saying, ‘We trust you guys … go out and try to build a business.’”
For some seasoned venture capitalists, the calibre of the startup team is crucial. As a result, it makes the decision to invest in repeat, or serial, entrepreneurs that much easier.
“There’s a lot of understanding that the team will make the big difference,” says Sophie Forest, managing partner at Toronto’s Brightspark Ventures.
“So when they come up and they realize that whatever they pitched us when we invested is not working, and they pivot or they change, it’s usually very well received.”
For Ms. Forest, if the original business idea is going to fail, it is generally better if it does so quickly, but ironically, she says a good team can extend a failing concept’s shelf life, whereas a bad team will torpedo it much more quickly.
When it comes to investing in ideas, whether an original concept or a pivot, she says that she generally looks to invest in those who dream big.
“Making money in the venture capital world is really hard and you’re only going to do it if you’ve got the big home run,” she says. “And big home runs only happen with people who are very aggressive and are thinking big.”
Companies such as Twitter, Slack and Uber all adapted their original concepts, says Robert Simon, managing partner at the IT venture fund at the Business Development Bank of Canada. He adds that during a pivot, maintaining trust with investors is all about showing forward movement. Providing tangible evidence of success means investors are more likely to stay the course.
“If you’re making progress and we can see light at the end of the tunnel, or we can see sort of what the next milestone looks like, then we most often give them more money,” says the Calgary-based executive.
He says that investors are mostly along for the ride, and while they might provide input, if they don’t like the idea of a pivot, they can decide against investing more money. By and large, though, when investors look at investments, they look at a combination of three things: market, team and the product or service.
“Each of those three things are critical,” Mr. Simon says. “Some people will put more emphasis on the team versus the product or the market, but I would say they’re [all] critical.”
After successfully turning its business around, Dash Hudson can attest to that.
“That pivot point was certainly difficult,” Mr. Rankin says. “Lots of companies have to try to go through it. We don’t all make it, so we feel very lucky that we were able to figure something out and create a great business.”